Demand for oil service companies surges in Permian Basin
Bryan Sheffield isn’t worried about a land-price bubble in West Texas’s booming Permian Basin oil field.That sounds like a recovery in the works. I expect to hear about a shortage of fast food workers again soon in the Midland-Odessa area. The price being paid for an acre is higher than anything I have ever seen in my limited experience with drilling leases. I recall when I got around $150 an acre for a lease a few years ago.
Sheffield, chief executive of Austin-based Parsley Energy, just spent $2.8 billion on Permian land held by Fort Worth’s Double Eagle Energy. It was the second largest deal of the year so far, behind only Exxon Mobil’s $6.6 billion purchase of Bass family land in the Permian’s Delaware Basin.
Parsley paid about $37,000 an acre and Sheffield says he won’t pay more than $40,000 any time soon. But he argued that Permian sweet spots are so good they’ll make money at $60,000 an acre — which some have paid — as long as the companies get rigs up and running on the land within a few months of purchase.
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Still, he warned, competition for services is now quickly tightening, and that will likely cut into profits. Hydraulic fracturing teams, drilling rigs and truck hauling crews are in such demand they’re firing clients who won’t pay higher prices, or skipping jobs to find higher-paying work, he said.