Notes: Shows the number of conventional exploration farm-outs split by location excluding North America. Note Westwood defines deepwater as >500 m Source: Westwood Farm-Outs
Farm-ins to exploration programs are increasing since the recent low of 57 deals in 2016, according to Westwood Global Energy. However, the market remains well below the norm prior to the oil price crash of 2014 onwards.
As activity levels dropped, companies also paid less for farm-ins, with the cost of accessing an offshore drilling opportunity in 2018 typically half the amount paid in 2014, said Westwood senior analyst Vikesh Mistry.
Higher oil prices, lower cost terms, and recent large farm-in discoveries are all positives for the market, Mistry said. However, with a typical duration of about 500 days between an opportunity coming to market and a deal being completed, followed by 300 or so more days before an exploration well is drilled, the quality of current farm-in opportunities may not be fully apparent for another two years.