Tuesday, January 7, 2014

Mark Anthony debunks the oil/gas fracking rush

Financial State Of The Natural Gas Industry

It puzzles me how the US NG industry manage to fund development of shale gas for these years, if the adventure is deeply unprofitable?

The True Economy Of Bakken Shale Oil

I have written repeatedly on SA to warn people that the shale oil and gas developers tend to use unreliable production models to project unrealistically high EURs (Estimated Ultimate Recovery) of their shale wells. They then use the over-estimated EURs to under-calculate the amortization costs of the capital spending, in order to report "profits", despite of the fact that they have to keep borrowing more money to keep drilling new wells, and that capital spending routinely out pace revenue stream by several times.

When the capital costs are fairly amortized, most shale oil and gas development projects are deeply non-profitable. Even the Bakken shale oil, regarded as the most profitable shale play under current pricing environment, is not profitable. Let me use real data from Whiting Petroleum (WLL), the second largest Bakken shale oil developer, to demonstrate the real economy in Bakken shale.

Mark Anthony's instablog

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