Economic Report 2016 - Oil & Gas UK

ECONOMIC REPORT 2016

5.2 Drilling Activity

Exploration and Appraisal The downward trend in exploration and appraisal (E&A) activity continued in 2015 with just 13 exploration and 13 appraisal wells drilled. At the start of this year, Oil & Gas UK forecast a further decline in E&A activity with seven to ten exploration wells expected to be spudded and six to nine appraisal wells in 2016 19 . This remains good guidance although there may be potential upside on the exploration forecast, particularly as a number of companies may be under obligations to drill commitment wells as part of their licence agreement. By mid-2016, six exploration and three appraisal wells had commenced drilling, with a similar number again expected in the second half of the year.

Figure 16: Exploration and Appraisal Drilling

45

40

Exploration

Appraisal

35

30

25

20

15

10

5

Wells Drilled Including Geological Sidetracks

0

Q1 Q2 Q2 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

Source: OGA

There are a number of factors currently constraining E&A activity globally, not least on the UKCS. Exploration budgets are under severe pressure and companies have cut much of their discretionary expenditure to preserve cash-flow. In some circumstances, companies have even postponed all E&A activity until market conditions improve sufficiently and corporate balance sheets recover.

Exploration budgets are under severe pressure and companies have cut much of their discretionary expenditure to preserve cash-flow.

19 Forecasts for 2016 activity can be found in Oil & Gas UK’s Activity Survey at www.oilandgasuk.co.uk/activitysurvey

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