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Lifecycle shale economics: where instincts end and analysis begins

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Report summary

Shale projects have a certain stigma around them. Over a decade into the US shale boom, many investors still doubt the value proposition. The recurrent question is whether operators can truly generate acceptable full-cycle returns when every single cost is accounted for. We studied a number of historic shale projects in their entirety to help answer the question. By focusing on shale assets that were sold over the past few years, we are able to put clear figures and hard data around the themes that many investors and E&Ps fear regarding shale value: expensive land can easily ruin unconventional project metrics and even render plays that have rock bottom development well breakevens uneconomic on a full-cycle basis.

What's included

This report contains

  • Document

    Lifecycle shale economics: where instincts end and analysis begins

    PDF 547.83 KB

Table of contents

    • Catalyst for the analysis
    • Full-cycle returns vs half-cycle metrics: contrasting messages
    • Asset disposals provide a market valuation for full-cycle value creation analysis
    • Value destruction is a common theme in the deals selected
    • Full-cycle acreage valuation lags current M&A metrics
    • What strategies created the most value?
    • Portfolio optimisation and financial stretch were key factors in selling out
    • Some projects sold had a big longer-term strategic impact
    • Implications for ongoing shale projects today: timing remains critical
  • Appendix

Tables and charts

This report includes 5 images and tables including:

Tables

  • Summary of deals studied

Images

  • Commonly referenced half-cycle returns
  • Cumulative cash flow including sale proceeds
  • Acreage value creation or destruction
  • Theme groupings

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