Dear Ian,

In reading your June 25 online report “Insiders Sound an Alarm Amid a Natural Gas Rush,” it is apparent that the story, with the application of sincerity and more thoughtfulness, would have been titled “Shale-Gas Well Decline-Rate Criticism Unfounded.” You were on the cusp of the real story and missed it; it appears that great effort went into missing it.

Instead of simply pushing readers’ Enron and dotcom buttons via highlighting these words from critics’ e-mails, your report would have explained that the critics’ comparison of these with the shale-gas investment phenomenon is unfounded: Shale gas is a real asset; the Enron, or gas-marketing, bubble and the dotcom bubble were burst upon a lack of fundamental business principle — that is, to operate profitably.

As free and transparent markets work, investors themselves — those trading in and those trading out — define the ultimate boundary of an asset’s value on a daily basis. That boundary is tested 24/7; at times, such as in the case of the dotcom phenomenon, the correction can be gross, yet the dotcom business did not end — it simply was righted, just as the automaker industry found its way in the past century from dozens to the few best and how the home-ownership industry pushed to an ultimate test in this past decade, and tens of thousands more U.S. citizens are now enfranchised with property rights.

And, then, in your report, there are the anonymous critics themselves: They are provided to substantiate a scientific premise, yet the individuals themselves are unsubstantiated and not real assets in your story modeling. In reviewing the pages of e-mails with identifiers — although the remnants of their protocols are easily recognizable by industry — marked out, their commentary is merely that of friendly banter, envy or wonder, when read by one who understands the science behind forecasting decline rates, evaluating demonstrated decline rates from surfaced resources and, then, modeling in rate-of-return economics upon which an investment decision is made.

Your report lacks what would be easily demonstrable, as decline rates are no secret — they are on the surface, literally — and, while sophisticated, consist of simple math. Had the anonymous critics been asked to demonstrate this to you, your report would have been titled “Shale-Gas Well Decline-Rate Criticism Unfounded.” The business of evaluating decline rates is not mysterious and it is not taken lightly by oil and gas producers and by the investment community. Knowledge of it is easily obtained.

And, why provide safe harbor of anonymity for these critics anyway? There is regular debate and diligent effort within the oil and gas industry — as it is a science- and, thus, math-based business — on best practices, from well placement to completion method to reinvesting returns. This debate is conducted internally within oil and gas companies on a daily basis and also in open sessions at professional-organization symposiums and even in oil and gas producers’ regular investor conference calls.

Why, then, does criticism of this have to be secreted with anonymity? Are the critics anonymous because identifying them would show your readers that they lack credentials in contrast with that of members of an industry of hundreds of thousands who drill wells and are accountable for their profitability?

The energy analyst John Olson signed his name to his early 2001 report that said something was amuck at Enron. Alan Greenspan publicly stated he believed there was irrational exuberance in public markets in 1996 and devotes a chapter to his reason for this in his autobiography. Yet, your sources cannot do the same — sign their name to their statements? And, yet, your report’s intent is to affect the value of hundreds of billions of dollars of public and private investment in U.S. shale-gas resources?

These are incongruous.

The market for shale-gas stories is regularly corrected as wells work out and wells don’t work out, and simultaneously by user-market appetite for the natural gas itself. In mid-2008, for example, natural gas prices began to fall, thus the value of both shale-gas and all other gas wells — and not due to any change in the wells’ performance, but upon the application of simple business math, that is X$=X$ and X$-50%=0.50/X$.

In fact, shale-gas stories are out of favor in the short-term-investment marketplace today — not for poor well performance but because of the low price of the product the shales are making so well and, thus, is a contrarian investment opportunity for longer-term investors, who understand decline rates and that there will be gas — and years from now.

Alas, those who seek unsubstantiated journalism get unsubstantiated journalism. Your report suggests “sell your gas holdings now,” while the smart money is buying in.

It’s unfortunate you have burned your very own readers too.

–Nissa Darbonne, Editor-at-Large, Oil and Gas Investor,, Oil and Gas Investor This Week, A&D Watch,, Contact Nissa at