Cost is realigning to reflect reduced levels of competition
“There has been a marked reduction in the number of international E&P companies looking to acquire new exploration acreage as the industry focuses on cost management”, according to Ophir Energy, the London listed explorer. “In the middle of the last decade, fuelled by a combination of rising commodity prices and the ease of access to capital markets, exploration activity increased dramatically. This resulted in increased competition in licensing rounds where signature bonuses would be high and work programmes would typically involve a commitment to drill a number of firm exploration wells”.
Ophir writes that “the cost of acquiring exploration acreage is now realigning to reflect the reduced levels of competition”. Whilst the risk profile of the rocks remains constant, the company explains, “the cost of assessing those risks has fallen considerably. Signature bonuses have reduced, commitments are generally for seismic only and there is an opportunity to abandon the licence before having to commit to drilling, and service costs have reduced dramatically. It is therefore an opportune time to be acquiring acreage to provide optionality in the portfolio for potential future exploration drilling”.