What, Me Worry?
I am, quite obviously, an outspoken critic of the unconventional shale oil phenomena in America. It has adversely affected the end of my long oily career, yes. I willingly admit that. Mine and tens of thousands of small, conventional, stripper well operators in the United States just like me. And big, deep-water Gulf of Mexico operators as well. Hell, the entire world oil order has been disrupted because of it. The shale thing drove all of our costs up in America, and all of our oil and gas prices down. Price volatility is hard on the oil industry; we can't make a plan, can't make a budget, don't know whether we are coming, or going. Overleveraged oversupply of light tight oil in America has hurt the entire domestic oil industry in our country.
But there is more to my criticism of the US LTO industry than my own personal issues with it. Its about lying, which the shale industry has done a bunch of, and about misleading Americans into the belief there is now an abundance of oil in America, that we can become "energy independent," and we don't need to worry about running out of oil anymore. That is a big whopper, a real doozy, and one that helps the shale oil industry raise money, and con lenders into loaning them more money. The shale oil industry has gotten so good at lying that politicians, even bigger liars, actually believe the shale oil industry and have completely dropped any resemblance of conservation of our remaining hydrocarbon resources from our nation's energy policies. We are the largest oil consuming nation in the world, by a significant margin, yet we are exporting our hydrocarbon resources away now at an alarmingly increasing rate. Its the blind leading the blind. Dumb and dumber.
The shale oil industry has never been profitable. Well, it was probably marginally profitable when the price of oil was over $100 a barrel but the shale industry did not focus on profitability then; it did not pay back its indebtedness and it did not deliver for its shareholders. It instead focused on reserve growth and kept drilling wells like crazy, with no fiscal responsibility whatsoever. When the price of oil collapsed in 2014 that business model backfired and now the shale oil industry in America is over $200,000,000,000 in debt. And still borrowing more money. Some very large shale oil companies pay up to 40% of their revenue in interest expenses alone. In the mean time, CEO's across America benefiting from reserve base compensation packages keep raking in hundreds of millions of dollars. The whole shale gig is based on using 'other people's money.' All of it. I hate to coin the overused phrase, "Ponzi," but... that is pretty much all it is. A big scheme.
Does my criticism of the US shale oil phenomena make me un-American? Hell no, it doesn't. I am Texan thru and true and my entire life has been dedicated to oil and natural gas production. I care about the future of my country and what kind of world we are going to leave our kids. I, by God, think that my industry owes my country, the truth.
So, I swim against the current and find bad news to report about the shale oil industry, essentially because most of what I see is bad news. I poke fun at it, blow holes in well economics whenever I can, remind folks, constantly, that borrowing money to drill oil wells does not work; never has. The financial condition of the US shale oil industry is dismal, at best, and when I have time I point that out to folks thru SEC filings, etc. I want the lying to stop ! I want my country to start conserving what's left of our remaining oil reserves. Yes, we need our unconventional shale oil resources. We need the jobs it provides. The process of shale extraction is fascinating. But Americans need to begin a real, honest discussion about who is going to pay to get the stuff out the ground. Except for maybe EOG, Pioneer and two or three others with very low debt to asset ratios, private enterprise in America has failed miserably at shale oil extraction.
So, I am going to stay calm and rant on. Its time America gets its head out its ass, I should say, out of the sand... and face the truth about its hydrocarbon future. We're plum out of the cheap stuff and now on a mission, it seems, to totally deplete what's left of our expensive stuff as fast as we can. And sell it to China. Then what ?
I am worried about it.