CEO of Major Shale Oil Company 'Has Second Thoughts' on Fracking Rush
By Sharon Kelly
On Monday, The Wall Street Journal featured a profile of Scott Sheffield, CEO of Pioneer Natural Resources, whose company is known among investors for its emphasis on drawing oil and gas from the Permian Basin in Texas using horizontal drilling and hydraulic fracturing, or fracking.
Back in 2014, Sheffield told Forbes that he expected Pioneer could produce a million barrels of oil a day from the Permian basin by 2024 – up from 45,000 barrels a day in 2011.
Now, Sheffield, who left the helm of Pioneer in 2016 and returned this February, says that those million-barrel-a-day plans are looking increasingly doubtful as the industry has struggled to prove to investors that it's capable not only of producing enormous volumes of oil and gas, but that it can do so while booking profits rather than losses.
"We lost the growth investors," Sheffield told the Journal. "Now we've got to attract a whole other set of investors."
Doubts on Shale Gas and Shale Oil
Mr. Sheffield's comments on the shale oil industry's fiscal difficulties come on the heels of a warning from the former CEO of the country's largest natural gas producer about the shale gas industry's financial distress.
Steve Schlotterbeck, former CEO of America's largest producer of natural gas, described the impact of over a decade of fracking on Marcellus shale drilling companies at a recent petrochemical industry conference.
"In a little more than a decade, most of these companies just destroyed a very large percentage of their companies' value that they had at the beginning of the shale revolution," he said, in remarks reported by DeSmog on Sunday. "Excluding capital, the big eight basin producers have destroyed on average 80 percent of the value of their companies since the beginning of the shale revolution."
Doubts about the shale drilling industry's financial prospects have simmered nearly as long as the industry has been producing oil and gas. "There is undoubtedly a vast amount of gas in the formations," The New York Times reported in 2011, citing concerns among industry insiders dating back to 2009. "The question remains how affordably it can be extracted."
In the years since, shale drillers churned out massive volumes of fossil fuels, first shale gas then shale oil, pushing American oil production up 12 million barrels a day, according to Energy Information Administration figures cited by The Journal.
At the same time, they have spent hundreds of billions of dollars more than they've earned from selling the fossil fuels they drew from the ground.
"Over the past 10 years, 40 of the largest independent oil and gas producers collectively spent roughly $200 billion more than they took in from operations, according to a Wall Street Journal analysis of data from financial-information firm FactSet," the Journal reported. "During that time, a broad index of U.S. oil-and-gas companies fell roughly 10%, while the S&P500 index nearly tripled."
Schlotterbeck, the former CEO of EQT who now serves on the board of directors for the Energy Innovation Center Institute which offers training for workers in the oil and gas, solar, and construction trades, offered his view of the end results for investors at the petrochemical industry conference on Friday.
"The fact is that every time they put the drill bit to the ground, they erode the value of the billions of dollars of previous investments they have made," he said in his presentation. "It's frankly no wonder that their equity valuations continue to fall dramatically."
Belt-Tightening Comes Amid Regulations Rollbacks
Sheffield's own company has a rocky track record when it comes to translating production into profits.
"In August 2015, Mr. Sheffield said Pioneer's wells were expected to yield 45% to 60% returns on investment at the oil prices at that time, excluding costs such as administrative expenses and taxes. The company lost $218 million in the second quarter of that year," the Journal reported.
"The company acknowledged that capital spending exceeded operating cash flow in 2015, but said it is focused on changing that in 2019 and beyond," it continued.
The industry's financial troubles have caused drillers like Devon Energy to begin layoffs.
So too, is Pioneer.
"Among those who are leaving is Mr. Sheffield's own brother, Thomas Sheffield, the company's vice president of health, safety and environment," the Journal reported in its Monday profile.
That belt-tightening comes as the Trump administration has pushed to roll back federal environmental regulations.
More than 80 regulations and rules written to protect the environment have either been rolled back on Mr. Trump's watch or are in the midst of rollbacks, according to a tracker published by The New York Times.
Eighteen of those rules applied specifically to "drilling and extraction," the Times observed, and others affect the drilling industry, like the scrapping of methane emission reporting requirements for drillers and rules aimed at curbing methane leaks on public lands.
Timothy Dove, who helmed Pioneer from 2016 until February, had predicted the company could grow its fossil fuel production at least 15% a year while cutting cost overruns.
But those projections drew pushback from company insiders, the Journal reported.
"Several times in recent years, technical staffers raised concerns to management that Pioneer was being too aggressive with how it talked up its prospects to investors and potential business partners, according to people familiar with the matter," the Journal reported. "In one of those instances, the company eventually walked back internal production forecasts for some of its wells in the Permian, according to one of the people. In other instances, Pioneer continued to use what some of the people said were overly optimistic estimates."
The following year, Pioneer spent $549 million more than it earned from selling fossil fuels, the Journal reported, adding that oil prices had climbed $10 higher than the $55 a barrel that Dove had said would allow Pioneer to raise production while matching spending and earnings. Sheffield told the Journal that Pioneer's board of directors had been surprised to learn that the company's management had gone $350 million over the board's approved $500 million 2018 budget hike.
Mr. Sheffield told the Journal he was backing away from million barrel-a-day plans for Pioneer. But he also maintained it would be technically possible to produce at that rate, economics aside.
"But my point is the rock will produce over one million barrels a day," he told the Journal.
Few observers would doubt that drillers can produce vast amounts of fossil fuels from shale, given the industry's history of rapidly increasing production.
An unsettled question remains, however — as it has since the early days of the shale rush — at what cost?
Reposted with permission from our media associate DeSmogBlog.
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Where Does the Deficiency Begin?<p>Nobody knows exactly how much vitamin D a person actually needs. The question of when a deficiency starts is correspondingly controversial. However, vitamin D is becoming increasingly popular.Not only is the pseudo-scientific literature on the "sun vitamin" experiencing an upswing, but the number of published studies has also increased enormously in recent years. For example, in 2019 <a href="https://academic.oup.com/edrv/article/40/4/1109/5126915" target="_blank">a study found that</a> Vitamin D is responsible for keeping the skeleton functional and is associated with cardiovascular diseases, type 2 diabetes and various types of cancer. <br></p>
An All-Rounder<p>Vitamin D levels in the body rise and fall according to sun exposure. If sufficient UV rays reach the skin, the body is able to produce the vitamin itself. However, the human body only derives an estimated 10 to 20 percent of its daily requirement from food.</p><p>The vitamin D that we synthesize from sunlight or food is not biologically active at first. Before the kidneys can produce the biologically active form of the vitamin, known as calcitriol, and release it into the blood, some metabolic processes must take place beforehand.</p><p>In addition, many organs have receptors to which the precursor of calcitriol binds. Further, this substance is also present in blood.</p><p>From this precursor, the organs then produce calcitriol themselves, which the body then uses for countless other processes in the body. This form of vitamin D thus regulates insulin secretion, inhibits tumor growth, and promotes the formation of red blood cells as well as the survival and activity of macrophages, which are important for the <a href="https://www.mdpi.com/2072-6643/5/7/2502/htm" target="_blank">immune system.</a></p>
Low Vitamin D, Severe COVID-19 Disease?<p>A research study carried out <a href="https://www.sciencedirect.com/science/article/pii/S2352364620300067?via%3Dihub" target="_blank">at the University of Hohenheim</a> has now established a link between vitamin D deficiency, certain previous diseases, and severe cases of COVID-19.</p><p>According to the study, "there is a lot of evidence that several non-communicable diseases (high blood pressure, diabetes, cardiovascular diseases, metabolic syndrome) are associated with low vitamin D plasma levels. These comorbidities, together with the often accompanying vitamin D deficiency, increase the risk of severe COVID-19 events."</p><p>"This statement is completely correct," said Martin Fassnacht, head of endocrinology at the University Hospital of Würzburg. However, he qualifies that it is a pure association, "i.e. a mere observation that these events occur together.</p><p>Dr. Fassnacht is very critical of the hype surrounding vitamin D, but not because he denies the vitamin serves important functions. However, studies on humans have not been able to show that vitamin D has the healing powers many often propagate.</p><p>Fassnacht says, "If you take a closer look, the hopes that the administration of vitamin D has a healing effect have not been confirmed so far."</p>
Association Versus Intervention Studies<p>Many studies on the vitamin are association or observational studies. "By definition, these studies cannot prove the causal relationship, but only point to mere correlations," said Fassnacht. The physician tries to illustrate this with an example:</p><p>"Imagine two groups of 80-year-olds. One group is spry, active and does sports. If you compare them with another group living in nursing homes, the difference in vitamin D levels will be dramatic. Life expectancy would also be extremely different."</p><p>But to try to explain the difference in fitness by vitamin D status alone is far too simplistic. "Vitamin D levels are a good measure of how sick someone is. But not more," says Fassnacht. </p><p>According to Fassnacht, none of the intervention studies carried out to date -- that specifically examined the effect of vitamin D on various diseases -- has been able to confirm the previous association and laboratory studies or the presumed positive effect of vitamin D.</p>
Further Research Is Needed<p>"If a coronavirus infection is suspected, it is therefore absolutely necessary to check the vitamin D status and quickly correct any possible deficit," said the recommendation of the paper published by the University of Hohenheim.</p><p>"Studies are underway to see whether vitamin D helps in COVID-19 infection, but I personally do not believe that this is really the case," says endocrinologist Fassnacht. Nevertheless, he says it is of course useful to carry out these studies.<br></p><p>"I don't want to rule out that there are actually subgroups of people who benefit from an additional vitamin D dose," he says. After all, this has been proven to be the case with a severe deficit.</p><p>In view of the study situation, Fassnacht does not think much of preventive, nationwide vitamin D substitutes. "My belief that the vitamin helps somewhere is very low. But, of course, I can be wrong."</p>
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