Private equity firm investing heavily in Permian Basin drilling business

Bloomberg/Fuel Fix:
If you happen to find a battered, exhausted oil baron slumped in a dark corner (and who doesn’t from time to time?), just whisper this one word in their ear to revive them:


This shale basin, which stretches across northwestern Texas and into a portion of New Mexico, is rapidly becoming a Narnia-like place for the exploration and production sector. There, profits can still be made and growth can be had. For an industry savaged by job losses and bankruptcies, that sort of escapism is a good thing. Until, of course, it becomes a bad thing.

Blackstone is offering the latest affirmation of the Permian’s attractions where it counts: money. The private equity firm is deploying more than $1 billion in partnerships to buy up land in this shale sweet spot. Earlier in the week, PDC Energy paid $1.5 billion for two E&P companies with Permian acreage. More money has changed hands buying and selling Permian assets this year than in the all the other major U.S. shale basins combined.

U.S. oil output has fallen by roughly 1.1 million barrels a day since the last peak in April 2015, according to official estimates. Yet the Permian is the last man standing.

It isn’t that oil companies have simply ignored the dismal numbers on the Nymex: The rig count in the Permian has fallen by roughly half since spring of last year, according Rystad Energy data. But the other two basins have fared even worse, down about 80 percent. And higher productivity has cut the number of new wells needed to keep Permian production flat.

“More from less” is what Narnia looks like to cash-strapped E&P companies; hence the desire of many to establish or expand positions in the Permian.
The Permian has had its ups and downs during recent years.  Before the shale boom, the economy in the region seemed to be in the doldrums and housing was cheap and hard to sell.  Then during the boom, it was hard to find and expensive and companies were building motels as fast as they could and RV parks were full.  Fast food places were busy and found it hard to hire workers who could make more in the oil fields.

What is happening now is that producing oil in the Permian cost less than in any other field in the US.  That has brounght in some of the major oil companies and the big investors.


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