Permian Land Swaps | Russell T. Rudy Energy LLC
Innovation and creative thinking helped fuel the shale revolution. Now “Rigzone” reports that one of these innovations, horizontal drilling, is giving rise to another, land swaps. Within the Permian Basin of West Texas and Southeast New Mexico, shale operators have developed a barter system to maximize return on investment and ultimate oil recoveries.
As is always the case, operators are looking to produce more oil for less money, and one way to do this is by drilling ever longer lateral legs on horizontal wells. According to Herbert Vogel with SM Energy, doubling the length of a lateral from the customary 5,000 feet to 10,000 can result in an over 4 fold increase in value.
However, target structures often extend beyond the limits of the operator’s lease and continue under a neighbor’s property. If the extension of the structure is not large enough for the neighboring operator to economically drill, it is in everyone’s interest to trade slivers of land between the parties. With drilling rights in the Permian running as high as $60,000 an acre, trades make sense. However, to create these win-win situations, both operators need significant acreage positions. John Sellers with Double Eagle Energy Permian LLC sums it up nicely: “Land is really a currency out here.”
No one knows how long this practice will last, but SM Energy, Double Eagle, Parsley Energy and Pioneer Natural Resources are all actively playing the trading game. In fact, Tim Dove, with Pioneer relates that at any given time his company is working on 10-15 trade deals.
To read the article in its entirety, please go to http://www.rigzone.com/news/oil_gas/a/149023/Land_Swaps_Let_Permian_Drillers_Expand_Shale_Wells_on_the_Cheap?utm_source=DailyNewsletter&utm_medium=email&utm_term=2017-03-29&utm_content=&utm_campaign=Production_1 .
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