Tuesday, June 28, 2011

Reposting Statement About NYT June 26th Ponzi Article

Here is the link to my Statement about the NYT June 26th Ponzi/Enron Article.  http://johnhanger.blogspot.com/2011/06/statement-about-todays-nyt-front-page.html.

The original posting was June 26th.


  1. The Barnett has been surpassed by the Haynesville in production already and yet there are 10 times more wells on the Barnett than the Haynesville. That means the Average Barnett well is producing 1/10 of the average Haynesville well. This is a perfect example of the decline curve realities that the NYT exposed.

    Another good example is the city of Ft. worth in the heart of the Barnett. In 2008, Ft. worth received about 50 million in royalties. This dropped to 19 million in 2009 and trended back up to 38 million in 2010. Sounds like you're heading in the right direction until you realize that the number of wells in the city more than quadrupled between 2008-2010.4 times as many wells could only keep royalty income at 2/3 the former level. You cannot account for this ONLY by the drop in gas prices.

  2. Re: Anonymous post of June 28, 2011 11:54 AM

    "Exposed"? The fact that shale wells have high decline rates is not only NOT a secret, it's not an issue regarding statements of production or reserves. It's just not a known fact to 99% of all people, just as the deails about how you do your technical job are not known to 99% of all people. Just because people don't care about the details of my job, or don't have easy access to them, doesn't mean anyone is hiding anything.

    The most important issue regarding reserves and production rate in shale plays is the production history in the SPECIFIC area of production, and we just don't have a lot of history yet. You can drive 5 miles and get into a completely different geological environment, changing the economics of a project from good to bad. It is all subject to risk. Congratulations to the thousands of innovative and hard-working people that made "dead rock" come to life and potential value!

    As an employee of a company drilling both non-conventional (including shale) and conventional wells, I can ABSOLUTELY assure you that everyone from the field hands to the Board of Directors knows and understands the business profile of drilling unconventional wells (as do the owners of the company, our stockholders, if they want to). Well, facility and operational costs, mechanical and geological risks, specific well performance based on how the well was drilled and completed, and a long list of other issues have to be factored in for hundreds of wells in a project in order to make an "educated" assessment, which would be limited to the project (not the "trend", i.e. the Marcellus, the Haynesville, etc.). Any reporter that doesn't get into that level of detail is not reporting the facts, they are creating a story. It is no secret that majority of newspaper and television media now attempt to create stories rather than report facts.

    You would be the first to tell a newspaper writer that they can't write an accurate article about how you do your job if they don't show up every day and actually do your job, and are involved in the entire business cycle of your projects. You don't get the same results on your job every day because things change or are handled differently. If indifferent or isolated co-workers or contractors of yours (representing less than 1 percent of the input necesary to produce your product) tell a reporter that the sky is dark sometimes, and the fools among us are used to lazily accepting a story as truth, then the reporter will tell the world the sky is falling and they will all run for cover (or in this case, a hammer).

    If you would like to hear a story, the NYT has your cup of koolaid, but please be careful not to spill it on anyone else.