The Permian Basin has seen a renaissance over the last few years as exploration and production companies appear smitten with the abundance of oil and liquid plays combined with the sheer magnitude of the basin. (To know more about oil and gas, read Oil And Gas Industry Primer.)

Investopedia Markets: Explore the best one-stop source for financial news, quotes and insights.

Permian Basin
The Permian Basin is the home of many large cap oil and gas operators, with Occidental Petroleum (NYSE:OXY) considered the leader in the basin. The company reported average daily production of 170,000 barrels of oil and natural gas liquids per day from here during the third quarter of 2011.

There are also a number of small-cap companies that are involved with exploration and development of the Permian Basin. These companies carry more risk than an investment in larger and more established operators, but can also provide higher returns if management is successful in carrying out its financial and operating strategy.

Small Cap Players
Resolute Energy Corporation (NYSE:REN) entered the Permian Basin through an acquisition in June 2011, picking up 7,900 net acres prospective for the Wolfbone play in the Delaware Basin portion of the Permian. The company also made a second acquisition of producing Permian properties in the Midland Basin later in the year.

Resolute Energy Corporation has moved fairly quickly on development here, drilling four gross wells through early November 2011. The company plans a total of seven wells in 2011, and will continue this development in 2012.

Approach Resources (Nasdaq:AREX) has 142,000 net acres in the Permian Basin and is working on the Wolffork play, developing the properties with vertical wells and recompletions of existing wells.

Approach Resources also plans horizontal well development of the Wolfcamp Shale on its acreage and has set a $160 million drilling budget for 2012. The company will operate three rigs next year and expects to grow production by 22% over 2011.

Comstock Resources (NYSE:CRK) is a recent entrant to the Permian Basin, and bulked up its position here with the purchase of 68,000 gross acres in the Delaware Basin. The company plans to develop numerous formations here, including Bone Spring, Avalon Shale and Wolfcamp Shale.

Gulfport Energy Corporation (Nasdaq:GPOR) has 15,300 net acres under lease in the Permian Basin and reported proved reserves of 14 million BOE on these properties. The company plans more development on its acreage in 2012 and estimates that it will drill as many as 25 gross wells at a cost of approximately $24 million.

The Bottom Line
The Permian Basin is seeing yet another boom as operators crowd into this massive area looking to develop crude oil and other liquids. Investors can choose from both small and large capitalization players here. (For additional reading, check out A Guide To Investing In Oil Markets.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

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

Related Articles
  1. Investing

    Time to Bring Active Back into a Portfolio?

    While stocks have rallied since the economic recovery in 2009, many active portfolio managers have struggled to deliver investor returns in excess.
  2. Economics

    Investing Opportunities as Central Banks Diverge

    After the Paris attacks investors are focusing on central bank policy and its potential for divergence: tightened by the Fed while the ECB pursues easing.
  3. Stock Analysis

    The Biggest Risks of Investing in Pfizer Stock

    Learn the biggest potential risks that may affect the price of Pfizer's stock, complete with a fundamental analysis and review of other external factors.
  4. Stock Analysis

    Allstate: How Being Boring Earns it Billions (ALL)

    A summary of what Allstate Insurance sells and whom it sells it to including recent mergers and acquisitions that have helped boost its bottom line.
  5. Chart Advisor

    Copper Continues Its Descent

    Copper prices have been under pressure lately and based on these charts it doesn't seem that it will reverse any time soon.
  6. Options & Futures

    Cyclical Versus Non-Cyclical Stocks

    Investing during an economic downturn simply means changing your focus. Discover the benefits of defensive stocks.
  7. Markets

    PEG Ratio Nails Down Value Stocks

    Learn how this simple calculation can help you determine a stock's earnings potential.
  8. Stock Analysis

    What Exactly Does Warren Buffett Own?

    Learn about large changes to Berkshire Hathaway's portfolio. See why Warren Buffett has invested in a commodity company even though he does not usually do so.
  9. Investing Basics

    How to Deduct Your Stock Losses

    Held onto a stock for too long? Selling at a loss is never ideal, but it is possible to minimize the damage. Here's how.
  10. Fundamental Analysis

    Using Decision Trees In Finance

    A decision tree provides a comprehensive framework to review the alternative scenarios and consequences a decision may lead to.
  1. Which mutual funds made money in 2008?

    Out of the 2,800 mutual funds that Morningstar, Inc., the leading provider of independent investment research in North America, ... Read Full Answer >>
  2. Do hedge funds invest in commodities?

    There are several hedge funds that invest in commodities. Many hedge funds have broad macroeconomic strategies and invest ... Read Full Answer >>
  3. What does low working capital say about a company's financial prospects?

    When a company has low working capital, it can mean one of two things. In most cases, low working capital means the business ... Read Full Answer >>
  4. Do nonprofit organizations have working capital?

    Nonprofit organizations continuously face debate over how much money they bring in that is kept in reserve. These financial ... Read Full Answer >>
  5. Can a company's working capital turnover ratio be negative?

    A company's working capital turnover ratio can be negative when a company's current liabilities exceed its current assets. ... Read Full Answer >>
  6. Does working capital measure liquidity?

    Working capital is a commonly used metric, not only for a company’s liquidity but also for its operational efficiency and ... Read Full Answer >>

You May Also Like

Trading Center