Farm-ins driving UK offshore exploration

Dec. 12, 2018
From 2012-2018 there were 140 reported farm-in deals in the UK (67) and Norway (73), according to Westwood’s analysis.

Offshore staff

LONDON – From 2012-2018 there were 140 reported farm-in deals in the UK (67) and Norway (73), according to Westwood’s analysis.

These led to drilling of 71 exploration and appraisal (E&A) wells and a further 17 wells are planned as a result of farm-ins that have been agreed but where drilling has yet to start.

Wells involving one or more farm-in partners account for around 16% of all wells drilled off both countries since 2012 (a total of 450 wells).

Farm-in activity has been more intensive in recent years off the UK, which accounts for 69% of the deals since 2015.

Exploration drilling in UK waters has improved, with commercial success rates rising from less than 10% in 2012 to 45% in 2016, since falling back to 36% in 2017 and 2018. But the average commercial success rate for wells involving one or more farm-in partners was just 10% between 2012 and 2018 compared to 25% for exploration wells drilled over the same period where there was no farm-in partner.

In Norway, the gap between commercial success rates for farm-in wells and non-farm-in wells over the same period is much narrower, Westwood added, and this may be due to regulatory and tax differences.

Barriers to entry are said to be higher in Norway but with a 78% tax break on exploration activity, fewer companies require partner to share drilling costs. In the UK, smaller companies looking to reduce their well costs are driving the farm-out market.

As for future drilling from farm-in activity, Westwood foresees eight exploration wells offshore Norway over the next 12-18 months of which five have drill-ready prospects selected with resources totaling around 500 MMboe, with over half in the Barents Sea Shenzhou prospect.

Off the UK, 17 exploration wells are in prospect targeting more than 2 Bboe prospective resources over the same timeframe. Six wells have pre-drill resources of more than 100 MMboe each and have been the subject of one or more farm-in deals.

12/12/2018