In this report, Deborah Rogers from Energy Policy Forum explores the role of Wall Street investment banks in the recent shale gas drilling frenzy and related drop in natural gas prices.

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In 2011, shale mergers and acquisitions (M&A) accounted for $46.5B in deals and became one of the largest profit centers for some Wall Street investment banks. This anomaly bears scrutiny since shale wells were considerably underperforming in dollar terms during this time. Analysts and investment bankers, nevertheless, emerged as some of the most vocal proponents of shale exploitation. By ensuring that production continued at a frenzied pace, in spite of poor well performance (in dollar terms), a glut in the market for natural gas resulted and prices were driven to new lows. In 2011, U.S. demand for natural gas was exceeded by supply by a factor of four.

It is highly unlikely that market-savvy bankers did not recognize that by overproducing natural gas a glut would occur with a concomitant severe price decline. This price decline, however, opened the door for significant transactional deals worth billions of dollars and thereby secured further large fees for the investment banks involved. In fact, shales became one of the largest profit centers within these banks in their energy M&A portfolios since 2010. The recent natural gas market glut was largely effected through overproduction of natural gas in order to meet financial analyst’s production targets and to provide cash flow to support operators’ imprudent leverage positions.

Deborah Rogers began her financial career in London working in investment banking. Upon her return to the U.S., she worked as a financial consultant for several major Wall Street firms, including Merrill Lynch and Smith Barney. Ms. Rogers was appointed as a primary member to the U.S. Extractive Industries Transparency Initiative (USEITI), an advisory committee within the Department of Interior, in 2013 for a three year term. She also served on the Advisory Council for the Federal Reserve Bank of Dallas from 2008-2011. She was appointed in 2011 by the Texas Commission on Environmental Quality (TCEQ) to a task force reviewing placement of air monitors in the Barnett Shale region in light of air quality concerns brought about by the natural gas operations in North Texas.

Ms. Rogers is a Member of the Board of Earthworks/OGAP (Oil and Gas Accountability Project). She is also the founder of Energy Policy Forum, a consultancy and educational forum dedicated to policy and financial issues regarding shale gas and renewable energy. She lectures on shale gas economics throughout the U.S. and abroad and has appeared on MSNBC and NPR. She has also been featured in articles discussing the financial anomalies of shale gas in the New York Times (June 2011), Rolling Stone (March 2012) and the Village Voice (September 2012).