global exploration review
TRANSCRIPT
woodmac.comTrusted Intelligence
Global exploration review
APPEX, London, March 2019
1. Exploration trends
2. 2018 exploration results
3. Outlook for 2019 and beyond
Exploration results and outlook
Exploration wells Success ratesExploration spend
Context: exploration was struggling with dwindling volume & value
Global conventional exploration results 2007-2016
Source: Wood Mackenzie Exploration Service.
Large and giant discoveries Full cycle returnsVolumes discovered
0
25
50
75
100
0
25
50
75
100
2007 2009 2011 2013 2015
Spend p
er w
ell (U
S$M
)
Spend (
US
$bn)
E&A spend Spend per well
0
500
1,000
1,500
2007 2009 2011 2013 2015N
um
ber
of W
ells
0%
10%
20%
30%
40%
50%
2007 2009 2011 2013 2015
Success r
ate
s (
%)
Commercial Overall
2007 2009 2011 2013 2015
Bill
ion b
oe
Liquid Gas
0
10
20
30
40
50
Giant > 500 mmboe Large >100 mmboe
0
10
20
30
40
50
60
2007 2009 2011 2013 2015
Dis
cove
ries
0%
5%
10%
15%
2007 2009 2011 2013 2015
IRR
(%
)
Poor recent exploration results impact oil supply
Production is comparable to pre-crash volumes only in the first few years from discovery
Source: Wood Mackenzie Upstream Data Tool
Total commercial liquids production each year from discovery
0.0
0.5
1.0
1.5
2.0
2.5
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
Liq
uid
s p
rod
ucti
on
(m
illio
n b
/d)
Rebased year from discovery
2010
2011
2012
2013
2014
2015
2016
2017In the short term, production forecast from post-crash discoveries per year is
comparable to production from pre-crash discoveries
Post-crash exploration is forecast to deliver less
production per year
2010 – Buzios, Johan Sverdrup
2011 – Libra, Johan Castberg
Exploration’s return to profitability from 2017
Source: Wood Mackenzie
New discoveries add 11+ billion barrels of oil and 6+ billion boe gas
Blocks A6/A7Gorgon Snoek
Zama
Horseshoe
Eridu
Halifax
Yakaar
Neptune
C. Olginskoye-1
Whale
Ballymore
Ruby
Positive economics
• Discoveries worth US$30 billion
• Value creation US$8bn+
• IRR > 10%
Legend
2017 gas discovery
2017 oil discovery
Bozhong 19-6
1. Exploration trends
2. 2018 exploration results
3. Outlook for 2019 and beyond
Exploration results and outlook
More success in 2018, including some high value discoveries
Source: Wood Mackenzie
Ivela-1
Stony Hill-16604/5-1
DoverMC 612 #1BP1 (G33166)
Ranger-1Pacora-1Longtail-1Hammerhead-1Pluma-1
Boudji-1
Calypso-1
Pilipili-1
6506/11-10
Epu
Kalimba-1
Dorado-1
Guanxuma-1
Glendronach
Discoveries > 50 mmboe
2018 gas discovery
2018 oil discovery
North ObskoyeNyakhartinskoye
Triton
Timi-1
ExxonMobil’s Pluma is the tenth discovery from 12 wildcats
Stabroek licence, Guyana Guyana production outlook by field
Guyana: volumes now > 5 billion boe, value > US$25 billion
Source: Wood Mackenzie
0
200
400
600
800
1000
20
20
20
25
20
30
20
35
20
40
20
45
20
50
Pro
du
ctio
n (
'00
0 b
/d)
Phase 6 - Ranger
Phase 5 - Hammerhead
Phase 4 - Longtail, Pluma & Turbot
Phase 3 - Liza, Liza Deep, Pacora & Payara
Phase 2 - Liza & Snoek
Phase 1 - Liza
Russia: Yamal gas giants underpin future Arctic LNG projects
Source: Wood Mackenzie
North Obskoye11.3 tcf
Nyakhartinskoye2.3 tcf
Australia: Dorado discovery
Source: Wood Mackenzie
Source: Carnarvon Petroleum Ltd, ‘Dorado-1 Oil Discovery 18 July 2018
125 mmboe (gas/condensate)
Caley Member Sst
22-26%
171 mmbbl oil + 552 bcfgas discovery
Offshore
88 metre WD
Location
Santos (80%), Carnarvon (20%)
Partners
Pre-drillestimate
Key Facts:
Target
Technical Risk – EV2
Status
• Promising light oil discovery. The well intersected an 80 metre net oil column with excellent permeability and porosity characteristics
• Currently there are no offshore developments in the Roebuck basin
• The well is located less than 20km and up-dip of the successful Roc-1 and Roc-2 wells
• Multiple secondary targets (Crispin & Milne Members) also oil-bearing
A U S T R A L I AA U S T R A L I A
PhoenixSouth
Nebo
RocWA-437-PQuadrantEne
119°E118°E
18
°30
'S1
9°S
19
°30
'S2
0°S
0 10050km
Source: Wood Mackenzie, Esri
AUSTRALIA
Progress on many fronts is driving exploration recovery
Source: Wood Mackenzie
“How exploration can fix its broken economics” (published 2016)
Reduce exploration
costs by >50%
Reduce development
costs by >25%
+Refocus
portfolios to avoid
complexity
+Avoid tough fiscal terms
+Reload acreage at low cost
+ Exploration returns up=
0%
2%
4%
6%
8%
10%
12%
14%
2008 2010 2012 2014 2016
Co
nve
nti
on
al
ex
plo
rati
on
IR
R (
%)
Exploration is now back in the black
Reduced costs and quicker commercialisation of discoveries are now creating value
Source: Wood Mackenzie Exploration Service . Value creation and returns at US$65/bbl Brent.
Exploration industry value creation Exploration industry returns
-35
-30
-25
-20
-15
-10
-5
0
5
10
2009 2011 2013 2015 2017
Va
lue
cre
atio
n (
US
$B
n)
0%
2%
4%
6%
8%
10%
12%
14%
16%
2009 2011 2013 2015 2017
IRR
(%
)
13
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Deepwater sweet spots a critical part of exploration’s recovery
Key to the sweet spots: exceptional reservoirs at unexceptional depths
Source: Wood Mackenzie. Chart includes deepwater oil developments >50 mmboe achieving FID since 2012 or expected in the next few years. Bubble size represents full field reserves. Reservoir depth based on typical development well TD. Development well EUR is based on field reserves divided by well count including production and injection wells.
Deepwater oil FIDs add over 30 billion boe since 2012
0
2
4
6
8
10
12
0 10 20 30 40 50 60
Reserv
oir d
epth
(km
)
Development well EUR (mmboe)
FID 2012-2017 Probables
Brazil & Guyana
US GoM
West Africa
Threshold ofcommerciality at US$50 oil
14
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New frontiers also critical to exploration’s recovery
Half of recent exploration volumes found before first production in the play
Source: Wood Mackenzie Exploration Service
Proportion of new fields volumes discovered by play maturity
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Pro
port
ion o
f vo
lum
es d
iscove
red
Frontier Unproven Frontier Proven Early Emerging Late Emerging
Established Early Mature Late Mature
1. Exploration trends
2. 2018 exploration results
3. Outlook for 2019 and beyond
Exploration results and outlook
0
10
20
30
40
50
60
70
80
90
1995 2000 2005 2010 2015 2020
US
$/b
oe
Cash margin
Tax
Opex
Capex
Exploration
Revenue
Upstream cash margins looking strong
Outlook at US$60 Brent as good as any time in past 20 years
Source: Wood Mackenzie
Majors’ upstream Cash Flow per barrel produced Cash Margin v Brent
0
20
40
60
80
100
120
-5
0
5
10
15
20
25
1995 2000 2005 2010 2015 2020
Bre
nt O
il P
rice (
US
$/b
bl)
Cash M
arg
in (
US
$/b
oe)
cash margin - high
Cash margin
Brent - High
Brent
But exploration budgets will remain flat in real terms
Activity may edge up with further improvement on costs
Source: Wood Mackenzie
Global Upstream Capex
100
200
300
400
500
600
700
800
2014 2015 2016 2017 2018 2019 2020 2021
US
$ b
illio
n Exploration
US Onshore
Probable
Under Development
Onstream
0
High-impact exploration is now a very exclusive club
Led by the Majors, selected NOCs and a handful of independents
Source: Wood Mackenzie Exploration Service
2017 volumes by company 2018 volumes by company
0.0
0.5
1.0
1.5
2.0
2.5
3.0
Exx
on
Mo
bil
To
tal
En
i
Equ
ino
r
Sh
ell
Vo
lum
es d
isco
vere
d (
bn
bo
e) Gas
Oil
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
BP
Ch
evr
on
Exx
on
Mo
bil
Sh
ell
To
tal
En
i
Oth
ers
Gas
Oil7 Majors
22%
Top ten
60%
7 Majors
35%
Top ten
76%
Source: Wood Mackenzie
Planned Drill
Drilling
Primary hydrocarbon phase - Gas
Primary hydrocarbon phase - Oil
Top 20 wildcats to watch – more deepwater and frontiers in 2019
Jethro
Venus-1
Block 48-1
Peroba-1
Brulpadda-1RE
Cholula-1
VinstraBlackrock
Glaucus-1
Khan Khubrat-1
Nour-1
Mailu-1Etzil-1
KBD-2X
Nasua-1
Kingsholm-1
Hazri-3
Alto Cabo Frio O
Kekra-1
Mondi
Key exploration themes
A smaller, more profitable industry
1. Majors continue to dominate
2. Little sign of inflation
3. Most budgets stay cautious, but will
some break ranks?
4. Latin and North American deepwater
and frontier basins drive success
5. Average full cycle returns well above
10%
Dr Andrew Latham
Vice President, Global Exploration
Biography Connect with Andrew
Andrew has over 25 years experience assisting majors and independents in the development of their exploration strategy and currently works on Wood Mackenzie’s Exploration Research. He provides analysis of exploration economics, strategies and industry trends.
Andrew previously led the Exploration Strategy offering within the Upstream Consulting business. He worked with clients to help optimize their investments in petroleum exploration and advised on strategy, process, opportunity characterization and evaluation. As part of this offering, Andrew directed Wood Mackenzie’s series of multi-client projects on exploration, deepwater and Arctic themes.
Andrew has been with Wood Mackenzie’s energy team since 1995. Until the end of 2001, he managed the team responsible for Sub-Saharan Africa research products and consultancy, undertaking a range of market analysis and regional strategy projects.
He started his career in 1990 as an international new ventures geologist with Ranger Oil. Later, as Ranger focused on West Africa, he became project geologist for Angola.
Andrew graduated from Imperial College, London, with a BSc Honours degree in Geology, and holds a PhD in Geology from University College, Cardiff.
+44 131 243 4408
@AndrewLatham_WM
22
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