Texas oil land takes position in global order

Helmerich & Payne motor man Michael Palmer, left, and floor hand Travis Palmer, right, move equipment as a section of pipe is drilled into the ground for oil and gas extraction on a Diamondback Energy lease Wednesday, Sept. 14, 2016 outside of Midland. ( Michael Ciaglo / Houston Chronicle )
Helmerich & Payne workers Michael Palmer, left, and Travis Palmer, right, on a Diamondback Energy lease in September 2016 outside of Midland. (Michael Ciaglo/Houston Chronicle)

The shale boom has made Texas oil land some of the most sought-after in the world.

Texas deals account for almost one-quarter of the total money spent on oil-and-gas acreage this year, according to year-end figures gathered by the energy research firm IHS Markit. Texas hasn’t represented such a large portion for 20 years, at least.

“Texas and the Permian Basin have proven to be a prime location,” said Chris Sheehan, IHS’s director of transaction research. “But the shale revolution has really unlocked additional resources.”

The driving force this year, Sheehan said, was economics. After oil prices crashed in February, U.S. drilling ground to a halt. As they slowly recovered, companies sent rigs to oilfields with the lowest costs and highest returns. West Texas’ Permian Basin became the hottest in the U.S. because its layers of underground hydrocarbons allowed companies to drill efficiently and access vast swaths of oil.

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Companies wanted into that field. But, since the Permian is an old basin, most of its land was already leased. To get in, they had to buy in.

Some firms already there were too damaged by the downturn, and couldn’t muster the capital to develop even the most efficient field. So they sold their acreage. In other cases, larger, stronger companies bought weaker ones in order to access prime Permian land.

The two largest U.S. deals this year weren’t focused on Texas land. In September, Fort Worth-based Range Resources announced it was buying Houston’s Memorial Resource Development, which was heavily into Louisiana gas, for at least $4.2 billion. Then Rice Energy, based in Pennsylvania, agreed to buy Colorado’s Vantage Energy, which focused on Appalachian gas, for $2.8 billion.

But the Permian boasted eight deals this year over $1 billion, by far the busiest region in the U.S., according to IHS. And the most expensive deals there focused on the Permian’s western lobe, the Delaware Basin.

In September, Houston’s EOG Resources announced it was buying the privately owned Yates Petroleum Corp., out of New Mexico, for $2.5 billion in stock and cash. Yates holds almost 200,000 acres in the Delaware.

In October, Dallas-based RSP Permian agreed to buy Silver Hill Energy Partners, also headquartered in Dallas, and its 41,000 Delaware acres for $2.5 billion, or as much as $47,000 per undeveloped acre — far above the average, according to some analysts.

And earlier this month, Midland-based Diamondback Energy announced it would pick up Brigham Resources and its 76,000 acres of Delaware land for $2.4 billion in cash and stock.

 

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