Shale Grab in U.S. Stalls as Falling Values Repel Buyers

[xchrom]

http://www.bloomberg.com/news/2013-08-18/shale-grab-in-u-s-stalls-as-falling-values-repel-buyers.html

Oil companies are hitting the brakes on a U.S. shale land grab that produced an abundance of cheap natural gas -- and troubles for the industry.

The spending slowdown by international companies including BHP Billiton Ltd. (BHP) and Royal Dutch Shell Plc (RDSA) comes amid a series of write-downs of oil and gas shale assets, caused by plunging prices and disappointing wells. The companies are turning instead to developing current projects, unable to justify buying more property while fields bought during the 2009-2012 flurry remain below their purchase price, according to analysts.

The deal-making slump, which may last for years, threatens to slow oil and gas production growth as companies that built up debt during the rush for shale acreage can’t depend on asset sales to fund drilling programs. The decline has pushed acquisitions of North American energy assets in the first-half of the year to the lowest since 2004.

“Their appetite has slowed,” said Stephen Trauber, Citigroup Inc.’s vice chairman and global head of energy investment banking, who specializes in large oil and gas acquisitions. “It hasn’t stopped, but it has slowed.”

[JayhawkSD]

1. Don't get complacent.

Prices will go back up and the exploitation will resume.

Three things will happen. The production of new wells will not last as long as predicted and prices will rise as that production drops; we will begin exporting natural gas which will increase prices; and markets will find a way to manipulate prices higher.