100% Predicted, 100% Realized

 First, for the record: in the ongoing debate across the oil & gas sector—largely a mechanical repetition of legacy talking points—there has been no substantive engagement with the issue of approximately 10 Bcf per day of Permian gas flowing into Henry Hub priced as a by-product. That volume, treated effectively as surplus, has exerted a structural influence on Henry Hub pricing. Given that Henry Hub functions as the continental benchmark, the implications are systemic. The upstream pricing distortion affects capital allocation, reserve valuation, infrastructure planning, and long-term competitiveness across North America.

Yet there has been silence. No governance reckoning. No strategic reassessment. The absence of accountability at the level of officers and directors of Permian or any producers is conspicuous.

The title of this post reflects a self-assessment of the Preliminary Specification and the body of analysis published before and after its August 2012 release. Every structural concern raised since then has been incorporated into that framework as a proposed solution. What the Preliminary Specification anticipated—organizational fragility, capital erosion, systemic underperformance—has since manifested not only as an industry crisis but as a broader challenge to service-sector viability, political and economic independence, and societal competitiveness.

Recent developments underscore the trajectory.

• Liberty Energy has signaled a strategic pivot toward powering AI infrastructure as a core future growth vector—an understandable diversification move from a leading frac operator that has endured sustained margin compression from producer capital discipline.

• Harold Hamm of Continental Resources has halted drilling in the Bakken and redirected attention toward Argentina.

• Meanwhile, majors are consolidating long-life, conventional positions in North Africa and the Middle East. TotalEnergies and ConocoPhillips have secured long-term extensions in Libya, Chevron has entered the country, and Iraq is again positioned as a strategic anchor.

The rationale presented publicly is straightforward: to prevent production decline in the 2030s, large-scale, durable conventional resources are required now. Libya and Iraq offer scale, existing infrastructure, and long reserve lives.

However, these are also firms built on shale expertise. When leading shale producers collectively pivot capital away from North America within a compressed time frame, it is reasonable to ask whether this is cyclical repositioning, a signal of structural exhaustion or leadership failure.

The hypothesis advanced in the May 2004 Preliminary Research Report was that producer profitability was largely financial and specious in nature—dependent on continuous external capital rather than internally generated. That premise has held and therefore several consequences logically follow:

• Investors eventually recognize the asymmetry and withdraw.

• Cash flow proves insufficient to sustain normal operations.

• Service providers absorb the initial contraction.

• Field capacity is cannibalized, degrading capital structures.

• Deliverability maintenance falters.

• Dividend sustainability erodes.

• Leadership exits, leaving hollowed enterprises behind.

Instead of exiting, leadership appears to be redeploying geographically—retaining authority, capital control, and governance positions while shifting exposure offshore. That choice raises additional risk considerations. Jurisdictions such as Libya and Iraq present geopolitical, regulatory, and accountability variables materially different from North America. Two years from now, today’s public positioning will be evaluated against any performance reality.

The broader picture is sobering. Over two decades, the industry was entrusted with what may have been the largest concentrated endowment of wealth in modern history—North American shale. The outcome, measured in capital efficiency, balance sheet durability, service-sector resilience, and pricing stability, reflects deep structural misallocation. In other words, absolute destruction.

The absence of financial engagement with People, Ideas & Objects has consistently identified these systemic failures is not incidental. It suggests that unaccountability is embedded in the culture and governance model itself, deliberately.

The concern now extends beyond North America. If the structural deficiencies that impaired shale capital are exported into fragile jurisdictions, the consequences will not remain contained.

This is no longer a cyclical downturn narrative. It is a governance, accountability and capital-structure failure of historic proportion.

Dividends, Buy-Backs, Or Cash Flow?

 It is difficult to understand how producers have allowed their essential service sector to deteriorate so severely. As the industry’s primary actors, they know full well that the tier-2 and tier-3 ecosystem is not peripheral—it is economically interdependent. Producer revenues are not created in a vacuum. They are made possible by a geographically dispersed, technically sophisticated service network that enables operations at continental scale. By forcing that network to absorb the entire impact of every boom-bust cycle, producers have systematically eroded its capacity, talent base, and capital structure.

Service Sector Liquidation

This follows on Liberty Energy Ltd's fourth quarter 2025 report which saw their highlights for the quarter fall within the domain of supplying energy to Artificial Intelligence installations. Liberty is the largest capacity frac operation. Chris Wright, the founder of Liberty is President Trump's Energy Secretary. Or Texas Pacific Land (TPL) partnership with Bolt Data & Energy to build large-scale data center campuses on its West Texas land, supported by a $50 million U.S. water supply rights and investment. Are these consequential?

The damage is now structural. Service-sector investors have largely concluded that re-entering the industry under the current model is economically irrational. Having financed and built the infrastructure once, only to watch its economics repeatedly destroyed by cyclical collapse, they are unwilling to recapitalize it again without credible reform and meaningful producer skin in the game. Suppliers will no longer participate in a system that systematically externalizes downside risk to them while producers capture all the upside.

The dominant producer playbook—aggressive cost compression during self-inflicted downturns—mistakes a tactical tool for a strategy. Cost discipline is necessary to root out inefficiency; it is not a substitute for an operating model. Sudden, drastic cuts to quarterly drilling programs ripple violently through the service complex, destroying equipment fleets, workforce continuity, technical capability, and regional readiness. These are not frictionless adjustments. As shale decline curves steepen and global energy demand continues to grow, a chronically weakened service sector is becoming a binding constraint on supply responsiveness. Mobilization, staffing, skills development, and operational reliability are becoming materially more difficult—and far more expensive. The long-term risk is a permanent impairment of North American supply capability.

A real solution requires institutional redesign, not another round of incremental austerity. Implementing the Preliminary Specification would be a disciplined, market-based effort to build the institutions that stabilize both producers and the service sector. Without that architecture, volatility will keep destroying productive capital.

To Dividend, or Keep The Lights On

The financial history of the past four decades reveals a deeper governance failure. When the industry quietly shifted its primary performance metric from profitability to cash flow, the consequences were entirely predictable. Capital allocation discipline collapsed. Spending—often funded by outside capital—became conflated with value creation. Earnings strength was mistaken for revenue growth, while underlying competitiveness eroded. The cash flow now being generated is simply inadequate relative to the capital intensity and risk profile of the business.

By 2015, investors had effectively closed the spigot on incremental equity funding. The implicit ATM machine was shut down. Large institutions did not sell everything; many still hold significant positions. But they made it unmistakably clear they would no longer finance structural underperformance.
Recent fourth-quarter 2025 disclosures bring the tension into sharp focus. Major institutional holders—BlackRock, Citadel, Bridgewater, and others—continue to maintain substantial oil and gas exposure, with many producers 70–80% institutionally owned. Officers and directors are under intense pressure to sustain elevated dividends and share buybacks, the classic signals of high-return, competitively advantaged businesses. Yet deteriorating operating cash generation has made those distributions increasingly dependent on working-capital liquidation. Sector-wide working capital has been in structural decline since 2015, eroding financial resilience. The growing talk of tapering buybacks and dividends is simply recognition of that reality.

The industry now faces a binary choice: continue managing financial optics, or undertake genuine structural reform by developing and implementing the Preliminary Specification. The latter path rebuilds competitiveness, restores profitability as the central metric, and stabilizes the service ecosystem on which production ultimately depends.

Every dollar of capital producers must now deploy is to rehabilitate their own performance. And is capital that, by itself, will not deliver a return to shareholders. The window for incrementalism is closing. Without fresh capital, without leadership, and without a functioning organizational model, the best days of the North American oil and gas industry may already be behind us.

A Title, a Deadline and a Date

We have been focused on developing a paper first announced on November 27, 2025. I am pleased to have been able to turn full attention to this work. The subject matter is necessary for the industry, integral to the Preliminary Specification, and fundamental to securing producer infrastructure for the future.

We are now in a position to formally announce both the title and publication date. The paper will be released on Friday, March 27, 2026, under the title:

A 21st Century Marketplace Vision for Oil & Gas:

People, Ideas & Objects 

Preliminary Specification

with

Autonomous Asynchronous Transaction Orchestration

The four-month preparation period reflects both the complexity of the problem set and the rigor required to address it credibly. This work is intended to move the discussion beyond incremental reform toward a structurally modern marketplace framework aligned with 21st-century operational, financial, and governance realities.

Billions and Trillions, Again.

 Delivering bad news runs counter to my generally optimistic outlook, so I will begin there. I have updated the natural gas losses for the 2025 calendar year. The result is an additional $364.8 billion in lost value across North America, bringing cumulative losses this century to $5.035 trillion. For ease of communication, we will round that figure to $5 trillion. That rounding is intentional and strategic. We will not round the annual loss, as doing so would imply producers lost approximately $1 billion per day, a distinction they would rather avoid. Accordingly, the precise figure—$364.8 billion—must be written down and repeated accurately. We are well aware of how sensitive producers can be about such matters.

To compound the issue, total realized natural gas revenue this century amounts to $3.56 trillion, substantially below the $8.6 billion that could have been achieved under the Preliminary Specification. The opportunity cost is neither theoretical nor abstract; it is documented and cumulative.

These losses are calculated as the differential between the realized natural gas price and the price that would, should, and could have been achieved absent systematic self-inflicted price dilution by producers. Historically, natural gas traded on a heating-value equivalency with oil: six thousand cubic feet of gas to one barrel of oil (6:1). Both commodities contain equivalent energy content, and prices reflected that reality, with modest deviations.

That pricing discipline collapsed following the entry of shale, beginning in July 2007. Since then, natural gas prices have deteriorated dramatically. In March 2024, the ratio reached an extreme of 52.4:1, and since July 2007 has averaged 19.57:1. This scale of price destruction reflects a complete absence of pricing or market strategy. That this has persisted for nineteen years—fourteen of which coincided with the availability of a clear solution in the form of the Preliminary Specification—is indefensible. The “drill and produce” business model was predicated on the assumption that it could not fail. It did.

For fourteen years, People, Ideas & Objects has endured a form of purgatory, promoting the Preliminary Specification to industry participants who demonstrate little understanding of business fundamentals. Along the way, we have documented failures that show a profound disregard for historical record and shareholder capital. The origin of the $5 trillion natural gas loss became unmistakable when I examined the LNG trade a few years ago.

Producers sell natural gas to LNG facilities and shippers at Henry Hub prices. Those prices, distorted by chronic shale overproduction, have been among the lowest in the world. LNG buyers purchase gas at Henry Hub—$1.55 per thousand cubic feet in March 2024—liquefy it, ship it at a cost of approximately $8.00, and sell it into global markets at prices that have, at times, exceeded $50. The value transfer is staggering.

Independent validation of this dynamic appears in the litigation between Shell, BP, and Repsol and Venture Global. Shell and Repsol lost to Venture Global; BP’s decision went against Venture Global. These arbitration outcomes involved multi-billion-dollar claims, with Venture Global disclosing in its most recent annual report that the Shell decision alone could represent an additional $90 billion in revenues. Identifying trillion-dollar value dislocations does not require years of analysis—sometimes it takes five minutes of clear thinking. What remains inexplicable is why producer officers and directors appear unwilling or unable to engage in the actual business of oil and gas.

For years, I have challenged producers to stop treating associated gas from the Permian as a byproduct. I have urged them to consider alternatives to selling gas at deep discounts—or even negative prices. The Permian is the second-largest shale gas producer in the United States. This is not waste gas; it is a valuable resource that is being deliberately destroyed. I have raised this issue repeatedly on this blog. The response has been silence.

Perhaps LNG buyers have paid closer attention. If so, producers may eventually discover that they misplayed their hand and will look for someone to sue in order to rehabilitate their image.

Henry Hub

This point bears repeating. Natural gas is produced in the Permian, both from gas wells and as associated gas from oil wells. Regardless of origin, it is delivered to Waha Hub, then transported via pipelines and facilities into Henry Hub, the continental point of sale for natural gas. Every price on the continent is netted back from Henry Hub.

By dumping so-called “byproduct” gas into the pricing nexus for all North American gas, Permian producers are exerting a massive downward force on prices. This practice must stop. Reinjection alone would be cheaper than the value destruction currently underway. Overproduction is unprofitable production. Oil and gas are non-renewable resources, and through convenience and institutional inertia, trillions of dollars in value are being sacrificed.

Higher gas prices would benefit producers immediately through revenues, but the larger impact lies in reserves valuation. As prices rise, reserves increase in value, and probable and possible reserves migrate into proven categories. This increases enterprise value, even if it does not appear on the balance sheet. Accounting measures performance, not value—a distinction producers continue to misunderstand.

The critical question is how much of the $5 trillion loss is directly attributable to dumping associated gas into Henry Hub. The answer is a substantial portion. That said, the loss calculations are benchmarked to realized oil prices, which themselves have been depressed by chronic oil overproduction. Oil may well have its own parallel $5 trillion reckoning, though we lack an objective counterfactual for what oil prices should have been.

Despite this, producers continue to insist they are “price takers,” not price makers, filing quarterly and annual reports with rationalizations to justify the continuation of failed policies. Even Harold Hamm felt compelled to take a swipe at this line of thinking—just before boarding a ship to Argentina.

The record, however, is unambiguous. Price takers do not destroy trillions of dollars in value. Only price makers who refuse to acknowledge their responsibility can do that.

They've Abandoned Their Responsibilities

 As Artificial Intelligence advances, it is becoming increasingly evident that electrical energy is emerging as a binding constraint on its development and deployment in the United States. Electrical demand is, at its core, energy demand—no different in economic substance from oil and gas demand. As aggregate U.S. energy requirements rise, the strategic question is not whether demand exists, but why domestic supply leadership continues to retreat from it.

Against this backdrop, it is difficult to reconcile the behavior of self-described “shale innovators,” such as Continental Resources, abandoning U.S. shale in favor of jurisdictions such as Argentina. This is occurring precisely at a moment when domestic energy demand—driven by data centers, electrification, and industrial reshoring—should represent a structural advantage rather than a liability.

People, Ideas & Objects anticipated this outcome years ago. The long-term financial performance of U.S. producers has been consistently destructive, not cyclical. Since the inception of shale, the industry has accelerated and intensified systemic overproduction, compounding the deficiencies of the conventional business model rather than correcting them. The result has been predictable: sustained capital destruction, operational instability, and growing political friction—each of which I’ve documented extensively.

At this stage, the manner in which producers choose to exit—through divestiture, privatization, or geographic relocation—is largely immaterial. What matters is that the existing leadership model has reached its terminus. The industry now requires new leadership, a new organizational framework, and a fundamentally different operating logic. To that end, People, Ideas & Objects has developed the Preliminary Specification.

Through abdication, inaction, unresolved conflicts, and self-selection, the authority to act has effectively moved beyond incumbent producer leadership. Decisions regarding whether and how to proceed—particularly with respect to funding and adoption—now rest outside my direct visibility or control.

What is clear, however, is that continued delay carries national consequences. If the United States waits for legacy leadership—explicitly including Harold Hamm—to reverse course, the country will fail to secure affordable and competitive domestic energy supply. The downstream implication is a loss of U.S. economic leadership at precisely the moment when an industrial transformation, driven by Artificial Intelligence and electrification, should be a source of dominance rather than constraint.

This outcome is not the result of a lack of solutions. Shareholders raised concerns for over a decade. Viable alternatives have existed for nearly fifteen years. Offering solutions that would benefit producers financially, however they were summarily dismissed.

After years of disregarding shareholder discipline—culminating in privatization in Continental Resources instance—complaints that U.S. shale “cannot make money” ring hollow. The inability to generate returns is not a market failure; it is a strategic one. Domestic energy demand represents opportunity. Treating it as a reason to exit reflects a failure of vision, not economics.

The price system has been transmitting this signal since 1986. It has consistently indicated that the prevailing producer model does not generate sustainable profit. Rather than respond, the industry constructed an internal accounting mythology to justify continued capital misallocation. The result was the destruction of shareholder value and, ultimately, the erosion of the industry’s credibility. 

Profit and loss exist precisely to prevent this outcome. They signal not only where capital should be deployed, but the urgency and scale of that deployment. Ignoring those signals does not suspend economic reality; it merely delays its consequences. 

From a historical standpoint, the failure of North American oil and gas leadership constitutes one of the most comprehensive management breakdowns in modern industrial history. This outcome was not driven by regulation, politics, or subsurface constraints. It was self-inflicted—rooted in a persistent refusal to adapt organizational structures, economic models, and decision-making frameworks to changing realities.

For example, I have consistently argued that associated gas can no longer be treated as a secondary byproduct. Material volumes of gas are transported out of the Permian Basin and ultimately priced at Henry Hub. Despite raising this issue repeatedly, the industry has shown little interest in addressing the implications. That indifference is precisely what is concerning.

The relevant facts are straightforward:

• While I do not have precise visibility into associated gas volumes alone, total natural gas production exiting the Permian exceeds 10 Bcf per day.
  
  

• Once commingled, so-called “byproduct” gas is entirely fungible with gas produced from dedicated gas wells. Henry Hub makes no distinction—because there is none.
  
  

• This practice contributes to structural oversupply at Henry Hub, driving wide differentials and, at times, negative pricing.
  
  

• Henry Hub remains the clearing price and final settlement point for North American natural gas markets.
  
  

• By definition, Permian gas volumes therefore influence pricing across the entire North American gas complex.

Treating associated gas as waste or incidental production is no longer a defensible assumption; it is a market distortion with continent-wide consequences.

There remains an opportunity to change course—but not under the assumptions, governance structures, or leadership paradigms that produced the current outcome. The Preliminary Specification is presented in that context: not as an incremental optimization, but as a structural alternative. I have identified the systemic failures and outlined practical solutions to address them.

I correctly anticipated that incumbent leadership would ultimately abdicate responsibility and exit. What I did not anticipate was the audacity to relocate to Argentina in order to preserve control over resources while abandoning accountability at home. That behavior is not leadership. It is precisely the failure mode the industry must move beyond if it intends to remain viable.

Trust and Credibility?

 The producer officers and directors have entangled themselves in what appears to be an unprecedented conflict of interest, evident in their shifting narratives over the past decade.

On one side, they've consistently downplayed earnings prospects to investors, blaming government policies (e.g., under the Biden administration), regulatory hurdles, and a litany of external scapegoats—while insisting that aggressive drilling ("drill baby drill") was the path to prosperity if only the president would permit it. Yet, following President Trump's election, that same "drill baby drill" mantra has quietly faded, with producers now claiming it's neither desirable nor viable.

Investors had every reason to exit in 2015, when accounting irregularities and lack of accountability became glaringly apparent. A viable alternative—the Preliminary Specification from People, Ideas & Objects—was already available by 2012, offering a framework for true profitability through decentralized, user-centric operations and proper cost allocation.

A decade later, financial statements paint pictures of wildly profitable operations, yet the industry continues to burn through enormous volumes of cash. North America's multi-trillion-dollar oil and gas sector is effectively operating on dramatic losses disguised as gains.

The recent finale of "Landman" drove this home: Producers project an image to the public of effortless wealth—raking in fortunes in weeks that dwarf ordinary paychecks—much like the hype of the late 1990s, when promoters touted "millions" in natural gas production, conveniently omitting that it meant millions of cubic feet, not dollars. Investors were sold visions of "free money" once production kicked in, only to face endless surprises and excuses. The show portrays producers as business superheroes, echoing the glamour of "Dallas's" J.R. and Bobby Ewing in the late 1970s. We all remember how that saga ended—someone shot J.R.

Reality bites hard. Savvy investors have long since protected their interests and moved on. Consumers, however, may soon face a rude awakening: either prices crash, potentially bankrupting the industry (a self-inflicted wound, as forensics would likely rule it a suicide), or they skyrocket, leaving producers stunned and unresponsive when asked for solutions.

Harold Hamm's actions at Continental Resources exemplify this shift. After taking the company private in 2022 to escape public market pressures and pursue aggressive growth, Hamm has now pivoted dramatically. In recent weeks (January 2026), Continental announced expanded investments in Argentina's Vaca Muerta shale—acquiring non-operating interests in multiple blocks from Pan American Energy, following earlier deals—and plans $100–$200 million annually to scale it into a core play. Meanwhile, Hamm has halted all drilling in North Dakota's Bakken shale for the first time in over 30 years, citing "margins basically gone" at current oil prices (around $58–$60 per barrel).

This may mark a symbolic beginning of North American producers' exodus from domestic basins. Expect a broader rush to international opportunities like Vaca Muerta, where costs and prospects appear more favorable and offer some shade from North American consumers.

Shale remains one of the greatest resource endowments ever bestowed on a nation—especially arriving at the dawn of an intellectually driven industrial revolution in North America, amplified by AI, data centers, and energy demands. Yet leaders like Hamm and other North American producers have squandered it: turning potential wealth into self-destruction through overproduction, poor accountability, and cash hemorrhage. Investors recognized the trajectory in 2015, withdrew capital, and alternatives like the Preliminary Specification existed to make shale truly dynamic, innovative, accountable, and consistently profitable.

This track record disqualifies current officers and directors from continued leadership. Their only unqualified success has been enriching their personal bank accounts.

A renewed, focused approach to shale is essential. Following reorganization of these producers, a strategy rooted in American economic dynamism could deliver abundant, affordable, secure oil and gas to North Americans within a decade—the original promise of shale. Unthinking, bloviating leadership has failed spectacularly and predictably.

Producers like Hamm might consider apologizing—to President Trump for misguided advice and to the stakeholders they've now abandoned. Consumers will soon demand reliable producers. Action is needed immediately to restore responsible leadership, or the industry risks proving there never was any accountable or responsible leadership.

Action is imperative: We must begin funding the development of the Preliminary Specification immediately. The current producer leadership has effectively stepped off the stage—abandoning North American shale basins, redirecting capital abroad, and turning their backs on the industry they once dominated—yet they continue to cling to authority, responsibility, and control over the remaining resources. Reliance on this status quo is no longer delusional; it is suicidal. When I launched this work in August 2003, the overwhelming majority who dismissed me as crazy were the very bureaucrats I had sworn to eliminate. Their isolation tactics only confirmed the necessity of the mission. I am at peace with the personal sacrifice and suffering this path has demanded. The first five years were the hardest, but one adapts—especially when the goal is to solve what the industry has long treated as unsolvable. Today, that “unsolvable” problem must be solved. The Preliminary Specification offers the only credible path to make shale truly dynamic, innovative, accountable, and consistently profitable. Delay only deepens the damage and risks leaving consumers without reliable, affordable energy. The time for excuses is over. Our funding must start now.

Until Such Time as...

 ...I can confirm I've been accepted back into the X community without conditions. Ill be cross posting my X posts back to the blog to ensure the community receives the message. 

The ongoing discussion within the oil and gas industry regarding breakeven costs remains both confusing and fundamentally flawed, a topic I explored in my recent Wednesday X post and Monday blog entry.

World Oil X Post

The central flaw in this narrative lies in the misapplication of historical costs. A recent WorldOil article, for instance, claims that the shale sector has achieved a 60-75% cost reduction, translating to savings of $30-$40 per barrel and purportedly saving consumers $3 to $4 billion per day.

This claim inaccurately conflates historical costs with prospective savings. A capital expenditure of $10 million made three years ago remains a $10 million fact today; it is a cost already incurred. The reported 60-75% reduction in drilling and fracking costs, while a valid figure for a company like Liberty, applies only to future wells, not to the wells already drilled and paid for. Therefore, past operations cannot retroactively claim these percentage-based cost savings.

Furthermore, producers must account for the full cost implications of selling below their actual breakeven point. When a property operates at a loss, those unrepaid costs are added back into the total expenditure that must ultimately be recovered. I assert that my calculated figure of $129 per barrel of oil equivalent (boe) is a more defensible breakeven value than the industry's commonly cited $30-$40 range. At today's price of $61.79, this discrepancy means an additional $67.21 ($129 - $61.79) in cost must be recovered for every barrel produced to truly reach breakeven.

Such claims of financial wonders validate the wisdom of oil and gas investors who abandoned the sector. A decade has passed since then, prompting the question: which is worse—being abandoned by investors, or continuing to promote such fables ten years later?

Breakeven Mis-belief

 The energy sector is once again engaged in the "break even" debate, intensified by declining oil and gas prices and the sustained reality of systemic overproduction. This situation compels producers to justify their operations despite having “restructured” their cost base through consolidation, creating a financially tenuous position. This analysis suggests that reported "break even" figures for Permian Basin oil and gas production may be significantly understated. People, Ideas & Objects are rightly questioning Reported Breakevens

Major consolidated producers are currently claiming WTI breakeven prices as low as $40 per barrel, with ExxonMobil stating its core "premium" Permian inventory (post-Pioneer acquisition) has a WTI breakeven in the low-$30s, and some of its best acreage approaching the high-$20s on a half-cycle basis.

Key Caveats on Producer Claims (ExxonMobil Example):

• These are development breakevens (NPV-positive at 10%), not corporate cash breakeven.
  
  

• They assume optimal conditions: full-field development, long laterals, pad drilling, and integrated infrastructure.
  
  

• Crucially, they exclude sunk acquisition costs, such as the $65 billion paid for Pioneer Natural Resources.

To illustrate the potential understatement, consider a representative $10 million well (drilling, completion, equipping, and takeaway capacity) on a 15,000-foot lateral. While initial production may be high (e.g., 1,100 boe oil and 900 boe gas), steep decline rates (60–70% in the first year, 30–40% in the second) can drop production to approximately 100 boe/d within a few years, without subsequent interventions.

Several key cost exclusions and problematic assumptions lead to an artificially low breakeven point:

1. Selective Criteria: Breakeven is often structured for payback within the first two years based on selective cost inclusion.
   
   

2. Excluded Operational Costs: Royalties, operating expenses, and corporate overhead are frequently omitted.
   
   

3. Acreage Bias: Calculations are based on premium acreage and may not represent the average shale well.
   
   

4. Associated Gas Valuation: Associated natural gas is valued at the Henry Hub benchmark, which ignores wide regional differentials. When realized prices approach zero or become negative (e.g., sold/disposed of at –$0.25/Mcf), a significant cost is created in terms of breakeven. If $5.00/Mcf is a profitable price the loss will be $4.50 + $0.25 = $4.75 requiring ($4.75/$0.50) 9.5 profitable natural gas volumes to cover the loss. Material downward adjustments in natural gas reserves are not considered in producers breakeven calculations.
   
   

5. Exclusion of Acquisition Costs: Acquisition premiums are not allocated to individual wells. For example, ExxonMobil's Pioneer acquisition premium amounted to approximately $90,210 per daily boe of production at the time. Allocating a proportionate share of this premium to a new well—factoring in its rapid production decline—would drastically increase the effective capital cost.

Recalculated Breakeven Example:

By integrating a proportionate share of the Pioneer acquisition premium ($41.5 million) into the capital cost of the model well, the total breakeven target for capital alone is estimated to be $129.21 per barrel for the total oil volumes produced (estimated ultimate recovery of 386,946 barrels), assuming the monetary value of natural gas production is a wash. This figure is substantially higher than commonly quoted prices. Peer Comparison of Claimed Breakevens (Late-2025)

Peer Comparison of Claimed Breakevens (Late-2025)

• ExxonMobil.
  
  

• Claimed Breakeven (WTI): $30–35 (Best: high-$20s)

• Narrative & Edge: "Manufacturing mode shale." Post-Pioneer scale, integrated infrastructure, lowest unit costs.

• Strategic Risk: Diminishing returns if development pace outruns geology.
  
  

• Chevron.
  
  

• Claimed Breakeven (WTI): $35–40 (Best: low-$30s)

• Narrative & Edge: Capital discipline over growth, optimizing for free cash flow. Conservative spacing, lower decline profile.

• Strategic Constraint: Smaller Tier-1 inventory relative to Exxon.
  
  

• ConocoPhillips.
  
  

• Claimed Breakeven (WTI): $35–40 (Best: low-$30s)

• Narrative & Edge: Portfolio optimizer; Permian competes internally with other basins. Strong execution consistency, disciplined reinvestment rate.

• Strategic Constraint: Permian is not a strategic centerpiece, limiting scale efficiencies.
  
  

• Diamondback Energy.
  
  

• Claimed Breakeven (WTI): $30–35 (Best: high-$20s)

• Narrative & Edge: "Pure-play efficiency leader." Best-in-class well execution, short decision cycles.

• Strategic Constraint: No downstream integration, higher volatility exposure, capital access sensitivity.

Skeptical Take: All major producers focus their quoted breakevens on "Tier-1" inventory, neglecting the higher costs and diminishing returns from "Tier-2+" acreage exhaustion. While Exxon benefits from scale, pure-play operators like Diamondback often achieve superior economics on a well-by-well basis.

Executive Summary:

• Exxon is positioned to have the lowest-cost shale manufacturing system due to scale.
  
  

• Diamondback is often considered the best operator in terms of pure execution efficiency.
  
  

• Chevron is focused on capital stewardship and lower corporate risk.
  
  

• Conoco is the best portfolio allocator, managing the Permian within a diverse portfolio.

Greater transparency and the inclusion of all relevant costs—particularly acquisition costs and realistic associated gas valuation and volumetric adjustments—are essential for a more accurate assessment of shale profitability and sustainability.

In Conclusion:

The consistent failure of producers to address their poor financial performance is striking. People, Ideas & Objects has observed producers, over decades, pivot from one excuse to another, with the only constant being the coordinated delivery of their message.

As we've documented, they have demonstrated an inability to generate profit. Significant losses stemming from a lack of genuine profitability have impacted an industry soon to be crucial in supplying the energy that fuels our progress. This responsibility has been evident, yet deliberately ignored. The officers and directors of these producer firms—the only ones with the authority, resources, and duty to act—have consistently failed to do so.

Consequently, People, Ideas & Objects offers a material value proposition, repeatedly validated by the inaction of producer officers and directors. The established history shows their decade-plus inability to effectively respond to investors. What we see as a positive sign is that the need for change is widely recognized, and the multi-decade adherence to the current status quo is proving fatal to their current administration.