In Shale Fraud Created by Wall Street, The Burning Platform (TBP) analyzes and exposes some key facts about the “fracking revolution” that are usually hidden from the public due to, according to TBP, the hype fostered by Wall Street. As Shale Bubble reports, “the Reality is that the so-called shale revolution is nothing more than a bubble, driven by record levels of drilling, speculative lease & flip practices on the part of shale energy companies, fee-driven promotion by the same investment banks that fomented the housing bubble, and by unsustainably low natural gas prices. Geological and economic constraints – not to mention the very serious environmental and health impacts of drilling – mean that shale gas and shale oil (tight oil) are far from the solution to our energy woes”. USA energy independence will certainly not come from fracking.
KEY FINDINGS, SHALE GAS
- High productivity shale gas plays are not ubiquitous: Just six plays account for 88% of total production.
- Individual well decline rates range from 80-95% after 36 months in the top five U.S. plays.
- Overall field declines require from 30-50% of production to be replaced annually with more drilling – roughly 7,200 new wells a year simply to maintain production.
- Dry shale gas plays require $42 billion/year in capital investment to offset declines. This investment is not covered by sales: in 2012, U.S. shale gas generated just $33 billion, although some of the wells also produced liquids, which improved economics.
KEY FINDINGS, TIGHT OIL (SHALE OIL)
- More than 80 percent of tight oil production is from two unique plays: the Bakken and the Eagle Ford.
- Well decline rates are steep – between 81 and 90 percent in the first 24 months.
- Overall field decline rates are such that 40 percent of production must be replaced annually to maintain production.
- Together the Bakken and Eagle Ford plays may yield a little over 5 billion barrels – less than 10 months of U.S. consumption.
KEY FINDINGS, THE FINANCIAL PICTURE
- Wall Street promoted the shale gas drilling frenzy which resulted in prices lower than the cost of production and thereby profited [enormously] from mergers & acquisitions and other transactional fees.
- Industry is demonstrating reticence to engage in further shale investment, abandoning pipeline projects, IPOs and joint venture projects.
- Shale gas has become one of the largest profit centers in some investment banks, in direct parallel with the decline of natural gas prices.
- Due to extreme levels of debt, stated proved undeveloped reserves (PUDs) may have been out of compliance with SEC rules at some shale companies because of the threat of collateral default for some operators.