Watch Out For The Aggregate Disguise in Shale

The high depletion rates experienced in shale formations is being masked by the aggregate increase in gas production bought about by heightened levels of drilling. It reminds me of declining same store sales numbers being hidden by increased revenues from new store growth in the retail area.

I have been skeptical of the shale revolution from the beginning because I read a number of pieces highlighting the rapid well depletion rates early on. But that skepticism has had to take a backseat as the aggregate numbers have bullied any opposing view into submission. As with a large addressable market with plenty of room for new store growth (for a new concept), US shale formations provide a large addressable market with plenty of room for new wells.

P.S. From a USA Today article 11/4/13 "Sweet spots" — small areas with the highest yields. Hughes says these spots simply don't last long. Unless more wells are drilled, the Bakken shale of North Dakota and Montana loses 44% of its production after a year and the Eagle Ford shale of Texas, 34%. Most of the nation's major shale regions produce both oil and gas.