Part of the reason I’m curious about this is because I’ve noticed a huge discrepancy between the price of homes in the middle of the shale boom and the price of rent. Rent in Williston is as high as Manhattan (or higher), but the prices of homes are very low. Why aren’t investors buying up property and renting it out and these yields?
SpareTime, there is a company that is a spin-off of an oil services company that does that (kind of) – it’s called Civeo Corp but they build housing. They mostly own ‘man camps’ around Fort McMurray, AB, another huge boomtown due to oil.
I’m not familiar with the real estate in Williston, ND. Surprising that it’s that low, if true. I think some modest homes in Fort McMurray go for close to one million.
On another note (prior post), I agree with Kanuck on Halcon. It’s the debt that makes them unattractive. For comparison’s sake, Halcon is 5.3x 2015 EV/EBITDA and EOG Resources is 6.0x 2015 EV/EBITDA (according to Bloomberg avg. estimates). EOG is hardly any more expensive than Halcon, and EOG is a ton better company with far more attractive growth opportunities.
I don’t recommend going dumpster-diving on these oil and gas stocks that are trading real low b/c they probably have a lot of debt and companies won’t acquire them b/c of that. Instead, they’ll try to buy acreage positions from overleveraged companies – not the entire company.
Probably because they don’t want to get stuck with a bunch of empty houses when the workers go away. Also the challenge is I’d be surprised if there was a lot to buy. Closer to home for me so to speak, in Midland, the supply constraint is made worse by the fact that its tough to get any large number of new builds because the labor can make more money working for the oil companies than the builders.
That’s what I was thinking. But if fracking is going to be around for 10+ years, that’s plenty of time to recoup the investment. A mobile home rents for $2000+, or more if it’s furnished. Workers in the oil field could be paying less than half of what they pay in rent if they bought, but many of those workers don’t want to set down roots. Still, the discrepancy is so huge that I would think more people would be rushing in to exploit it.
I was also thinking maybe there isn’t that much to buy. I found a decent amount of listings, and it’s possible that they’re not still available. But if the supply is so low why haven’t prices risen?
^ seems pretty expensive to me. from a quick glance they appear to be about the same price as Calgary, AB. i mean, mobile homes for $150,000-$200,000? pretty pricey, i’d say. schooling and other social services are in a major deficit there. median prices are up 133% in 5 years so clearly money is rushing in, though i bet plenty of the price change is due to better quality, and higher priced, houses being built.
though the price to rent ratio looks attractive, i bet drugged out oil workers are not the best tenants and repairs are probably a major expense, especially at the low end of the renting world.
Texas is nothing but empty land. There is no limit of supply.
does anyone have info on the colorado oil fields and who is working them?
^ I don’t follow the companies that have large positions there, but I think you’re referring to the Wattenberg field NE of Denver. In terms of trying to find a pure play on Wattenberg, it’s most likely Bonanza Creek. Anadarko and Noble also have big positions. Bill Barrett Corp is trying to transform itself with Wattenberg after getting crushed in nat gas the last few years…I don’t follow them but they could be a lotto ticket type of play on the field. Maybe others have more insight on this. It’s still in the relatively premature stages. I don’t believe it is viewed as favorably as the Bakken, Eagle Ford, Permian or Marcellus in terms of total potential but I’ve read some third party research that has written positively about it (and Niobrara which goes into Wyoming, too)