Permian Basin Land Rush is Reported to Be Over

For oil and gas players like Devon Energy of Oklahoma City and WPX Energy of Tulsa, the so-called “great Permian Basin land rush”, as described by the Houston Chronicle, is over. Ended. The big boys have spoken.

So proclaimed the newspaper in a story this week which indicated most of the land has been leased or bought and now the smaller remaining pieces of land are being acquired. And it could turn out to be pricey when smaller energy firms try to buy up competitors in the hottest oil-producing region in the world.

That’s because land prices have been driven up to as high as $60,000 an acre.  Let that sink in….$60,000 an acre paid by wildcatters, private equity investors, independents and the majors like Devon and others.

Consider how Oklahoma companies rank in the Permian.

Biggest Permian players by acreage:

Occidental Petroleum (Houston), 2.5 million net acres

Exxon Mobil (Irving), 1.8 million

Chevron (San Ramon, Calif.), 1.7 million

Apache Corp. (Houston), 1.6 million

ConocoPhillips (Houston), 1 million

Devon Energy (Oklahoma City), 670,000

Pioneer Natural Resources (Irving), 660,000

Concho Resources (Midland), 642,000

EOG Resources (Houston), 559,000

Cimarex Energy (Denver), 380,450

Anadarko Petroleum (The Woodlands), 240,000

Energen Corp. (Birmingham, Alabama), 240,000

Parsley Energy (Austin), 216,000

Diamondback Energy (Midland), 207,000

WPX Energy (Tulsa, Okla.), 131,000

One recent example of a big oil and gas deal was the announcement by Concho Resources of Midland that it will pay $8 billion to buy RSP Permian of Dallas just so it could acquire 100,000 acres contiguous to Concho’s Permian holdings.

The rush to buy land or lease it in the Permian peaked about one year ago and the acquisitions totaled a reported $18 billion.  The fall-off was quick because by the second half of 2017, the deals totaled less than $4 billion according to research firm IHS Markit.

However, there was a rebound in the first three months of 2018 and the Permian deals reached $10 billion, thanks mostly to Concho Resources purchase of RSP Permian.

While the big boys have most of the holdings in the Permian, more than 500 exploration and production companies have holdings in the region across west Texas and eastern New Mexico.  But the biggest challenge facing them now is a lack of drilling rigs.  There are fewer than 450, thus resulting in a shortage of fracking crews as well. That shortage, according to analysts, will likely spark consolidation among all of those companies.