Can producers still make money in the Permian Basin despite recent stratospheric movements in land prices that have gone as high as $50,000 an acre? The answer is maybe, according to an analyst who follows the big play.
Darrel Koo, director at Calgary-based RS Energy Group, told a Petroleum Engineers’ Club of Dallas luncheon March 24 that it’s still possible to make money in the Permian even after buying such high-cost leases. The basin’s multi-pay potential is a plus but high drilling and completion costs and lease operating expense (LOE), coupled with a potential shortage of midstream takeaway capacity that could crimp commodity prices, can offset that advantage.
“I get asked a lot if the Permian Basin is overhyped,” Koo said. “But it can make economic sense even at current acreage prices.” His presentation covered the Permian’s geologic and technical aspects—which despite its overall promise can vary widely—and then discussed how its attributes can turn into a profitable return. He said RS Energy relies on “a ground-up approach’ for its data research, using information available from some 100,000 wells in the Lower 48 states. “The rocks really do matter,” he added with a chuckle.
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