Exploration by companies operating in frontier regions has been disappointing over the last five years, according to a new industry report which benchmarks drilling performance.

Some firms have had big successes in finding big fields, but overall industry performance in deepwater in particular has been unsatisfactory, according to analysis by Richmond Energy Partners.

While key exploration plays in East Africa and Iraq are maturing rapidly, the report suggests frontier exploration drilling has been broadly disappointing “with a success rate of less than 10%. The new pre-salt play in Angola has become the key emerging play globally”.

Keith Myers, managing partner at Richmond and one of the report’s authors, emphasised: “At $100 million average cost per well, industry exploration performance in frontier deepwater plays in particular has simply not been good enough recently. There is great pressure to deliver in 2014.”

Richmond studied 40 E&P companies between 2009 and 2013 to determine which have had the greatest success. Its study looked at the industry’s $8.4 billion exploration spend planned for 2014 and at $32.5 billion of exploration spending over the five years to 2013.

Companies which have captured acreage early in deepwater gas provinces off East Africa and the Mediterranean Sea have been among the best exploration performers between 2009 and 2013, and include Anadarko Petroleum, Noble Energy and Ophir Energy, the Richmond report reveals.

A second group have proven to be top performers by virtue of the size of the finds, including Tullow Oil, Lundin Petroleum, Talisman Energy and Cobalt International.

Looking at the best exploration performers in the report for the 2009-13 period, Myers said there are broadly two types. “First, there are the companies who explored in the emerging deepwater gas provinces in East Africa and the Eastern Mediterranean, e.g. Anadarko, Noble and Ophir [who] all discovered over 6 Tcf net in the 2009-13 period.

“Second, there are the four top oil explorers who all discovered more than 500 MMbbl of net in the period. Tullow made 72% of its discoveries onshore Africa in Uganda and Kenya with a further 21% in deepwater Ghana. [Up to] 83% of Lundin’s oil was discovered in one field – Johan Sverdrup in Norway. Talisman made 96% of its oil discoveries onshore in Colombia and Iraqi Kurdistan. Cobalt International’s success outside of the USA came from the pre-salt play in deepwater Angola,” said the author.

“There are different routes to exploration success but most typically out-performance is down to exploring emerging plays where large discovery sizes and high success rates are possible. The exception is Lundin’s phenomenal Johan Sverdrup oil discovery made in the mature Central North Sea and attributable more to forensic geoscience,” he indicated.

The Richmond report says conventional oil and gas exploration is alive and well, and – for selected companies – continues to be successful: “There is no shortage of commercial discoveries being made. 2013 was the best year for oil discoveries for five years.”

Commercial success rates are at 1 in 3 globally, the report suggests, with a finding cost of $1 per boe over the last five years.

But the report does illustrate downsides too: Gas found in East Africa, Israel and Australia makes up half of the 35 Bboe discovered by the companies analysed, boosting exploration statistics, but: “Although these gas discoveries are commercial, much of this gas will take decades to produce and monetise. In fact, the study finds 40% of recent discoveries have still not progressed to development six years after discovery,” Richmond’s research reveals.

This is the fifth year that the Exploration Performance Report (EPR) has been produced by Richmond, and it is regarded as a benchmarking tool for small, medium and large E&P companies.

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