Ha-Ha! Fracking Chesapeake Energy In Dire Fiscal Straits

Here is a story that really warmed my heart, if for no reason than because I am a cynical, cold-hearted SOB. CNN Money has the details:

Can Chesapeake Energy's chief executive pull yet another rabbit out of his hat?

To plug what's been estimated as a $9.2 billion gap between Chesapeake Energy's 2012 capital expenditures and its cash flow, CEO Aubrey McClendon needs to sell assets fast.

Record low natural gas prices have the potential to bankrupt a highly indebted company that was built on $4 natural gas. As natural gas prices hit 10-year lows in recent months, that's put Chesapeake on thin ice.

McClendon has said that Chesapeake plans to sell up to $17 billion in assets by the end of 2013 to fill that gap, but analysts and M&A advisors question whether Chesapeake's assets are worth as much as McClendon claims.

While Chesapeake has valuable assets, it's unlikely to be a takeover target because it also has a heavy debt burden of roughly $10 billion, say analysts.

McClendon and Chesapeake came under fire this week after Reuters reported that McClendon took roughly $1.1 billion in personal loans against his stake in Chesapeake wells.

Low natural gas prices, however, are not the company's only problem:

Yet Argus' Weiss noted that there's only so much that Chesapeake can cut because they could lose leases on production sites if they don't make investments in them. "Since 2001, their capital expenditures have always exceeded their cash flows," said Weiss.

McClendon has built a track record on buying oil and gas wells and selling them for a profit. The company recently sold assets for $2.6 billion to three groups of buyers.

"That's what they're good at, buying stuff and selling it at a higher price," said Subash Chandra, an oil and gas analyst at Jefferies Group.

Hmmm...you know what that business model sounds like? The mortgage, real estate and home construction industries during the housing bubble years. Buying stuff at a lower price and selling it at a higher price is a great business model...until you run out of greater suckers. THEN, you're fucked.

It also doesn't do anything whatsovever to improve the overall economy. Being an expert "flipper" of any asset may make a person rich provided they know enough to bail out before the fall, but all they really are is a scavenger getting fat on the excess of wealth that is sloshing around during times of prosperity.

The real problem for the fracking industry, aside from the numerous environmental concerns about the practice, is that production grew so fast that it caused the bottom to fall out on natural gas prices. Now you know why there was so much pressure on the Federal Energy Regulatory Commission to approve a natural gas liquefaction and export terminal in Texas as I posted about here last week.

In the end, the entire fracking industry appears to be in trouble:

Overall, investors remain a bit befuddled by how Chesapeake accounts for interest expenses and where profits come from.

"They're spending a lot of money and the money they're making seems to be coming from raising more money," said Daniel Yu, a private investor who has been studying the company but does own any shares or short positions on Chesapeake.

Like many of its competitors, Chesapeake must wrestle with a new world of $2 and under natural gas prices. "If gas stays at $2, there's not a single company out there that's prepared for it," said Chandra.

So we allowed the fracking industry to go crazy with little regulation despite having no idea what the real risks of the process are just so it could oversupply the market at put its own future in jeopardy. What a brilliant fucking culture we are.


Bonus: Sounds like the fracking industry lost on Jeopardy

Another U.S. Government Sellout: Fracking For Export

It's bad enough that rampant natural gas fracking is being allowed in the U.S. despite the negative environmental impacts of the process as well as the risk of earthquakes. Because natural gas is difficult to export, however, one could at least argue that fracking is helping to reduce America's dependence on foreign energy sources. But now all of that is about to change thanks to the fact that the U.S. government has become a wholly owned subsidiary of the corporations. Here is CNN Money with the details:

The government approved the first ever natural gas export facility in the lower 48 states on Monday, clearing the way for a project that could be a significant job creator.

But critics argue that, just like the Keystone pipeline expansion, building this project will have environmental impacts far beyond the plant itself. They also say it could raise the price of natural gas in the U.S.

The Federal Energy Regulatory Commission voted in favor of Texas-based Cheniere Energy's plan to build a giant natural gas liquefaction and export terminal at Sabine Pass, which straddles the Texas-Louisiana boarder just north of the Gulf of Mexico.

Well, so much for the argument that fracking is helping to make America more energy secure. Surprise, surprise, that argument is and always was complete bullshit. Instead, it's all about the Benjamins:

Cheniere says the plant itself and the natural gas extraction needed to fuel it will support between 30,000 and 50,000 jobs a year.

The United Sates is currently experiencing a boom in natural gas production, largely thanks to the controversial process of hydrologic fracturing, or fracking for short.

All the big oil companies, including BP, Exxon Mobil, and Royal Dutch Shell, are now participating in the boom.

But the surge in production -- without any way to export it -- has caused a collapse in natural gas prices in the U.S. The gas industry sees exports as crucial to keep the boom going, along with the thousands of jobs the boom has created.

Natural gas can command five times the U.S. price in Asia or Europe. It can be used as a home heating fuel, burned to make electricity, or used in chemical or fertilizer production.

Notice how they lamely try to justify this action by claiming it will create jobs. Not withstanding the fact that, just like with the Keystone Pipeline, the job creation estimates are no doubt greatly overinflated, there is this little problem:

Cheniere's application was the first the government approved. Applications for seven other facilities around the country are pending. If all are approved, the nation could end up exporting one-fifth of its current gas output.

That's something critics are working to stop.

Fracking is a big reason why. Opponents say an increase in gas exports will lead to an increase in fracking.

Fracking involves injecting sand, water and chemicals deep into the ground to crack the rock and allow the gas to flow more freely. Some fear it is contaminating the ground water and leading to earthquakes.

Critics also say it could lead to an increase in natural gas prices in the U.S.
That could harm not only consumers who may pay more for heat, but also manufacturers that could pay more for electricity and materials.

That "could potentially have catastrophic impacts on U.S. manufacturing," said a report on the matter from House Democrats on the Natural Resources Committee.

Which would no doubt destroy far more jobs than will be created in the fracking industry. So all of the risks that the American public is being asked to run by allowing fracking to continue are not even being borne to benefit them, and what's more, their own elected government is the one selling them down the river. Too bad so many of them are hooked on American Idol, Dancing with the Stars and the NFL and will never notice until the day a fracking-generated earthquake drops the roof right down on their fucking thick skulls.


Bonus: Now you know what it is like to live in an exploited colony

Ohio Quakes Linked to Oil-Drilling Waste Pumped Into Wells

Okay, so technically the recent earthquakes in Ohio were not the result of fracking, but check out the key passage in this USA Today article about the quakes:

Oil-drilling wastewater pumped into a northeast Ohio well "almost certainly" triggered 11 minor earthquakes around Youngstown since last spring, including one Saturday, a seismologist tells the Associated Press.

Ohio officials closed four inactive "fluid injection" wells within a five-mile radius of the Youngstown well, which is near a fault that geologists apparently weren't aware of. Pressure from the wastewater caused the fault to shift.

Northstar Disposal Services has used the wells to dispose of brine wastewater from shale oil and gas drilling, which officials said is different from so-called fracking, the Youngstown Business Journal and AP report.

Despite the disclaimer, The Christian Science Monitor writes that the disposal wells -- and the earthquakes -- are related to fracking, or hydraulic fracturing ("How fracking caused an Ohio earthquake").

The seismologist interviewed by the AP, John Armbruster of Columbia University's Lamont-Doherty Earth Observatory, said more minor shakes can be expected throughout 2012.

"The earthquakes will trickle on as a kind of a cascading process once you've caused them to occur," he said. "This one year of pumping is a pulse that has been pushed into the ground, and it's going to be spreading out for at least a year."

"...which is near a fault that geologists apparently weren't aware of..." in other words they were tampering with the geology of a potentially unstable area and had no idea about the risks they were taking. If they had no idea this fault line was there, how many other fault lines in potential fracking zones around the country do they have no idea about?

What is it going to take to stop this insanity, the accidental triggering of a major earthquake in a large metropolitan area? And before you scoff and say that can't happen, I would simply ask this question: how do you know? The science of earthquakes is still not well understood and they have yet to be predicted with any degree of accuracy. For all we know, every day that fracking and other injection techniques being used to extract oil and natural gas is placing us at risk of a major catastrophe. Do you want to be living in the area where the fracking equivalent of the Deepwater Horizon disaster takes place? Because I sure don't.

We should stop this madness once and for all and accept the fact that extending our fossil fuel supplies by a few years is not worth the risk of touching off a major earthquake, especially since we are eventually going to be forced to power down one way or another. But of course we won't. We're on a highway to hell, barreling at top speed with the brake line severed.


Bonus: "No stop signs...speed limits...nobody's gonna slow us down"