MIDLAND, Texas—The price war in the Permian Basin—as public and private E&Ps bid against one another—may just be getting started.

But the scouting reports for acreage may be obsolete as companies increasingly search out zones, instead. In short, it’s all about well locations and what’s underneath them.

At the end of October, Occidental Petroleum Corp. (NYSE: OXY) said it had spent $2 billion for 35,000 net acres in the Delaware Basin. It was the fifth Delaware transaction of 2016 to eclipse $1 billion and one of the most expensive. Oxy paid $42,000 per acre or more, depending on how production is valued.

Analysts and CEOs say Permian acreage prices are not leveling off any time soon. With much of the Permian Basin leased, E&Ps are in a tug of war between the haves and have nots.

At Hart Energy’s Executive Oil Conference held Nov. 8, Permian superstars Scott Sheffield, chairman and CEO of Pioneer Natural Resources Co. (NYSE: PXD), and Randy A. Foutch, founder, chairman and CEO of Laredo Petroleum Inc. (NYSE: LPI), both said escalating prices make sense.

Bernstein Research recently made the startling prediction that acreage could reach $100,000 per acre.

Sheffield doesn’t see prices getting quite as high as Bernstein envisions “until we see oil prices get up to at least $60,” he said. In August, Pioneer closed on Devon Energy Corp.’s (NYSE: DVN) 28,000 Midland acres for $435 million. Some of the acreage, which cost Pioneer about $15,500 per acre, was undeveloped.

Bernstein’s larger point, shared by Sheffield, is that the Midland and Delaware basins shouldn’t be judged so much by acreage prices as by the zones beneath wells. Bob Brackett, senior analyst with Bernstein, said higher prices are a function of transactions being made on a per-well basis that distinguish between top and bottom tier acreage.

Sheffield told Hart Energy that with efficiency gains, a typical well location has a present value of $80,000 to $100,000 per acre.

“People can afford to pay in the $40,000 to $60,000 range,” he said.

The updraft of prices is more a “combination of too much money chasing too few deals coupled with the fact that the economics of the Permian are the best in the U.S.”

At $40,000 per acre, putting those ingredients together can still generate a 15% to 20% return, Sheffield said.

“That’s why you’re seeing the prices bid up on all these type transactions,” he said. “Most of them are in the Delaware because most of the Midland Basin has been purchased and there are very few opportunities left.”

Sheffield said that high prices require companies to hit the ground running when they make a deal.

“If you can drill a three-well pad and hit three zones that improves your economics even more so. If you’ve got six zones it helps,” he said. “If you sit there and buy something and wait three years or five years to drill it, you can’t afford to pay [high acreage prices].”

Rigs have to be moved in swiftly with an eye toward developing more than one zone.

“One zone will at least give you a decent return,” he said. “Having a second zone and third zone will improve the economics even better.”

The recent lurch forward in the Permian’s rig count is partly due to companies moving quickly to deploy rigs, he said.

Pioneer built its 785,000-acre position in the Permian Basin’s Spraberry oil field over decades through property acquisitions, mergers and exploratory efforts.

For Laredo, the company moved to purchase much of its 127,000 net acres for $1,000 per acre or less, Foutch told Hart Energy.

“We stopped buying when we couldn’t block it up appropriately,” he said.

Laredo operates high-efficiency production corridors and combines infrastructure with extremely long laterals—more than 13,000 ft—to maximize value.

“We knew when we bought our first acreage in the Midland Basin in early [2009 and 2010] that it needed to be blocked up,” Foutch said. “We bought acreage that had no production on it … that was blocked up cause we had this view of how this acreage was going to be developed.”

Foutch said elevated acreage prices have resulted from the difference between “people who have good acreage, good rocks and the people who don’t.”

Longer lateral lengths continue to be the driver for Laredo. The company has made bolt-ons, including its July purchase of 9,200 net acres in Glasscock and Reagan counties, Texas, for $125 million.

Generally Laredo is unwilling to make an acquisition unless the acreage is superior to what it already owns or has a strategic benefit.

“We just haven’t seen a lot of acreage that we think fits that criteria,” he said.

Instead, Foutch said established operators are realizing they need to cooperate to maximize their holdings.

“There’s some swaps going on right now as we speak. We know of them—we’ve already done some,” he said.

The next big wave of sales pitches to hit the Permian may just be E&Ps convincing their neighbors to work together.

Darren Barbee can be reached at dbarbee@hartenergy.com.