The second and third quarters of 2016 have seen more than a dozen significant asset transactions involving Permian acreage with large deals being announced weekly. Most of the announcements highlight acreage that is held by production (HBP). The upside of HBP acreage for buyers is that they don’t have to develop the acreage quickly to maintain access, but it also puts upwards pressure on the price paid per acre. Buyers are forced to negotiate with other operators who often have a better idea of what the acreage (mineral holdings) are worth.
Because of the high potential production of Permian reservoirs like the Wolfcamp (oil zone) and the business-to-business nature of acreage transactions, the price paid per acre this year has ranged from $7,000 to $58,000 per a net mineral acre. The highest price paid so far was by QEP resources, who paid more than $58,000 per net undeveloped acre for core Midland Basin (includes your Howard, Martin, and Eddy County holdings with your Ward being on the eastern edge) acreage. That price has raised eyebrows and left many wondering how much e acreage is actually worth and concern about how high prices can go up. See Table 1 reflecting recent large sales of assets in the key counties.