Horizontal drilling is the preferred solution in a majority of domestic hydrocarbon basins. It is now the preferred approach in the Permian Basin. One little-noticed milestone occurred in the weeks leading up to Thanksgiving. The horizontal and directional rig count—nonvertical drilling—now exceeds the vertical rig count in the Permian.

The trend, though subtle, is an example of the shift underway in how the industry “does” oil and gas. Nationally, 76% of the rig count involves horizontal or directional drilling. The Permian had been the largest—and last—bastion of conventional vertical drilling. During fourth-quarter 2011, vertical drilling in the Permian represented 78% of the rig count. Two years later, that share has fallen below 50%.

Does it matter? Well, the Permian Basin is the answer to the question of what's next after oil production in the Eagle Ford and Bakken peaks in the next decade.

Permian rocks lack the productivity of the Karnes Trough in the Eagle Ford, but the enormous geographic scope and sobering stacked thickness of the region's varied hydrocarbon column suggest there is plenty more tight-formation oil on the horizon, especially as operators crack the production code and improve resource recovery through downspacing and stacked horizontal laterals.

Repolarization in the Permian rig count illustrates that delineation for tight oil in the basin's multiple stacked formations has reached critical mass. The promise of a significant resource originating in previously inaccessible tight oil is evident in the yin and yang of the Permian story. Horizontal delineation efforts are moving south of the original Bone Spring core along the Texas/New Mexico state line to the Wolfcamp shale in the Delaware Basin south and west of Fort Stockton.

Farther east, Wolfcamp delineation efforts are moving north from the original horizontal core in the southern Midland Basin.

Two themes contributed to repolarization in the Permian rig count. First, vertical drilling declined as public operators redirected capital away from vertical commingled formation plays such as the Wolfberry in the Midland Basin and the Wolfbone in the Delaware Basin. The vertical rig count peaked at 350 to 370 during the November 2011 to July 2012 time frame, then dropped steadily. At an average 228 units quarter to date in November 2013, the Permian vertical rig count is down 38% from its peak 18 months earlier.

Meanwhile, the horizontal rig count looks like a graph from those high school math class quadratic equations, rising consistently as the data line moves right. The Permian nonvertical rig count first topped 100 units in November 2011. It topped 200 units in October 2013. At press time, the Permian nonvertical rig count was knocking on the door of 250 active rigs, according to Baker Hughes Inc.

The particulars merit recognition. Most headlines have focused on the rapidity with which delineation of the various Wolfcamp shale benches moved north in the Midland Basin, extending the prospectivity of the burgeoning tight-oil play by dozens of miles. The center of gravity for horizontal drilling is shifting from the Wolfcamp and Cline core in Glasscock and Irion counties north to Martin and Midland counties, where the nonvertical rig count quadrupled after the beginning of third-quarter 2013.

Indeed, flipping what was once known as the world's largest uneconomic oilfield into a tight-oil powerhouse may become one of the industry's enduring legends.

But the nonvertical rig count in the Midland Basin is the little brother to what's happening farther west across the Central Basin Platform.

More than 60% of horizontal drilling in West Texas takes place in the sparsely populated Delaware Basin, along the salt cedar and creosote-studded course of the Pecos River. Currently, New Mexico's Eddy and Lea counties represent half of the horizontal rig count in the Delaware Basin as operators optimize exploitation of the Bone Spring after more than three years of painstaking delineation.

New Delaware Basin potential is evident well south of the New Mexico state line, where the horizontal rig count in Reeves County, Texas, doubled to 30 units in fewer than four months as operators turned their attention to the Wolfcamp shale. The trend is sustainable. Operators are now projecting a basinwide increase in the Permian horizontal rig count by dozens of units over the next two years.

For more data and analysis of rig count trends, see UGcenter.com and OilandGasInvestor.com.

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