Recently, the EIA noted that by the end of 2013, the Permian Basin's 215 rigs surpassed both the Eagle Ford and Williston Basin, which had 173 and 164 rigs, respectively.

Source: EIA.

During the first quarter of 2014, the increase in oil-directed horizontal rigs in the Permian Basin was more than four times the combined increase in the Eagle Ford and Williston Basin, up by 63 rigs, which was 50% of the total increase in the United States.

An increasing amount of activity in any of the burgeoning shale formations naturally piques an energy investor's interest. So here are two top producers that are betting big on this particular formation. 

Occidental Petroleum's (NYSE:OXY) largest U.S. operation is in the Permian Basin of West Texas and southeast New Mexico, where it is the No. 1 oil producer, accounting for 16% of total production. This means its sales and profits are greatly influenced by developments in this region, making it a top selection for investors looking for significant exposure to the Permian Basin.

Citing the potential of the Permian Basin during its first quarter presentation, Steve Chazen, President & CEO stated: "Permian resources is the cornerstone growth operation for the domestic business. Our substantial acreage position in the Permian gives us significant resource development potential."

He continued: "We are starting to see the positive results of our horizontal drilling program, expect the resources business to grow production rapidly, similar to what some other operators in the basin have been able to achieve. We believe this business could increase its production by 13% to 16% this year, and in excess of 20% going forward."

Those are huge gains, and if they translate to profits, as expected, Occidental could have its best days ahead with decades of production expected. One might expect a company with such potential to command a premium, but looking at Occidental's fundamentals that doesn't appear to be the case. In fact, it looks to be downright cheap.

MetricOccidentalIndustry Average
P/E 13.60 22.50
Yield 2.90% 2.40%
Payout Ratio 36.00 47.00
5 Year Dividend Growth Rate 15.90% 9.87%
LT Debt/Equity 0.16 0.48
5 Year Average Net Profit Margin 23.20 8.50
5 Year Average Return on Assets 8.60 4.10
5 Year Average Return on Investment 11.80 5.90

Significantly lower P/E, less debt, and a greater yield coming at the expense of a smaller payout ratio compared to the industry average are just a few of the highlights. Historic rates of growth and return have also surpassed industry averages, demonstrating management's effectiveness. With a history of outperformance and strong prospects, Occidental presents an attractive opportunity for investors.

Anadarko Petroleum (NYSE:APC) is another company betting big with 602,000 gross acres in the Delaware Basin, which is part of the greater Permian Basin. Anadarko is a global company and doesn't have the operational percentage concentration that Occidental has in the Permian Basin, which could be a plus for investors seeking a bit more diversification and stability. But gains in the Permian Basin are still reflected in its balance sheet, albeit to a smaller degree.

In the Delaware Basin, Anadarko's net sales volumes for the first quarter of 2014 were more than 24,000 BOE/d, a 34% increase relative to last year. Total liquids volumes averaged more than 17,000 Bbl/d, a 53% increase compared to last year. Anadarko now has 25 wells producing in the Delaware Basin, with another 14 wells waiting on completion and/or pipeline connection.

The payoff
Increases in horizontal drilling efficiency have increased productivity, while decreasing costs and drilling times. Many areas in the U.S. are experiencing booms in the tight oil and natural gas fields as a result. Inevitably, some regions will be confirmed as more productive than others.

Watching where drillers are positioning themselves can be a key indicator as to where companies believe the most profitable resources are located. This latest shift has many investors watching the Permian Basin to see if this latest activity can be backed up with solid results in the coming quarters.