Is it Profitable ?

I’ve been watching this side of the fracking story quietly unfold gradually over the past few years and it seems to have some real legs now.  Even the gas industry is now trying to distance itself from the poor financial results that their wells are showing in Texas – now they are trying to hype the “better prospects” in the Marcellus Shale region.

Study Finds More Costs Than Benefits From Fracking

July 29, 2011

Regulators Seek Records on Claims for Gas Wells

By IAN URBINA

WASHINGTON — The Securities and Exchange Commission sent subpoenas this week to energy companies asking them for documents about how they calculate and publicly disclose the performance of their shale gas wells, according to oil and gas industry lawyers.

The subpoenas reflect the regulators’ interest in determining whether companies are overstating how their gas wells perform and how much gas these companies can profitably extract over the long term.

It is not clear how many subpoenas were sent. John Nester, a spokesman for the commission, declined to comment.

“The use of subpoenas makes clear that the S.E.C. is taking a formal, not a casual, look at the matter,” said a market research report on Thursday by Robert W. Baird & Co., an international financial services firm. The report also noted that subpoenas do not mean that the commission intends to take action against any particular company, and that estimating reserves is not an exact science.

In a separate note, Gerard G. Pecht, a lawyer with Fulbright & Jaworski, told clients that the subpoenas were focused on the actual performance of shale gas wells compared with how companies were projecting their performance, according to an article on FuelFix.com, an energy news Web site. Mr. Pecht did not respond to messages seeking comment.

The subpoenas also request documents related to discrepancies between what companies are telling investors about the costs of shale gas versus what they are reporting in federal filings.

Large natural gas companies, including Chesapeake EnergyEOG Resources and the Petrohawk Energy Corporation, did not return calls seeking comment. Alan T. Jeffers, a spokesman for Exxon Mobil, the largest natural gas producer in the country, said the company had not received a subpoena.

One oil and gas industry consultant said that he was called to a meeting in mid-June with investigators from the Fort Worth office of the S.E.C. The investigators, he said, wanted to discuss a range of shale gas companies, and discrepancies between data reported to federal officials and what these companies had told investors about profit and well performance. The consultant asked not to be identified, to avoid alienating the energy companies that are his clients.

According to several oil and gas industry lawyers, the subpoenas are in response to articles published in June in The New York Times, which showed that a range of industry and federal officials had questioned whether shale gas companies might be playing down costs or inflating their predictions about well performance.

Some federal agencies have also begun discussing concerns about the long-term productivity of shale gas wells.

For example, the 2011 summer newsletter of the National Energy Technology Laboratory, a research arm of the Department of Energy, says that technology needs to improve in the Barnett shale in Texas, and in other shale gas areas, for these shale gas wells to be more economically viable.

Shale gas wells often decline sharply after their first year, but many in the industry had remained optimistic about the wells’ ability to produce at a slow but steady rate for decades. Others have doubted these assumptions, which may not be holding up.

“A crucial challenge for the industry today,” the newsletter said, is that only a “fraction” — a third or less — of wells show “sustained long-term production,” which makes it difficult for companies to make money on this drilling.

The newsletter added that many of the wells produce poorly and others drop in production sharply after an early period of heavy production.

Comments

  1. This comes from a good friend of mine who was born and raised in Williston, N.D. Her parents and a sister still live there. This is what sand from Wisconsin is partly responsible for.
    A meeting was held of the ND Sheriff’s & Deputies Association in Bismarck, as part of this meeting we had an opportunity to sit down with Law Enforcement from western ND to discuss what they are going through with oil impact. Here is a summary of points made:
    1. Currently there are a total of 84 companies involved in the oil industry in western ND.
    2. It takes between 2000 and 2200 semi loads of water per well. Currently there are 258 wells in progress with so many scheduled it is hard to determine the exact amount.
    3. Traffic accidents, especially fatal traffic accidents are of very high concern. At one location on Highway 85 south of Williston, a traffic count was conducted in October of 2011. In one 24 hour period of time there where 29,000 vehicle through the intersection looked at with 60% of the traffic being semi’s.
    4. Traffic is typically backed up for 1⁄2 to 3⁄4 of a mile. One of the guys stated that one day last week he sat at an intersection on Highway 85 for about 30 minutes to get a big enough opening to cross over.
    5. They have closed the weigh scale house because it was causing such a traffic jamb that it was closing the roadway.
    6. Rent in Williston currently is: $ 2000 for a one bedroom to $ 3400 for a three bedroom. 7. They have no more hook ups for campers any where in the area.
    8. Williams County allows three campers per farmstead, the farmers almost all have three campers on their property and are charging $ 800 per camper per month for rent.
    9. Wal Mart in Williston no longer stocks shelves, they bring out pallets of merchandise at night, and set it in the isles, people then take off the pallets what they want.
    10. On 1-1-12, the Williston Wal Mart had 148 campers overnight in their parking lot.
    11. Willams County wrecked a pickup and ended up bringing it to Bismarck for repairs because there no available body shops to do the work. Williams County has purchased a trailer and has started to bring vehicles to the Bismarck area for repairs. Willaims County took a pickup in for ball joints and front brakes, the shop charged them $ 2800 for the repairs.
    12. Williston and Williams County now produces more taxable sales than any other area in ND.
    13. The Williams County jail has increased booking by 150%. With a 100% increase in inmate population. Bonds of $ 5k to $ 10 K are typically paid with cash out of pocket. The WilliamsCounty Sheriff stated that a couple of week ago he received a $ 63,000 bond in cash carried into the jail in a plastic Wal Mart bag.
    14. Williams County Sheriff’s Department has more than doubled in staff over the last two years, they are now buying trailer houses that come up for sale to rent to newly hired deputies.
    15. Williams County new starting salary with the academy is $ 46,000 plus 100% of all benefits paid.
    16. They are in a continuous hiring cycle, they have no set budget at this time, the Sheriff has been told to manage his office to the best of his abilities and keep the Commission updated, but do not worry about the budget.
    17. The Williston McDonalds just announced that they will pay $ 15 an hour, a $ 500 immediate sign on bonus and a single medical plan paid for.
    18. The restaurants are full and with limited staff to work in them they usually just have the drive through open. The restaurants that have inside seating are now an hour wait at all times.
    19. Law Enforcement in the Williams County area cannot provide training to staff due to time constraints and no location to hold training.
    20. The local Motel 6 in Williston now rents rooms fro $ 129.95 per night.
    21. Law Enforcement no longer does any proactive work (school programs, community services, house checks) they do very little traffic related issues as well, they just to from call to call. Bars fights are one of the biggest issues.
    22. Other law enforcement issues include the strip clubs. The local clubs have now started what is called “babe buses”. These buses go out to areas and pick up people and bus them back and forth to the strip clubs, the buses have poles on them as well as live entertainment.
    23. Drug problems are immense, and they are seeing narcotics that they have never seen in the area before, like black tar heroin.
    24. The civil process section of the Sheriff’s Department use to average 1800 paper a year, they are now doing 4500 processes a year.
    25. Law Enforcement said that they make as many Driving under the influence arrest at 10 Am as they do at midnight.
    26. Illegal aliens have become a huge problem, especially getting the proper authorities do remove them from the Country.
    27. The current thought from the oil companies is that the area will continue to grow as it has over the past two years for the next five years and stay for ten years. At the end of the ten years they feel the communities will drop in population somewhat.
    28. The current thought is that the oil companies will be drilling wells on every 1280 acres of leased land, this way they have tied up the land and do not have to release the property.
    29. The Williston General Motors dealership has now become the number 1 seller of Corvettes in the upper Midwest.
    30. The bigger oil companies are doing very well in hiring good people. They run checks and make sure the people they hire are drug free; it is the smaller companies that are having trouble-hiring people that will look the other way on hiring issues.
    31. They said they do not know anybody anymore. The Sheriff of Williams County he use to be able to go to Wal Mart and not be walk very far without knowing somebody, now he does not know any of the people in there.
    32. Many of the local citizens are taking retirement and moving out of the area.
    33. They have an extreme amount of alcohol abuse going on. They have more calls than ever of drunk people trying to get into houses, to find out they are at the wrong place.
    34. Minot population has grown by a projected 9000 people since the completion of the census. Minot is expecting to reach a population of 75,000 in the next five years.
    35. Trinity Hospital in Minot has just hired 115 nurses from the Philippians to work at the hospital, as they cannot get enough local nurses to apply.

  2. From Jay in New York!

    Hey……

    While reading an opinion piece by Jerry Lausted of Wisconsin’s Dunn Co. News (Aug. 2011), I was thinking of the famous line in the movie All The President’s Men which revealed in painstaking detail how the Watergate scandal was investigated by two dedicated journalists who followed the money. As Jerry reports:

    “….With frac mines paying little or no sales tax, low property taxes ($16 million plant assessed at $3.5 million), no excise tax and no fee for huge water use, and no special road destruction fee, the situation does not look too good for taxpayers. Shale gas resulting from fracking now costs about $10 MBtu and sells for $4 Mbtu. These wells lose 93 percent of their productivity by year five. This is a nonrenewable resource. Regardless, the salesmen, investment firms, drillers, service and pipeline companies get paid. So do the sand suppliers. Maybe we are seeing a bubble that is going to burst like the dot com and real estate bubbles. Slowing down in gas land as well as here in sand country may be prudent….”

    Read more: http://chippewa.com/dunnconnect/news/opinion/letters/article_4b48650a-bfb0-11e0-90bb-001cc4c03286.html#ixzz1UQpuNI9d

    In addition to environmental poisoning; the direct threat to the lives of people, animals and fish; the permanent removal of huge amounts of potable water from the earth’s supply; and the ugly scarring of the earth’s surface that ruins the quality of life for so many, we all need to spend more time on exposing the international Ponzi Scheme aspect of horizontal fracking for gas – especially here in New York. And we should use what has already happened big time in Texas and its neighboring states as a powerful example – as the following news sources do:

    http://blogs.forbes..com/ericagies/2011/06/27/industry-insiders-call-shale-gas-a-ponzi-scheme-invoke-enron-nyt-report/

    – – Jay

Courteous, concise comments relevant to the topic are welcome, whether or not they agree with the views that predominate here. Long rants proclaiming the infallibility of your own views or favorite ideology will not be posted, neither will repeated attempts to hammer on a point already addressed, nor will comments containing profanity, abusive language, flame-baiting and name calling. Please indicate precisely what you are blogging about. I just got a post from ? E-Mail ? which said: "Is this going to be OUR furture??. I have no idea what they were referring to and no way to contact them. This is why we prefer comments that are signed by actual persons who leave their E-Mail address (it won't be published) so they can be contacted if questions arise.

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