The UNeconomics of UNconventional Shale Gas – the 80/20 “rules”

update 8/14/15 SeekingAlpha reported  some positive info on Chesapeake but the commenters had other opinions like this one…

Screen shot 2015-08-14 at 4.06.27 PM

update 11/2014 no words….

end update


Go to 27 minutes into Deborah Rogers video “It is sometimes said…that 20% of (shale) wells carry a project; the other 80% can easily be uneconomic.”

http://www.nytimes.com/interactive/us/natural-gas-drilling-down-documents-4.html#document/p7/a23530 also references the 80/20 rule

Deborah also presents Arthur E. Berman, Petroleum Engineer, who studied 9,100 of 15,000 Barnett Shale wells (from RRC data) and found less than 6% met economic needs.

“Eye of the Storm” slide presentation http://www.artberman.com/presentations/Berman_Shale%20Gas–The%20Eye%20of%20the%20Storm%2020%20July%202011_OPT.pdf

Here is a slide show on SEC subpoenas to shale producers…. http://www.ryderscott.com/pdfs/presentations/2011/01-%202011%20RSC%20Conference_Subpoenas%20to%20Shale%20Producers_Elkin.pdf

Now compare this to what Chesapeake (CHK) Ceo Aubrey McClendon told some analysts on a 2008 conference call:

I can assure you that buying leases for X and selling them for 5X or 10X is a lot more profitable than trying to produce gas for $5 or $6 mcf.

Or to this anonymous email from a Schlumberger (SLB) employee:

All about making money. I’m working on a shale gas well that was just drilled in Europe. Looks like crap, but the operator will flip it based on ‘potential’ and make some money on it. Always a greater sucker.

Or to this one from an Anglo-European geologist:

After buying production for over 20 years, hopefully I know the characteristics of great wells (flat decline curves, low operating costs, large production), and as you know, the shale plays have none of these. The herd mentality into the shale will eventually end possibly like the sub-prime mortgage did. In the meantime it is very difficult to sell any kind of prospect that is not a shale play.

Though personally I really liked this quote from the 1968 brief:

The test or standard for determining whether a valid discovery has been made on a mining claim, i.e., whether a valuable mineral deposit has been found, is whether a person of ordinary prudence would be Justified in the further expenditure of his labor and means in actually working the property with a reasonable prospect of success in developing a valuable or paying mine. In other words, the test is simply whether the property is valuable for mining pur- poses. The test is not whether a person of ordinary prudence might be Justified in the expenditure of time and money in an effort to ascertain whether the property might be valuable at sometime in the future for mining purposes.

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About Kim Triolo Feil

Since TX Statute 253.005 forbids drilling in heavily settled municipalities, I unsuccessfully ran for City Council Seat to try to enforce this. Since Urban Drilling, our drinking water has almost tripled for TTHM's. Before moving to Arlington in 1990, I lived in Norco’s “cancer alley”, a refinery town. It was only after Urban Drilling in Arlington did I start having health effects. After our drill site was established closest to my home, the chronic nosebleeds started. I know there are more canaries here in Arlington having reactions to our industrialized airshed (we have 55-60 padsites of gas wells). Come forward and report to me those having health issues especially if you live to the north/northwest of a drill site so I can map your health effects on this blog. My youtube account is KimFeilGood. FAIR USE NOTICE: THIS SITE MAY CONTAIN COPYRIGHTED MATERIAL THE USE OF WHICH HAS NOT ALWAYS BEEN SPECIFICALLY AUTHORIZED BY THE COPYRIGHT OWNER. MATERIAL FROM DIVERSE AND SOMETIMES TEMPORARY SOURCES IS BEING MADE AVAILABLE IN A PERMANENT UNIFIED MANNER, AS PART OF AN EFFORT TO ADVANCE UNDERSTANDING OF THE SOCIAL JUSTICE ISSUES ASSOCIATED WITH EMINENT DOMAIN AND THE PRIVATIZATION OF PUBLIC INFRASTRUCTURE (AMONG OTHER THINGS). IT IS BELIEVED THAT THIS IS A 'FAIR USE' OF THE INFORMATION AS ALLOWED UNDER SECTION 107 OF THE US COPYRIGHT LAW. IN ACCORDANCE WITH TITLE 17 USC SECTION 107, THE SITE IS MAINTAINED WITHOUT PROFIT FOR THOSE WHO ACCESS IT FOR RESEARCH AND EDUCATIONAL PURPOSES. FOR MORE INFORMATION, SEE: HTTP://WWW.LAW.CORNELL.EDU/ TO USE MATERIAL REPRODUCED ON THIS SITE FOR PURPOSES THAT GO BEYOND 'FAIR USE', PERMISSION IS REQUIRED FROM THE COPYRIGHT OWNER INDICATED WITH A NAME AND INTERNET LINK AT THE END OF EACH ITEM. (NOTE: THE TEXT OF THIS NOTICE WAS ALSO LIFTED FROM CORRIDORNEWS.BLOGSPOT.COM)
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