As anyone who lived through the rise and fall of the dot.com bubble can attest, the emergence of new, poorly understood technologies in the investment market creates opportunities that can be extraordinarily exciting, or extraordinarily painful. In many cases, even the most savvy investors and industry players are flying blind as the new economics, processes, competitors, and markets take shape. New technology and new capabilities, harnessed by creative minds, explode into the market with business plans and prospects that attract investors who don’t want to be left behind on by “next great thing.” But, as the market is inevitably culled, companies that seemed so uniquely promising disappear into the “ether“, along with sizable investments.

When technologies are new, money is cheap, Investors are chasing every promising Cinderella story, and every investment opportunity feels like it’s bound to be a winner in the short term. Over time, reality sets in as it becomes clear that the market can sustain only a limited number of participants. Weaker hands must shake out, as stronger hands remain at the table through consolidation and bankruptcy. That rude awakening – of the same type that punished overzealous investors in the telecom and computing bubbles – is now creating some sleepless nights for shale investors.

Observers of industrial innovation have long rightly suggested that many of the same factors that revolutionized computing and communications are now at play in the energy sector. Energy production, delivery, and consumption is being transformed by the advent of renewable generation, energy storage, fuel cells, carbon capture, and fossil fuel exploration and production techniques that have made vast amounts of oil and natural gas readily available in North America.

As these technologies begin to reach their near term maturity, companies operating in markets that have hardness them are beginning to face the same factors that brought about the demise of so many of their tech industry predecessors: competition, cost cutting, and tightening margins. There is plenty of room in America for a robust oil and gas exploration and production sector, but tighter profit margins may mean that there is not room for all of today’s players, especially if they expect to live with the profits and largesse of decades past.

As this article explores, we may be approaching a dramatic consolidation of oil and gas players which, as we’ve seen many times before, creates danger and opportunity. For companies operating today, the future is uncertain, but many of them are taking steps to ensure that their financial houses are in order. Armies are organizing and the money is beginning to pick sides. A few names we know will be standing larger and stronger when the dust settles, many more will join their dot.com brothers on the pyre. Place your bets.

https://www.houstonchronicle.com/business/energy/article/Texas-shale-and-Silicon-Valley-are-more-alike-14541209.php