growser7

Shale Gas Companies: All Talk, No Walk?

The article and some of the comments remind me of Mark Twain's definition of a mine as "a hole in the ground with a liar on top,"

Handsome, I think the author is arguing that shale gas is a lot more expensive to extract than the investing public has been lead to believe. I have some friends in the oilpatch who confirm that opinion, along with the high intial decline rates (i.e over the first 12 months). The same holds true for the Bakken shale oil play---expensive drilling with 30+% decline at twelve months.

Countering that of course is the fact that leasing costs will fall, as will rig and pipe costs etc.

A BIG fly in the ointment will be the tax treatment of drilling. I understand that the new administration is looking to eliminate the tax credits for intangible drilling expenses, with legislation to take effect later this year. That will dampen future drilling even if the commodites are hedged---the dry hole costs of some of these wells are in the millions. So--we might have constrained supply in the future for entirely different reasons, with the breakeven points of all of these projects pushed to the right.