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."
I wish to first point out that all this ‘fracking’ (and its easily foreseen environmental & health catastrophes) only even started-up because of ‘our’ (sic) & (sick!) governments’ = (hereinforth, “Our Sic(k) Gov’ts’ ”) tax policies. (See, generally,. ‘Oil Depletion Allowance’, et al.) . Thus, fracking would NOT HAVE EXISTED AT ALL if we could have far earlier simply ensured that Our Sic(k) Gov’ts had followed the obviously wisest policy for any fair government to abide by, if it wishes to
A) respect the rights of its individual citizens; AND
B) have those citizens enjoy the synergistic benefits that society and technology have to offer. (a/k/a, the highest and best combination of individual freedom and societal benefit). Though not mentioned in the article, ‘the playahs’ in the Fracking Industry to whom he spoke, (like those in the asbestos, energy, S&Ls, & even tulip markets!, before them) are, in real time, pulling down and/or stealing, enough money - in half a year, max - to leave any reasonable human absolutely 'set' for life.* They are acquiring it through salaries and likewise shares of stock in their fracking companies.
But about those shares...
The speaker's only really audacious actions are his mere conclusions of truth. The reasons why he said what he did when he did? I dare say they are as a warning NOT to all those poor, ripped off shareholders, but only to those who can move their money relatively quickly out of this malevolent and destructive 'fracking' ‘industry’(sic), while the humanoids & computers which/who invest the megapension funds will require much, much more time to react, so that by the time the 'little shareholder' (e.g., Joe Blow & his 401K, a Public School Teacher’s Pension Fund, etc.) gets out of the industry, it will be simply because their shares will be, by that time, worthless and unsalable, as all of those 'in the know' bailed out within six months of the above speech.
Thus, this apparently surprising expression of truth is not done out of any kind STO tendencies by Mr. Shale Pioneer, but instead most likely so that he'll be able to call in favors from those who already know, from their status as “insiders” (which is supposedly NOT allowed to affect their trades in on the markets) that the industry is going South and quicker than expected.
Thus, they, those listening insiders, NOW have THIS PUBLIC statement (by a guy who's likely already pulled out >85% of his investments in Fracking), so that, in the event of an SEC investigation in 2020 or 2021, they will point to the above speech as the reason that they, these 'insiders', all, 'toward the end of June 2019, and continuing through the final fiscal quarter, of 2019', each and all likewise got most of their assets and all of their asses out of that market just before it did an imitation of 'Junk Bonds" in the 80's,r "Enron" in the 90s, or "Derivatives" & Realty and the 'banking crisis and bail outs' of 2007? - present.
Got the picture? Questions?
R.C.
*At that point, I detect SOTT-typr folk might find themselves then doing STO type activities; but not most people, and certainly not the STS(Cubed) bastards behind all these scams - fracking just happens to be the one I am writing about here.
RC