The Permian Basin covers an area of West Texas (and part of New Mexico) roughly 250 miles wide by 300 miles long.
In addition to its sheer size, a key to the Permian’s profitability is its “stacked formations.” In the Permian, one piece of land likely contains three or more zones layered on top of one another. Each zone is capable of producing oil. We call that “stacked pay.” The oil and gas business has changed. In years past, Permian production was all “conventional” vertical wells. But most of the big conventional fields have been discovered, and that technology reached its full potential years ago. Now, “unconventional” horizontal drilling has changed the way we look at oil exploration. New technologies developed in the mid-2000s by companies like Haliburton (HAL) and Schlumberger (SLB) have revolutionized this method. We can now drill a mile deep and two miles sideways. With horizontal drilling came “fracking” (or hydraulic fracturing), which involves cracking open the rocks in a drilling area and forcing sand (called proppant) into the cracks to hold them open. High-pressure water is pumped into the drilled well to fracture the rock. The proppant enters the fractures and lets the oil flow easier from the oily rocks. Fracking also makes “bad” rocks into better rocks. Bad rocks are rocks that contain oil but won’t let the oil loose. Fracking helps the oil move out of the rocks and into the well bore. More oil, more money.
The following cross section shows how horizontal wells are drilled in the Permian.
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