Can Other Oil Basins Ever Catch Up To The Permian's Prosperity?
While many exploration and production (E&P) companies hustle to buy diminishing available acreage in the Permian Basin, other basins are lining up to the be next play that cashes in on $50-plus oil.
Increasingly, the rig count bears out the possibilities. Although the Permian remains the leader in rig addition, others are showing signs of life. For the week ending Feb. 3, RigData reported another 33 rigs bringing the total to 707 rigs in U.S. service. Of those 33 new rigs, two were activated in the Midland and eight were added in the Delaware areas of the Permian. But outside of the Permian Basin, Eagle Ford added seven rigs and Haynesville added four.
“Both the Eagle Ford and Haynesville saw nice jumps in activity [week over week] and have actually put more rigs back to work over the past month than the Midland cluster,” analysts at Tudor, Pickering & Holt wrote in a note to investors, adding, “Keep an eye out to see if this trend continues going forward.”
Driving much of the interest in other plays is the high cost of acreage in the Permian. Recent deals in the Eagle Ford were priced close to $16,000 per acre, but in October, RSP Permian bought Permian acreage in the Delaware region for an estimated $48,000 per acre. And prices could go higher, said Darin Turner, Invesco Ltd. managing director and portfolio manager.
“I could see somebody paying above that,” Turner said. “That can be very location specific [within the Permian], but we wouldn’t be that surprised to see a higher land cost.”
A key reason the Permian remains a hot buy at $40,000-plus per acre is that profit can be made even when oil is $30 per barrel, according to both analysts and E&Ps. But the West Texas play might not be the only basin with a low breakeven cost. In fact, the powerhouse Permian production might be no more economic than Oklahoma’s SCOOP and STACK plays.
“We think the SCOOP/STACK today is [profitable at] low $30 economics as well,” Turner said.
Companies have been drilling into the Permian for almost 100 years. As such, they’ve learned a thing or two about how best to coax the hydrocarbons. Commercial potential of the SCOOP was found in 2011, and in the STACK, just two years later – indicating there’s a significantly longer learning curve.
“There’s just been a lot more trial and error in the Permian, and we would say the SCOOP/STACK is much earlier on in its life,” Turner said. “And what you generally see is that as more drilling occurs, the operators start to understand the most efficient way to proceed with their drilling, so you can generally see costs coming down just because of expertise getting better.”
But even among the plays that aren’t the Permian, there are economies of scale.
12
View Full Article
WHAT DO YOU THINK?
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
- The Rigzone Interview: Private Equity Cash Focuses on Oil, Gas Development
- Could Argentinian Politics Beat the Vaca Muerta?
- The Rigzone Interview: Oil, Gas Goes Digital for Safety, Speed
- Deal Of The Month: EQT, Rice Energy Merge in Mega Marcellus $6.7B Gas Deal
- OpEd: OPEC Production Cuts Fail, Markets Pay for Underestimating US Shale
- ExxonMobil Racks Up Discoveries in Guyana Block Eyed by Chevron
- Oil Market Sentiment Has Improved Significantly
- EU, US Eye Collaboration on Nuclear Materials
- USA Driving Activity to Increase to All-Time Highs
- TC Energy to Sell Prince Rupert Gas Pipeline Project to First Nation
- EU Electricity Export to Ukraine Up 94 Percent in Two Years
- China Coal Output Falls for First Time since Government Ordered More
- BP Pulse Buys One of Europe's Largest Truck Stops
- UK CCUS Plans Outdated: Think Tank
- North America Enters Rig Loss Streak
- Norway Regulator Blasts Proposal to Halt New Oil and Gas Permits
- Chinese Mega Company Makes Major Oilfield Discovery
- EIA Drops 2024 Henry Hub Gas Price Forecast
- EIA and Standard Chartered Offer Up Latest Oil Price Predictions
- Red Sea Region Sees Another Watershed Incident
- Chevron Oil Project in Kazakhstan to Cost $48.5B
- OPEC Voices Encouragement after IEA Affirms Support for Oil Security
- Biden Govt Bares Strategy for Freight Charging, Hydrogen Fueling Infra
- Ukraine Hits Third Russian Refinery In Escalating Drone Strikes
- Rystad Looks at the Buzz Around White Hydrogen
- VIDEO: Missile Attack Kills Crew Transiting Gulf of Aden
- Norway Regulator Blasts Proposal to Halt New Oil and Gas Permits
- Chinese Mega Company Makes Major Oilfield Discovery
- What Is the Biggest Risk to Offshore Oil and Gas Personnel in 2024?
- Is Peak Oil Demand Close?
- Vessel Sinks in Red Sea After Missile Strike
- JP Morgan, Standard Chartered Reveal Latest Oil Price Forecasts
- Exxon Rights in Stabroek Do Not Apply to Hess Merger with Chevron: Hess
- Rystad Forecasts Net Production of Top Permian Producers in 2024
- Analysts Reveal Latest Oil Price Outlook Following OPEC+ Cut Extension