Free Republic
Browse · Search
News/Activism
Topics · Post Article

Skip to comments.

Financial questions seen for US shale gas, tight-oil plays
Oil & Gas Journal ^ | 25 March 2014 | OGJ editors

Posted on 04/02/2014 7:14:39 PM PDT by Lorianne

Financial problems of operators in US shale gas and tight oil plays might hold production growth below current expectations, according to the author of a March comment published by the Oxford Institute for Energy Studies (OIES).

But a reorientation of the industry toward “the most commercially sustainable areas” of unconventional-resource plays might extend the period of growth, writes the analyst, Ivan Sandrea, an OIES research associate and senior partner of Ernst & Young London.

The producing industry has demonstrated it can create opportunities, innovate operationally, and address environmental issues despite evolving government policies and questions of public acceptance, Sandrea writes.

“What is not clear from higher-level company data is if the industry (both large players and independents) can run a cash flow-positive business in both top-quality and in more marginal plays and whether the positive cash flow could be maintained when the industry scales up its operations.”

Sandrea cites asset write-downs approaching $35 billion since the shale boom began among 15 of the main operators.

“While most of the companies that have made write-downs are not quitting, many players in this industry have already noted that the revolution is not as technically and financially attractive as they expected,” the analyst writes. “However, to deem the [business] model flawed due to the investment write-downs of some large companies would be misleading and too early in the evolution of the business for some players.”

Sandrea also cites a recent analysis by Energy Aspects, a commodity research consultancy, showing 6 years of progressively worsening financial performance by 35 independent companies focused on shale gas and tight oil plays in the US.

(Excerpt) Read more at ogj.com ...


TOPICS: Business/Economy
KEYWORDS: anwr; gas; keystonexl; oil; opec; petroleum

1 posted on 04/02/2014 7:14:39 PM PDT by Lorianne
[ Post Reply | Private Reply | View Replies]

To: ckilmer; thackney

Ping to see what you guys think of this.


2 posted on 04/02/2014 7:25:16 PM PDT by Lurkina.n.Learnin
[ Post Reply | Private Reply | To 1 | View Replies]

To: thackney

Any thoughts?


3 posted on 04/02/2014 7:29:01 PM PDT by Fractal Trader
[ Post Reply | Private Reply | To 1 | View Replies]

To: Lorianne

The bottom line is this will be self regulating. As the price of gas increases, more investment will make financial sense. After all, the oil sands in Canada are not worth developing if oil falls below forty or fifty dollars.


4 posted on 04/02/2014 7:45:54 PM PDT by MSF BU (n)
[ Post Reply | Private Reply | To 1 | View Replies]

To: Fractal Trader; Lurkina.n.Learnin

There have been many articles discussing the high cost and quickly falling production rates of tight formations like the Shale fields.

In my opinion, too many have the expectation of falling oil prices when the production cost are quite high and the drilling must continue at high rates just to keep production total rates from falling.


5 posted on 04/03/2014 4:22:13 AM PDT by thackney (life is fragile, handle with prayer)
[ Post Reply | Private Reply | To 3 | View Replies]

To: Lurkina.n.Learnin

“While most of the companies that have made write-downs are not quitting, many players in this industry have already noted that the revolution is not as technically and financially attractive as they expected,” the analyst writes. “However, to deem the [business] model flawed due to the investment write-downs of some large companies would be misleading and too early in the evolution of the business for some players.”
............
This is correct. The big players Exxon, Mobile, Chevron etc have not been successful (except if they’ve bought companies that are successful like Exxon purchase of XTO.

The fracking play has been entirely driven by mid level players. A couple of whom will likely become big players in the next 10 years on the backs of the their technology and chops.

For at least the next five years or so demand and supply will be pretty tightly balanced imho—even as US production rises. The reason for this is that few other fields around the world are enjoying rising production but many old fields are experiencing falling production. Meanwhile demand is rising because of rising prosperity around the world.

After 2020 imho things will likely change—but gradually year by year. But right now these are the glory days of the fracking revolution.


6 posted on 04/03/2014 1:54:10 PM PDT by ckilmer
[ Post Reply | Private Reply | To 2 | View Replies]

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.

Free Republic
Browse · Search
News/Activism
Topics · Post Article

FreeRepublic, LLC, PO BOX 9771, FRESNO, CA 93794
FreeRepublic.com is powered by software copyright 2000-2008 John Robinson