Art Berman - Is shale over-hyped?

Started April 17, 2017 at 03:05 pm by @George Vietze in Marcellus Shale

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George Vietze
04/17/17 03:05:58PM

This consultant to the gas/oil industry explains the supply/demand, price cycles and the value of oil "density" compared  to renewables that insures that gas/oil will be the main source of energy world-wide for decades.

Audio: Click Here to Listen to the Audio

Skip Peel - Independent Landman
04/17/17 03:17:20PM @skip-peel-independent-landman:

Over on GHS we have interacted with Mr. Berman and discussed at some length his unique take on O&G in general and the Haynesville Shale Play in particular.  Mr. Berman believes that shale production is generally non-economic owing to high initial decline rates and inaccurate EUR projections. His opinion has been that operating companies have over-sold their internal rates of return and fudged data to provide a less than honest depiction of their D&C costs.  Mr. Berman even provides data to support his claims.  That's where the problem comes in.  Mr. Berman cherry picks his data to conform to his opinion.  After eight years of saying that unconventional reservoir development is a house of cards that would eventually collapse, there is no proof - obviously.  I don't know what he is selling now but buyer beware.

John B Gustavson
04/17/17 04:55:35PM @john-b-gustavson:

Maybe Art Berman (whom I have heard in person over the years) should compare the investment in shale with the investment in Tesla? I see a parallel!

04/17/17 10:24:26PM @lerret:

If shale isn't overhyped explain why Sand Ridge and dozens of other companies have screwed investors and filed bankruptcy but are back up running and gunning just as if nothing happened. If I had a bunch of dopey Chinese and Korean investors throwing cash at me I'd be "making money" too. These don't cash flow.  Companies who generate their own cash cut back. Look at Stephens who bought a bunch of Slawson stuff...look how much debt Devon has compared to 10 years ago...

Why are companies dumping Barnett assets? Why is SWN the only one left in the Fayetteville? Why is CHK being sued for sending BILLS to royalty owners when gas prices fell below these sweetheart deals for the gathering systems...speaking of which is the biggest rip off ever create to abuse the royalty owners.

Skip Peel - Independent Landman
04/17/17 10:50:15PM @skip-peel-independent-landman:

Sand Ridge wasn't into shale.  Ward liked conventional reservoirs that's why he split from McClendon and Chesapeake.  Bankruptcies were caused by aggressive companies that ran up too much debt and then couldn't meet their financial obligations when commodity prices fell.  Didn't matter whether they were producing conventional reservoirs, tight sands or shale.

04/18/17 02:45:50PM @lerret:

SR went back to Aubrey's roots - docket jumping the Sooner trend. Look where it landed him? But Ward was all in in the Barnett and the Fayetteville. So what about Maverick? What about Hallwood partners? What about Kerogen Shale?  On and on.  They are all playing the same game whether Miss limes or Miss shales... And in the process they have averaged 10% post-production costs and that is now in the Fayetteville about 40% post-production costs with many of the wells. And do you deny that Chesapeake actually tried to charge mineral owners for expenses after they sold off the gathering companies at absurd prices?

Do you deny BHP Billiton has written off millions in the Fayetteville? BP bought 20% of Chesapeake's junk complete with 15% bad title, and it isn't a very thrilling investment either.  I grow weary of reading a lot of crap about zillions of barrels of "resources" or TRR - technically recoverable reserves...Technically recoverable? At what price?  $2000 a bbl?  Go compare the proven RESERVES that these companies actually are brave enough to offer on their SEC filings.  Count ALL the expenses including G & G, land, AND drilling and see. Where's the beef?  This is just 1980 all dressed up and no where to go but deeper in investor's pockets. 

Has SWN made a dime in the Marcellus?  Why are all these stocks in companies cheap?  Undervalued?  Or, perhaps not, penny stocks for a reason.

Skip Peel - Independent Landman
04/18/17 05:00:06PM @skip-peel-independent-landman:

Aubrey was never connected to SR.  Tom started the company after leaving CHK.  In the beginning SR invested in conventional reservoirs until that business plan ended in bankruptcy.  Tom was ousted and now runs Tapstone. 

I'm unsure of just where your argument is headed.  My comments are concerning analysts, like Berman, that cherry pick certain data to support their contentions.  For every company you name I can name two that are not bankrupt.  I'm not arguing deductions or non-arms-length sales.  In fact I have worked indirectly on a number of court cases against CHK, and others.  Penny stocks are also far from the topic of the discussion.

Apologies to George for participating in high jacking his thread.  If you can come up with a coherent and lfocused topic under your own discussion, I will be happy to participate.

David Allen Lilly
04/22/17 09:23:20AM @david-allen-lilly:

A couple of years ago a writer for The Cleveland Plain Dealer wrote an article downplaying the economic advantages to the state of Ohio from the shale development industry.

As a frequent user of I challenged the author on the thread discussion under the article and he actually responded to me.

I then challenged him to come to Guernsey county with his photographer and spend a day here with me as his guide and see for himself that the article he had just written was a total and purposeful miss representation of the topic.

He marveled that I appeared to be so angry over what he wrote and challenged me on it, avoiding for the moment the truth, or lack thereof, concerning what he had written.

My anger is over folks like the reporter, a certain leftist participant of this site, seemingly the person who this thread is about and one of the other participants of this thread who throw bomb after bomb at the topic whether there is an relative or total truth to what they say.

I have said this over and over, on the topics of renewables and climate change you have folks who have an ax to grind and who are willing to lie, obfuscate and tell half truths to back up their incorrect contentions.

These people view the world as they so desperately WISH it to be, at the expense of reality.

To conclude the story I told in the beginning of this comment the writer accepted my invitation to come see for himself who was correct in the matter at hand, we even exchanged some emails on the topic and then the matter was totally dropped and there was no further communication or even acknowledgement from them.

The reason is obvious and simple, they do not WANT to be confronted with the truth or the reality of the matter, preferring to bury their heads in the sand and take comfort among a crowd of likewise minded folks also detached from reality.

If you're telling me that shale is over hyped or that renewables will displace fossil fuels or that we can boil the earth to dust or prevent the earth from turning to dust I know who and what I am dealing with.

Skip Peel - Independent Landman
04/22/17 10:53:49AM @skip-peel-independent-landman:

Dang you, david.  I had intended to avoid listening to the Berman interview because I've heard his arguments a number of times before.  I wondered if he had become a booster of renewables since I last read one of his article.  In this radio interview he does not promote renewables.  In fact he seeks to make the case that the time to reach scale is decades away.  He thinks both renewable promoters and energy company management are far overselling their products.

Berman is an oil and gas guy but one that has made a place for himself in energy media by basically being the lone detractor of the return on investment claims made by companies developing unconventional reservoirs.  His contrarian view, which has changed little over time, is that the relatively high decline rate of many unconventional formations skews the return on investment to look better than it actually is.  The methodology behind his derogatory early Haynesville Shale critiques was exposed as being largely composed of early vertical test wells and first generation short lateral wells.  Those wells had high decline rates and low EUR calculations.  There can be no doubt that current Haynesville well designs are a huge improvement in production volumes and drilling and completion (D&C) costs.

In this interview Berman seeks to make the case that technical innovation is less responsible for claimed improved returns on investment than is the lower cost of field services and supplies and that when those costs go back up the industry is back where it started with only marginal profitability gains.   Those costs will go up and they will lower profits but not sufficiently so IMO to drop returns below a level of acceptable profitability for many companies.  I don't find his analogy of drilling wells versus buying new cars compelling. 

A number of technical innovations have reduced drilling times to about 30% of what they were when the horizontal well revolution took off.  Complex completion designs spanned a range of ingredients that have now been winnowed down to basic slick water and sand proppant.  Restrictive choke programs have reduced initial decline rates in high pressure formations and extended productive well life, and thus EUR. Here in LA there is a severance tax abatement program that is a significant cost savings for operating companies.  They pay no severance tax for the first 2 years or until well payout.  The program incentivizes companies to be accurate in reporting their drilling and completion costs.  They could turn in reports for less than they actually spent if one thinks their priority is hiding the full cost from the public.  I don't think they do.  I think they get every penny they can from the program.  Those reports support the role that technology has played in greatly reduced D&C costs.

Berman gets media attention not because he promotes renewables or questions climate change.  He gets that attention because energy media, like all media, needs content and editors, many of whom know little of substance about the subject, like to give the impression that they give both sides of an issue equal time.  Since Berman is basically the only one on the other side of this issue, he continues to get opportunities to promote his analysis.  I know of no one in the industry that agrees with him.

David Allen Lilly
04/23/17 01:19:39PM @david-allen-lilly:

I never said Berman was promoting renewables, my comment alluded in that regard to Heckbert.

What is it with you ?

Do I understand correctly that you live down south somewhere and aren't even in the Marcellus ?

I see your name up and down the Marcellus site, I wonder why so much interest, especially in banging on my comments.

Berman, according to another comment is pooh-poohing shale because of high decline rates and so on, fine and fair enough, except that this industry is valuable in so many other ways to so many people but it appears there is not much mention of it.

The Cleveland Plain Dealer reporter and his employer simply did not want to be shown the light that they feared, probably from personal ideological perspectives that they adhere to desperately in spite of reality.

Look Skip, I have no bone to pick with you except for the one you pick with me, what gives ?

Perhaps some of the derogatory comments I have made about selling ones minerals have hit a little close to home ?

Perhaps there is in fact no "Skip Peel" or perhaps he is a make believe internet sensation living rent free under your hat.

I'm just some hick in Guernsey county Ohio who comes here to share information and give my opinion when I feel like it. 

Perhaps you feel a little better about yourself each time you try to pound a flaw into my latest comment, whatever, the internet is full of guys who aren't what they pretend to be and who play games on comment threads like this for any number of reasons I will never understand.

You wanna tell me that "shale production is generally non-economic, I don't believe you or Art and would opine differently.

You wanna tell me some unrealistic or impossible pipe dream about renewables and their affordability, fine, I don't believe you.

You wanna give me some line about mankind cooking the planet and how mankind can un-cook the planet, go ahead but you'll have to talk over the laughter directed at you.

You wanna ignore all reality, print lies and misinformation and then crawl under a rock instead of investigating the truth, go ahead.

Lastly, if you wanna troll a comment thread where you really have no attachment that I know of, I will never understand the fun but knock yerself out.

Skip Peel - Independent Landman
04/23/17 02:01:02PM @skip-peel-independent-landman:

david, did you listen to the audio of the interview?  Or did you reply based on your dislike for Heckbert?  I am an original GHS member (2008) and a financially supporter of Keith when he was getting started. If you wish to know if I am "real" simply ask Keith.  I don't know you and I don't follow you.  I do from time to time post in discussions on ShaleForum which includes discussions on all three regional sites.  My comments are based on the topic and I try to steer clear of comments off topic.  I also seek to share my information and give my opinion.  My response was intended to inform any member reading the subject discussion that Art Berman is someone whose opinions should be suspect based on his past history.  On GHS we have been dealing off and on with Mr. Berman for nine years now.  I don't share his opinions and I did not say that "shale production is generally non-economic..", I said the exact opposite.  I'll stand by all my comments on this forum.  I regularly provide explanations and supporting documentation to back up what I post.  My reply to which you take exception was based on the Berman interview that was the topic of the discussion.  I would not have listened to it, as I could have told you what Berman was going to claim before he said it, except for your reply which gave the impression that Berman was promoting renewables.  He is not.




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