Energen (NYSE:EGN) is one of the many exploration and production companies looking to increase the share of crude oil and liquids in its production stream. The company made progress on this goal during the first quarter of 2012 with the development of several plays in the Permian Basin.

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First Quarter of 2012
Energen reported total production of 5.8 million barrels of oil equivalent (BOE) during the first quarter of 2012, with approximately 34% of this production composed of crude oil and natural gas liquids. The percentage of crude oil and liquids in the production stream is increasing fairly rapidly and is expected to average 48% in 2012.

Permian Basin
It is targeting a number of formations in the Permian Basin as it looks to increase oil and liquids development. The company's main focus is on the Bone Spring and Wolfberry plays.

SEE: A Guide To Investing In Oil Markets

In the Midland Basin, Energen is concentrating on vertical development of the Wolfberry play at depths between 7,500 and 10,500 feet. The company plans to drill 170 net wells here in 2012, and is assessing the acreage for horizontal development of other formations. The company estimates that the average Wolfberry well will have oil and liquids content of 88%.

Bone Spring
It is also working on the Third Bone Spring Sands formation in the Delaware Basin, and plans to drill 43 net wells in 2012 on its acreage in West Texas. Wells here have an estimated liquids content of 78%.

SEE: What Determines Oil Prices?

Capital Spending
Energen raised the company's 2012 capital budget to $950 million, up from the previous estimate of $890 million. The company will spend approximately 95% of these funds on development of properties in the Permian Basin.

In 2013, its preliminary budget calls for spending of $855 million, with 85% allocated to various parts of the Permian.

SEE: Oil And Gas Industry Primer

Contrarian Opinion
Although many exploration and production companies are developing the Bone Spring formation, there is some disagreement as to the future potential of this play. IHS (NYSE:IHS) recently released a report entitled the "IHS Herold Bone Spring Regional Play Assessment" and contends that the geological complexity of this play may provide "limited upside" to many operators that are active here.

IHS singled out Concho Resources (NYSE:CXO) as the operator that has achieved the most success in the Bone Spring play. This is due primarily to the location of its properties in New Mexico, according to IHS.

IHS was also positive on the Avalon or Leonard Shale, which is under development by EOG Resources (NYSE:EOG) and other operators in New Mexico. The company said that this shale has the most consistent results and future down spacing potential.

The Bottom Line
Energen has settled on the Permian Basin to achieve its strategic goal of boosting its crude oil and liquids production. The company is working on a number of prolific plays in this basin.

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At the time of writing, Eric Fox did not own shares in any of the companies mentioned in this article.

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