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Land Swaps Let Permian Drillers Expand Shale Wells on the Cheap

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Horizontal drilling in the Permian Basin is creating a new kind of swap meet.

Working with fresh technology that lets producers drill longer wells than ever before, companies such as Pioneer Natural Resources Co., Parsley Energy Inc. and Double Eagle Energy Permian LLC are increasingly haggling with other producers for slivers of land that allow them to extend the reach of their drilling with hardly any acquisition costs.

Prices for Permian drilling rights can run as high as $60,000 an acre. Trading land allows companies to drill the longer wells using ground a second company probably won’t develop, a win-win situation, said Bryan Sheffield, Parsley’s chief executive officer. But developers should take advantage now, because the practice likely has a low life expectancy.

“The trade rush is happening now,” said John Sellers, co-chief executive officer at Fort Worth-based Double Eagle, which built much of its current position in the Permian from dozens of trades. “The golden era of trades is probably going to happen over the next 18 to 24 months. Then people are going to really have their positions buttoned up more.”

Double Eagle, which is in the process of selling about 71,000 acres in the Permian to Parsley for $2.8 billion, has found that trading is the best way to catch the attention of larger players whose mineral rights he covets.

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By David Wethe

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