The Bone Spring has been producing oil and gas for decades in southeastern New Mexico and West Texas. The Permian-age formation, composed of interbedded sandstones, carbonates and shales, has already enjoyed several cycles of industry attention. Initially, conventional-quality sandstones were targets. Next, high-rate wells were brought in from carbonate lenses, and that phase was followed by a spate of vertical drilling in low-permeability sandstones. Now, horizontal drilling is tapping new accumulations in the shales and tight facies.

Some 30 rigs work in the Bone Spring today, targeting several intervals within the complex formation, from the Avalon shale and the Leonard shale (see "Here's Leonard" in the September issue of Oil and Gas Investor), to the 1st, 2nd and 3rd Bone Spring. Industry has drilled about 250 horizontal wells in the various objectives to date.

"Everything that's going on in the Bone Spring is brand new," said Tim Leach, chairman, chief executive and president of Midland independent Concho Resources Inc., speaking at EnerCom Inc.'s The Oil & Gas Conference in Denver. "It's very new and very competitive."

The reborn Bone Spring trend covers some five million acres in the Delaware Basin portion of the greater Permian, on the western side of the Central Basin Platform. The prospective area stretches from Lea and Eddy counties, New Mexico, down into Ward County, Texas.

Concho holds more than 100,000 acres in the sprawling trend, pro-forma with its acquisition of Marbob Energy Corp., which it expects to complete in the fourth quarter. Currently, four rigs are running in the Bone Spring on the Marbob assets, and next year Concho plans to almost double that count.

Several of the Marbob rigs are working in the Avalon shale play, in the upper section of the Bone Spring formation. Vertical depths are 6,000 to 7,000 feet and well costs run $4 million each, said Leach. The play is advancing rapidly, and recent wells are delivering estimated ultimate recoveries (EUR) of 500,000 barrels of oil equivalent (BOE).

Denver-based Cimarex Energy Co. also spoke at the EnerCom conference, and it too emphasized the delights of the Permian Basin in general and the Bone Spring in particular. It currently holds 380,000 net acres and runs 12 rigs in the basin, said Tom Jorden, executive vice president.

Cimarex is one of the most active horizontal drillers in the Permian, and this year it will spend $425 million there. It expects investment to remain at or above that level for the next few years.

"The secret is out—the Permian Basin is a wonderful operating arena," said Jorden.

In Lea and Eddy counties, New Mexico, Cimarex is particularly engaged in drilling 2nd and 3rd Bone Spring horizontals. It launched the play last year by experimenting with cheap reentries in existing boreholes, and when that was successful it kicked off a ground-floor program. Currently, it runs four rigs on a 38,000-net-acre slice in Lea and Eddy counties.

Today, its Bone Spring wells can average more than 1,000 BOE per day on first 30-day rates. "For a new drill in this area, our average estimate is about 570,000 BOE EUR," said Jorden. Drilling costs range from $3.8- to $4.2 million per well.

Cimarex's gross daily production from this slice of the Bone Spring has swelled to almost 4,000 BOE in June 2010, up drastically from levels below 500 BOE in November 2009.

Additionally, Cimarex has a Bone Spring play in Ward and Winkler counties, Texas. "From shallow to deep, the Permian continues to give new opportunities," said Jorden. "It's a hand-to-hand combat basin when it comes to land work, but we absolutely love it."

Finally, mega-independent Anadarko Petroleum Corp. used the floor at EnerCom's conference to talk up the Bone Spring a bit.

"We anticipate the Bone Spring area to have four to six rigs running through 2011," said Doug Lawler, vice president of operations.

Specifically, he noted the exploration potential in the Avalon shale: "It's early there, but we are looking into exploring it further and we're excited about what we see."