Will Wall Street Love Fracking as Oil Prices Fall?

In a ballroom at the Dallas Ritz-Carlton in September, Aubrey McClendon told an investor conference that since leaving Chesapeake Energy last year to start his own company, American Energy Partners, he’s raised an average of $1.6 million an hour. Laughter swept the crowd. McClendon then put up a slide covered with the logos of Wall Street backers that have collectively handed his outfit $13 billion. Among them: KKR, BlackRock, and Apollo Global Management. “Everybody here knows that capital is more easily accessed today than probably at any other point in your careers,” McClendon said.

On the day he spoke, Sept. 4, oil traded at about $95 a barrel. By Oct. 28 it was $80, and falling prices are testing investors’ commitment to the Wall Street-funded shale boom. The Energy Select Sector Index is down 15 percent since the end of August, compared with 2.1 percent for the Standard & Poor’s 500-stock index. Investors’ attitude toward the oil and gas industry has “certainly changed in the last 30 days,” Ron Ormand, managing director of investment banking at MLV & Co., said on Oct. 13. “I don’t think the boom is over, but I do think we’re in a period now where people are going to start evaluating their budgets.”