The Permian Basin wasn’t garnering as much support in terms of spending for unconventional drilling in the eight years between 2004 and 2011. When the oversupply of natural gas saw a downturn in gas-directed rigs, producers began to focus more on the play. In the past three-plus years the play has since accumulated increased interest from producers and the second-highest spending for unconventional drilling from any play after the Eagle Ford.

Wood Mackenzie anticipates approximately $18 billion to be spent on horizontal drilling and fracturing in the Permian in 2014 with two-thirds of this activity being focused on the Wolfcamp. “The Permian was a little later to the [unconventional] game. It wasn’t until producers in the region began to see the returns out of the Bakken and Eagle Ford and decided to utilize the same techniques in the Permian,” Shattuck said.

These producers assumed that their learning curve would be higher since they were already operating in the Permian through conventional drilling. Since they were already familiar with the region, they theorized they could achieve some of the same production rates in the Permian that were coming out of the Bakken and Eagle Ford. As it turned out, this assessment has been correct so far. “Being familiar with the Permian has been a key driver of success,” he said.

Indeed, Darrel Koo, senior associate, energy research at ITG Inc. stated that the Permian is now one of the “three big oil plays” in the U.S., alongside the Eagle Ford and Bakken with unconventional activity accounting for the bulk of all future production going forward.

In fact, ITG found that the unconventional region in the Permian is similar to the Bakken and that it could reap similar results. “The Midland Basin/Wolfcamp-Cline is similar to the Bakken in that it has ten-times gross thickness in its shale, which means more resources,” Koo said. In just three years this region has led to a 50% growth in production due to horizontal drilling with horizontal rigs surpassing vertical rigs for the first time in October 2013.

“Productivity increases with depth,” Koo said, which should continue to grow as laterals and proppant have doubled since 2011 and are still evolving. By 2025, ITG forecasts that the horizontal rig count will increase production out of the Midland Basin by 750,000 barrels per day (bbl/d) based on its 5 million acre fairway.

ITG is forecasting up to 1.8 million bbl/d (MMbbl/d) of oil production growth out of the Permian by 2025, with a base case of 2.5 MMbbl/d of oil production out of the entire Permian and a best case scenario of 3.2 MMbbl/d of oil production by 2025. Koo said that the play is currently producing 1.5 MMbbl/d. Not only will production ramp up due to unconventional drilling, it will also be fiscally attractive with solid margins with West Texas Intermediate prices below $80/bbl.

These economics help to explain why activity in the Permian continues to trend upwards despite an increasingly bearish oil futures market, Raphael Hudson, director of upstream research at Hart Energy, said.

Hudson agreed with the assessment that the Permian plays well in a lower economical range for oil prices, stating that lower well costs combined with higher EUR can make horizontal production cost-effective in the play with prices between $75 to $80/bbl.

The Delaware Basin has deeper, overpressured formations, which has caused operators to use flowing completions more frequently than in the Midland. “Wells drilled in the Wolfberry were already economical at $70/bbl in 2009, but its horizontal wells were not economical at that price,” he said. Improved drilling techniques have helped to reduce these costs and Hudson anticipates the improving its economics going forward.

“Operators continue to report impressive Delaware Wolfcamp IP rates, but from a low base: we expect near-term upside to tilt towards the Bone Spring, as wells are cheaper and development is at a more mature stage,” Hudson said. This maturity should result in the Bone Spring achieving average breakevens of about $50/bbl by 2020. Overall, Hart Energy’s Upstream Research group expects the Delaware Basin’s contribution to Permian unconventional production to increase from 34% in 2013 to 45% in 2020.