High Costs Are Pushing Investors Away From The Permian

23 Jun 2017   Shale Oil

The Permian has enjoyed a rush of capital since oil prices began to recover from a low of $26.21 in February of last year. The play is home to some of the best economics in the country, making it a prime target for E&P companies looking to maximize profit in a lower price environment. But the surge in land costs is leaving little room for new investors to profit. The Delaware basin, the Permian’s hottest zone, is beginning to become a victim of its own success. EnerCom Analytics’ well economic models indicate that the internal rates of return (IRRs) in the Delaware are now lower than those seen in the Midland due to the high cost of land. At $45 WTI, EnerCom’s well economics models show IRRs in the Midland of 22.8 percent compared to 21.5 percent in the Delaware when acreage costs are included in the equation. The […]

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