Ann: Investor Roadshow Presentation, page-120

Eshmun ,

I think your description of the U.S. light tight oil patch being a "shale bubble" is overly simplistic .

To go from where they were 8 years ago to where they are now could not have been done organically . It took money , for infrastructure , rapid expansion and until recently competition for labour and services forcing up the price of both .

If 2007 wells had of been drilled with 2015 tech they would have thrown off plenty of free cash .

Hedges are not going to stop being available . As in any class of insurance if you get a bad year , rates harden - the premiums increase for following years . At least these drillers have a real insurable interest , it's not synthetic like all the credit default swaps (which are frequently incorrectly termed insurance) so does not carry the same level of systemic risk .


Personally I reckon that further innovation will not be able to compensate for depletion of sweet spots . Once the sweet spots are drilled out and infill drilled out the tier two liquids acreage won't offer much .

At that time maybe they will have a perfected a solution for using microbes to convert residual liquids into methane - which would ruin the game for everyone .

The U.S. is likely to transition from liquids to natural gas in areas such as transport - and even dry gas can be extracted economically from shales .