Go South, young man!

That’s the advice Horace Greeley would give to today’s frontier oil and gas operator when the subject turns to tight formation horizontal oil in the Delaware Basin.

A wagon train of companies is taking that advice as delineation efforts in the Delaware stretch tantalizingly close to the Davis Mountains in West Texas. It’s a surprising development since the horizontal play in the northern Delaware has been the most economic out of the twin sub-basins—the Midland and Delaware—that create the overall Permian Basin.

If you imagine the Permian Basin as a butterfly-shaped province, the western wing would be the Delaware, stretching 200 miles north to south and another 125 miles east to west. There is a little irony in the fact that the horizontal play is moving south in the Delaware while it is moving north in the Midland Basin, a market permutation that illustates the Ying Yang principle of Tao in Permian Basin tight formation exploration.

While the headlines focus on Wolfcamp and Cline development in the Midland Basin, the fact of the matter is that the Delaware Basin has led the Permian Basin forward in horizontal drilling. Consider the stats: In the fourth quarter 2011, 16% of Permian rig count was tied to horizontal drilling out of 420 active units. Two years later, rig count was roughly the same at 438 units, but 45% of those rigs were drilling horizontal wells with the majority at work in the Delaware Basin. Delaware Basin horizontal rig count averaged 114 units in the third quarter 2013.

And if it sounds as though operators have been delineating the Delaware forever, you’re hearing correctly. The Delaware is a massively complex geologic play featuring multiple interlocking stacked formation targets up to 3,500 feet in depth that resulting from the slow filling of a deepwater basin during Permian times 250 million years ago. As the basin cycled through periodic filling and subsidence, multiple layers of sands interbedded across a shallow shelf into the deeper basin. Those sands are known today as the Bone Spring, and are analogous to the Spraberry-Dean formations in the Midland Basin, just across the Central Basin platform that divides the Permian in two. The latter are part of the vertical Wolfberry play.

In more recent geologic times (“recent” meaning 35 million years ago), tectonic activity to the west uplifted the region and created naturally occurring fractures that add to downhole complexity and the gassier nature of the play west of the Pecos River, a surface feature that essentially bisects the Delaware Basin. The Delaware also contains the deepest part of the Permian Basin where operators have been exploiting the vertical Wolfbone over the last half-decade, a play that features commingled production from multiple stacked formations and that serves as a an analog to the more widely known Wolfberry play in the Midland Basin.

However, the broader Delaware features a target-rich environment with operators employing horizontal drilling and multi-stage fracturing to develop shallower Delaware sands in southeastern New Mexico, exploring the upper and lower Avalon shale, which tends to be gassier, and moving into optimization on the three intervals of the Bone Spring sands in a 120-mile interval straddling both sides of the Texas-New Mexico state line.

Devon Energy Corp. (NYSE: DVN) is drilling 300 wells in the Permian Basin in 2013 on a $1.5 billion capital spending program spread across 27 rigs. Roughly half of those—13 rigs—are concentrated in the Delaware where the Oklahoma City-based independent holds 320,000 net acres. Devon is currently generating 23,000 BOEPD, 60% oil, out of the Delaware and has been particularly successful drilling Bone Spring wells in southeastern New Mexico. Devon’s 2013 capital budget calls for 100 Bone Spring wells with another 30 targeting Delaware Sands.

Devon’s Bone Spring wells average $6 million to drill and produce 30-day IP rates of 575 barrels of oil equivalent per day (BOEPD) and estimated ultimate recoveries of 500,000 barrels of oil equivalent. But the new angle in the Delaware involves prospecting for the Wolfcamp shale, specifically the A bench, as the play moves south into Reeves and Pecos counties.

Concho Resources Inc. (NYSE: CXO) is leading the charge south. Concho plans to drill 175 horizontal wells in the Delaware Basin by year-end 2013 and is eyeing 4,300 potential horizontal locations. The Midland-based independent has home-field advantage in the Delaware, where it has more than doubled rig count from six units in the third quarter 2011 to 14 in October 2013. Production has followed rig count, rising form 8,900 BOEPD in third quarter 2011 to 31,700 BOEPD, 63% black oil, at midyear 2013.

Concho is reporting an average 30-day IP rate of 857 BOEPD out of multiple formations in the economically enticing New Mexico portion of the Delaware Basin, including an average 30-day IP rage of 772 BOEPD, 80% oil, mostly out of the second Bone Spring sand. Concho claims to have de-risked 20% of its southern Delaware Basin acreage where it is targeting 200 drilling locations in the Wolfcamp A bench. Large acreage parcels will allow the company to drill extended reach laterals up to 8,000 feet in length. Those wells cost an estimated $10.5 million but can produce estimated ultimate recoveries (EURs) up to 700,000 barrels of oil equivalent, 75% oil.

Like the Permian Basin in general, the Delaware offers multiple targets in a stacked play configuration both above and below the Upper Wolfcamp. Concho has drilled 11 wells with a 30-day IP rate of 691 BOEPD split between its North Harpoon area just south of the Pecos River in eastern Reeves county, and in its Big Chief area further south along the Reeves/Pecos county line.

Clayton Williams Energy Inc. (NASDAQ: CWEI) is delineating the Wolfcamp A in the southern Delaware. The company has drilled 10 horizontal wells in 2013 and is advancing along the learning curve on where to land laterals and how to frac the play. The company is also looking at the C bench in the Wolfcamp and the second Bone Spring interval after acquiring 77,000 acres in the southern Delaware from Chesapeake Energy Corp. (NYSE: CHK) previously.

Further north in Pecos County, Whiting Petroleum Co. (NYSE: WLL) has drilled two horizontal Wolfcamp tests on its Big Tex prospect where it is evaluating longer laterals, more frac stages, and additional pumping pressure, techniques it has developed in the company’s successful Bakken shale development program.

EOG Resources Inc. (NYSE: EOG) is also in delineation mode prospecting for the Wolfcamp in Reeves County. The company is characterizing the Wolfcamp as a combo play with three potential pay zones. To date, EOG has drilled four Wolfcamp horizontals and plans to expand the program in 2014 as it overcomes takeaway issues. The company is on record speaking highly of Permian potential, including the Delaware Basin, although that potential is based on the geographic extent of the resource rather than the rock quality found in the high-flying Bakken and Eagle Ford shale plays. Under this view, new Permian liquids production can replicate the bounty found in the Bakken and Eagle Ford, but the effort will require more wells, rigs and resources to match equivalent production growth in the Bakken and Eagle Ford.

Further north, Energen Corp. (NYSE: EGN) is well-advanced on a $425 million 2013 capital program in the Delaware Basin where the company plans 30 net Bone Spring wells and 10 net horizontals prospecting the Wolfcamp A and B benches in Ward, Winkler, and Loving counties, and the A, B, and C benches in Reeves county.

Results to date include the University 28-21 #1H in Winkler County, which featured a 30-day peak average of 653 BOEPD, 74% oil and the University 39-17 #1H in Ward County that produced a peak 30-day average of 950 BOEPD, 60% oil.

Contact the author, Richard Mason, at rmason@hartenergy.com