A couple of veteran Permian players were especially bullish on the Delaware Basin at this year's annual Enercom Inc. event, The Oil & Gas Conference. More than 400 rigs are currently working in the Permian Basin—a level of activity not seen since the glory days of 1981. Some 80 of these are in the Delaware Basin, and are focused on new-generation unconventional plays.

"What we discovered in the Permian was that many of the zones that were bypassed historically were great producers using the new technology," said Tim Leach, chairman and chief executive of Midland-based Concho Resources Inc.

This year, Concho is running 35 rigs in the Permian, and is devoting its entire $1.35-billion capital budget to the basin. Historically, it has been active in the Yeso/Lower Abo play on the New Mexico Shelf, and in the Wolfberry play in the Midland Basin. But it is most excited about prospects in the Delaware Basin, where it holds 160,000 net acres.

"The Delaware Basin is clearly where the growth is going to come from the next three to five years," said Leach.

"The producing zones go from the Avalon shale to the First, Second and Third Bone Spring sands and the Wolfcamp below. And they all look to be equally prospective and equally productive."

To date, Concho has participated in more than 150 Bone Spring wells, and as of 2Q 2011 it was making 5,600 barrels of oil equivalent (BOE) net per day from the formation. Concho's horizontal wells cost $5-to $7 million and feature vertical depths of 8,500 to 9,500 feet and laterals of 4,000 to 4,500 feet. Estimated per-well recoveries are 400,000 to 700,000 BOE.

In addition to the Bone Spring, Concho is looking at potential targets in the Delaware sands, Avalon shale, Wolfcamp and Penn shale across its position.

Interestingly, a mirror-image play to the Midland Basin's Wolfberry could be developing in the Texas portion of the Delaware Basin, centered in Reeves County. In the new Wolfbone play, the Bone Spring (correlative to the Spraberry) is being completed in vertical wells along with the Wolfcamp. Concho figures a vertical 11,000- to 12,000-foot well will cost $4- to $6 million and recover 200,000 to 400,000 BOE. It's still too early to predict whether the Wolfbone will be best developed with densely spaced vertical wells or by horizontal exploitation, noted Leach.

For Denver-based Cimarex Energy Co., the Permian is one of three main operating areas. "We're a major player in the Permian," said Tom Jorden, executive vice president. The company holds about 450,000 net acres and this year is running 14 operated rigs and spending $750 million in the basin.

"Even though we talk about the Permian as one play, the Permian is many, many different plays to us," he said.

Although Cimarex, like Concho, is active in the horizontal Abo and vertical Yeso plays on the New Mexico Shelf, the Delaware Basin's resource plays are drawing its attention.

Cimarex's busiest play is the Second and Third Bone Spring sands in New Mexico's eastern Eddy and western Lea counties. A garden-variety well costs between $5- and $5.5 million and will ultimately produce 571,000 BOE.

"We have seven rigs at work, a multi-year drilling inventory and we're also actively leasing," said Jorden.

A bit farther south, three emerging plays are also percolating for Cimarex. It has completed 12 horizontal Wolfcamp shale wells, and its average well has produced 6.3 million cubic feet of gas equivalent per day. About 50% of that is oil.

"After just 12 wells, it looks like it's a nice economic play, and we'll be prosecuting it," said Jorden.

The firm has drilled a couple of Avalon shale wells, and is currently watching the play closely and evaluating its economics. Additionally, Cimarex is quite intrigued with the Cisco/Canyon or Penn shale.

It is currently flowing back its first Cisco/Canyon lateral that was completed with a modern frac.

"We've more than doubled our investments in the Permian," said Jorden. "And our Permian production is growing at double digits."

For more on the Delaware Basin, see UGcenter.com.