HOUSTON—The industry’s fixation on the Permian Basin, highlighted by recent deals in the Delaware Basin, isn’t dying down anytime soon.

Most recently, on July 13, Diamondback Energy Inc. (NASDAQ: FANG) took its first steps into the Delaware with the purchase of about 19,000 acres from Luxe Energy LLC for $560 million.

Contango Oil & Gas Co. (AMEX: MCF) is also on the hunt for deals in the Permian—holding back on capex to make a deal—and has talked to portfolio companies there and on the Gulf Coast, according to Seaport Global Securities.

But Bill Marko, managing director of Jefferies LLC, said the Permian isn’t the only region with potential for deal making. He gave a rundown of hot and not-so hot deal spots at a July 12 presentation at Tulane University’s Houston campus.

Despite the intense interest in the Stack play, its potential for deals might be limited.

The Stack play, centered on Canadian and Kingfisher counties, Okla., is “kind of a fixed size, so there’s not a lot of transactions beyond a few that will happen,” Marko said.

Similarly, the Bakken is a hard place to find deals because of its well-defined area. Companies there have more recently focused on drilling deeper rather than outward.

The Permian, on the other hand, is huge. And some areas of the basin contain 200 million barrels (MMbbl) within a one-square mile section.

“It’s 5,000 feet of hydrocarbons,” Marko said. “Not all the sections are economic today and may not be ever. But there’s so much oil in play it’ll probably turn out to be the biggest accumulation basin in the world—bigger than what Saudi Arabia has.”

The deepwater Gulf of Mexico could also make a comeback at $60 or $70 oil, but only for large companies with plenty of capital.

On the gas side, interest is being rekindled in the Haynesville in north Louisiana. Wells are now 3x more prolific than in years past, while costs have been cut by 40%, Marko said.

“You used to need $5 or $6 [gas prices] for breakeven,” he said. “Now in the core you need $2 or $2.25, so there’s been a lot of deals around there and more coming.”

Marko said the Haynesville is “perfect for LNG because the vast majority for all LNG exports will be Texas and Louisiana.” The U.S. produces about 75 billion cubic feet per day (Bcf/d) of gas and will eventually export 25 Bcf/d of LNG.

However, the economics are a more powerful motivator than LNG.

“I haven’t seen a lot of people make acquisitions of upstream assets specifically for supply of LNG. They all talk about doing it and a few have done it, but not a lot,” he said.

In Ohio, some interest should also be felt in the deep Utica Shale, where massive 50 MMcf/d wells have been drilled. The drawback is that wells with so much production will keep gas prices tamped down.

“That’s why gas can’t ever go over $3.50, because if it goes to $3.50, more and more places get drilled, which lowers the price,” he said.

Despite a fairly steady flow of Permian transactions, deal flow continues to be muted compared to the robust activity in the early part of the decade when international investors from France, Japan, Norway, Italy, Spain and China were interested in shale.

“Starting in 2015, when oil prices fell and gas price fell, you could do deals at lots of different pricing levels,” Marko said. “But when pricing is moving and is volatile, deals kind of stand still.”

He said this year A&D value will reach perhaps $30 billion or $35 billion.

Companies, in the meantime, continue to work to save money as leverage remains a big concern. Historically, Marko said, optimistic E&Ps have spent roughly 130% of their cash flow.

Small and mid-sized companies are particularly vulnerable, and more than $65 billion in debt reduction is required for the sector to reach 4x total leverage.

“If price keeps rising, this bails people out,” he said. “I think equity markets are valuing companies as if we’re going to get to $60 oil. The equity investors are kind of optimistic in general.”

Whether service costs remain low as the downcycle turns up, companies have changed how they’re thinking about spending.

“We’ve gone from, in 2014, going as fast as we could and now we’re focused on efficiency because we have to be,” Marko said. “It’s actually a good thing for the business.”

The industry was severely overspending “all the way up to Exxon or Chevron,” Marko said. “They think it was being spent less efficiently than it should have been and could have been.”

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