WATFORD CITY, N.D.—As it stands now, the Permian Basin is the crown jewel of U.S. shale oil plays.

The wells run deep, the growth is substantial and there is more production coming out of West Texas and New Mexico than can be moved these days.

The Bakken, which is on the upswing after experiencing a three-year downturn, isn’t a threat in terms of growth and production, but it does have enough benefits that it’s become a serious competitor to the Permian.

Because of the fast growth, the Permian is a more costly game for investors and operators. While the gains can substantial, so too are the risks.

“The Permian right now is the leading play and it gets most of the attention of the industry,” Wood Mackenzie upstream analyst Pablo Prudencio said during The Bakken Conference & Expo on July 17. “However, there are some major tradeoffs to growing that much and that fast.

“We think that’s where Bakken operators and Bakken investors can look to find opportunities and to capitalize on some of those tradeoffs that there are in the Permian.”

Prudencio said during his session titled “The Bakken vs. The Permian: Making The Case For The Williston,” the size of the two plays is almost identical. But that is where the similarities end.

Because the Permian is the hottest play in the U.S., the cost for acreage is expensive. It’s a little more reasonable in the Bakken. Since 2015, analysis said buyers paid $2,500 per every net acre of land on average in the Bakken. Buyers in the Permian have spent nearly 10 times as much for every acre—upwards of $20,000 for every undeveloped acre.

Prudencio said a major reason for the difference is stack pay. The Permian has over 2,000 feet of different productive formations that are stacked on top of each other. The Bakken only has 300 feet of productive formations.

“So from this perspective the Permian is equivalent to many Bakkens stacked on top of each other,” he said. “That’s one of the reasons operators are paying so much more for Permian acreage.”

The Bakken is less capital intensive, which translates to fewer risks.

“That’s going to be important because different operators have different strategies,” Prudencio said. “Not everyone is willing to spend hundreds of millions of dollars. They would rather spread their investments a little bit more. So when it comes to strategies, this is one of the main difference between both plays.”

But what is going on in the Permian—even with limited infrastructure—has made many companies believe the chance for a big return is worth the associated risks. Oasis Petroleum Inc. (NYSE: OAS), once a mostly exclusive Bakken producer, late last year purchased 20,300 net acres in the Permian for nearly $1 billion.

Jason Swaren, vice president of operations at Oasis, pointed out in an earlier session at the Bakken Conference, that his company is still committed to producing in the Bakken. Swaren said 95% of Oasis’ hydrocarbon production comes from Bakken assets, while just 5% comes from the Permian.

“One of the things we wanted to do is diversify,” said Swaren, whose company is the fourth largest oil producer in North Dakota. “If anything happened in the Bakken … In the Bakken, differentials were not favorable and really we were struggling to compete on the global market.

“What’s interesting now is we have seen a complete shift and the Permian is actually experiencing infrastructure limitations. So for us having that optionality where we can flex our capital resources within the U.S. gives us a lot of versatility to optimize our revenue stream.”

The Permian is showing nonstop growth from now until 2030 with the oil production anticipated to peak at 6 million barrels of oil per day (MMbbl/d). Currently, the Bakken is exceeding its 2014 record of 1.23 MMbbl/d and is expected to stabilize at 1.5 MMbbl/d before plateauing for a period of time.

New technology has made the Bakken increasingly more competitive, making it possible for wells that once took as long as 80 days to drill now requires just 10 days or less. The controversial Dakota Access Pipeline is also up and running which has eased some of the transportation issues.

As a consequence, some of the services have become a little more expensive in the Bakken. But experts insist the added expense has been offset by improvement in data analytics and other technology.

“It’s been a totally different story in the Permian. We see that operators have really struggled to maintain their costs. If we look at 2018 compared to 2017, our Wood Mackenzie view is that on average Permian operators are spending about 12% more on every well than they did last year.

“This is for identical well design. Basically, the only difference is service cost inflation.”

Terrance Harris can be reached at tharris@hartenergy.com.