DALLAS—Buyers are rushing to non-Permian, non-Scoop/Stack basins as prices for these assets have exceeded their entry-level economics, according to Geoff Roberts, BMO Capital Markets Corp.’s managing director and head of U.S. A&D.

“The Permian is still the king, of course,” in terms of basins buyers would like to own, Roberts said at Oil and Gas Investor’s A&D Strategies and Opportunities conference and workshop. “You can’t have a conversation about the upstream without starting with the Permian.”

But it’s expensive. “We’ve seen the logical results of that kind of focus. Over the last three years, we had that many people trying to spend that much money in one place—if you want to combine the Delaware and Midland [basins] into ‘one’ place.”

What they’re encountering? “The competition is severe,” he said. “The supply [of available land] is inadequate. And there’s a lot of money looking to be spent.”

In the past two years, BMO’s asset-marketing group has seen “overflow money that couldn’t be spent in the Permian but needed to be spent by (operators) looking for ways to expand through acquisitions and they had to go to the next best areas.”

That money began buying in the Eagle Ford, the Haynesville and the Scoop/Stack, “which, I guess, is now the Stack/Merge,” he said. “Those basins benefited and, for a while, we were pretty much commodity agnostic—oil or gas, so long as it was a decent acquisition—if there was less competition and they could get in at the PV-10s [for PDPs] and the PV-20s [for PUDs].”

Now prices in those plays are exceeding many entry economics; they’ve “heated up too much.” So, the BMO team is seeing “a lot of people moving up to the Rockies now.” Interest is in the Piceance Basin “and a couple other basins in the area,” he said.

“There is a lot of activity headed that way now. And,” he added, “people are starting to talk about the Marcellus again. It’s kind of a food chain in reverse.”

Randy King, managing director of Anderson King Energy Consultants LLC, concurred with that money is looking again at older plays. He added that upstart E&Ps would do well to consider a business strategy of enhanced exploitation of old unconventional-resource wells.

“We are creating a huge inventory of older horizontal oil wells that will eventually fall back into that ‘food chain’ category,” he said. “You could argue that a good strategy would be to put the expertise together to manage the artificial lift, restimulation, cleanouts, plugging and repair of these horizontal wells to milk them over long periods of time.”

Jimmy Crain, director at EnCap Investments LP, said the private-equity dollars EnCap and some other firms are deploying today are going to business plans that aren’t all typical of five years ago. “We’ve seen a big push in private equity to get into minerals and nonoperated properties,” he said.

“We’ve seen over $1 billion buying minerals largely in [the Permian and Oklahoma] as ways in which to continue to be able to create value in those basins that don’t look like our traditional operated E&P companies.”

Among the traditional start-ups, however, Crain concurred with Roberts and King that money is looking for better entry-level economics. “I’ve seen two trends. One is you’ve seen a lot of private equity [start-ups] go to non-Permian, non-Scoop/Stack basins because they feel like it’s too competitive and too expensive to reinvest back in those plays [they just exited]. We’ve seen a lot of transactions outside of those basins.”

Meanwhile, the other trend is of start-ups trying to get back into these basins—if they can. “In those areas, you have to be creative to be able to compete with big capital coming into the door. For us, that was, in many cases, kind of pushing the edges of the basins, extending whatever the core looks like today.

“In some cases, some of our teams with just incredible business-development capabilities have been able to buy assets in the core, but that’s tough to do—very competitive and expensive.”

Nissa Darbonne can be reached at ndarbonne@hartenergy.com.