Global Oil & Gas Exploration Recovering After Steep Plunge in 2016, per 1Derrick

NEW YORK–(BUSINESS WIRE)–The number of global oil and gas exploration wells increased 23% to 546
in 2017 after plunging from 1,331 in 2014 to 444 in 2016 following the
oil price crash, per oil and gas information and insight provider
1Derrick. Excluding drilling by national oil companies (NOCs), global
exploration wells spuds are expected to rise 19% after a 31% increase
between 2016 and 2017. South/Central America (112 wells), the North
Sea/Europe (91 wells), and Africa (85 wells) will be the major targets
of drilling activity, 1Derrick’s proprietary Exploration Wells Database
reveals.

“The curtailment of oil and gas exploration was one of the most dramatic
effects of the steep drop in oil prices in late 2014,” commented Mangesh
Hirve, COO of 1Derrick. “Producer strategies shifted from long-term
resource growth to short-term survival as they slashed capital budgets
and shifted focus to cash-flow producing assets. The high-impact,
expensive deepwater exploration was the biggest casualty, as the Majors
(BP, ExxonMobil, Shell, Chevron and Total) reduced drilling by 75% from
121 in 2013 to just 31 in 2017. However, that number is expected to grow
by more than 50% to 48 in 2018 as oil prices have stabilized in the
$60/bbl range.”

More than half of Majors’ exploration wells will target South/Central
America (16) and North America, primarily the U.S. Gulf of Mexico (10).
Among the high-impact wells, ExxonMobil’s Pacora-1 well offshore Guyana,
spud on January 29, 2018, has already been announced as the company’s
seventh oil discovery in the region. Large Cap E&Ps such as ENI,
Woodside Petroleum, Apache, Anadarko Petroleum, and Repsol, plan 49
exploration wells focused primarily on deepwater wells in the North
Sea/Europe, the U.S. Gulf of Mexico, and Asia/Australia regions. ENI
announced a major gas discovery in February 2018 from its Calypso 1 well
offshore Cyprus. Mid-Cap E&Ps, which will drill 105 exploratory wells,
the largest of any peer group, are largely focusing on lower-cost
drilling on prospective onshore plays in Australia and Colombia.

NOCs have historically drilled the highest number of exploration wells,
including about one-third of all spuds, or an average of 430, in
2011-2014. The most active drillers include Petrobras (Brazil), Statoil
(Norway), Pemex (Mexico), ONGC (India), Ecopetrol (Colombia), and CNOOC
(China). The number of spuds plummeted to about 134 in 2016 and 141 in
2017, just 26% of reported wells. The relatively slower recovery likely
reflects the higher impact of the oil price plunge on state-owned
institutions that lacked the flexibility to quickly cut spending and
shift strategy. The pace of recovery in 2018 won’t be clear until the
end of the year, because NOCs rarely disclose future drilling plans.

In terms of overall regional trends, the most rapid recovery was
observed in South/Central America, where the number of exploration wells
nearly doubled from 56 in 2016 to 104 in 2017, driven by factors such as
ExxonMobil’s dream run in Guyana and renewed development offshore
Brazil. Producers have announced 112 spuds for 2018, including potential
high-impact wells by ExxonMobil offshore Guyana and by Kosmos Energy
offshore Suriname. The most dramatic cuts in exploration took place
offshore Africa, where the number of wells fell 79% from 228 in 2014 to
47 in 2017. That number is expected to jump to 85 in 2018, with
high-impact wells planned offshore Gabon, Congo, and Gambia offshore
West Africa and offshore Namibia and the Republic of South Africa on the
southern portion of the continent.

The most stable regions were North America, primarily the Gulf of
Mexico, and North Sea/Europe, where drilling fell off less than 50%
between 2014 and 2016. However, spuds are expected to decline by nearly
40% in the North America from 68 in 2017 to 42 in 2018. This decrease is
expected to be temporary, and the drilling activity is expected to boost
in the long term as international firms begin drilling newly acquired
offshore Mexican blocks. Spuds should rise substantially from 53 to 91
in the North Sea/Europe. Among the potential high-impact wells are
Statoil’s Gjokasen well and Aker BP’s Svanefjell well in the Barents Sea
and ENI’s wildcat Santola-1 well offshore Portugal.

“While the 2017 and 2018 data demonstrate the pace of global exploration
has stabilized, there are no indications that the industry will revert
to 2011-2014 activity levels any time soon,” Mangesh Hirve said. “Major
oil and gas companies are continuing to high-grade rather than expand
their portfolios, which are increasingly focused on lower-cost, high
return resource plays. Despite spurts of drilling activity spurred by
large discoveries such as ExxonMobil’s multiple finds offshore Guyana,
significantly higher exploration likely depends on much higher oil
prices. 1Derrick will continue to track this activity through our
comprehensive international Exploration Wells Database.”

1Derrick/Derrick Petroleum Services (www.1derrick.com)
is an independent oil and gas research firm with offices in Houston,
London, Singapore and Bangalore. For more information on its industry
leading databases and reports on M&A, business development strategy, new
ventures, and exploration, please contact Ajit Thomas at [email protected]
or 1.646.284.8661

Contacts

1Derrick
Ajit Thomas,1-646-284-8661
[email protected]