Consistent productivity has kept the Permian basin one of the most active E&P areas in the US and a secure source of domestic energy for more than 80 years. Comprising more than 40 counties throughout West Texas and southeastern New Mexico, the basin is bustling with unconventional activity as higher oil prices have influenced a steady shift to liquids among North American operators.

According to the Permian Basin Petroleum Association, the region leads the nation in crude oil production. At year-end 2010, the Permian had more than 150,000 active producing wells generating 72% of the oil production in Texas and 13% of US domestic oil production in addition to 67% of casinghead gas, 13% of well gas, and 8% of the condensate produced in Texas annually based on Texas Railroad Commission data.

Improved drilling techniques and fracturing technology have curbed a previously expected decline in production from the mature region, which boasts 1,300+ oil reservoirs and some 30 identified plays. The largest inland oil and gas reservoir in the Lower 48 states also is poised to lead all US regions in unconventional development in 2012, with operators planning a 20% increase in capex for the Permian, according to Barclays Capital’s annual oil and gas upstream spending survey.

Spurring the push is a new generation of “it” plays that has lifted production in the decades-old basin, including the Abo, Bone Spring, Leonard, Spraberry, and Wolfcamp formations. And as of September 2011, recent Permian activity has affirmed these prospects’ potential.

Completions prove new zones

Statistics for 1H 2011 completions compiled in a review featured on Hart Energy’s UGCenter.com ? website show the Permian basin ahead of all other unconventional areas with 1,258 completions out of a combined 6,287 wells reported for 1Q and 2Q 2011. Spraberry drilling led Permian activity during the first half, accounting for 906 completions.

Meanwhile, the level of activity in the Permian basin is steadily ramping up, with more than 400 rigs working the Midland region as of September 2011.

In the Phantom field of Ward County, Texas, Chesapeake Operating Inc. recently completed a Delaware basin horizontal. The #1H Monroe 1-10 flowed 1,010 bbl of 47° crude, 1.42 MMcf of natural gas, and 1,022 bbl of water per day from the Bone Spring at 3,549 m to 4,531 m (11,643 ft to 14,865 ft) after fracture stimulation.

Yates Petroleum Corp. also recently completed a horizontal Bone Spring producer in the Berry North field at a depth of 4,062 m (13,327 ft) with a lateral that was drilled to a vertical depth of 2,699 m (8,856 ft). The well flowed 195 bbl of oil, 236 Mcf of gas, and 174 bbl of water per day from acid- and fracture-treated perforations at depths to 4,002 m (13,130 ft).

Another key player in the Permian, Concho Resources Inc. is running 35 rigs in the basin where it has allocated its entire US $1.35 billion capex, focusing on new potential in the Bone Spring, Delaware sands, Avalon shale, Wolfcamp, and Penn shale, in addition to its primary horizontal Abo and vertical Yeso plays. As of September 2011, the Midland-based company participated in more than 150 Bone Spring wells, and exiting 2Q, it was producing 5,600 boe/d net from the formation. According to UGCenter data, Concho’s horizontal wells cost $5 million to $7 million and feature vertical depths of 2,591 m to 2,896 m (8,500 ft to 9,500 ft) and laterals of 1,219 m to 1,372 m (4,000 ft to 4,500 ft). Estimated per-well recoveries are 400,000 boe to 700,000 boe.

Third-quarter 2011 activity also underscored Permian basin progress. Expanding its Permian footprint, Houston-based Linn Energy LLC said in its 3Q 2011 quarterly report it expected to add net production of approximately 800 boe/d and proved reserves of approximately 8.3 MMboe (78% oil and NGLs) from two bolt-on acquisitions in the Wolfberry play.

At its San Jacinto County Property in Midland County, Texas, Caza Oil & Gas Inc. saw encouraging results from its Permian basin targets as well, according to 3Q results. The Caza Elkins 3401 and 3402 wells each reached a target depth around 3,613 m (11,854), with log data from both wells indicating multiple potential pay sands for oil and gas in the Spraberry, Dean, Wolfcamp, Strawn, Atoka, and Mississippian formations. As of September, the 3401 well had gross production of 151 b/d of oil and 172,000 cf/d of gas, and the 3402 well has gross production of 68 b/d and 184,000 cf/d.

While operators focus on previously overlooked oil and gas formations in the prolific Permian basin, the region’s limited availability of fracturing services could affect the timing of future well completions. But for now the region is reaping the benefits of increased oil bounty within this legacy asset.