The Secret of the Great American Fracking Bubble

[NeoGreen]

https://www.desmogblog.com/2018/04/18/finances-great-american-fracking-bubble

The Secret of the Great American Fracking Bubble
By Justin Mikulka

In 2008, Aubrey McClendon was the highest paid Fortune 500 CEO in America, a title he earned taking home $112 million for running Chesapeake Energy. Later dubbed “The Shale King,” he was at the forefront of the oil and gas industry's next boom, made possible by advances in fracking, which broke open fossil fuels from shale formations around the U.S.

What was McClendon’s secret? Instead of running a company that aimed to sell oil and gas, he was essentially flipping real estate: acquiring leases to drill on land and then reselling them for five to 10 times more, something McClendon explained was a lot more profitable than “trying to produce gas.” But his story may serve as a cautionary tale for an industry that keeps making big promises on borrowed dimes — while its investors begin losing patience, a trend DeSmog will be investigating in an in-depth series over the coming weeks.

From 2008 to 2009, Chesapeake Energy’s stock swung from $64 a share under McClendon to around $17. Today, it's worth just $3 a share — the same price it was in 2000. A visionary when it came to fracking, McClendon perfected the formula of borrowing money to drive the revolution that reshaped American energy markets.

[SWBTATTReg]

1. A lot of these companies played investors big time, and ripped off investors big time too. nt

[bigbrother05]

2. Very similar to the last big oil boom in the late 70's - early 80's

Lots of fracking for natural gas. The pricing structure allowed higher prices for production from "deep/hot" wells and so lots of activity requiring new technology for big rigs to get to deeper zones followed by fracking.

The wells were expensive to finish, but proved the capability of the fields, so the 2nd & 3rd generation of investors came in to buy out the exploratory companies who moved on to make new discoveries.

Typical pump and dump selling techniques went along with each cycle of sales. Add in office construction booms in Houston, Dallas, etc. and the money was flowing. Then the bills started to come due and that led to the S&L crash because everyone was overleveraged and the big banks had stayed away from most of the action.

Move on to the Housing bust in 08 and you see many of the same characteristics, except they were playing with gov't backed money though mortgage insurance, so they crashed the world economy.

Cons are gonna con.

BTW - the 70's/80's oil bust included W with jobs his daddy's friends gave him in the oil bidnez and his brother as a part of the S&L failure