article: "SHALE BUST HAS BEGUN WITH A FURY"

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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Replies to This Discussion

Permalink Reply by Dave Mahan on December 5, 2014 at 7:37am

Erik V. writes:

"What this country needs is an energy policy which dictates and governs the price of fossil fuels and the importation/exportation of these fuels.  Only this kind of policy will assure a reliable supply at a cost that consumers and drillers can live with."

Any one else remember the (ahem) "good old days" when we had Windfall Profits Taxes on oil production, and a lot of regulation of natural gas markets?

Any one else remember standing in line for hours to get their gasoline on the correct odd or even day, or plant and school shut downs due to inadequate natural gas supplies on the coldest days?

"Those who do not remember the past are doomed to repeat it."

Permalink Reply by craig on December 5, 2014 at 7:59am

Agreed Dave.  I remember those days well.

We need less gov't intervention, not more, to ease the pain.

Permalink Reply by Erik V. on December 5, 2014 at 4:24pm

Dave Mahan & Craig....I understand what you are saying about government intervention and I don't like it any more than you do.  I also understand what I was proposing would likely never work especially when dealing with politicians.  The problem we have now is when oil is $17 a barrel nobody cares that we can't even afford to produce our wells and when oil hits $140 a barrel they call foul and throw a windfall tax on us.  A policy that would set a price and inflation factor so we could continue to develop the shale reserves and protect us from OPEC overproduction and price gouging.  I believe it's a workable idea since we now have a method of extracting large quantities of oil/gas from reserves here in the USA.  What I didn't read in either of your posts was a solution. 

Permalink Reply by frank speaker on December 5, 2014 at 1:07pm

I seem to remember that these were emergency measures taken  as a response to the OPEC oil boycott, so oil was in short supply before controls were put in place. Later, the Alaska Pipeline was built and offshore drilling expanded so OPEC was never again the threat it had been.

Permalink Reply by Bill Bergseid on December 7, 2014 at 3:35pm

Erik V.:

A national policy that dictates the price of fossil fuels?  We had just that and it was a disaster.  Pres. Nixon imposed wage and price controls in a futile attempt to rein in inflation.  So the federal government fixed prices for everything.  I remember going to a Kroger in 1973 during this time and the entire frozen food display was completely empty--except for one frozen turkey.  Producers just would not sell their goods for the price established by a federal bureaucracy.  Eventually, the government recognized that it could not effectively set prices for goods and wages and so dismantled them for everything but fuel.  So the price for gasoline was set below what it would have been in a free market in the US.  Because there was more demand for gasoline at prices below market levels (a political manuevre) the result was there was not enough supply to meet the demand at the government set artificially low price.  The result?  Gasoline station lines.  Then days of the week allocation.  This was all the result of the government trying to do what the market does no much more efficiently. 

We don't need any federal agency trying to set prices for anything--be it wages (e.g., minimum wage) or prices.

Permalink Reply by Trapper on December 7, 2014 at 4:09pm
Ah yes....I remember soybean burger. We ate too much of that crap during those days! Lol.
Permalink Reply by Philip Brutz on December 5, 2014 at 6:54am

http://www.ohio.com/news/local/ohio-s-utica-shale-likely-to-be-prod...

Ohio’s Utica shale likely to be productive for up to 50 years, energy analyst says

By Bob Downing 
Beacon Journal staff writer

CLEVELAND: Ohio’s Utica shale will produce natural gas and liquids for decades, a Texas-based energy analyst predicted Wednesday.

Irene Haas of Wunder­lich Securities in Houston said the shale under eastern Ohio probably will produce vast quantities for the next 50 years.

“Ohio is going to be very, very busy for a very long time,” she said. “It’s very prolific.”

Her comments came in a talk at the Ohio Oil and Gas Association’s Oilfield Expo 2014 and Safety Congress, held at the I-X Center near Cleveland Hopkins international Airport. The event continues Thursday.

A survey of the top four drillers in Ohio shows they likely have captured about 51 trillion cubic feet of equivalents from the shale, a measure of the gas and liquids produced since 2011, Haas said, calling it “a really big number.”

Overall, she estimated, Utica shale has produced 190 trillion cubic feet of equivalents for the top 12 Ohio drillers operating on 2.5 million acres.

The United States burns 26 trillion cubic feet of natural gas annually, meaning that the Utica production is comparable to more than seven years of energy generated by natural gas.

Utica shale drillers in Ohio are starting to move away from the so-called wet gas window that produces natural gas and liquids, including crude oil, ethane, butane and propane, Haas said.

Now, the companies are moving eastward toward the Ohio River and hitting very productive natural gas wells in Belmont and Monroe counties, she said.

Haas said Utica shale probably can be tapped in northern West Virginia and southwestern Pennsylvania, as well.

Pennsylvania-based Rice Energy expects to complete a Utica well in Pennsylvania’s Greene County in the first half of 2015, and Pittsburgh-based EQT Corp. has said it should complete a Utica well late this year, she said.

Texas-based Range Resources is drilling a similar Utica well in Pennsylvania’s Washington County, she said. Texas-based Magnum Hunter Resources has drilled one well — with excellent results — in northern West Virginia.

Such wells in West Virginia and Pennsylvania are deeper and more costly than in Ohio, Haas said, and drillers must determine whether they make economic sense.

Haas expects the drilling of big natural gas wells in Ohio and surrounding areas to continue even if oil and gas prices dip. That’s because the needed infrastructure, including pipelines and processing plants, to get the natural gas to market largely are in place.

Bob Downing can be reached at 330-996-3745 orbdowning@thebeaconjournal.com.

Permalink Reply by frank speaker on December 5, 2014 at 12:46pm

Nothing in this article speaks of decline curves or of the number of good producing acres yet untapped. The statement of *productive for up to 50 years* is not proven at all.

Permalink Reply by S S C on December 5, 2014 at 1:42pm
You pays your money and you takes your chances. The burningplatform writer is not a fractivist, he is someone who wants to buy your mineral interests real cheap. Anybody thinks theirs are worthless, you can give them to me.
Permalink Reply by frank speaker on December 5, 2014 at 1:53pm

From my reading, Bakken producers get a 30% ROI when oil is at $80. This puts their break even point at about $63 and they would get about a 5% ROI when oil is at $66.  This is less than the interest they must pay on their bonds. At that point, holding back production is the most sensible course of action if finances allow, and wait til prices get back near $80. That would give them a nice fat return.

Permalink Reply by Joseph-Ohio on December 5, 2014 at 2:33pm
In that 'shut in' mean time their ROI is 0%.

If there's a market for their production it would seem to me that a 5% ROI is better than a 0% ROI.

But that's just me sayin'; and me not being made of money !
Permalink Reply by frank speaker on December 5, 2014 at 2:56pm

If there was an endless supply, then taking what you could get at the time might be reasonable, but with 50% of your volume gone in the first two years, (or thereabouts), you know you have only one shot at paying back your investors and making a killing. Try raising more funds with those poor returns. My well goes into production in a couple months and I'm hoping the powers above see the light and cap it off.

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