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Rare run of oil finds is little respite for price-hit explorers
* Seven oil and gas discoveries made in recent weeks
* 2015 still expected to see lowest discoveries on record
* Exploration companies slash budgets after oil collapse
* Graphic on oil discoveries: http://link.reuters.com/ted84w
(Adds table, corrects spelling in paragraph 18)
By Ron Bousso
LONDON, May 29 (Reuters) - Exploration firms have made a
rare run of oil and gas discoveries in recent weeks as more
targeted search strategies bear fruit, but they offer little
respite to a sector that remains severely bruised by the oil
price slump.
Global exploration and production (E&P) companies that scour
frontier lands and seas in search of new energy reserves have
had meagre success in recent years, putting many under pressure
before a near halving of oil prices since last June.
Seven successful discoveries with potential to become
commercial have been made so far in 2015 by explorers ranging
from independents such as Premier Oil (LSE: PMO.L - news) to majors
including ExxonMobil, according to Anish Kapadia,
Managing Director, International Upstream Research at Tudor,
Pickering Holt and Co (TPH) investment bank.
Of the seven, all but one were made in the second quarter of
the year.
By contrast, Last year saw a total of 10 new well
discoveries, of which only 2 are estimated to be commercially
viable, based on the TPH "Top 50ish" wells index.
"We haven't had 6 discoveries in a single quarter for a long
time," Kapadia said.
"This year people are drilling a lot less as exploration
spending has fallen sharply, so companies are focusing on higher
quality projects," Kapadia said.
The decline in oil price due in large part to growing
production from U.S. shale production has led the oil and gas
sector to slash budgets and their exploration programmes.
"It is always a game of luck. But the luck was bound to
change because the lack of success across the industry meant
that people are taking less risk in a tighter market. With less
money around they can do more technical work before actually
drilling," an industry source said.
Although the sector's shares have recovered in recent months
after a rebound in oil prices, investors remain wary with the
outlook for oil prices unclear.
"A cautious investor base recognises the value of core
producing assets, but is unconvinced about pre-development
opportunities and focuses on the risks ahead rather than the
upside opportunity," analysts at Barclays (LSE: BARC.L - news) said in a note,
maintaining their view on the European E&P sector as neutral.
Norwegian-based consultancy Rystad Energy says 2014 was the
worst year on record for conventional oil and gas discoveries,
with 78 with estimated reserves of 13.3 billion barrels of oil
equivalent.
And despite the sharp rise in recent weeks, 2015 is expected
to be even weaker, according to Rystad's ECube database.
"For this year, there has been less activity and spending by
oil companies due to the oil price collapse. Exploration is the
first thing you look at to cut," Rystad analyst Nils-Henrik
Bjurstrøm said.
The latest discovery was announced this week at the Isobel
Deep exploration well in the Falkland Islands (LSE: FKL.L - news) by Premier Oil,
Falkland Oil and Gas (Other OTC: FLKOF - news) and Rockhopper, just weeks
after the first discovery there.
Another was announced earlier this month at the Liza well in
the Stabroek block 120 miles offshore Guyana, which is developed
by a consortium including ExxonMobil, Hess and China's
Major oil and gas discoveries in 2015
Well name County Companies Link Date
Isobel Falklands Premier Oil, 28-May
Deep Rockhopper,
FOGL
Liza Guyana XOM, HES, Nexen (KSE: 005720.KS - news) 20-May
(CNOOC)
Kronos 1 Colombia APC, Ecopetrol
Tortue 1 Mauritania Kosmos Energy 27-Apr
Zebedee Falkland Premier Oil, 02-Apr
FOGL
Xana 1 Denmark Maersk Oil, 12-May
Noreco
Anchor Gulf of Chevron 07-Jan
Mexico
(Reporting by Ron Bousso, editing by David Evans)
