Tickers in this Article: ECA, NFX, WTI, LGCY
The siren call of oil development continued to sound loudly during the first quarter of 2011 as exploration and production companies directed capital to these types of plays. This trend was reinforced by the surge in oil prices during the quarter and a persistent belief in the long-term fundamental story behind this commodity. (For a look at the other side of the oil play debate, read 7 Reasons Why You Shouldn't Invest In Oil.)

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Some companies are acquiring producing leasehold in known oil basins in the onshore area of the United States. W&T Offshore (NYSE:WTI) just announced the purchase of 21,500 net acres in the Permian Basin for $366 million from a private oil and gas company. The property has proven reserves of 27 million barrels of oil equivalent (BOE), 91% of which is oil and natural gas liquids.

The properties currently produce 2,800 BOE per day, and W & T Offshore plans to keep three rigs operating here in 2011 to get production higher. The company has allocated between $35 million and $40 million to develop this acreage in 2011.

In the first quarter of 2011, 48% of W & T Offshore's production was composed of oil and natural gas liquids, and rapid development of its Permian Basin assets might increase that percentage over the next few years.

Another company making an acquisition in the Permian Basin was Legacy Reserves LP (Nasdaq:LGCY). The company spent $67 million to buy natural gas producing properties that also have the potential for future development.

Other Players
Newfield Exploration (NYSE:NFX) is directing virtually all of its 2011 capital budget toward oil or liquids development, and recently disclosed a new play in the Arkoma Basin that produces oil and wet gas. The company has 25,000 net acres prospective for this play, and reported that the first five wells here averaged 930 BOE per day during the first 30 days of production.

Companies that have continued to focus mostly on natural gas development have ramped up ambitious goals set in earlier times. In March 2010, EnCana (NYSE:ECA) pledged to exploit its multimillion acre North American inventory to double production per share over a five-year period.

During the first-quarter earnings conference call, EnCana management delayed this goal due to weak natural gas prices. "We have not abandoned our goal to double our size on a per share basis. We have just accepted that it may take a little longer than we originally planned to achieve it," said Randall Eresman, the CEO of EnCana.

EnCana also highlighted the oil and liquid potential of its acreage in North America. The company has 1.7 million acres and plans to spend $1 billion on exploration and development here in 2011.

The Bottom Line
The trend toward oil development in the energy industry continued in the first quarter of 2011 as companies moved to accelerate the development of these plays in the belief that the fundamentals for oil will support higher prices in the long term. (For related reading, also take a look at How Does Crude Oil Affect Gas Prices?)

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