The Market And Energy Page, T+30, February 19, 2017

Hard to believe it's been just 30 days since Donald J. Trump sworn in as president. I took a quick look at the front page of today's New York Times: the headline story was a congratulatory essay on all his successes in his first 30 days. Just kidding.

I'm still wading through the SeekingAlpha story on Whiting's wells in North Dakota. It would take a month of Sundays to do a really good job going through that analysis but hopefully we can have some fun with it. As "exhaustive" as that analysis was, I do think there are aspects of Bakken 2.0 that were not discussed, or at least not discussed in depth. It looks like the players to watch in the Bakken right now are Marathon, Oasis, and Whiting.

The other day I posted a link to this Rigzone story: can other basins ever catch up to the Permian's prosperity? I did not see much written about "prosperity" in the Permian in that article. I think the headline writer was looking for some alliteration. What I saw in the article was a lot of talk about "future activity." I don't understand why this is so surprising. Folks have to remember two things:

• after paying upwards of $50,000 / mineral acre, public companies better start showing some kind of return on that investment; and,
• they better start drilling if they want to "hold their leases by production"

This is exactly what was seen in the early days of the Bakken Boom, Bakken 1.0.

Blogging about the Bakken has taught me a lot. Perhaps the biggest lesson: don't invest in common shares in US shale oil companies. LOL.

But back to the linked article. "Upwards of $50,000 / mineral acre"? From the article:

Data from East Daley shows that acquisition prices in the Permian have returned to – and in some cases, exceeded – prices during the height of the shale revolution. Four Permian deals averaged roughly $29,000 per acre in 2014. While most of 2017 is still at hand, deals within the last year have exceeded $40,000 per acre. And in more recent months, M&A is still trending close to $30,000, according to East Daley’s data.

Recent deals in the Eagle Ford were priced close to $16,000 per acre, but in October, RSP Permian bought Permian acreage in the Delaware region for an estimated $48,000 per acre. And prices could go higher, said Darin Turner, Invesco Ltd. managing directorand portfolio manager.

“I could see somebody paying above that,” Turner said. “That can be very location specific [within the Permian], but we wouldn’t be that surprised to see a higher land cost.” 

Bad news for Saudi: of the major US shale oil plays, the biggest may be the Permian and operators can make money on $30-oil in the Permian. Saudi will go broke at $50 oil and only recently came out with a new budget based on $80-oil after years of a budget based on $100-oil.