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About 23% of world's rigs drilling in Texas
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SAN ANTONIO (AP) — The Texas oil industry for several decades seemed headed into territory best described by the old saying "all hat and no cattle."

But the state appears awash again in oil and gas, with drilling in fields across the state, including one West Texas shale formation that could dwarf both the Eagle Ford Shale in South Texas and North Dakota's famous Bakken Shale.

Texas recently had 839 drilling rigs operating — nearly half of all rigs in the U.S. and 22.7 percent of rigs worldwide, according to the Feb. 15 Baker Hughes Rig Count.

And most of those rigs were working in five regions of the state: the Permian Basin in West Texas, the Eagle Ford Shale in South Texas, the Granite Wash in the Panhandle, the Barnett Shale in North Texas and the Haynesville Shale in East Texas.

"You'd be hard pressed to find anybody who saw this coming," said economist Karr Ingham, noting that there are more drilling rigs in the Permian Basin than during the 1980s boom. "That's a stunning turn of events right there."

West Texas has a multitude of overlapping oil fields, but the Cline Shale has created a stir. The formation runs about 140 miles north to south and about 70 miles wide through Howard, Glasscock, Reagan and Sterling counties.

Early estimates for the Cline, based on Devon Energy's exploration in the area, put the estimated recoverable reserves at 30 billion barrels of oil.

By comparison, the U.S. Geological Survey estimates the Eagle Ford holds up to 7 billion to 10 billion in recoverable reserves, while the Bakken Shale could hold as much as 4.3 billion barrels of recoverable oil.

Benjamin Shattuck, an analyst with Wood Mackenzie in Houston, told the San Antonio Express-News ( that just 80 to 100 wells have been drilled in the Cline, and data is sketchy so far. He expects the industry in six months will have twice as much information on Cline Shale as it does now.

"Operators are doing their best to keep the result confidential," he said. "The big thing in the Cline is that results so far have been good."

Peggy Williams, editorial director with Hart Energy, said the Permian Basin, with more than 400 drilling rigs operating, is the most complex field in the state, with both horizontal and vertical drilling in multiple geologic horizons. The formations are so thick that they're using vertical hydraulic fracturing, the process of using water, sand and chemicals pumped at high pressure to break open dense rock.

"It's a very prolific conventional basin that produces in many, many zones," Williams said. "If you're in an area that's produced a lot of oil, it's a good place to look for more oil. In the Permian you have a world-class petroleum basin. There's just oil all over the place."

Hart Energy estimates the Permian Basin could produce 1.65 million barrels of oil equivalent per day by 2020, just from unconventional drilling that uses hydraulic fracturing.

The company estimates South Texas' Eagle Ford Shale could produce 2.4 million barrels of oil equivalent per day by 2020.

"It's enormous, enormous," said Williams. "That's more than some OPEC countries produce."

In the Fort Worth area, the Barnett Shale is the grandfather of unconventional drilling — the place where operators first used both horizontal drilling and hydraulic fracturing.

Although drilling has declined, with most of the recent business activity coming in the form of asset sales, Chris Robertson, an analyst with Wood Mackenzie, said it's still the third most productive U.S. gas field behind the Marcellus in Pennsylvania and the Haynesville in Louisiana.

"The Barnett is very well understood," he said. "It's a good source of cash flow that's predictable."

And natural gas prices have started to rise a bit from historic lows, driving a slight uptick in drilling in the Barnett. "Rigs have started to return to these dry gas plays," Robertson said. "It's nothing to write home about, but they are returning."

In East Texas, there were 21 drilling rigs targeting the Haynesville/Bossier Shale as of Feb. 15.

The formation is more productive and lucrative in Louisiana, but it primarily produces natural gas, so operators are largely drilling because they must if they want to hold onto their mineral leases.

But there's one area of the field, the Cotton Valley formation in Rusk, Panola and Harrison counties, where companies have been able to produce a higher proportion of the more profitable crude oil and natural gas liquids.

"In the Haynesville right now our view is that operators can make money in the top-tier core areas," Robertson said. "On average there's no economic reason to be drilling other than to hold acreage or to explore the liquids prone areas in the Cotton Valley."

In the Panhandle, 47 drilling rigs were recently targeting the Granite Wash, a tight sandstone that extends into Oklahoma. "There's quite a lot going on there, too, even though it's primarily natural gas," said Ingham.

Most of the state's drilling is focused on finding crude oil because dry natural gas is selling near historic lows. But the heat content of the Granite Wash gas is so great that it sells at a premium of 30 percent to 50 percent over standard prices.

"You can sell it for more, so the natural gas and the liquids are a big deal up here," Ingham said.