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Westwood Global Energy Group (WGEG)’s annual State of Exploration report analyses the last five years of conventional oil & gas exploration and forecasts exploration drilling plans for 2017

  • The analysis confirms that 2016 saw a nine-year low in oil & gas exploration in both wells drilled and discoveries made
  • But it expects a brighter outlook with exploration efficiencies starting to deliver results
  • Conventional exploration can compete with North American unconventional oil and gas in full cycle breakeven costs
  • Decreased competition means lower access costs and greater opportunity for accomplished explorers, tempered somewhat by the lack of new oil plays to explore

(Aberdeen, UK) – 09 May 2017 – Westwood Global Energy Group (WGEG) today launches its eighth annual State of Exploration Report, the definitive global benchmark for conventional oil & gas exploration1. The most detailed report of its kind, it covers five years of global high impact exploration and also benchmarks the performance of 40 international E&P companies and 991 completed conventional wildcat wells at a total drilling cost of $43.5bn.

Amongst its key conclusions, it reveals that:

  • Commercial oil and gas volumes discovered fell to a nine-year low in 2016, as the ‘lower for longer’ oil price scenario caused companies to reduce exploration programmes further, with less exposure to frontier, especially deep water, and emerging play drilling.
  • The diminished 19 well frontier programme delivered only one commercial success, a modest sized gas discovery offshore India. Frontier oil exploration continues to fail to replenish the emerging play prospect inventory, which is acting as a break on future oil exploration performance.
  • The commercial success rate was the highest in nine years at 35 per cent, eight percentage points higher than 2015, with success rates improved on the lower well count in proven plays and proportionally fewer high risk frontier wells.
  • Overall drilling finding costs increased to $2.0/boe in 2016 from $1.6/boe in 2015 due to the lack of large frontier and emerging play discoveries and much smaller average discovery sizes. Oil prospect finding costs averaged $3.1/bbl in 2016 – slightly down on the $3.4/bbl recorded in 2015.
  • 88 per cent of the gross 17.4 bnboe discovered by the REP40 peer group companies since the start of 2013 is still at an appraisal stage, reflecting a marked slowdown in resource progression to production due to the oil price fall.
  • Exploration drilling plans for 2017 would suggest a slightly higher (~10 per cent) drilling count than in 2016. Plans are still fluid, however, and the number of wells drilled in the first quarter of 2017 was down 35 per cent on the same period in 2016, with a record high average commercial success rate of ~60 per cent.
  • 62 high impact wells are planned globally for 2017, targeting 19.5 bnboe (unrisked), 37 per cent of which is oil. 24 of these wells are targeting frontier plays, 11 of which are in the Atlantic margins and the Norwegian Barents Sea.

Dr Keith Myers, President, Westwood Research, comments:If the industry is out of the emergency room in 2017, it is not yet out of hospital. Even if oil prices recover further, explorers will need to focus on finding low cost oil and gas profitable to develop at $40 per barrel or less.

“Companies will need to believe they have the acreage portfolio, technology, people and processes to deliver exceptional performance. This means an efficient exploration process with larger prospect portfolios and fewer, better wells targeting bigger prospects at higher commercial success rates.”

The industry is emerging leaner and fitter from this latest down-cycle, but it must be able to remain disciplined during the bull oil market to come (whenever that might be). Decreased competition means lower access costs for exploration acreage and more opportunity to create value from exploration for the accomplished explorer.”

The State of Exploration report is available to purchase in hard copy and digital formats.

1 The State of Exploration Report was originally produced under the name of Richmond Energy Partners, which is in the process of re-branding to its parent company, Westwood Global Energy Group.