Oil producers see mixed prospects in Permian plays

|By:, SA News Editor

Oil and gas producers in the Midland Basin, part of the larger Permian Basin, may run up against higher costs in the coming months, while those in the Delaware Basin should enjoy expanded production opportunities, Sterne Agee analyst Tim Rezvan says.

Commentary from this week's EnerCon Oil & Gas Conference in Denver suggest that "pricing power is swinging back to the service providers, Rezvan says, while noting that Energen (NYSE:EGN) is one Midland producer that does not see cost inflation as an issue; EGN says it likely will add at least two horizontal rigs in the basin in 2015, and does not see problems getting rigs with one- to three-year contracts.

Meanwhile, the Delaware Basin - also part of the Permian - remains relatively under the radar, with strong oil cuts and prolific three-stream production rates present across much of the basin, according to Rezvan.

Carrizo Oil & Gas (NASDAQ:CRZO) seems particularly bullish on prospects in the Delaware, Rezvan says, as management sees ample opportunities to bolt on more acreage to its initial 17K net acre position.