While the United States is blessed with a vast amount of productive oil and gas basins for exploration and production (E&P) companies to develop, in 2012 many operators are focusing a large part of their capital budget on a single play. These chosen plays by the industry typically produce crude oil or wet gas for the operator.

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Single Play Dependence
In 2012, Rosetta Resources (Nasdaq:ROSE) plans to spend $640 million in capital and is putting 93% of this budget into the Eagle Ford Shale. This was a higher percentage than last year when the company spent 85% of its capital budget in this play.

It has been ramping up activity in the Eagle Ford Shale since 2010, and has rapidly increased production over the last two years. The company reported Eagle Ford Shale production of 27,400 barrels of oil equivalent (BOE) per day in the fourth quarter of 2011, up from 1,100 BOE per day in the first quarter of 2010.

It plans to operate up to five rigs in the Eagle Ford Shale in 2012 and complete 60 wells during the year. The company expects this level of development to increase production by 40% over 2011.

SEE: Oil And Gas Industry Primer

Abraxas Petroleum (Nasdaq:AXAS) has chosen to focus its energy and capital on the Bakken play. The company has set a $70 million capital budget for 2012, and will put approximately 77% of these funds into the development of this formation.

It has approximately 21,000 net acres under lease exposed to the Bakken and plans to operate its own development program here as well as participate in several non-operated wells.

PDC Energy (Nasdaq:PETD) is putting 85% of its $198 million development capital budget into the Wattenberg Field in Colorado in 2012. The company plans to drill more than two dozen horizontal wells here during the year, and will also conduct several hundred refracturing or recompletions on existing wells to stimulate additional production.

Larger operators usually have a more diversified development program that targets many different basins. Devon Energy (NYSE:DVN) plans to spend between $6.1 billion and $6.5 billion in exploration and development capital in 2012. This budget covers many different areas and includes $1.4 billion in the Permian Basin, $950 million in the Barnett Shale and $870 million in the Woodford Shale during the year.

SEE: What Determines Oil Prices?

When an operator concentrates its activities into a single play or geographical area, it typically raises the operational risk to the company. However, this risk is mitigated because most of the plays described above have already had large, proven areas. This lowers the geological risk associated with being dependent on a single play. Another mitigating factor is that these plays are all in the U.S., a stable area with little political risk to these companies and operations.

SEE: A Guide To Investing In Oil Markets

The Bottom Line
Many exploration and production companies have chosen to focus an overwhelming share of capital budgets on a single play, or region in 2012, as the industry attempts to harvest the abundant amount of crude oil resources present in the U.S.

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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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