Thursday, June 30, 2011

Tudor, Pickering, Holt & Co.: "A conspiracy among gas drillers or those who write about them?" (NYT; CHK; DVN; RRC; UNG)

From the Houston Chronicle:

Following is a commentary from Dan Pickering, Chief Energy Strategist of TPH Asset Management, an arm of the energy merchant bank Tudor, Pickering, Holt & Co.

I had to sigh this weekend as I began to receive emails and phone calls regarding the New York Times article entitled “Insiders Sound an Alarm Amid a Natural Gas Rush.” I encourage you to read this article and its companions.

I don’t agree with many of the conclusions that are drawn, but it does serve to illustrate what critics of the energy industry are saying. And there is no doubt that the author (and evidently the New York Times) are indeed critics.

Having spent most of my professional career writing about energy issues, I understand and appreciate the power of the pen. Writing persuasively and interestingly can make a difference. In a world where the news cycle is 24/7 and people are swamped with information, anecdotes are king. The Times article wields cherry-picked anecdotes like a samurai with a sword.
One snippet is as follows:
“Money is pouring in” from investors even though shale gas is “inherently unprofitable”, an analyst from PNC Wealth Management, an investment company, wrote to a contractor in a February email. “Reminds you of dot-coms”.
Wow. That is good stuff. Captivating. Entertaining. But is it the truth? Or is it an opinion?
I’m not sure that PNC actually has any dedicated energy analysts (I couldn’t find any on their website). So perhaps that cool quote came from a high net worth broker? Maybe he/she is a genius with reams of analysis on shale gas decline. Or maybe the observations are based on reading blogs and internet postings. One can’t tell from the anecdote.

Which should I trust more? – the February 2011 $4.7+ billion purchase of Fayetteville shale gas assets by BHP Billiton or the February 2011 anecdotes from an unnamed broker of unknown quality. Follow the money is usually a good credo.

The New York Times also captured the eye-opening and alarming comments of Deborah Rogers, a member of the advisory committee of the Federal Reserve Bank of Dallas.

Her research indicated Barnett shale wells were declining faster than expected. Fascinating. A Dallas Fed adviser has spotted an important issue. But is it the truth? Or is it an opinion? Would I be just as fascinated if the article quoted Deborah Rogers, proprietor of Deborah’s Farmstead, a small Fort Worth family dairy that produces goat cheese? That’s her bio from the 2008 Dallas Fed press release....MORE