update 11/2014 no words….
end update
Go to 27 minutes into Deborah Rogers video “It is sometimes said…that 20% of (shale) wells carry a project; the other 80% can easily be uneconomic.”
http://www.nytimes.com/interactive/us/natural-gas-drilling-down-documents-4.html#document/p7/a23530 also references the 80/20 rule
Deborah also presents Arthur E. Berman, Petroleum Engineer, who studied 9,100 of 15,000 Barnett Shale wells (from RRC data) and found less than 6% met economic needs.
“Eye of the Storm” slide presentation http://www.artberman.com/presentations/Berman_Shale%20Gas–The%20Eye%20of%20the%20Storm%2020%20July%202011_OPT.pdf
Here is a slide show on SEC subpoenas to shale producers…. http://www.ryderscott.com/pdfs/presentations/2011/01-%202011%20RSC%20Conference_Subpoenas%20to%20Shale%20Producers_Elkin.pdf
Now compare this to what Chesapeake (CHK) Ceo Aubrey McClendon told some analysts on a 2008 conference call:
I can assure you that buying leases for X and selling them for 5X or 10X is a lot more profitable than trying to produce gas for $5 or $6 mcf.
Or to this anonymous email from a Schlumberger (SLB) employee:
All about making money. I’m working on a shale gas well that was just drilled in Europe. Looks like crap, but the operator will flip it based on ‘potential’ and make some money on it. Always a greater sucker.
Or to this one from an Anglo-European geologist:
After buying production for over 20 years, hopefully I know the characteristics of great wells (flat decline curves, low operating costs, large production), and as you know, the shale plays have none of these. The herd mentality into the shale will eventually end possibly like the sub-prime mortgage did. In the meantime it is very difficult to sell any kind of prospect that is not a shale play.
Though personally I really liked this quote from the 1968 brief:
The test or standard for determining whether a valid discovery has been made on a mining claim, i.e., whether a valuable mineral deposit has been found, is whether a person of ordinary prudence would be Justified in the further expenditure of his labor and means in actually working the property with a reasonable prospect of success in developing a valuable or paying mine. In other words, the test is simply whether the property is valuable for mining pur- poses. The test is not whether a person of ordinary prudence might be Justified in the expenditure of time and money in an effort to ascertain whether the property might be valuable at sometime in the future for mining purposes.
