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America Is Blowing The Shale Revolution
businessinsider ^ | Jun. 4, 2014, 4:25 PM | Rob Wile

Posted on 06/05/2014 5:33:02 AM PDT by ckilmer

We recently declared that the fracking debate was over. Despite clear evidence of the shale boom's local environmental effects, it's probably added about 50 basis points to GDP, shrunk the trade deficit, and created tens of thousands of jobs.

Despite all that, Goldman Sachs believes America has left tons of figurative barrels and cubic feet on the table by not more aggressively investing in spurring demand. While the U.S. share of global upstream (that is, production) investment outpaced funds into Saudi Arabia and Russia by 10:1, the rest of the world outspent the U.S. on demand-side investment — places to put all those resources — by 15:1.

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


TOPICS: Business/Economy
KEYWORDS: energyexports; naturalgas; shalegas

1 posted on 06/05/2014 5:33:02 AM PDT by ckilmer
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To: nuke rocketeer; thackney; bestintxas; Kennard

an interesting argument against exporting natural gas.


2 posted on 06/05/2014 5:34:29 AM PDT by ckilmer
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To: ckilmer

Obama is blowing the shale revolution. This thing put a serious crimp in his plans to reduce the power of this country. He’s fighting it in any way he can.

Imagine where we would be if there were no shale revolution.

Seriously.


3 posted on 06/05/2014 5:37:17 AM PDT by cuban leaf
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To: ckilmer

This is a very long story, short on important facts.

For those who want to see a video showing how horizontal drilling and fracking is done, Northern Gas and Oil has a great one. It’s 6 minutes.

It includes a visual piece on how fresh water aquifers are protected from contamination.

http://www.northernoil.com/drilling-video


4 posted on 06/05/2014 5:39:49 AM PDT by Balding_Eagle (Want to keep your doctor? Remove your Democrat Senator.)
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To: ckilmer

“To successfully develop domestic gas demand over the longer term, business and government leaders need to work together to solidify the confidence that is required to attract capital over the next 30 years,” they write.


5 posted on 06/05/2014 5:43:55 AM PDT by beaversmom
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To: ckilmer

as the United States has lagged other countries in generating the demand – and the high-value manufacturing jobs that come along with this demand

- - - - - -

Greatly disagree with this statement. We have had billions of dollars recently invested with ethane crackers and other petrochem investment to take advantage of the increased supply.

Also I see no mention of the fact the Natural Gas Liquids (NGL, ethane, propane, etc) are the primary feedstocks to the petrochem industry, not the methane used in LNG. Exporting LNG, which increases the demand for methane, results in greater domestic production of NGLs from wet gas wells.


6 posted on 06/05/2014 5:48:36 AM PDT by thackney (life is fragile, handle with prayer)
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To: ckilmer
Still producing a heck of a lot of oil. Could certainly be more though:


7 posted on 06/05/2014 5:57:56 AM PDT by Wyatt's Torch
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To: ckilmer
While much of the country enjoyed the standard price of $4/mmBtu, prices in large metro regions in the Northeast soared to above $120/mmBtu because of that lack of adequate infrastructure. Read more: http://www.businessinsider.com/goldman-the-us-is-wasting-its-shale-revolution-2014-6#ixzz33loKpLnm

The reason for that debacle is the fact that the enviro-nazis keep stalling new pipeline construction. They DO NOT want cheap gas for anyone.

8 posted on 06/05/2014 6:14:12 AM PDT by nuke rocketeer (File CONGRESS.SYS corrupted: Re-boot Washington D.C (Y/N)?)
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To: beaversmom
I watch RT (Russia Today) occassionally, I know, I know, Al Jazeera wasn't available. RT's financial show is called The Keiser Report, by Max Keiser, reporting out of London. He was claiming that US frackers are losing money, spending $1.50 to get a $1 return. Somehow, someone's subsidizing the losses and that the oil, gas is running out anyways.

This is what the Russian government thinks, as it whistles by the graveyard.

Now, being outspent on the infrastructure side could have several causes. One, the US is simply better at fracking. Two, the US is more efficient in building what it needs. Three, the US is (still, yet?) less corrupt than the other countries, keeping our costs lower.

Now, the US is unique in that private property owners have mineral rights. So, it's easier to get approvals to drill, frack, etc., because the locals have skin in the game. There's zillions of cubic feet of gas and oil on the table, because the Federal Government is stopping drilling on Federal lands in order to meet the Greenies religious obligation of hating fossil fuels, development, prosperity and civilization. This also links up the Obama's goal of weakening America.

9 posted on 06/05/2014 6:20:12 AM PDT by Jabba the Nutt (You can have a free country or government schools. Choose one.)
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To: Jabba the Nutt

That’s what I was wondering after watching that fracking video above...seems like it would be awfully expensive to extract.


10 posted on 06/05/2014 6:24:12 AM PDT by beaversmom
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To: Jabba the Nutt

Shakeout threatens shale patch as frackers go for broke
http://fuelfix.com/blog/2014/05/27/shakeout-threatens-shale-patch-as-frackers-go-for-broke/
May 27, 2014

The U.S. shale patch is facing a shakeout as drillers struggle to keep pace with the relentless spending needed to get oil and gas out of the ground.

Shale debt has almost doubled over the last four years while revenue has gained just 5.6 percent, according to a Bloomberg News analysis of 61 shale drillers. A dozen of those wildcatters are spending at least 10 percent of their sales on interest compared with Exxon Mobil Corp.’s 0.1 percent.

“The list of companies that are financially stressed is considerable,” said Benjamin Dell, managing partner of Kimmeridge Energy, a New York-based alternative asset manager focused on energy. “Not everyone is going to survive. We’ve seen it before.”

Some investors are already bailing out. On May 23, Loews Corp. (L), the holding company run byNew York’s Tisch family, said it is weighing the sale of HighMount Exploration & Production LLC, its oil and natural gas subsidiary, at a loss.

HighMount lost $20 million in the first three months of the year, after being unprofitable in 2013 and 2012, Loews said it its financial reports. As with much of the industry, HighMount has shifted its focus to oil after natural gas prices plunged and has struggled to find sites worth developing, company records show.

Mary Skafidas, a spokeswoman for Loews, declined comment.

In a measure of the shale industry’s financial burden, debt hit $163.6 billion in the first quarter, according to company records compiled by Bloomberg on 61 exploration and productioncompanies that target oil and natural gas trapped in deep underground layers of rock. And companies including Forest Oil Corp. (FST), Goodrich Petroleum Corp. (GDP) andQuicksilver Resources Inc. (KWK) racked up interest expense of more than 20 percent.

Production declines

Quicksilver acknowledges the company is over-leveraged, said David Erdman, a spokesman for Quicksilver. The company’s interest expense equaled almost 45 percent of revenue in the first quarter. “We have taken concrete measures to reduce debt,” he said.

Drillers are caught in a bind. They must keep borrowing to pay for exploration needed to offset the steep production declines typical of shale wells. At the same time, investors have been pushing companies to cut back. Spending tumbled at 26 of the 61 firms examined. For companies that can’t afford to keep drilling, less oil coming out means less money coming in, accelerating the financial tailspin.

More at link...


11 posted on 06/05/2014 6:29:21 AM PDT by thackney (life is fragile, handle with prayer)
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To: thackney

This Chicken Little Bloomberg stringer obviously doesn’t know his way around a financial statement, much less the petroleum industry. He picked the most troubled companies to interview. Why didn’t he call Harold Hamm?


12 posted on 06/05/2014 10:32:41 AM PDT by Kennard
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To: nuke rocketeer; thackney; bestintxas; Kennard

While the U.S. share of global upstream (that is, production) investment outpaced funds into Saudi Arabia and Russia by 10:1, the rest of the world outspent the U.S. on demand-side investment — places to put all those resources — by 15:1.
.............
I think that this is a key take away from the article.

What it means is that there is enough worldwide demand for oil to absorb US oil production increases without materially affecting the price of oil.

The EIA currently expects the USA to add 1 million barrels@ day in 2014 and 2015.But then the EIA foresees production flattening after that.

Will flattening USA oil production increases in 2017 and beyond pressure oil prices upwards? Beats me. But a nice thought for speculative drillers


13 posted on 06/05/2014 10:46:12 AM PDT by ckilmer
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To: ckilmer
What it means is that there is enough worldwide demand for oil to absorb US oil production increases without materially affecting the price of oil.

I think the market has clearly shown that over the last couple years.

Image and video hosting by TinyPic

14 posted on 06/05/2014 11:06:01 AM PDT by thackney (life is fragile, handle with prayer)
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Image and video hosting by TinyPic

Image and video hosting by TinyPic

15 posted on 06/05/2014 11:07:35 AM PDT by thackney (life is fragile, handle with prayer)
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To: ckilmer
I think that this is a key take away from the article.

The author, whose background is in history and journalism, quotes a Goldman Sachs report. The author says we don't invest enough in energy intensive industries which, he says, is due to a "failure of ambition and foresight on the both public and private sides". Toward the end, we discover that both he a Goldman favor a (continued) ban on both oil and LNG exports. That's right, punish the O&G industry with lower prices because industry isn't consuming as much of their product as you wish. He forgets that this will cause lower E&P. Forget the author; he's a nanny-stater if not worse. The quotes from GS seem bad enough, but they may be selective, so let's review the full GS report, not the Business Insider (Democrat) spin on the topic.

There is no story here. U.S. industry is adapting to lower natural gas prices as any prudent business would. For example, new refineries are financed over twenty+ years, not on the basis of spot NG prices.

Let's keep the government out of the O&G industry to the greatest extent possible; and Business Insider off FR

16 posted on 06/05/2014 11:46:37 AM PDT by Kennard
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To: Kennard

First “major independent” I grabbed to look at was Devon.

http://phx.corporate-ir.net/phoenix.zhtml?c=67097&p=irol-reportsAnnual&leftnav=6

2013 Annual Report
Page 51
CONSOLIDATED COMPREHENSIVE STATEMENTS OF EARNINGS

In millions

Total operating revenues 10,397
Total operating expenses 9,776
Operating income 621

Net financing costs 417
Restructuring costs 54
Other nonoperating items 1

Earnings from continuing operations before income taxes 149
Income tax expense 169

Net earnings (loss) $ (20)

They had a lot of revenue, but wound up for a $20 million loss for the year.


17 posted on 06/05/2014 12:00:39 PM PDT by thackney (life is fragile, handle with prayer)
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>> the rest of the world outspent the U.S. on demand-side investment

Because the a-hole is intentionally undermining advances in US energy production.


18 posted on 06/05/2014 12:03:09 PM PDT by Gene Eric (Don't be a statist!)
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To: wideawake

ping for some real world shale production numbers.


19 posted on 06/05/2014 12:29:25 PM PDT by thackney (life is fragile, handle with prayer)
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To: thackney
First “major independent” I grabbed to look at was Devon.

... and the next would be Chesapeake. Now you're being selective.

The author wants to pin the problem on decline rates, which were fully anticipated. The cause of low earnings is lower than expected natural gas prices.

Debt is common to most of these companies. That's smart; better than giving away equity. That is Hamm's approach. The difference is that the oil explorers did well by oil prices and the natural gas explorers were beaten up by natural gas prices.

I'm sure you agree. My quarrel is with the media that puts a negative spin on an industry they don't like politically, by emphasizing decline rates, for example, and then tries to get the government meddling and keeping export controls in place. I "consider the source", ignoring as appropriate.

20 posted on 06/05/2014 12:36:38 PM PDT by Kennard
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To: thackney
Thanks! Good information.

I note with interest that the pre-tax income there was $149, but the taxes were $169, or 113% of the pre-tax income.

That's a fairly high rate.

21 posted on 06/05/2014 12:37:52 PM PDT by wideawake
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To: wideawake

I believe that taxes were based upon the amount before their financing and restructuring cost. But I’m no accountant.


22 posted on 06/05/2014 12:41:10 PM PDT by thackney (life is fragile, handle with prayer)
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To: Kennard

Really, I just grabbed Devon because I thought of them as one of the better players in shale. I wouldn’t look at numbers from Chesapeake for any reason.

I searched next for Anadarko but run out of time.


23 posted on 06/05/2014 12:43:11 PM PDT by thackney (life is fragile, handle with prayer)
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To: thackney
But isn't one of the main points of corporate debt financing that interest expense is deducted for tax purposes?

But I’m no accountant.

Nor am I. But I'm going to guess that there is a difference here between actual cash flow and accounting for earnings purposes.

24 posted on 06/05/2014 12:45:36 PM PDT by wideawake
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To: wideawake

I think many people outside the industry, do not understand how greatly cost have risen for an increases in domestic oil production.

In many cases, it is the subscontractors and equipment/material suppliers that are seeing higher profits than the actual oil production companies.

On the debt/tax, I was only guessing. I don’t know, but a tax rate over 100% makes even less sense.


25 posted on 06/05/2014 12:56:53 PM PDT by thackney (life is fragile, handle with prayer)
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To: thackney
I think many people outside the industry, do not understand how greatly cost have risen for an increases in domestic oil production.

Fair point.

In many cases, it is the subscontractors and equipment/material suppliers that are seeing higher profits than the actual oil production companies.

That's actually pretty fascinating. I can see how that could work - if you're committed to a project, you're committed a project.

On the debt/tax, I was only guessing. I don’t know, but a tax rate over 100% makes even less sense.

Something's definitely going on there that requires further information.

26 posted on 06/05/2014 1:07:30 PM PDT by wideawake
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To: thackney
cost have risen for an increases in domestic oil production

Bill Thomas hasn't seen much cost pressure, particularly because they do most of their own servicing.

27 posted on 06/05/2014 1:46:21 PM PDT by Kennard
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To: Kennard

Agree. The rest of the article is junk. But I like that Goldman Sachs ratio. That said, Thackney has a better graph.
In fact we really need a catalog of the good graphs that have been posted here.


28 posted on 06/05/2014 5:25:05 PM PDT by ckilmer
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To: thackney

Darn, I like your graphs.


29 posted on 06/05/2014 5:26:28 PM PDT by ckilmer
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To: ckilmer

Most of mine are just from EIA. Our tax dollars at work.


30 posted on 06/05/2014 6:52:21 PM PDT by thackney (life is fragile, handle with prayer)
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