Multibillion-dollar write-downs on North American shale gas assets have clobbered international energy giants like Royal Dutch Shell, BP, BG and BHP Billiton over the past two years. Other majors such as Exxon Mobil and Chevron have escaped the ugly impairments despite making similarly large investments. Why is this? Write-downs — reducing the book value of an asset because it is overvalued compared to its market value — usually imply a company has overestimated the potential of an investment. Weaker-than-expected prices or production capacity — or a combination of both — are normally to blame. That such impairments have been prevalent during North America's shale gas revolution is unsurprising: The era has been marked by intense and expensive M&A activity and a sharp drop in spot Henry Hub prices — from a record average of nearly $9 per million Btu in 2008 to $3.84 in 2013, up about $1 from 2012 (WGI Feb.22'12).
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