The nature of shale gas/oil production:Shale oil/gas sreservoirs...

The nature of shale gas/oil production:
Shale oil/gas sreservoirs have got low=bad permeability and low production rates in comparison of conventional reservoirs. In the past nobody was keen to produce these fields because of bad economics (10 $/bbl).
Since we got the higher oil price, since the tax for this crappy reservoirs were reduced in the US (tank you Bush and Chaney)it became economic to produce these fields (horizontal wells and hydraulic fracturing is done since 50 and more years - one of the new things: frac stages per well are increased now.).
When you produce unconventionals you are doomed to drill new wells because of the decline. With the first peak production you pay the bills for the rig and frac units. At the end of the day you got 100s or even 1000s wells with very low production but together as a sum you will get a nice production rate per day.

And another important point is statistics: about 30% of the wells (sometimes less like 10% or if you are lucky and good more) hit the sweet spots that means show a higher production rate in comparison to the other production wells. And with these wells you earn the extra money for the shareholders.

Since too many years I am a dissapointed MPO shareholder and today`s shareprice brings tears into my eys. But todays operations only tell me that MPO published an overoptimistic production forecast for the end of 2012. But hey it`s not easy to get oil out of crappy reservoirs and I still think/hope MPO will get their 30% sweet spot rate too.

We produce oil, we generate cash flow and the company will not go bankrupt. So we are already on the lucky side when you invest into small oil/gas companies (see RRS, BUL for example which I bought too).

It always takes longer than you expect - MPO hurry up, and try to publish more realistic production prognosis and not the sweet spot rates from your neighbours as long as you are not sure where to find the sweet spots!