Authored by Nick Cunningham via OilPrice.com,
Fracking has been an “unmitigated disaster” for shale companies themselves, according to a prominent former shale executive.
“The shale gas revolution has frankly been an unmitigated disaster for any buy-and-hold investor in the shale gas industry with very few limited exceptions,” Steve Schlotterbeck, former chief executive of EQT, a shale gas giant, said at a petrochemicals conference in Pittsburgh.
“In fact, I’m not aware of another case of a disruptive technological change that has done so much harm to the industry that created the change.”
He did not pull any punches.
“While hundreds of billions of dollars of benefits have accrued to hundreds of millions of people, the amount of shareholder value destruction registers in the hundreds of billions of dollars,” he said.
“The industry is self-destructive.”
The message is not a new one. The shale industry has been burning through capital for years, posting mountains of red ink. One estimate from the Wall Street Journal found that over the past decade, the top 40 independent U.S. shale companies burned through $200 billion more than they earned. A 2017 estimate from the WSJ found $280 billion in negative cash flow between 2010 and 2017. It’s incredible when you think about it – despite the record levels of oil and gas production, the industry is in the hole by roughly a quarter of a trillion dollars.
The red ink has continued right up to the present, and the most recent downturn in oil prices could lead to more losses in the second quarter.
So, questionable economics is not exactly breaking news when it comes to shale. But the fact that a prominent former shale executive – who presided over one of the largest shale gas companies in the country – called out the industry face-to-face, raised some eyebrows, to say the least. “In a little more than a decade, most of these companies just destroyed a very large percentage of their companies’ value that they had at the beginning of the shale revolution,” Schlotterbeck said. “It’s frankly hard to imagine the scope of the value destruction that has occurred. And it continues.”
“Nearly every American has benefited from shale gas, with one big exception,” he said, “the shale gas investors.”’
The industry is at a bit of a crossroads with Wall Street losing faith and interest, finally recognizing the failed dreams of fracking. The Wall Street Journal reports that Pioneer Natural Resources, often cited as one of the strongest shale drillers in Texas, is largely giving up on growth and instead aiming to be a modest-sized driller that can hand money back to shareholders.
“We lost the growth investors,” Pioneer’s CEO Scott Sheffield said in a WSJ interview. “Now we’ve got to attract a whole other set of investors.”
Sheffield has decided to slash Pioneer’s workforce and slow down on the pace of drilling. Pioneer has been bedeviled by disappointing production from some of its wells and higher-than-expected costs.
But, as Schlotterbeck told the industry conference in Pittsburgh, the problem with fracking runs deep. While shale E&Ps have succeeded in boosting oil and gas production to levels that were unthinkable only a few years ago, prices have crashed precisely because of the surge of supply. And, because wells decline at a precipitous rate, capital-intensive drilling ultimately leaves companies on a spending treadmill.
Meanwhile, as the financial scrutiny increases on the industry, so does the public health impact. A new report that studied over 1,700 articles from peer-reviewed journals found harmful impacts on health and the environment. Specifically, 69 percent of the studies found potential or actual evidence of water contamination associated with fracking; 87 percent found air quality problems; and 84 percent found harm or potential harm on human health.
The health impacts have been a point of controversy for years, pitting the industry against local communities. The industry largely won the tug-of-war over fracking, beating back federal and state efforts to regulate it. However, the story is not over.
In many cases, there is an abundance of anecdotal evidence pointing to serious health impacts, but peer-reviewed research takes time and has lagged behind the incredible rate of drilling. Now, the public health research is starting to catch up. Of the more than 1,700 peer-reviewed studies looking at these issues, more than half have been published since 2016.
One need not be an opponent of fracking to recognize that this presents a threat to the industry. For instance, a spike of a rare form of cancer has cropped up in southwestern Pennsylvania recently. The causes are unclear, but some public health advocates and environmental groups are pointing the finger at shale gas drilling, and have called on the governor to stop issuing new drilling permits. The Marcellus Shale Coalition, an industry group, said the request was “ridiculous.” The region is right at the heart of high levels of shale drilling, so any regulatory action coming in response the public health outcry could impact drilling operations. Time will tell.
In the meantime, poor financials are the largest drag on the shale sector.
“And at $2 even the mighty Marcellus does not make economic sense,” Steve Schlotterbeck, the former EQT executive said at the conference.
“There will be a reckoning and the only questions is whether it happens in a controlled manner or whether it comes as an unexpected shock to the system.”
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A shame that the piece only scratches the surface of the health impacts of this process. These wells are sending contaminated water into underground aquifers that are SHARED resources. Riparian law (dating back hundreds of years), is quite clear on water rights. As always, government has stepped in to screw over everyone getting water from these aquifers in return for likely huge campaign contributions, seats on boards of directors, and so much more. And then there are all the earthquakes that have been 100% linked to fracking operations. That so many of these are happening around the New Madrid fault line is quite disturbing, as nobody has any idea how all of this underground disruption of the crust, underground water penetration, etc. will affect this monster of a fault line. Any earthquake even close to the size of the ones in the late 1800s, would bring America to its knees given all the development near the fault and the transmission of seismic waves in the type of land east of the Mississippi river (during the 1890s quake, the bells in the Old North Church in Boston rang – even though the earthquake was in Missouri). Sad that basic respect for private property rights and water rights likely could have kept this ridiculous bubble from ever happening and all the destruction from every happening as well. But that’s what you get when you have a government that is owned and controlled by big business.
New Madrid earthquakes were in 1811-12
at a time when the area was much less developed. We only can guess at the damage that another such incident would inflict
Horrible long term health consequences from this nonsense no doubt
You can never ‘frack it’ too much.
That’s Stucky’s motto.
wow the great American oil fucktards are losing billions and wrecking the earth. but solar and wind are evil. In the last 60 days from roof top solar we generated 2.66 MWH maybe if we use all the money from mindless mother earth destruction and idiot wars and stick to our own knitting when it comes to flying drones and spycraft. We can put solar on many homes and use less oil and not piss poison in our own water supply. maybe even have enough left over to pay down the debt a bit.
When Americans are provided a truly ACCURATE accounting of ALL THE COSTS of ALL of their energy choices, then they can pick the ones that actually make good sense. Until then, who the hell knows what solar panels REALLY cost (to the environment, the taxpayers, etc.). We all know that the oil markets get free US military protection paid for by taxpayers. We all know that massive subsidies are being handed out to every well-connected “alternative” energy company going, etc. But NOBODY is ever allowed to see ALL the costs, where the raw materials come from, what sort of environmental damage occurs to get them, how many war deaths can be attributed to obtaining them, how many migratory birds die in their propellers on an annual basis, how much drinking water is polluted in trying to obtain shale oil, etc.
There are a lot of millionaire dairy farmers in PA that used to scrape to get by. Still waiting on the poison water that will kill us all. Maybe the climate change will kill us in 12 years 1st.
Is this a joke?
At least these guys are honest: “Screw YOUR health; we got bottom lines to meet, profits to make, dividends to pay, and you f*ckers are just in the way. YOUR health is not OUR problem, so . . . DIE! DIE! Dead people can’t sue!”
Just sayin’
I bet they make it up on volume though lol?