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Doubts Develop Around Shale Boom: Fact or Fiction?



June 30, 2011 – Comments (0) | RELATED TICKERS: OIL , UNG , USO


We all know that there is always two sides to a story, and this story is no different. We have been very bullish on shale plays and the companies working in the shale formation areas. So what’s the deal with the sudden doubt around shale plays? Are these assuptions valid? Well, Christopher Helman calls their bluff, and is a bullish about shale plays as we are.

"…Most of this argument is absurd on its face. The United States is currently producing more natural gas than at any time in history, on track for 27 trillion cubic feet this year. This is thanks in large part to the breakthroughs in drilling shale formations. And development of these shales has only just begun. In fact, gas is so plentiful in the U.S. right now that companies like Cheniere Energy have gotten the green light to start exporting it. (See: To Import Less Oil, U.S. Must Export More Gas)…

…As to whether the gas is economic to extract? Would drillers be investing billions a year in new wells if they weren’t getting some return out of it? Granted, today’s low price of $4.30 per thousand cubic feet is so low that drillers have literally thousands of wells that have been bored and completed but that are not yet hooked up to pipelines because they’re waiting higher prices. But a lot of the new gas being brought on line now is what’s called associated gas — that is it is produced from wells alongside oil or natural gas liquids like propane and butane. With petroleum selling for $90 a barrel, drillers in places like the Eagle Ford shale or the Bakken can give away their natural gas for nothing and still make 100% annual returns on their drilling dollars…"


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