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Richmond Energy Partners
Exploration Performance 2009-14 The Good, the Bad, the Unfortunate
Finding Petroleum June 2014
Copyright 2014 Richmond Energy Partners
Finding Petroleum June 2014
Agenda • Introduction • Sector Performance • The Good – emerging plays • The Bad – high risk wells, frontier plays, highly mature basins • The Unfortunate • Conclusions Copyright 2014 Richmond Energy Partners
Finding Petroleum June 2014
Richmond Energy Partners UK based Oil and Gas consultancy founded in 2006 Independent research and insights into smaller E&P companies
• • • • • •
Investor Clients
E&P Clients
Research services
Corporate advisory
Company and asset evaluations Research on high growth companies Guide to hot E&P geography/themes Value changing events and insights Corporate governance assessment Monthly activity reports
Copyright 2014 Richmond Energy Partners
• • • • •
Exploration performance Exploration strategy Online ‘Wildcat’ service M&A opportunity screening Company & asset valuations Finding Petroleum June 3 2014
Exploration Performance Report REP 40 Company
Gross Exploration Wells Company 2009-2013
Gross Exploration Wells 2009-2013
Mid-Caps
Afren Africa Oil Corp Beach Energy Cairn Energy Canacol Energy Caracal Coastal Energy Cobalt Det norske DNO Faroe Petroleum Genel Energy Gran Tierra HRT Ithaca Energy
2009 – 2013, & 2014 look-ahead
11 12 93 31 12 2 14 5 46 15 20 8 24 9 12
Karoon Gas Kosmos Energy Kris Energy Lundin Maurel & Prom Niko NORECO OGX Ophir Energy Oryx Petroleum Pacific Rubiales Petroceltic Premier Oil Queiroz Galvao Salamander
8 15 6 53 35 21 26 48 14 7 67 17 39 8 24
•
932 completed wells,
•
$32.5bn of drilling spend ($17.3bn net)
•
Found 11.1bn oil, 146tcf gas
•
Success rate 35%
•
Finding cost av c. $1/boe
50 24 47 28 15
Oil Search Santos Talisman Tullow Oil Woodside
16 48 62 82 41
•
291 planned wells
•
$8.5bn planned spend
Large-Caps
Anadarko Centrica Hess Corporation Murphy Oil Noble Energy
Copyright 2014 Richmond Energy Partners
Finding Petroleum June 2014
Key messages The Positives •
No shortage of discoveries being made. 2013 was the best year for oil discoveries for five years.
•
Commercial success rates are being maintained at around 1 in 3 globally with a finding cost of $1 per barrel of oil equivalent.
The headwinds •
Half the volume is deep water gas that will take decades to produce. 40% of discoveries have not progressed to development 6 years after discovery.
•
The increased spending on frontier drilling in recent years has been largely disappointing with a success rate of less than 10%. The new pre-salt play in Angola has become the key emerging play globally.
•
Key plays in East Africa and Iraq are maturing rapidly, delivering smaller discoveries,
•
More deep water frontier wells than ever planned, 2014 may be literally a make-orbreak year for some companies.
Copyright 2014 Richmond Energy Partners
Finding Petroleum June 2014
Sector performance REP 40
Copyright 2014 Richmond Energy Partners
Finding Petroleum June 2014
Discoveries by play maturity REP40 Companies: Net Discovered Commercial Resources by Play Maturity 2009-2013 (mmboe)
3,000 Frontier 2,500
Emerging Maturing Mature
2,000
1,500
1,000
Copyright 2014 Richmond Energy Partners
27
26
25
24
23
22
21
20
19
18
Resource volumes found by company
17
16
15
14
13
12
11
10
9
8
7
6
5
4
3
0
2
500
1
P50 Oil & Gas Resource volumes mmboe
3,500
Finding Petroleum June 2014
Success rates by play maturity •
Overall success rates for the REP40 group of companies for the 5-year period was 35% and similar in 2013 at 33%
•
The large caps have a better success rate than the mid-caps over the 5-year period at 40% compared to 32%
•
For frontier wells: – 7% success rate overall for the REP40 in the 5-year period, and for 2013 – The 8 large caps had a particularly poor year in 2013 with a 3% commercial success rate for frontier exploration.
Copyright 2014 Richmond Energy Partners
Finding Petroleum June 2014
Drilling finding costs $/boe
Commercial Finding Costs 2009-2013
($/boe) >$10/boe
10 9 8
Mid-Caps ($/boe) Large-Caps ($/boe)
7 6 5 4 3 2
Average
0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39
1
• •
Drilling finding costs shown for the REP40 group of companies Overall average for all plays is c.$1/boe
Note: only exploration drilling costs are included
Copyright 2014 Richmond Energy Partners
Finding Petroleum June 2014
REP40 Country and basin highlights •
Wells were drilled in 64 different countries and 118 different basins with Australia, Colombia, Brazil and the Norway seeing the largest numbers of wells drilled.
•
Commercial discoveries were made in 37 countries with 83% of the volume discovered accounted for by just 10 countries – Mozambique, Israel, Norway, Iraq, Tanzania, Australia, Brazil, Angola, Ghana and Colombia.
•
Over the 2009-13 period the Levantine, Ruvuma and Browse Basins were the top three basins for gas volumes discovered, whilst the Central North Sea, Kurdistan Fold-belt and Tano Basin are the top ranked oil basins.
•
French Guiana and Greenland stand out as the biggest disappointments with $2.4bn spent for no commercial discoveries.
•
In 2013, Mozambique, Angola and Iraqi Kurdistan were the top three countries for gross oil and gas volumes discovered. Gabon and Namibia were notable disappointments.
Copyright 2014 Richmond Energy Partners
Finding Petroleum June 1 2014
Emerging plays •
•
•
A number of the key emerging plays of recent years appear to be maturing • the Ruvuma Basin, Levantine Basin Kurdistan Fold-belt, the Ghanaian Tano Basin all have flattening creaming curves. Of the new emerging plays, the Kwanza Basin pre-salt play on the conjugate margin to the Campos Basin in Brazil is the most significant, but it has not yet delivered discoveries of a Santos Basin size and may not be of the same scale. The emerging African Rift oil plays appear to be of 1-2 bnbbl scale and hence likely to mature quickly, offering running room to no more than a handful of companies each. Emerging Play Creaming Curves - gas
Figure removed
Copyright 2014 Richmond Energy Partners
Emerging Play Creaming Curves – Predominantly Oil
Figure removed
Finding Petroleum June 2014
Frontier plays Frontier wells by year and by location – Basin openers and Play openers shown
•
Across the industry REP recorded 159 frontier wells between 2009 and 2013 that generated 14 new commercial plays in 9 different basins, at drilling cost of $11.2bn and at a commercial success rate of 9%.
•
For the 40 study companies frontier success rates were 1 in 14 (7%) and the success rate in deep water Upper Cretaceous plays was only 1 in 23
•
The success rate in frontier wells where one partner owned >75% of the equity was only 1 in 49 emphasising the importance of risk sharing and farming down before drilling.
•
Reservoir quality as much as hydrocarbon charge was the most common weak link in frontier wells, particularly in deep water wells.
Figure removed
2013 Frontier wells Wisting, Gohta Barents Sea Shpirag Barati Thrustbelt Albania
Pitu Potigar Basin Brazil
Commercial discovery
Frontier unsuccessful
Technical discovery
Copyright 2014 Richmond Energy Partners
Finding Petroleum June 2014
Sector Performance 2009-13 Main messages so far •
Declining success rates over the cycle linked to maturing of emerging basins
•
The first 20 wells in emerging plays are the most rewarding
•
Over the 5-year period 1 in 15 wells (or 7%) discovered fields of 100 mmboe or more.
•
Frontier exploration success rates averaged 7% over the 5-year period and for the LargeCaps were only 3% in 2013.
•
Only 10 countries out of 64 explored found commercial hydrocarbons
•
Finding costs for many companies are > transaction values for discovered resources
So, lets look at à High risk exploration à Company Strategy
Copyright 2014 Richmond Energy Partners
Finding Petroleum June 2014
Prospect risking 2013 2013 No of wells by chance of success
2013 Drill Spend $m by chance of success 534
17 45
3203 2691 74
72 3455 Pre-drill prospect CoS categories
<0.2
0.2-0.33
0.34-0.5
>0.5
$9.9bn of drilling spend Risked prospective volume mmboe
1418
6.4bn boe of discoveries
Actual Discovered Volume mmboe
345
1029 1533
1915 1795 2961 2563
Pre-drill prospect CoS categories
Copyright 2014 Richmond Energy Partners
<0.2
0.2-0.33
0.34-0.5
>0.5
Finding Petroleum June 1 2014
Pre drill risk v success rates 2013 Pre and post drill analysis - prospect risking Average REP pre-drill CoS Actual Comm Success Rate
0.70 Average pre-drill risk 0.38 versus 0.37 actual success rate
0.63
0.44 0.39
0.26 0.26
0.11 0.04 <0.2
0.2-0.33 0.34-0.5 REP Prospect Pre-drill CoS
>0.5
Average Pre-drill CoS in prospects where the CoS was less than 20% = 11% Commercial success rate = 4% Copyright 2014 Richmond Energy Partners
Finding Petroleum June 2014
Failure analysis of <20% CoS wells 45 Very High Risk Wells
Wells Drill Cost $m Comm. Discoveries Target not reached
Onshore
Shallow Water
Deep Water
9
16
20
373
787
2044
1
1
0
1
4
2
Reservoir Trap / Reservoir
1
Trap
1
Migration / Trap
1
Charge / Migration
1
7
2
1
1
1 2
5 6
3
Figure removed
Copyright 2014 Richmond Energy Partners
Finding Petroleum June 2014
Exploration strategy • Activity level and budget • Control and exposure • Geographic and geological focus • Play focus
Copyright 2014 Richmond Energy Partners
Finding Petroleum June 2014
Average equity Large-Caps Exploration Drilling and Average Equity 2009-2013 Average equity (%)
80
Gross exploration wells
70 60
Avg. equity 46%
50 40 30 20
10
9
8
7
6
5
4
3
0
2
10 1
Wells Drilled (number) and Average Equity (%)
90
REP40 large cap companies
Copyright 2014 Richmond Energy Partners
Finding Petroleum June 2014
Operatorship %"of"wells"operated"by"self"2009313" 100%#
>50%
<50%
90%# 80%# 70%# 60%# 50%# 40%# 30%# 20%# 10%# 0%# 1# 2# 3# 4# 5# 6# 7# 8# 9# 10# 11# 12# 13# 14# 15# 16# 17# 18# 19# 20# 21# 22# 23# 24# 25# 26# 27# 28# 29# 30# 31# 32# 33# 34# 35# 36# 37# 38# 39# 40#
REP40 companies
Copyright 2014 Richmond Energy Partners
Finding Petroleum June 2014
Resources to reserves •
40% of discoveries in the study remain at the appraisal stage 6 years after discovery.
•
The proportion is highest in deep water; and lowest onshore and for discoveries near infrastructure.
•
If a discovery does not progress to sanction within 2-3 years it seems to remain stuck.
•
The volume of oil and gas in ‘stranded’ discoveries made by the 40 companies is substantial –
•
1.8 bnbbl oil and 24 tcf of gas in 25 oil & gas discoveries.
Opportunities exist in several younger discoveries where development is currently uncertain
Status of all commercial discoveries
Figure removed
Copyright 2014 Richmond Energy Partners
Status of discoveries by volume
Figure removed
Finding Petroleum June 2014
The unfortunate? - Run of Dry Holes Longest run of consecutive dry or non commercial exploration wells 17
18 16
13
14
12
12
12
10
10
9
10 8
Gross wells Mature/ Maturing plays Gross Emerging plays
6 Gross Frontier plays
4 2
Copyright 2014 Richmond Energy Partners
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Finding Petroleum June 2014
Key messages & summary The Positives •
No shortage of discoveries being made. 2013 was the best year for oil discoveries for five years.
•
Commercial success rates are being maintained at around 1 in 3 globally with a finding cost of $1 per barrel of oil equivalent.
The headwinds •
Half the volume is deep water gas that will take decades to produce. 40% of discoveries have not progressed to development 6 years after discovery.
•
The increased spending on frontier drilling in recent years has been largely disappointing with a success rate of less than 10%. The new pre-salt play in Angola has become the key emerging play globally.
•
Key plays in East Africa and Iraq are maturing rapidly, delivering smaller discoveries,
•
More deep water frontier wells than ever planned, 2014 may be literally a make-or-break year for some companies.
Conclusion •
High risk exploration needs more attention to geological detail
•
Don’t explore high risk plays at high equity
•
More accountability for poor performance
Copyright 2014 Richmond Energy Partners
Finding Petroleum June 2014
THANK YOU" "
Acknowledgments :" - REP’s online wildcat service" - REP’s 2014 exploration performance report
Copyright 2014 Richmond Energy Partners
Finding Petroleum June 2014
