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6-18-2018
NEW YORK (Bloomberg) -- The next frontier for U.S. oil’s resurgence may come on familiar terrain.

The Austin Chalk, a vast underground highway of rock that runs along the Gulf Coast, is garnering new attention this year, with drillers including ConocoPhillips and EOG Resources Inc. trumpeting efforts in an area the industry largely wrote off 20 years ago. The latest sign of life came last week, as private-equity giant Blackstone Group LP sold royalty rights in the region for more than $400 million.

The revival is the latest testament to the oil industry’s improved health, now that crude prices are near $70/bbl following a painful three-year slump. Explorers are betting the kind of drilling techniques that led to a boom in U.S. shale plays can also work on the more unpredictable rock in the Austin Chalk.

“It is a play that I think is going to have a lot of legs," said Bernadette Johnson, a vice-president for researcher DrillingInfo Inc.

Blackstone’s sale followed a $2.7-billion deal in March by TPG Pace Energy Holdings Corp. to buy drilling rights on 360,000 acres in the Austin Chalk and the neighboring Eagle Ford shale basin. Conoco later announced it had grabbed another 211,000 acres while Marathon Oil Corp. said in May that it had acquired a “ material position" in the Louisiana portion of the play.

The Austin Chalk’s now home to “some of the most prolific and highest return wells in the company," EOG Executive V.P. Ezra Yacob told analysts on a call May 4, though he warned it’s “still pretty early" in the area’s development.

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