Offshore staff
LONDON -- Hannon Westwood has reviewed farm-in deals struck during 2006 and 2007 involving commitments to drill wells.
The report finds:
• The well farm-in market on the UKCS has expanded rapidly over the last two years as the oil price has increased and the total value and number of asset sales has fallen
• Drilling resources on the UKCS have been able to support 50 to 60 new wells each year, though this has now increased to be 70-80 wells as more units for E&A operations became available from late 2007
• In 2006 Hannon Westwood recorded 62 deals involving 40 farm-in wells that were committed with total gross well costs estimated at $775 million
• In 2007 Hannon Westwood recorded 52 farm-in deals involving 26 farm-in wells that were committed with total gross well costs estimated at $550 million
• The outstanding drilling result so far from the 2006 farm-ins is Oilexco's Huntington discovery, where oil was encountered in the Forties and Fulmar intervals and potential reserves are expected to be significant
• In 2007, notable farm-in successes to date were the appraisal of Breagh, Sterling's first operated UKCS well; Dana's Kerloch appraisal well in block 211/22a; and Oilexco's Malory well 22/14a-4, which may be connected to the Huntington discovery
• The number of well commitments generated by farm-ins in 2006 and 2007 represents a significant proportion of the drilled well pool and also a significant fraction of the estimated total value of deals compared to the period 2004 to 2005, when the value of farm-ins only accounted for a small percentage (<10%) of the overall value of all deals.
"The trend of 2006-7 drilled farm-in wells shows a marked shift towards lower-risk appraisal wells as opposed to exploration wells," says Chris Bulley, a partner in Hannon Westwood. "So far, in 2008, 12 wells have been committed through farm-in deals. The farm-in market is an important generator of well activity and looks set to remain an important vehicle for companies to achieve growth, as shown by the 50%+ success rate of drilled farm-in wells seen in 2006-7."
05/21/2008
