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Tuesday, September 4, 2012

Energy in Depth Called Out For Inaccuracies

Deborah Rogers is one of Energy in Depth's primary targets in their industry PR campaign.  She has repeatedly called out the shale gas boom as a Ponzi scheme which is going to collapse in on itself, which has led to some stinging criticism from the industry.  Energy in Depth in particular has not been shy about calling Rogers out, with statements like this one:
She’s a goat farmer, cheese maker, former model and committed anti-natural gas activist who chooses to present  herself as an independent economic expert.  Her message simply sells better that way.
Rogers recently responded to a series of articles Energy in Depth published which were designed to debunk her comments on shale development.  Here is an excerpt:
EID mistake #6: “…even if a natural gas play is in production decline, it does not necessarily mean the play is over..it simply means the well development rate is not keeping up with current production declines…so where is that treadmill?”
DR:  Dr. Cline is clearly unaware that he just defined the drilling treadmill.
Well development rate is not keeping up with current production declines. These companies have to keep up prolific and continuous drilling (i.e. Dr. Cline’s “well development rate”) in order to keep production from falling (i.e. Dr. Cline’s “production decline”). If you have little to no cash on your balance sheet and very high debt then production is how you meet debt service. If you stop drilling, production falls and so does cash flow and hence it becomes difficult to meet debt service. This is not a difficult concept to grasp.
But I should like to thank EID again for their admission that well development rates are not keeping up with current production declines.
Read the rest of the article here, which enumerates several more instances of what Rogers calls mistakes by EID in their reporting on her presentations.  Rogers also does well in adding a few zingers of her own:
I feel compelled to address one last statement by Dr. Cline and EID. It is as follows: “I don’t know of anyone that could have predicted this price collapse…”
This is an astonishing statement!
Are we to understand that Dr. Cline and his colleagues at EID had absolutely no inkling that prices were collapsing?
Current supply is four times greater than current demand. The rest of us have been aware of oversupply in the natural gas market for years now. It is an unfortunate fact that if you glut a market with supply, prices ALWAYS go down.
It must be noted that even as long ago as 2009 several shale companies announced production cuts in an attempt to shore up declining prices in natural gas. Production cuts, however, never materialized in any meaningful way due to high levels of debt and the price has continued to erode for the last three years. It is very curious indeed that EID was wholly unaware of such price declines.
And yet, perhaps it is not so curious after all. Given the myriad mistakes which Chesapeake Energy made in its public filings with the State of Pennsylvania recently, it is perhaps not so surprising that an entity funded by Chesapeake Energy might also make many, many mistakes.

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