You might have seen all the recent unconventional A&D announcements: Devon – Sinopec, Chesapeake-Total, Hess-Consol, Statoil-Brigham, Marathon-Hilcorp. These deals included assets in varying areas such as the Eagle Ford, Utica, Tuscaloosa Marine, Niobrara, and others. One area not mentioned in the aforementioned transactions is the Permian Basin. When was the last significant transaction in the Permian Basin? Well, you might have missed it if you were busy eating turkey and unwrapping gifts over the Christmas holiday.
In December 2011, Concho announced a transaction to buy Permian Basin Assets from Petroleum Development Corporation for $175 million in the Wolfberry Trend Area. The acquisition includes approximately 10,800 gross acres (10,200 net) located in Andrews, Ector, and Midland Counties. Highlights (as stated from the CXO News Release)
- Adds over 170 Wolfberry drilling locations (40 acre spacing)
- Estimated proved reserves of 13 MMBoe
- Current net production of 1,100 Boepd
- Increases working interest in the Wolfberry to 54% (from 50%)
Press releases like this are great because you can quickly come up with a few interesting numbers: $17,156 per net acre and $13.46 per proved reserve. Both these values seem in line with recent acquisitions in other oil plays. Combined with the $330 million acquisition in November (114,000 net acres in the Delaware Basin), this transaction solidifies CXO as one of the Permian’s biggest players and increases an already rich oil portfolio for the company. CXO has a history of strong acquisitions, as seen in their share price, increasing from $11.50 in 2007 to over $100 today.
Examining CXO’s assets in the Wolfberry and the PETD transaction, you can see below from their Investor Presentation that they believe they currently have over 2,000 Wolfberry drilling location and expect 140 MBoe EUR, 8-10 frac stages, $1.6 – $1.8 million per well, and 15-19 days to drill. They also believe they can enhance their Wolfberry assets by experimenting with 20 acre spacing and targeting the Wolfcamp with horizontal wells.
The charts below are from DI Desktop and DI-ESP data set. It shows (in green) the location of over 100 currently producing PETD wells just to the north of the existing CXO position in the western half of the Wolfberry Trend Area.
And to get an idea of what PETD had been permitting and drilling in 2011, below is a chart of recent permitting activity by PETD.
Even though the Permian Basin doesn’t gain as much attention in the A&D world as some of the other plays, it’s quickly becoming a world class onshore asset…and we now have a starting price for entry…$17,000 per acre.
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