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Shale gas reserves aren't what they used to be ...

The Wolf Has Arrived.

On its business page, the Pittsburgh Post-Gazette reports what we've been expecting since two years ago: Fracking companies are declaring big losses ("impairments") on their Marcellus acreage.

“Natural gas stocks have been one of the weakest segments of the broader market over the past five years, as runaway supply growth from shale productivity gains and associated gas growth has overwhelmed demand,” analyst Arun Jayaram of JP Morgan wrote last week in an analysis of EQT Corp.

Over the past six months, while the S&P 500 index climbed about 11%, the S&P exploration and production index dropped by 17%.

CNX and EQT are both members of that oil and gas company index. Both are down compared to last summer, but while CNX’s stock slid 3% during that time, EQT is down a whopping 55%.

EQT closed at $6.19 per share Thursday. CNX closed at $7.01.

That’s been the Catch-22 of the U.S. oil and gas renaissance. Drillers aren’t running out of assets, but they are running out of cash since shareholders and banks shifted from demanding growth to demanding returns.

"Drilling programs are threatened even for those with low break-even thresholds," Vincent Piazza, senior analyst at Bloomberg Intelligence, wrote in a note last week.

And, lest anyone dismiss these write-downs as mere "paper losses," remember that all the boom-time profits in the industry were "paper profits," too. As the drillers have burned through cash (and our communities) they declared "profits" based on the acquisition of high-priced reserves -- reserves which they must now admit to having overvalued.