DALLAS (AP) — An Austin-based driller said this week that it's buying about 71,000 acres of land in the energy-rich Permian Basin for $2.8 billion, becoming the latest energy company to make a major investment in the region.
Parsley Energy said in a statement Tuesday that it's purchasing the land from a Fort Worth oil explorer, Double Eagle Energy Permian. The move will bring Parsley's holdings in the region to 227,000 acres.
The deal comes just a few weeks after Exxon Mobil Corp. announced it was buying the Permian Basin holdings of the Bass family, of Fort Worth, in a more than $6 billion stock and cash deal that doubles its presence in the basin.
Energy companies have been investing heavily in West Texas and parts of New Mexico, as oil prices recover from a downturn that saw the energy sector hemorrhage jobs and curtail production.
"Right now the Permian Basin is hot and it's hot because, No. 1, there are all these pay zones, it's like a layer cake," said Bernard Weinstein, associate director of the Maguire Energy Institute at Southern Methodist University in Dallas.
A lone field can yield one layer of natural gas and another containing vast amounts of oil, and the advent of horizontal drilling and other technologies makes access to the hydrocarbons easier and cheaper, Weinstein said.
A barrel of oil currently sells for about $53, which is well above the break-even oil price of $30 to $40. Prices are expected to remain above $50 for the next five years, he said.
Weinstein said that big players like Exxon Mobil and Chevron Corp. determined in the 1980s that shale drilling wasn't lucrative enough so they went offshore and invested in deepwater drilling. But now they're seeing greater returns on the Permian and other land basins.
"There's been a kind of rethink on the part of the majors," Weinstein said, "and that's a big shift."
The Permian is comprised of a series of basins and other geologic formations in West Texas and southern New Mexico. It's one of the most productive oil and gas regions in the U.S.
The energy industry spent billions of dollars buying land in West Texas last year, which is far more than it spent there the year before. Companies that have sold or leased their holdings are generally smaller entities looking to benefit from sales on higher land prices rather than invest in drilling operations, analysts say.
The region's fortunes were further buoyed in November with a report by the U.S. Geological Survey that a vast field of shale rock could yield 20 billion barrels of oil, making it the largest source of shale oil the agency has ever assessed. The Wolfcamp Shale geologic formation in the Midland area also contains an estimated 16 trillion cubic feet of natural gas and 1.6 billion barrels of natural gas liquids, according to the agency.
The discovery is nearly three times larger than the shale oil found in 2013 in the Bakken and Three Forks formations in the Dakotas and Montana.
Ken Medlock, director of an energy-studies program at Rice University in Houston, said at the time that it seems "likely that we're seeing the birth of a new Permian Basin."
"The revival of the Permian Basin is going to last a couple of decades," he added.