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U.S. Energy Development Corp. sees growth opportunity in Permian

Arlington-based US Energy Development Corp. has been racking up Permian Basin assets over the last couple of years, and the region is a bright spot for the company.

“Two-thirds of our budget will be allocated to the Permian Basin over the next two to three years,” said Jordon Jayson, chairman of the board and chief executive officer, during a recent visit to Midland, estimating that would be $200 million to $300 million on an annual basis. The remainder of what he anticipates will be $400 million to $500 million in acquisitions over the next 18 to 24 months will be in the Powder River and Eagle Ford basins, he said.

The company announced in September a $60 million acquisition of three separate asset packages in the core of the Delaware Basin that will have US Energy Development partner with operators on 17 new wells across three counties. A year earlier the company acquired a $50 million asset in Loving County, with plans to add wells targeting the Third Bone Spring, Wolfcamp A and Wolfcamp XY benches. That acquisition came on the heels of the company’s $14.1 million purchase of an asset in Reeves County, targeting the Wolfcamp Shale. In August of 2021, the company entered into a joint venture with Atlantic Energy Partners to develop and operate three horizontal wells targeting the Wolfcamp Shale in Ward County, where earlier in 2021 the company had completed and put online a three-well pad at a development cost of $30 million.

In keeping with its plans to also invest in other basins, the company announced a joint acquisition with Eagle Ridge Energy to drill up to 12 horizontal wells over the next year in the Barnett Shale, primarily Wise, Denton and Johnson counties.

“We just completed a three-well pad in Ward County and plan to complete more in Ward and northern Reeves counties,” Jayson said.

US Energy Development will also participate in numerous projects as a non-operator and Jayson said the company’s budget will be split between operated and non-operated projects

“We’re looking for projects where we have the ability, as operator or non-operator, to participate in new drilling programs,” he said. He acknowledged the search for new drilling programs will be more difficult as drilling activity remains steady with a slight uptick.

“I don’t anticipate a large boom,” he said, adding that with oil prices at $85 or $90 per barrel, not as many operators need partners for drilling projects.

Higher commodity prices have also made acquisitions challenging due to the gap between what sellers expect to receive and what buyers are willing to pay. Jayson said, though, he sees that gap closing a bit.

“Over the next 12 months there will be a greater amount of opportunity for transactions in the basins we operate in,” he predicted.

For its part, Jayson said he wants to see US Energy Development continue to look at accretive opportunities and the company’s board of directors is supportive of its growth plans.

But, he said, “there is no mandate for growth so we can be thoughtful and patient with the allocation of our capital and grow at a measured pace.”

He also wants to build upon “the great team we have in place and search for additional teammates. But the labor market is tight as well, so we’ll have to be patient there, too.”

Written By: Mella McEwen