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Frackers Face Harsh Reality as Wall Street Backs Away

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Re: Frackers Face Harsh Reality as Wall Street Backs Away

#31

Post by roenxi »

burger_moon wrote: post #12

Interesting I have friends and family who work at sand mines that supply the sand for fracking. The companies they work for are still expanding and they have more overtime available than they can take. I'm not sure on the long term future of fracking but in the short 5-10 year span it doesn't appear to be going away based on how much infrastructure these companies are adding right now and how much land they're buying…

Extraction industries do turn on a dime between boom and bust though; there isn't a lot of warning things are going south and the symptoms can be a bit weird. Then everyone who can be sacked is out of a job. Indeed, for weird symptoms, one option in the face of financial problems is to scale up production to reduce unit costs and try and widen the margin.

Not that your friend and family are wrong, I've just worked in extraction companies that were expanding and short on labor, then 12 months later were reviewing their options for bankruptcy. That isn't a great metric for corporate health.

Re: Frackers Face Harsh Reality as Wall Street Backs Away

#32

Post by ec109685 »

panarky wrote: post #19

I'd love to see an unbiased analysis of the long-term economics of an individual shale well. There's some data that indicates volumes drop off pretty dramatically over time at the individual well level. If this is true, then it requires perpetual investment of new capital in new wells just to maintain constant production volumes. The public data isn't great because old wells are mixed in with new wells and so it's ha…

It would be good to overlay that with the price of oil. That is clearly a driving factor in how much they can pump out of the wells and whether they’ll drill new ones.

Re: Frackers Face Harsh Reality as Wall Street Backs Away

#33

Post by mirimir »

panarky wrote: post #19

I'd love to see an unbiased analysis of the long-term economics of an individual shale well. There's some data that indicates volumes drop off pretty dramatically over time at the individual well level. If this is true, then it requires perpetual investment of new capital in new wells just to maintain constant production volumes. The public data isn't great because old wells are mixed in with new wells and so it's ha…

TFA claims that:

> The once-powerful partnership between fracking companies and Wall Street is fraying as the industry struggles to attract investors after nearly a decade of losing money.

Is that inaccurate?

I'm guessing that fracking was profitable until oil prices crashed. So is the financial debate about if, when and how much oil prices will increase?

Re: Frackers Face Harsh Reality as Wall Street Backs Away

#34

Post by mirimir »

Gibbon1 wrote: post #20
ipsum2 wrote: post #14

Earlier quoted context omitted.

Prediction: this piece is just fearmongering, in 1-2 years we will see fracking increase, not decrease.

My prediction is the fracking industry will go bankrupt like the nuclear and coal industries.

One can hope.

Re: Frackers Face Harsh Reality as Wall Street Backs Away

#35

Post by Scarblac »

toomuchtodo wrote: post #9
polotics wrote: post #8

Earlier quoted context omitted.

Really? Please look up some references. Eg. https://jancovici.com/en/

Germany and other nations that poured subsidies into renewables early on (and are to be commended for their economic sacrifice for doing so) are outliers. The rest of the world caught up as soon as renewables were cheaper than fossil fuels. Capital markets don't have feelings. Humanity lucked out that solar and wind costs were driven down as rapidly as they were through manufacturing scale. We'd be screwed otherwise…

We didn't luck out, global CO2 output is still increasing, we have never output so much as in 2018.

All the green energy we've added so far is only in addition to burning fossil fuels, it hasn't replaced any yet.

Re: Frackers Face Harsh Reality as Wall Street Backs Away

#36

Post by Spooky23 »

toomuchtodo wrote: post #21
Spooky23 wrote: post #16

Earlier quoted context omitted.

That’s just a clueless statement. How are people going to heat their homes? Solar is amazing, but isn’t the be all end all.

Heat pumps and weatherizing. Likely some homes in very cold climates will still need natural gas service (propane tanks, more likely) for emergency heat when the polar vortex hits, but a tight envelope and an efficient heat pump do most of the heavy lifting.

Not everyone lives in California.

Heat pumps aren’t sufficient in the northeast without a substantial ($50k+) investment in a ground loop. Many homes require significant retrofit to even use one.

Re: Frackers Face Harsh Reality as Wall Street Backs Away

#37

Post by panarky »

mirimir wrote: post #33
panarky wrote: post #19

I'd love to see an unbiased analysis of the long-term economics of an individual shale well. There's some data that indicates volumes drop off pretty dramatically over time at the individual well level. If this is true, then it requires perpetual investment of new capital in new wells just to maintain constant production volumes. The public data isn't great because old wells are mixed in with new wells and so it's ha…

TFA claims that: > The once-powerful partnership between fracking companies and Wall Street is fraying as the industry struggles to attract investors after nearly a decade of losing money. Is that inaccurate? I'm guessing that fracking was profitable until oil prices crashed. So is the financial debate about if, when and how much oil prices will increase?

Oil prices aren't particularly low by historical standards.

https://imgur.com/a/twnV7GZ

So I'd guess that the "decade of losing money" is due to poor economics of individual wells, where production dramatically falls over time.

That requires more and more capital for new wells just to maintain constant volumes.

If you only look at aggregates it can appear there's a boom, when in reality it's a bit of a shell game that only works as long as you're constantly drilling new wells.

Re: Frackers Face Harsh Reality as Wall Street Backs Away

#38

Post by Spooky23 »

roenxi wrote: post #30
toomuchtodo wrote: post #28

Earlier quoted context omitted.

One of my properties is in northern Illinois, no problems running off a heat pump almost year round. Natural gas bill is about $150/year for monthly service connections and rare use. I’ve never lived in California.

Your comment omits an important but interesting detail here - how common is "rare use" and what is it being used for?

Air source heat pumps become less effective as the temperature drops. At 17F, you lose about 25% of BTU capacity as compared to 48F.

Hot water is another huge use — it’s really expensive to use electricity for that purpose.

Re: Frackers Face Harsh Reality as Wall Street Backs Away

#39

Post by aoner »

Spooky23 wrote: post #36
toomuchtodo wrote: post #21

Earlier quoted context omitted.

Heat pumps and weatherizing. Likely some homes in very cold climates will still need natural gas service (propane tanks, more likely) for emergency heat when the polar vortex hits, but a tight envelope and an efficient heat pump do most of the heavy lifting.

Not everyone lives in California. Heat pumps aren’t sufficient in the northeast without a substantial ($50k+) investment in a ground loop. Many homes require significant retrofit to even use one.

Just use an air to water heat pump. We've got one installed in the netherlands, costs was about €6k (ex subsidies) and we're disconnected from the gas supply. The newest generations can go up to -25 degrees celcius (look up Mitsubishi zubadan for example)

Re: Frackers Face Harsh Reality as Wall Street Backs Away

#40

Post by cascom »

panarky wrote: post #19

I'd love to see an unbiased analysis of the long-term economics of an individual shale well. There's some data that indicates volumes drop off pretty dramatically over time at the individual well level. If this is true, then it requires perpetual investment of new capital in new wells just to maintain constant production volumes. The public data isn't great because old wells are mixed in with new wells and so it's ha…

Couple of points:

- yes decline curves are fairly steep, requiring constant investment to maintain production (often referred to as the drilling wedge) see pg.20-21 [1]

- However, almost all of a new well's cost is the drilling and completion costs on the front end vs the lease operating expense to produce oil/gas once the well is online

-IRRs are pretty high on individual wells (see. pg. 15 [2])

- since decline curves are so steep the pricing environment when the well comes online is tremendously important to well economics

[1] https://d1io3yog0oux5.cloudfront.net/_be06fc1138095794ea39e9...

[2]http://investors.eogresources.com/Cache/1500112768.PDF?O=PDF...

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