The Alpine High discovery, made within the more than 300,000 contiguous acres the oiler has secured, is estimated by Apache to hold an estimated 75 trillion cubic feet of gas and three billion barrels of oil in the Barnett and Woodford shales.

Apache also sees significant oil potential in the shallower Pennsylvanian, Bone Springs and Wolfcamp formations, and the discovery has significantly strengthened industry interest in the area, which is part of the Delaware Basin in the wider Permian Basin.

However, IHS Markit senior consultant, energy research Imre Kugler said that while Apache deserves to be excited about its new discovery in the relatively untapped part of the Delaware Basin, previous well results in the immediate area have been "a bit hit and miss".

Kugler said that while unconventional drilling and completion technology had advanced much since several Permian Basin specialist companies left after drilling a handful of unsuccessful wells nearly a decade ago, Apache won't be able to escape the fact that well performance is critical, particularly in the current oil price environment.

"You don't have as much of a cushion or tolerance for failure or poor performance at today's prices as you did at $US120 a barrel," Kugler said.

While the analyst noted that some quality Wolfcamp wells owned by a variety of operators sat within 1.7km of the Apache acreage, there are also some poor performing wells nearby.

Therefore, Kugler said, "it remains to be seen whether Apache's initial success in the play will carry over into the Wolfcamp formation. It's too early to tell, but more drilling and appraisal will be necessary".

IHS Markit's analysis reveals that early economics for the area indicate gas production breaks even near $2.50/million cubic feet of gas, and oil production breaks even at $55/bbl assuming a ‘constrained' 24-hour initial production rate equates to peak-month production and a $5 million well cost, the mid-range guidance.

However, if recently published IP rates indicate true 24-hour rates, then breakeven costs for the play will be closer to $65/bbl and $3/mcf, IHS Markit said.

According to Kugler, the Woodford gas play is in the area of interest, as the ratio of oil at peak is around 15%, but has a wide variance of 1% to 19% in a six-well sample.

The projections only consider the Woodford Shale, as there is just one Barnett Shale well drilled in the area to date, IHS Markit said.

"To make this part of the play viable, gathering infrastructure will need to be built out," Kugler said.

"However, the play's proximity to the nearby Waha hub helps.

"We have seen associated-gas production nearly double from 500,000MMcfpd to nearly 1Bcfpd during 2014 to 2016, with Wolfcamp and Bone Spring development. To fully monetise production from this gas and NGL play, additional takeaway capacity may be required."

Apache is bullish on its new discovery and increased its 2016 capital spending by some $200 million to accelerate drilling in the Alpine High, around 25% of its total capital spending program.