The Palo Duro Basin seemingly has all the elements necessary for hydrocarbon generation and accumulation: reservoirs, traps, source rocks, and sufficient thermal maturity. Porous facies in pre-Pennsylvanian, Pennsylvanian, and Permian strata are potential hydrocarbon reservoirs.

The San Andres Formation on the Northern and Northwestern Shelves of the Midland Basin is a progradational stratigraphic unit consisting predominantly of carbonate facies. Lithofacies include dolomite, laminated anhydrite and dolomite, massive bedded anhydrite, limestone, salt, and red beds.

The San Andres Formation in the Palo Duro Basin is a middle Permian carbonate-evaporite sequence situated between two red-bed units, the underlying Glorieta and the overlying undifferentiated Queen-Grayburg sequences.

The Ogallala aquifer, which underlies the Southern High Plains, consists of the saturated sediments of the Neogene Ogallala Formation. The aquifer is the main source of water for the High Plains of Texas and New Mexico and is being severely depleted by extensive pumpage for irrigation.

The Upper Devonian Woodford Formation is an organic-rich petroleum source rock that extends throughout West Texas and southeastern New Mexico and currently is generating oil or gas in the subsurface.

Silurian and Devonian carbonate and chert rocks in the Permian Basin constitute a prolific hydrocarbon-bearing succession in West Texas and New Mexico.