Permian lease prices making other plays look more attractive

Record prices for drilling rights in the Permian Basin, the most fertile U.S. shale field, are prompting oil companies and private equity investors to look elsewhere for the next big gushers.

Explorers eager to tap the basin’s mile-thick stack of oil-soaked rock layers have paid as much as $60,000 an acre. That marks a 50-fold explosion in deal prices over four years, according to Wood Mackenzie Ltd. It also pushes the cost 10 times higher than in the Bakken of North Dakota.

The backlash is just beginning. BP Plc, the U.K.-based supermajor, has focused its shale-drilling efforts on the other end of the hemisphere, in Argentina’s Vaca Muerta region, while Sanchez Energy Corp. has targeted the Eagle Ford of South Texas and Newfield Exploration Co. has acquired rights in the Stack field in northern Oklahoma.

As far as the Permian is concerned, “companies that don’t already have a foothold are seeing valuations that are out of control,” said Gabriele Sorbara, an analyst at Williams Capital Group LP in New York. “They can’t get involved.”
There is more.

I have seen signs of a return to the Eagle Ford as laid off drillers are being called back to work.  It is a formation that has a few hot spots with some plays more speculative.


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