UK exploration drilling slips, claims report

Drilling activity offshore the UK tailed off this summer, according to Deloitte’s Petroleum Services Group’s latest North West Europe review.

Offshore staff

ABERDEEN, UK -- Drilling activity offshore the UK tailed off this summer, according to Deloitte’s Petroleum Services Group’s latest North West Europe review.

The analysts recorded 24 exploration and appraisal well spuds during 3Q 2010, down 20% on the comparable period last year when 30 such wells were spud.

“Despite a more consistent oil price recently, it is likely that what we are seeing is the continuing impact of the recent economic crisis playing out in this year’s North Sea drilling activity,” says Graham Hollis, Deloitte energy partner in Aberdeen.

“Many companies adopted a more cautious approach to drilling schedules during the recession as they placed emphasis on cash flow and controlling costs and these continue to be priorities for many organizations."

“This approach is illustrated further by the fact that so far in 2010 there has been a net decrease of 9% in exploration and appraisal activity when compared to the same period of 2009.”

The third-quarter total, however, does represent a 4% rise on the numbers of new well spuds during 2Q 2010. Deloitte’s says this is due to a greater focus on exploration drilling across the UKCS, with levels 32% higher for the first three quarters of 2010 compared to the same period in 2009.

The review found that the central North Sea drew the highest levels of activity in 3Q, accounting for 41% of all wells drilled on the UKCS. The southern North Sea, the most active sector of the previous quarter, attracted only 8% of drilling activity.

Elsewhere in northwest Europe, there were seven exploration and appraisal wells spud off Norway during 3Q, a 56% drop on the comparable quarter in 2009.

The Netherlands, Denmark, and Ireland were also sluggish, although the four wells Cairn Energy drilled offshore Greenland represented the first activity in this region for a decade. As for asset transactions, aside from KNOC’s takeover of Dana Petroleum and EnQuest’s acquisition of Stratic Energy, the market in the UK has been quiet.

Graham Sadler, MD of Deloitte’s Petroleum Services Group, said: “The sustainability of the recovery continues to dominate the market in the UK and credit conditions have only recently started to appear more favorable again.”

“There is evidence of a shift in company strategy as organizations are opting for less costly and less risky policies as they look to adjust their portfolios. This is reflected in the fact that the number of farm-ins announced has almost tripled this quarter to 11, in comparison with just four announcements during the second quarter.”

“Until more confidence in the recovery of the market becomes further evident, this may be a trend that continues in the future.”

10/15/2010

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