“Thousands of shale wells drilled in the last five years are pumping less oil and gas than their owners forecast to investors, raising questions about the strength and profitability of the fracking boom that turned the U.S. into an oil superpower”, says the Wall Street Journal.
It reports that two-thirds of production forecasts made by 29 of the biggest producers in in the Texas and North Dakota oil basins between 2014 and 2017 were wildly off the mark, some by more than 50%.
Financial and energy analysts have long warned that the fracking companies consistently inflate their forecasts of production and profitability to suck in capital, and gullible capital has rushed in.
“Shale companies have attracted huge amounts of capital from Wall Street over the past decade”, says the report. "So far, investors have largely lost money. Since 2008, an index of U.S. oil-and-gas companies has fallen 43%, while the S&P 500 index has more than doubled in that time, including dividends. The 29 companies in the Journal’s analysis have spent $112 billion more in cash than they generated from operations in the last 10 years.…”
But now the bubble appears to be popping.
The Journal investigation found that even current less-than-forecast production levels may be hard to sustain without greater spending, “yet shale drillers, most of whom have yet to consistently make money, are under pressure to cut spending…”