Comstock Resources (NYSE:CRK) recent purchase of properties in the Permian Basin gives the company another core area prospective for oil and liquids development. This acquisition will accelerate the company's move away from natural gas. (To know more about oil and gas, read Oil And Gas Industry Primer.)

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Permian Basin Acquisition
Comstock Resources signed an agreement to purchase 68,000 gross or 44,000 net acres in Reeves County, Texas. The acreage is in the Delaware Basin portion of the Permian and is prospective for a number of oil and gas formations including the Avalon Shale, Bone Spring and Wolfcamp formations. Comstock Resources will pay $332.7 million to a private oil and gas company for the properties, and the deal is expected to close by the end of 2011.

The company said the acreage includes 23.2 million barrels of oil equivalent (BOE) of proved reserves and daily production of approximately 1,400 BOE per day. There are 29 gross producing wells and five wells that are in various stages of completion.

The company already had 12,000 net acres under lease in the Permian Basin prior to this deal, and this new acquisition increases the company's position here substantially.

Comstock Resources estimates that the acquired properties have 900 vertical drilling locations into the Wolfbone play, with potential resources of 178 million BOE. The Wolfbone play includes a number of stacked formations at depths from 7,800 to 11,300 feet deep.

The company also plans horizontal development of several other formations including the Avalon and Wolfcamp shales, and the third Bone Springs formation.

During a conference call, the management of Comstock Resources said that it believes that acquisition will change the company. "... the Permian as a new core area will materially change Comstock, making us a much more balanced E&P company with a material oil story to tell in a major oil basin, the Permian Basin," said Miles Jay Allison, the CEO of Comstock Resources.

2012 Plans
The company has budgeted $170 million in 2012 to drill 46 gross wells in the Permian Basin. It plans mostly vertical development and will drill some horizontal test wells into the Wolfcamp Shale during the last half of 2012.

Several other operators have also set 2012 budgets with substantial spending in the Permian Basin. One company that operates exclusively here is Concho Resources (NYSE:CXO), which has properties in the Delaware, Midland and Central Platform Basins. The company has established a $1.2 billion drilling and completion budget for 2012, and is currently operating 31 rigs in the Permian Basin.

SandRidge Energy (NYSE:SD) is also active in the Permian Basin and has 228,000 net acres under lease, and is operating 14 rigs here. In 2012, the company plans to spend $1.55 billion on exploration and production with 34% of these funds allocated to the Permian.

The Permian Basin is a core for Cimarex Energy (NYSE:XEC), which has approximately 35% of its proved reserves and production from this basin. The company drilled 110 net wells here in 2011.

The Bottom Line
Comstock Resources can now work the company's Permian Basin acreage as well as the Eagle Ford Shale as the company transitions away from natural gas development and towards crude oil and other liquids. (For additional reading, check out A Guide To Investing In Oil Markets.)

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At the time of writing, Eric Fox did not own shares in any of the companies mentioned in this article.

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