by Max Brantley
Arkansas isn't specifically mentioned in this major New York Times article, but it might as well be. The crazy speculation, over-exploration and resulting bust that is now besetting the gas industry included a heavy Chesapeake Energy play in Arkansas, to name just one fast-and-loose production company whose go-go times have gone-gone. Fortunes have been made and lost. And the plunge in gas prices from exuberant, money-losing production has been a boon in many ways. (Some electric companies are converting to cheaper gas from dirty coal for example; though not the power companies that do business in poor ol' Arkansas.) But ...
The drillers punched so many holes and extracted so much gas through hydraulic fracturing that they have driven the price of natural gas to near-record lows. And because of the intricate financial deals and leasing arrangements that many of them struck during the boom, they were unable to pull their foot off the accelerator fast enough to avoid a crash in the price of natural gas, which is down more than 60 percent since the summer of 2008.
Although the bankers made a lot of money from the deal making and a handful of energy companies made fortunes by exiting at the market’s peak, most of the industry has been bloodied — forced to sell assets, take huge write-offs and shift as many drill rigs as possible from gas exploration to oil, whose price has held up much better.
Rex W. Tillerson, the chief executive of Exxon Mobil, which spent $41 billion to buy XTO Energy, a giant natural gas company, in 2010, when gas prices were almost double what they are today, minced no words about the industry’s plight during an appearance in New York this summer.
“We are all losing our shirts today,” Mr. Tillerson said. “We’re making no money. It’s all in the red.”
In other words, those thinking the exploration bubble in Arkansas won't ever end might want to read this article closely. If nothing else, read it for more background on Aubrey McClendon, the Chesapeake dealmaker who was treated like a deity in Arkansas by those prone to sanctify businessmen, no matter how shady or rapacious.