Hopefully the natural gas will be our saving grace....

http://www.theburningplatform.com/2014/12/03/shale-bust-has-begun-w...

In the last few days I’ve noticed a plethora of news stories from the usual suspects in the corporate mainstream media about how shale oil producers can still make a profit with oil selling for $66 a barrel. All of a sudden their breakeven costs are supposedly $40 per barrel or lower. That’s funny, because every legitimate estimate prior to this year was that oil needed to stay above $80 per barrel just so they could breakeven. When you see the new propaganda, you realize the entire shale miracle is nothing more than a Wall Street hyped debt financed Ponzi scheme. The Wall Street shysters are sending out their mouthpieces to lie, obfuscate, and mislead the public into thinking this fraud is still legitimate. The MSM pundits don’t even question the lies because their living depends upon perpetuating the lies.

The truth is revealed by the actions of the participants in the shale boom. The companies whose existence depends upon generating profits and cash flow will always take actions that will be in their own self interest. No company purposely takes actions to lose more money. All of the happy talk was just revealed to be false. 

New shale oil wells are expensive to begin and are 90% depleted after 2 years. Those are facts. Permits for new wells absolutely COLLAPSED in November. A 40% decline in one month is an epic collapse. If the Wall Street shysters were telling the truth and breakeven costs are really $40 per barrel, why would drillers stop drilling new wells when oil prices are $66? They wouldn’t. 

The shale oil boom is only sustainable at $100 a barrel oil. The Arabs know it. The big oil companies know it. The drillers know it. And the Wall Street shysters know it. The peak in U.S. oil production has arrived again, until prices go back up to $100 a barrel.

Facts don’t cease to be facts because they are ignored. Reality really is a bitch.

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How would anyone prove it, though?  I tried finding production records for a well that were not reported to the ODNR and the buyer refused to disclose the figures.

The ODNR was no help whatsoever; I'm convinced the producers have them and the politicians in their back pockets.  It is not like I can order an audit.

Do you have an audit clause in your lease? If not, at some point you will have to join forces with other land owners. My lease allows me to audit once a year.

When are their books audited ?

After / during litigation ?

Burden of proof on lessor ?

I don't know for sure but I think most landowners aren't prepared financially to go to court to prove something like that might be going on - unless an attorney is prepared to take on such a task on a contingency basis.

Maybe that's incentive enough for some of them to try it on ?
The more I read and the more I think about it all the more vulnerable / without advantage I perceive lessors / potential lessors to be.

A shame.

Yes, if it comes to that point, where the case is reasonably solid, attorneys would fall over themselves to get a united landowners suit on a contingency basis. After all, collectively, there are millions if not billions of dollars at issue.

Frank,

Wonder what an 'Audit' would cost a lessor ?

Also wonder what would be left to award lessors should a contingency basis class action be successful ?

Would the royalty be totally consumed by legal fees I wonder ?

Wonder if there are / have been any successful contingency basis class actions in the Utica 'Play' to cite as examples ?

At what point does it all become professional fodder I wonder ?

A cynic's cynic (like me) can contemplate many horrible scenarios based on discussions found on these GMS pages.
Also Frank I would like to ask your opinion on a more one on one man to man basis as it troubles me somewhat.

In your opinion, am I being too harsh on myself when I label myself for instance as cynical / as the cynic's cynic - or do you think I'm just thoughtful and giving these matters an appropriate amount of deliberation ? What are your opinions on my perspectives.

I'm only asking as I value your opinions.

Thanks Frank.

I think America is fast changing from "land of the free" to " land of the fraud" How's that for cynical?

A real audit would be prohibitively expensive for an individual landowner. What will be needed is a class action arbitration, where the law firm is willing to front the money for expenses, or find an auditor willing to charge a reasonable price which could be split among the suitors. The lawyer's percentage is negotiable depending on the anticipated recovery. The audit is not as important as establishing a case on firm legal grounds. Since there are so many other lawsuits in various stages it might be that the better course is to find one in your jurisdiction in a similar class to yours (according to your lease language) and join it if the terms are reasonable.

Have you considered the possibility that many O&G companies have a January to December fiscal year and that they may have spent the majority of their budget for the 2014 year by the end of October or early November?

New fiscal year starts in January (just a couple of weeks away). 

Watch for Well Permits from companies that have come out and said they are moving ahead with exploration and production even at these lower prices.

Good points Alan. Budgeted dollars are likely waining so close to year end.
I absolutely agree with you too Jonathan. I find it irritating that there is so much gloom and doom prophecy being spread about OIL prices having an affect on OUR GAS PLAY. What does the price of coffee have to do with the price of hay?

Exactly!

Agreed, Frank, with out a doubt the land of fraud with no one to do anything to put an end to it.

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