Small Cap Permian Players To Watch

By Eric Fox | December 21, 2011 AAA

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.)

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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.)

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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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