DEEPWATER STATISTICAL REPORT

Deepwater GOM discoveries to increase

Julie Wilson, Wood Mackenzie

In 2008, deepwater GOM exploration results suffered a decline for the second consecutive year. Reserves of only 360 MMboe were found, the lowest annual amount in a decade and far below the annual average of over 1 Bboe per year. Furthermore, the number of exploration wells drilled fell for the second year in a row. While success rates at 45% remained high, the discovery rate per well fell to just 12 MMboe—half the 10-yr average. Contributing to the low discovery rate was the high proportion of small discoveries.

Wood Mackenzie believes that deepwater GOM exploration will pick up in the coming years, and 2009 has already seen an encouraging start with three high-profile discoveries made in January. Especially welcome were two discoveries in the Paleogene play.

We believe that the fall in exploration drilling and success over 2007 and 2008 can be attributed to temporary factors. High levels of appraisal and development activity coupled with a tight rig market kept a lid on exploration. An influx of newbuild rigs in the next two years should ease these constraints.

At the same time, there was a shift toward shallower reservoir targets (Pliocene, Pleistocene, Upper Miocene and Middle Miocene), which typically yield smaller finds. The primary driver for this shift was the rise in exploration activity by small independents, which more than doubled their operated wells (to 13 from 6) between 2006 and 2008.

The larger companies more than halved their wildcatting, from 34 wells in 2006 to just 16 wells in 2008. Some of the drop may be due to more appraisal and development drilling. In addition, some larger companies were very exposed to widespread lease expirations in 2007 and 2008, and so those years’ widely-anticipated lease sales received a lot of focus. The highly competitive lease sales of 2007 and 2008 are expected to result in an exploration boost.  

Wood Mackenzie’s view remains that deepwater GOM basins are highly prospective with full-cycle economics among the most attractive of all deepwater basins. The range of opportunities available in deepwater GOM—from small, fast-track subsea tie-backs to large, complex, standalone developments—will attract high levels of exploration activity in the future.