The Collapse Of Shale Gas Production Has Begun
The U.S. Empire is in critical difficulty as a fall of a domestic shale gas prolongation has begun. This is usually another spike in a array of nails that have been driven into a U.S. Empire coffin.
Unfortunately, many investors don’t compensate courtesy to what is holding place in a U.S. Energy Industry. Without energy, a U.S. economy would grub to a halt. All a trillions of Dollars in financial resources meant zero though oil, healthy gas or coal. Energy drives a economy and financial steers it. As we settled several times before, a financial attention is pushing us over a cliff.
The Great U.S. Shale Gas Boom Is Likely Over For Good
Very few Americans beheld that a tip 4 shale gas fields sum prolongation appearance behind in Jul 2015. Total shale gas prolongation from a Barnett, Eagle Ford, Haynesville and Marcellus appearance during 27.9 billion cubic feet per day (Bcf/d) in Jul and fell to 26.7 Bcf/d by Dec 2015:
As we can see from a chart, a Barnett and Haynesville appearance 4 years ago during a finish of 2011. Here are a prolongation profiles for any shale gas field:
According to a U.S. Energy Information Agency (EIA), a Barnett shale gas prolongation appearance on Nov 2011 and is down 32% from a high. The Barnett constructed a record 5 Bcf/d of shale gas in 2011 and is now producing usually 3.4 Bcf/d. Furthermore, a drilling supply count in a Barnett is down a strenuous 84% in over a past year.
The Haynesville was a second to rise on Jan 2012 during 7.2 Bcf/d per day and is now producing 3.6 Bcf/d. This was a outrageous 50% decrease from a peak. Not usually is a drilling supply count in a Haynesville down 57% in a year, it fell another 5 rigs this past week. There are usually 18 drilling rigs now operative in a Haynesville.
The EIA reports that shale gas prolongation from a Eagle travel appearance in Jul 2015 during 5 Bcf/d and is now down 6% during 4.7 Bcf/d. As we can see, sum drilling rigs during a Eagle Ford declined a many during 117 given final year. The reason a descending drilling supply count is so high is due to a fact that a Eagle Ford is a largest shale oil-producing margin in a United States.
Lastly, a Mighty Marcellus also appearance in Jul 2015 during a towering 15.5 Bcf/d and is now down 3% producing 15.0 Bcf/d currently. The Marcellus is producing some-more gas (15 Bcf/d) than a other tip 3 shale gas fields sum (12.1 Bcf/d).
I have posted a Haynesville shale gas prolongation draft next to plead since U.S. Shale Gas prolongation will expected fall going forward:
What is engaging about a Haynesville shale gas field, located in Louisiana and Texas, is a high decrease of prolongation from a peak. On a other hand, a Barnett (chart above in red) had a many opposite form as a prolongation rise was some-more dull and slow. Not so with a Haynesville. The decrease of shale gas prolongation during a Haynesville was some-more fast and sudden. I trust a Eagle Ford and Marcellus shale gas prolongation declines will resemble what took place in a Haynesville.
All we have to do is demeanour during how a Eagle Ford and Marcellus ramped adult production. Their prolongation profiles are some-more identical to a Haynesville than a Barnett. Thus, a declines will expected act in a same fashion. Furthermore drilling and extracting shale gas from a Haynesville was a “Commercial Failure” as settled by appetite researcher Art Berman in his Forbes essay on Nov 22 2015:
The Haynesville Shale play needs $6.50 gas prices to mangle even. With healthy gas prices usually above $2/Mcf (thousand cubic feet), we doubt a shale gas business indication that has 31 rigs drilling wells in that play that cost $8-10 million every to sell gas during a detriment into a over-supplied market.
At $6 gas prices, usually 17% of Haynesville wells mangle even (Table 3) and approximately 115,000 acres are blurb (Figure 2) out a approximately 3.8 million acres that contain a drilled area of a play.
The Haynesville Shale play is a blurb failure. Encana exited a play in late August. Chesapeake and Exco, a dual heading producers in a play, both announced poignant write-downs in a 3rd entertain of 2015.
Basically, a strenuous infancy of a shale gas extracted during a Haynesville was finished so during a finish loss. So, since do they continue drilling and producing gas in a Haynesville?
The reason Art Berman states is this:
What we see in a Haynesville Shale play are companies that blindly find prolongation volumes rather than value, and that caring zero for a interests of their shareholders. The business indication is broken. It is time for investors to finally start seeking critical questions.
Chesapeake is one of a incomparable shale gas producers in a Haynesville as good as in a United States. According to a new financial reports, Chesapeake perceived $1.05 billion in handling money in a initial three-quarters of 2015, though spent $3.2 on collateral expenditures to continue drilling. Thus, a giveaway money upsurge was a disastrous $2.1 billion in a initial 9 months of 2015. And this doesn’t embody what it paid out in dividends.
The same materialisation is holding place in other companies drilling for shale gas in a other fields in a U.S. This stupidity has Berman nonplussed as he states this in another essay from his site:
This has undetermined me since a shale gas plays are not commercial during reduction than about $6/mmBtu solely in tiny tools of a Marcellus core areas where $4 prices mangle even. Natural gas prices have averaged reduction than $3/mmBtu for a initial entertain of 2015 and are now during their lowest levels in some-more than 2 years.
The reason these companies continue to furnish shale gas during a detriment is to keep generating income and money upsurge to use their debt. If they cut behind significantly on drilling activity, their prolongation would plummet. This would means money upsurge to dump like a rock, including their batch price, and they would go broke as they couldn’t continue servicing their debt.
Basically, a U.S. Shale Gas Industry is zero some-more than a Ponzi Scheme.
The Collapse Of U.S. Shale Gas Production Even At Higher Prices
I trust a fall of U.S. shale gas prolongation will start even during aloft prices Why? Because a cost of healthy gas increasing from $2.75 mmBtu in 2012 to $4.37 mmBtu in 2014, though a drilling supply count continued to fall:
As a cost of healthy gas increasing from 2012 to 2014, gas drilling rigs fell 40% from 556 to 333. Furthermore, drilling rigs continued to decrease and now are during a record low of 127. Just as Art Berman stated, a normal break-even for many shale gas plays are $6 mmBtu, while usually a tiny commission of a Marcellus is essential during $4 mmBtu.
Looking during a draft again, we can see that a cost of healthy gas never got tighten to $6 mmtu.. a tip was $4.37 mmBtu. Thus, a U.S. Shale Gas Industry has been a blurb failure.
Now that a vital shale gas producers are saddled with debt and many of a honeyed spots in these shale gas fields have already been drilled, we trust U.S. shale gas prolongation will fall going forward. If we demeanour during a Haynesville Shale Gas Field prolongation profile, a 50% decrease in 4 years represents a fall in my book.
The Two Nails In The U.S. Empire Coffin
As we settled in several articles and interviews, ENERGY DRIVES THE ECONOMY, not finance. So, appetite is a pivotal to mercantile activity. Which means, appetite outlay and a control of appetite are a keys to mercantile prosperity.
While a fall of U.S. shale gas prolongation is one spike in a U.S. Empire Coffin, a other is Shale Oil. U.S. shale oil prolongation appearance before shale gas production:
This draft is a few months out of date, though according to a EIA’s Productivity Reports,domestic oil prolongation from a tip 4 shale oil fields appearance in Apr of 2015… 3 months before a vital shale gas fields (July 2015).
Unfortunately for a United States, it was never going to turn appetite independent. The idea of U.S. appetite autonomy was built on hype, wish and cow excrement. Instead, we are now going to declare a fall of U.S. shale oil and gas production.
The fall of U.S. shale oil and gas prolongation are dual nails in a U.S. Empire coffin. Why? Because U.S. will have to rest on flourishing oil and gas imports in a destiny as a strength and faith of a Dollar weakens. we see a time when oil exporting countries will no longer take Dollars or U.S. Treasuries for oil. Which means… we are going to have to indeed trade something of genuine value other than paper promises.
I trust U.S. oil prolongation will decrease 30-40% from a rise (9.6 million barrels per day Jul 2015) by 2020 and 60-75% by 2025. The U.S. Empire is a suburban stretch economy that needs a lot of oil to keep trains, trucks and cars moving. A fall in oil prolongation will also meant a fall of mercantile activity.
Thus, a fall of mercantile activity means skyrocketing debt defaults, large bankruptcies and plunging taxation revenue. This will be a disaster for a U.S. Empire.
Lastly, it is tough to foresee how this unfolds, though a best devise of movement is to be some-more self-sufficient in a nation with resources hold in earthy bullion and silver.
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