With money running out to drill new wells, the steep production declines inherent in all shale gas wells are oozing into P&L statements, and suddenly, all that debt that made so much sense a year or two ago is unmanageable. Assets have to be sold off in a hurry, drilling diminishes further, and a vicious cycle overtakes the false promises of yore. And production, which lags behind rig count movements, will drop, and drop steeply.
Meanwhile, the low price of gas has bent the demand curve: utilities are shifting massively from coal to gas for power generation. Their demand is eating through the record amount in storage and will clash later this year with diminishing production. It’s a classic example of how a price that is too low will spike, but only after a monumental massacre in the industry.
.......... Testesterone Pit
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