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Julie Wilson1 Search and Discovery Article #70144 (2013)**
Posted July 22, 2013 *Adapted from oral presentation at AAPG Annual Convention and Exhibition, Pittsburgh, Pennsylvania, May 19-22, 2013 **AAPG©2013 Serial rights given by author. For all other rights contact author directly.
Senior Analyst, Exploration Research, Wood Mackenzie, Houston, Texas (email@example.com)
Abstract Nine countries have seen country-opening finds since early 2006 - Uganda, Ghana, Sierra Leone, The Falklands, French Guiana, Sri Lanka, Cyprus, Liberia and Kenya. Deepwater plays have provided the first material hydrocarbon discoveries in seven of these nine frontier countries. All nine of these important wildcats were operated by Independents, led by Tullow, Anadarko, and Noble Energy. The Majors have been fastfollowers, farming-in to French Guiana ahead of the discovery well (Shell, Total) and moving quickly to establish positions in Uganda, Ghana, and Liberia. Further moves to enter these emerging hydrocarbon plays are likely. Total volumes discovered in these nine frontier countries already exceed 4.5 billion barrels of oil and 13 trillion cubic feet of gas. These represent little more than 5% of global new field volumes since 2006, but exploration in each country is still at an early stage. We estimate that the initial finds have de-risked a further 10 billion barrels of yet-to-find oil potential, plus substantial gas upside. Frontier country exploration has out-performed since 2006, achieving full-cycle returns of 17% versus an industry average of 14%. Full-cycle value creation was more than US$20 billion at our long term Brent price assumption of US$80/bbl. This recent success contrasts with the decade prior to 2006 when explorers completed wildcat wells in 22 frontier countries, but made commercial discoveries in just three - Sudan, Israel, and Mauritania. Two factors have been key to opening frontier countries. Firstly, explorers had to be comfortable drilling wells with low chances of success, reflecting the product of both play risk and prospect risk. Secondly, the remoteness from proven play fairways means that the application of regional-scale geoscience has been a core competence. Since 2002, the wildcat success rate in frontier countries is just 10% - less than one-third of the industry average. The increase in the number of frontier country discoveries since 2006 reflects an improvement in success rate as well as slightly higher activity in these plays.
these wells should be rewarded with one or two new country play-openers annually. if one-in-ten success rates are maintained. . and overall.We expect the trend of around 15 frontier country wildcats per year to continue.
May 20th. 2013 . Exploration Research AAPG Pittsburgh.Independent explorers create high value opening up new countries Julie Wilson Senior Analyst.
Wood Mackenzie Disclaimer This presentation has been prepared by Wood Mackenzie Limited for delivery at AAPG Pittsburgh on May 20th. these slides and the contents of this presentation may not be disclosed to any other person or published by any means without Wood Mackenzie Limited's prior written permission. notwithstanding the foregoing. The information contained in these slides may be retained by attendees. It has not been prepared for the benefit of any particular attendee and may not be relied upon by any attendee or other third party. all liability for loss and damage suffered as a result. 2013. this presentation is relied upon by any person. © Wood Mackenzie 2 . If. Wood Mackenzie Limited does not accept. and disclaims. However.
Frontier conventional exploration continues to be led by the Independents Operated all nine “new country-openers” since 2006 Appetite for play risk and strong regional geoscience have been the keys Source: Wood Mackenzie Exploration Service © Wood Mackenzie 3 .
9 Gas Liquids 4.4 New frontier countries Global Source: Wood Mackenzie Exploration Service © Wood Mackenzie 4 .4 242.These new frontiers have yielded large volumes and value… but still only a small fraction of global totals Value creation Value creation 18 billion Volumes discovered in new frontier countries since 2006 (bnboe) $ $ 7.3 354 billion Volumes discovered since 2006 (bnboe) 2.
00 6.00 8.00 1.00 3.00 4.00 Low Base 68% 66% 64% 62% 60% 58% 56% 14% Unit developemnt value (US$/boe) 12% Full cycle IRR High Government take % 7.00 2.00 Frontier Emerging Mature 54% 52% 50% 1.00 2.Frontier basins benefit from low discovery costs… and attractive fiscal terms – though other factors make developments challenging Discovery costs and IRR 16% Development value and government take 9.00 Resource discovery costs (US$/boe) Frontier basins Mature basins Source: Wood Mackenzie Exploration Service Emerging basins All basins © Wood Mackenzie 5 Government take % .00 0.00 4.00 3.00 10% 8% 6% 4% 2% 0% 0.00 5.
(%) 100% Proportion of conventional E&A spend 10% 20% 30% 40% 50% 60% 70% 80% 90% 0% 38% Frontier Emerging Investment by basin maturity (2002-2006) 62% Mature Average Top explorers are shifting spend towards frontier and emerging basins Source: Wood Mackenzie Exploration Service Company Performance Report. October 2012 Kosmos Santos Inpex BG Petrobras Chevron Premier Oil ENI Total PETRONAS Apache Shell BP RWE Dea ConocoPhilips Tullow Oil ExxonMobil Nexen Statoil Cairn Energy BHP Hess Woodside Lundin Repsol Anadarko Occidental Marathon Noble Energy Talisman Wintershall Maersk Murphy (%) 100% 10% 0% Proportion of conventional E&A spend 20% 30% 40% 50% 60% 70% 80% 90% Investment by basin maturity (2007-2011) 48% Emerging Frontier 52% Mature Average Kosmos Cairn Energy Tullow Oil Santos Inpex Anadarko Hess Petrobras Noble Energy Chevron RWE Dea BP BG ExxonMobil BHP Premier Oil Repsol ConocoPhilips Shell Woodside Statoil ENI PETRONAS Apache Total Lundin Marathon Murphy Maersk Talisman Occidental Wintershall Nexen © Wood Mackenzie 6 .
00 Exploration & appraisal spend (US$ billion) 2011 Reported exploration spend (US$/boe) Independent 20.00 20 25.00 0.00 Exploration spend intensity (re-investment rate) 25.00 Majors NOC Brent (US$/bbl) 60 75.Exploration investment is rising – with plenty of headroom to go further Conventional spend – exploration 100 125.00 0 500 1.000 1.00 0 2004 2006 2008 2010 2012 0.00 40 50.00 5. © Wood Mackenzie 7 .000 E&A Spend (US$Bn) Brent (US$/bbl) 2011 production (mmboe) Source: Wood Mackenzie Exploration Service and Corporate Benchmarking Tool. Bubble size represents reported exploration spend.00 15.00 80 100.00 10.500 2.
Vast new areas have been licensed over the past few years Global blocks awarded 2003-2012 Block Awards Blocks Awarded 2003 to 2007 Blocks Awarded 2008 to 2012 Source: Wood Mackenzie © Wood Mackenzie 8 .
Net acreage signed since 2010 ('000 km2) 100 150 200 250 300 350 50 0 The Majors have been particularly aggressive in building up exploration positions and so have the minnows Source: Wood Mackenzie ExxonMobil Total Shell BP Eni Statoil Majors’ net acreage capture since 2010 Chevron Net acreage signed since 2010 ('000 km2) 100 200 250 300 350 150 50 0 Leading Small Caps by acreage capture since 2010 Silver Wave StatesmenRes Int Pet Ltd Upland O&G Pangaea Kosmos Amerisur Eco O&G Impact O&G Oranto NewAge Frontier Res CAMACEngy ERHC Niko Res Star Pet Tangiers Pet Instinct Simba Energy © Wood Mackenzie 9 .
providing opportunities for M&A Majors’ exploration well success rates 2002-2011 60% 50% 20 Leading Small Caps by acreage: wells since 2010 25 Success rate 40% Number of wells Statoil Chevron Eni ExxonMobil BP Total 30% 15 20% 10% 0% 10 5 Shell 0 Silver Wave StatesmenRes Int Pet Ltd Upland O&G Pangaea Kosmos Amerisur Eco O&G Impact O&G Oranto NewAge Frontier Res CAMACEngy ERHC Niko Res Star Pet Tangiers Pet Instinct Simba Energy Overall success rate Commercial success rate Average frontier overall success rate Average frontier commercial success rate Exploration wells Appraisal wells Source: Wood Mackenzie Exploration Service. Pathfinder © Wood Mackenzie 10 .Majors will need to be comfortable with lower frontier success rates while small caps may struggle to drill.
Huge swathes of frontier offshore acreage have been licensed. dominated by Africa and the Arctic Offshore frontier acreage licensed since 2009 – compared to deepwater Gulf of Mexico acreage Latin America Europe Pacific Africa Latin America Europe DW GoM Asia-Pacific FSU Africa DW GoM FSU Source: Wood Mackenzie © Wood Mackenzie 11 .
facilitated by increasing rig fleet But it may still be constrained by rig capacity from 2016 Cumulative newbuild MODU days added since 2008 60 Deepwater rig supply and demand 100 500 450 400 350 300 250 200 Rig Capacity & Well Demand ('000 days) 90 80 70 60 50 40 Cumulative rig capacity ('000 days) 50 30 20 30 20 10 0 150 100 50 0 2010 2012 2014 2016 2018 2020 10 0 2010 2012 2014 2016 2018 2020 Semi Drillship Drilling Demand E&A Well Count Rig Supply Source: Wood Mackenzie Future of Global Deepwater Markets © Wood Mackenzie 12 E&A Well Count 40 .Deepwater exploration expected to rise.
we still see a shortfall in supply by 2016 as demand outstrips supply Visit Wood Mackenzie’s www. however.woodmac. in spite of this. relative to their production levels Global spend is likely to continue to rise. yielding large volumes and value Full-cycle economics of frontier exploration are helped by large discovery sizes and attractive fiscal terms Top explorers have shifted their exploration dollars towards frontier and emerging basins over the past five years Exploration spend has risen dramatically over the same period. much of it in frontier areas.Summary Independent explorers have led the way opening up new frontier countries since 2006. with independents spending more on E&A than Majors. presenting varying challenges but also opportunities for M&A deals The huge amounts of recently leased frontier offshore acreage bring both increased complexity and greater demands on the service sector Deepwater drilling capacity is set to increase considerably over the next decade with 90 newbuilds to be delivered. © Wood Mackenzie 13 . given the vast amounts of acreage under license Companies of all sizes have been aggressively growing their land positions.com to learn of our latest research and communicate directly with our experts on key trends in your market.
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