How Oil and Gas Prices Will Affect Casino/Racino Revenues in 2015

In part 3 of my 2014 Review/2015 Predictions for the Casino and Racino Industry in the Southeast, I’ll discuss the single greatest economic factor for 2015 Casino and Racino Industry in the southeastern states: the Oil Industry. 

A January article in Fortune Magazine starts out: “A decade of strong oil and gas prices [$100/BBL] made Big Oil rich and fat which has led to waste across the industry.  This not only translated into runaway spending at the corporate level – including everything from executive jets to overly-generous pay packages.”…. “Pretty much all the oil and gas companies announced cuts to their 2015 capital plans.”

Bloomberg Business Reports “Oil explorers and contractors that help them drill wells, build offshore platforms, lay pipelines and feed rig crews have been whiplashed by the seven-month rout of oil markets that saw the value of a barrel of crude shrink by 57 percent.  The industry has responded by cutting more than 30,000 jobs, halting exploration projects and deferring investments in everything from gas export terminals to petrochemical plants.”

As you drive from Shreveport/Bossier City south on Highway 171 or I-49, you can smell the crude in the air. Travel from Lafayette, Louisiana to New Orleans on Highway 90 and you’ll be inundated with signs from every name known to the oil industry. 

Louisiana has the largest concentration of crude oil refineries, natural gas processing plants and petrochemical facilities in the Western Hemisphere.  It is America’s third largest producer of petroleum and third leading state in petroleum refining.  Louisiana is the second largest producer of natural gas.  It supplies over 25 percent of the total U.S. production.  

While Texas leads the U.S. in most of the categories of oil and gas production, Texas does not have casinos or racinos – so in the parking lots of casinos and racinos across the Shreveport/Bossier City and Lake Charles regions, you’ll see as many Texas license plates as Louisiana plates. 

The halting of projects, firing of workers and deferring of investments will certainly change the economies in Texas and Louisiana and negatively affect the Casino and Racino business in all four Louisiana regions.

So I’ll start with my predictions for the four Louisiana Regions:

First, Lake Charles: The new Golden Nugget Casino Resort opened for business December 2014. The Golden Nugget should be a good draw to the Region despite the Oil situation.  Its owner is a major force in the casino industry. However, like the other Lake Charles Casinos and Racinos, they all rely heavily on business in the oil and gas areas of Texas and Louisiana.  If cheap oil and gas continue through 2015, I predict an overall 2 to 3 percent decline in gaming revenues for the overall area.  Again, I believe the decline would be much larger if the Golden Nugget had not entered the market.

Shreveport/Bossier City: This region will also be negatively affected.  Again, if the low prices for oil continue through 2015, I predict 4 to 6 percent drop in gaming revenues for this Region and the shuttering of one casino.

 Baton Rouge and New Orleans Regions: Will likely be less affected, so I predict a 2 to 4 percent decline in gaming revenues if low crude prices last through the year.

The economies of the nine Southeastern States vary significantly -- from the oil and gas industry in Louisiana to the huge tourism industry of Florida to the agriculture industry in most of the states. But a ripple effect from fluctuations in the oil and gas industry reaches across all of the states. 

Arkansas’ racinos should be positively affected if If low oil and gas prices continue to leave consumers with more discretionary income, we should see a positive effect on Arkansas’s racinos.  The two racinos have had substantial increases in gaming revenues in the past five years, but I expect that to moderate to a 3 to 5 percent increase in 2015.

Florida’s racinos should have an increase in gaming revenues with the lower oil and gas prices, its significant agriculture industry, and good overall economic growth giving their residents and massive tourism and winter residents’ additional spending money. Plus Hialeah Park Racetrack and Casino will have its first full year. I predict a 5 to 7 percent increase for the Florida Racinos overall.  The Seminole and Miccosukee Casinos will have a solid 2015.

In Mississippi, I expect to see a decline of 2 to 3 percent in gaming revenues and the shuttering of one casino for the River Counties and a 2 to 3 percent increase for the Gulf Region.

Among the remaining southeastern states, Georgia, South Carolina and Tennessee do not have casinos or racinos, while Alabama and North Carolina have Native American Casinos only.