The Permian Basin (“Basin”) has been an integral part of the U.S. oil and gas industry since the first well was drilled in 1921. Vast quantities of crude have flowed from the region over the ensuing decades, and it’s estimated the Basin still accounts for 20% of the nation’s oil production.
Just like any oil-producing region, the Permian Basin has gone through many booms and busts over the years. That said, the current boom that is getting underway is a bit different than those of the past. Historically, booms and busts in the oil industry have been tied directly to the price of oil – when oil prices soar, producers can pull oil from areas that may not be economically viable in times of more reasonable or even depressed pricing.
Today’s boom in the Basin, while partly a product of pricing, is primarily being driven by technology; specifically developments in horizontal drilling techniques and advances in hydraulic fracturing methods that were learned as producers capitalized on more challenging natural gas shale plays. For example, Chevron (NYSE: CVX) is using techniques it learned in the tight gas fields in the Piceance Basin of Colorado. With natural gas prices depressed and oil prices near record levels, the major producers are quickly implementing these advanced methodologies to maximize the production of their oil assets while minimizing the expenses involved.
One company that is well-positioned to profit from this new boom in the Permian Basin is Cross Border Resources (OTCBB: XBOR). The Company currently owns approximately 31,000 net acres in the Permian Basin, with assets targeting various emerging resource plays including the 1st and 2nd Bone Spring as well as the Wolfberry trend, and more conventional plays such as the Abo, Yeso, and San Andres. In addition to these highly-coveted resource assets, XBOR holds an additional 268,000 net mineral acres in western New Mexico.
Utilizing a non-operated business model, XBOR is focused on partnering with proven operators, including Cimarex (NYSE: XEC), Apache (NYSE: APA), Mewbourne, Devon Energy (NYSE: DVN), and Concho Resources (NYSE: CXO). This non-operating approach allows XBOR to reap substantial cost-savings while partnering with the best and brightest in the Basin.
XBOR is a pure-play Permian Basin oil and gas company that is publicly traded. This provides investors with a unique opportunity to profit from the aggressive revival in the region. Recent acquisitions in the Basin, with production and acreage similar to XBOR, have been given production multiples in the range of $130,000 to $150,000 per BOE/d. We believe the Company will be a premium buyout target as it ramps up production levels within the next 18-24 months.
XBOR is already producing over 200 BOE/d (net) and has recently closed the necessary funding to begin their anticipated capital expenditure program in the current fiscal year. If XBOR were to achieve a production level of 500 BOE/d (net), based on the median range ($140,000 per BOE/d) of other recent acquisitions in the Basin, XBOR could fetch a price of $70,000,000, or $4.34 per share. While this represents a 100% upside from current prices, we believe the Company will ramp production to even greater levels before allowing itself to get picked up by one of the major operators in the region.
The Permian Basin has been making money for oil and gas investors for nearly a century. Don’t miss this opportunity to participate in the newest boom in the region.
Disclosure: The subject security is a client of RedChip Companies, Inc. RedChip Companies, Inc., employees and affiliates may maintain positions and affect transactions in the securities or options of the issuers mentioned herein. For full financial disclosures for all RedChip clients, please visit http://www.redchip.com/disclosures.asp?src=rcv.