Drilling activity in the W. Texas-southeastern New Mexico area showed a decline for the third successive year. Development wells showed an 11% decline from the previous year, and exploratory drilling showed a decline of approximately 5%. Although there was a 3-day decline in the number of producing days in Texas, total production for the year, including southeastern New Mexico, showed an increase of approximately 900,000 bbls. over 1960 for a total production of 501,763,148 bbls. The success ratio for development wells was 86%, while that for exploratory tests showed a slight increase to 26%, with 255 of the 957 exploratory wells drilled making discoveries. This increase in the success ratio for exploratory wells was brought about by industry-wide increased quality control with a more careful programming of exploratory wells. Large reserves were found on the Central basin platform with the opening of the North Justis field in New Mexico which is producing from 5 separate zones. The Permian basin had discoveries of significant reserves with the discovery of the Inez and Lane fields. The Eastern shelf area was dominated by Concho County with the emphasis on a shallow Pennsylvanian gas play. Exploratory methods followed the same pattern as in previous years. The emphasis for shallow prospects was placed on subsurface geology in conjunction with geophysics and that for deep prospects in areas of no control placed primarily upon geophysical prospecting. Lease acquisition, as in previous years, followed the discovery wells with the emphasis on wildcat acreage in the outlying areas yet to be found productive.