Oil Companies' New Math Makes Them Look Bigger in Texas



Reuters

HOUSTON, Nov 21 (Reuters) - Energy companies have long touted to Wall Street investors the number of acres they lease or own as a measure of how many oil and gas shale wells they can potentially drill.

Now, in a twist that has surprised some oil and gas analysts, several U.S. companies are looking deep into the earth and measuring their acreage in three dimensions instead of two.

Several smaller operators in the Permian Basin of Texas, including RSP Permian Inc, Laredo Petroleum Inc and Callon Petroleum Co, are telling investors there is more than meets the eye.

Using the term "net effective acreage," they are counting all the layers of rock they believe they could bore into and develop, effectively multiplying the acreage number. Defenders of this approach say it makes sense in the Permian Basin, where operators have had great success using horizontal drilling to exploit the stacked layers of oil-bearing rock that are found throughout the oilfield.

Some companies believe should receive credit for all their drilling potential.

A recent presentation from Permian operator Laredo Petroleum shows that company holds 154,374 acres (62,473 hectares) in the Midland Basin in Texas, but that figure jumps fivefold to 777,000 acres when calculated on a net effective basis.

A representative for Laredo did not return an email seeking comment.


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