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Delaware Basin Seeing More Activity
The Delaware Basin in West Texas and Eastern New Mexico is seeing more activity from the exploration and production industry, as operators seek out oil and liquids plays in an effort to diversify away from natural gas, and benefit from the higher relative price of oil.
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The Bone Spring formation in this area consists of several layers of sandstone and limestone at varying depths depending on what part of the basin is being developed. This formation has seen vertical well development for many years, but now drilling is shifting towards horizontal development.
The Players
Chesapeake Energy (NYSE:CHK) started drilling horizontal wells as early as 2007 to the Bone Springs, and the formation is one of the "big 12" oil plays that Chesapeake Energy lists in its marketing materials. The company lists the play with three other formations under the Permian Basin category, and has 290,000 net acres in these four plays.
Cimarex Energy (NYSE:XEC) has acreage in the play and is currently operating two rigs here. Two recent wells completed to the Bone Springs formation in the first quarter of 2010 produced an average of 760 and 360 barrels of oil equivalent (BOE) during the first 30 days of production. This production was approximately 80% oil, and the company may add a third rig in 2010.
Vanguard Natural Resources (NYSE:VNR) acquired Bone Springs acreage in an acquisition in 2009, and the company is drilling one horizontal well in 2010. The company estimates the cost at $5 million, and is using an internal rate of return on the well of 30%.
Sandridge Energy (NYSE:SD) has 150,000 acres in the Permian, and is pursuing four oil plays, including the Bone Springs formation. The company hasn't announced any wells here to date, and is focusing its oil development efforts in the Central Basin where it is pursuing Clear Fork and San Andres development.
Clayton Williams Energy (Nasdaq:CWEI) has extensive acreage in West Texas, and disclosed in November 2009 that it was beginning a multi-well development program targeting the Bone Springs in Ward County.
The Bottom Line
The exploration and production industry is leaving no stone unturned as it looks for oil and liquid plays in North America. This has given new attention to older basins that many thought were past its peak. (To learn more, see our Oil And Gas Industry Primer.)
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IN PICTURES: 7 Tools Of The Trade
The Bone Spring formation in this area consists of several layers of sandstone and limestone at varying depths depending on what part of the basin is being developed. This formation has seen vertical well development for many years, but now drilling is shifting towards horizontal development.
The Players
Chesapeake Energy (NYSE:CHK) started drilling horizontal wells as early as 2007 to the Bone Springs, and the formation is one of the "big 12" oil plays that Chesapeake Energy lists in its marketing materials. The company lists the play with three other formations under the Permian Basin category, and has 290,000 net acres in these four plays.
Cimarex Energy (NYSE:XEC) has acreage in the play and is currently operating two rigs here. Two recent wells completed to the Bone Springs formation in the first quarter of 2010 produced an average of 760 and 360 barrels of oil equivalent (BOE) during the first 30 days of production. This production was approximately 80% oil, and the company may add a third rig in 2010.
Sandridge Energy (NYSE:SD) has 150,000 acres in the Permian, and is pursuing four oil plays, including the Bone Springs formation. The company hasn't announced any wells here to date, and is focusing its oil development efforts in the Central Basin where it is pursuing Clear Fork and San Andres development.
Clayton Williams Energy (Nasdaq:CWEI) has extensive acreage in West Texas, and disclosed in November 2009 that it was beginning a multi-well development program targeting the Bone Springs in Ward County.
The Bottom Line
The exploration and production industry is leaving no stone unturned as it looks for oil and liquid plays in North America. This has given new attention to older basins that many thought were past its peak. (To learn more, see our Oil And Gas Industry Primer.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
by
Eric Fox
Eric J. Fox, CFA, is a freelance financial writer and has previous experience working in the asset management industry as an equity analyst and portfolio manager on the buy side. His favorite area to write on is the energy sector and he keeps current on the industry by reading Haynesville Shale, Permian Oil and Gas and various other blogs.
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