June 20, 2012

Fracking economics not looking so great

If you've been asking why I wonder things like:

  • Why would gas companies even want to invest when gas prices are this low?

  • Why would gas companies want to invest here when 'wetter' (and currently more profitable) gas is more easily found further west?

  • How often will gas companies need to drill and frack just to keep up?

  • How long can gas companies keep this system going?

there's a 33-minute exploration of the bigger picture on shale gas drilling at Energy Bulletion. Yes, I know "industry" folks don't like Art Berman, but I've not yet seen anything approaching a takedown of his data.

One key point - if and when gas prices recover to around $5 or $6 per thousand cubic feet, there will be more active interest in the Marcellus. After bottoming out in April at about $1.90, they're back up to $2.53, $2.67 in futures.

Yes, a transcript would be nice, and the video is pretty weird, from a conference where he connected electronically.

Posted by simon at June 20, 2012 1:19 PM in
Note on photos


Nathanael said:

I made a comment about the economics of this at an earlier blog post. Basically, my professional opinion as an investor is that the fracking companies are running a land scam against the majors, by overhyping the production of fracked wells, then selling them.

This scam is called a "pump and dump" when done in the stock market.