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The last two years have been a challenging period for the domestic exploration and production industry, as the global price for crude oil collapsed and has been slow to recover. But as the price has recovered a bit, from a February low of about $27 up into the mid-$40s – and as increased efficiencies continue to drive down the cost of production – the drilling rig count here in the U.S. has begun to move upwards, with net rigs having now been added in 9 of the past 10 weeks.

That growth in the rig count has been pronounced in one giant play:  the Permian Basin, which underlies a broad swath of West Texas and the Southeastern portion of New Mexico.  Having added 35 new rigs since June, the most recent count had the Permian home to 189 active rigs, almost 40 percent of all active land rigs in the U.S.  Of the major, world-class U.S. oil and gas plays, only the STACK and SCOOP plays in Oklahoma have seen similar recent percentage increases in rig counts.

The Permian region has become so hot in recent months that acquisition prices for undeveloped leases there have begun to rapidly ramp up.  One independent producer, SM Energy, recently paid the equivalent of more than $39,000 per acre for drilling rights on 24,783 Permian acres, in an acquisition that also included a significant amount of existing production.  That’s similar to prices that were being paid in the Eagle Ford Shale play a few years back, but that was in a $90 price environment.  That such prices are being commanded in a $40-$50 price environment show how attractive the Permian has become.

This enthusiasm for the Permian really isn’t just something that has developed in the last few months.  Two years ago, Parsley Energy, led by 38 year-old CEO Bryan Sheffield, was able to raise $925 million in what became one of the largest IPO offerings in the history of the industry thanks to an asset base consisting mainly of prime Permian acreage.  According to the Wall Street Journal, Sheffield has now become one of America’s you...