Permian continues to draw interest

On Tuesday, the Texas General Land Office (GLO) announced the results of an online lease auction for oil and gas properties, and the Permian proved to be the big draw.

In its report, the GLO said that more than USD 84 million had been raised for the state through the semi-annual lease sale. The highest bid came from Continental Land Resources, USD 14.9 million for a 2-square-kilometre plot in the Delaware sub-basin, where most of the land on offer is located. The average price per acre reached almost USD 5,900 in this latest round.

The news came on the same day Oklahoma-based independent Laredo Petroleum announced plans to spend more than USD 530 million on capex in the area. In its 2017 budget expenditures plans on Tuesday, the company revealed that the majority of this capital will be spent drilling and completions in the Upper and Middle Wolfcamp sections of the Permian. The company said it will operate four rigs in area.

Operators have been rushing to solidify their positions in the Permian, especially the Delaware sub-basin. On Tuesday, ExxonMobil announced it was acquiring 2,000 square kilometres of private New Mexico real estate for USD 6.6 billion in cash and stock. Noble Energy also picked up significant holdings in the play when it agreed to acquire rival Clayton Williams Energy this week. The USD 2.7-billion transaction gives Noble Energy 480 net square kilometres in West Texas.

As oil prices recover, drilling activity in the USA is picking up and the Permian is leading the charge. Prolific reserves and break-even prices of about USD 40, a discount of USD 10-20 from other domestic shale plays, is the reason for all the attention the Permian is getting. Acreage prices in the area have increased tenfold since 2012.