21.11.2016, 22:07
Permian basin acreage getting pricey: Encap
OREANDA-NEWS. Acreage in Texas' Permian basin is getting pricey as its low-cost production lures more buyers, according to Gary Peterson, founder of private equity firm Encap.
Permian acreage with the lowest-cost production have reached as high as $50,000/acre, Peterson said at the Oil and Economy conference organized by the Federal Reserve banks of Dallas and Kansas City last week. In comparison, Devon Energy paid $20,000/acre earlier in the year for acreage in the Delaware basin, David Hager, chief executive of the company said.
The Permian is one of the lowest-cost US production areas. Breakeven prices for the Permian range from as low as $15/bl of oil equivalent (boe) to $35/boe on average, while in the Bakken the best wells need $30-60/boe. The Eagle Ford has breakeven costs of $23-58/boe, according to consultancy Deloitte.
In June, Pioneer bought 28,000 acres from Devon for $435mn adjacent to its existing acreage in the Wolfcamp A area of the Permian, which translates roughly to a little over $15,000/acre.
"The Permian is a little too hot," Peterson said. But he noted those prices are only for the "core of the core" areas in the Permian. And there are still areas in the region which are available for a lot lower.
As a private equity investor, Encap would typically invest about $10,000-$15,000/acre, assemble acreage and put together deals, he said.
Overall, there is close to $88bn of private equity investment "waiting on the sidelines" and looking to investment in the US upstream industry, Peterson said. Many investors are keen on getting into the Permian, followed by the Scoop and Stack basins in Oklahoma. For Encap, 60pc of its investments go to the Permian and the Scoop and Stack, he said.
"There is a bit of a logjam," of investors willing to get in to those resources, Peterson said.
Recent acquisitions in the Permian include one by Occidental Petroleum of acreage and enhanced oil recovery (EOR) facilities, via separate deals, for a total of $2bn.
Occidental's purchase followed deals by others such as Concho Resources, Parsley Energy and SM Energy in the region.
Permian acreage with the lowest-cost production have reached as high as $50,000/acre, Peterson said at the Oil and Economy conference organized by the Federal Reserve banks of Dallas and Kansas City last week. In comparison, Devon Energy paid $20,000/acre earlier in the year for acreage in the Delaware basin, David Hager, chief executive of the company said.
The Permian is one of the lowest-cost US production areas. Breakeven prices for the Permian range from as low as $15/bl of oil equivalent (boe) to $35/boe on average, while in the Bakken the best wells need $30-60/boe. The Eagle Ford has breakeven costs of $23-58/boe, according to consultancy Deloitte.
In June, Pioneer bought 28,000 acres from Devon for $435mn adjacent to its existing acreage in the Wolfcamp A area of the Permian, which translates roughly to a little over $15,000/acre.
"The Permian is a little too hot," Peterson said. But he noted those prices are only for the "core of the core" areas in the Permian. And there are still areas in the region which are available for a lot lower.
As a private equity investor, Encap would typically invest about $10,000-$15,000/acre, assemble acreage and put together deals, he said.
Overall, there is close to $88bn of private equity investment "waiting on the sidelines" and looking to investment in the US upstream industry, Peterson said. Many investors are keen on getting into the Permian, followed by the Scoop and Stack basins in Oklahoma. For Encap, 60pc of its investments go to the Permian and the Scoop and Stack, he said.
"There is a bit of a logjam," of investors willing to get in to those resources, Peterson said.
Recent acquisitions in the Permian include one by Occidental Petroleum of acreage and enhanced oil recovery (EOR) facilities, via separate deals, for a total of $2bn.
Occidental's purchase followed deals by others such as Concho Resources, Parsley Energy and SM Energy in the region.
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