UK North Sea – Exploration and M&A slow, Drilling inventories pile up; Assets on the market increase

LIGHTNING RELEASES Singapore/London: February 25, 2013 – 1Derrick, the Singapore and London based provider of integrated energy news, research and databases, has released its latest data on UK North Sea Exploration & Appraisal (E&A) for the period Q1-2014 (Mid-Nov to Mid-Feb) and M&A activities for 2013.

 E&A activity slowest since 2001

The 1Derrick research shows that drilling commenced at only 3 wells while 6 wells were completed during the last 3 months. Currently 5 wells – operated by Total, BP, ConocoPhillips, Centrica and EnQuest – are in progress. Overall E&A drilling in 2013 was slow, with just 29 wells spud and 39 wells completed.

Table: E&A wells by spud year

Year

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014YTD

Wildcat

21

14

24

26

33

28

32

41

21

27

14

20

16

1

Appraisal

16

18

10

22

22

24

42

35

19

21

16

21

13

1

Total

37

32

34

48

55

52

74

76

40

48

30

41

29

2

 

High drilling inventory

According to Rajeev Singh, Senior Analyst, 1Derrick, “Drilling inventory is high… there are 92 ready-to-drill licenses awaiting a rig, and 251 licenses with Drill or Drop or Contingent decisions pending.” These 92 ready-to-drill licences include:

  • 54 in CNS/ Moray Firth: Maersk, with 7 operated licences, leads the activity, followed by Shell at 6, Premier at 5, Total and GDF at 4 each. Other significant operators included ConocoPhillips, Nexen, and Trap. Quad 30 is expected to see highest activity with 22 licences, dominated by Shell and Total, followed by Quad 21 at 15 dominated by Premier, Maersk and GDF.
  • 18 in SNS: GDF and RWE with 4 operated licences each followed by Centrica with 3 are expected to contribute to E&A activity. Quads 47 and Quad 43, with 6 licences each, and Quad 36 with 5 is expected to have the highest E&A activity.
  • 10 in NNS, 10 in WoS and other areas: Low activity with 2 wells each by TAQA in Quad 211, Total in Quad 3 and Centrica in Quad 110.

Mangesh Hirve, Director, Derrick Petroleum Services, “Positive exploration results during 2013 included Dana’s Liberator and Pharos, E.ON’s Tolmount, ConocoPhillips’ Lacewing, Fairfield’s Darwin and DONG’s Cragganmore.”

New licensing rounds expected to push the drilling inventory higher

Recent UK Round 27 tranche 2 award added 37 standalone licences including 6 licences with firm commitment. UK Round 28, with 2,729 sub-areas available for application, is expected to further add to the drilling inventory post awards. The 2,729 sub-areas available in Round 28 include 429 sub-areas with previously drilled E&A wells. Of these 207 had 1 E&A well while 222 had 2 or more E&A wells drilled. Around a sixth of the new sub areas on offer are hence, expected to have good historic precedents. Also, 411 sub-areas of these 2,729 sub-areas were relinquished, in full or part after Round 27 i.e. these areas were not available then.

M&A activity slows down, Assets on the market increase, Buyers change

UK A&D activity increased marginally in Q4-2013 after sluggish Q2-Q3 2013 ending the year at $1.1bn, lowest since 2008. Farm-ins increased from their historic average of approximately 5 per quarter with 29 in 2013 – excluding exploration portfolios acquired in corporate M&A. Assets on the market increased and include large divestment packages from Shell, Marathon, Premier, OMV and Atlantic. North Sea Energy and Sorgenia are considering strategic alternatives.


Mangesh Hirve, Director, Derrick Petroleum Services, commented, “The slowdown has been strongly visible given only one billion dollar plus deal OMV-Statoil in 2013 as compared to 4 in 2012. The Buyers’ segment has been evolving from European energy/utility during 2007-2009 to Asian/NOCs 2010-2012 to European industrials (Wintershall, OMV, Lotos, MOL) in 2012-2013. Independents were always an important segment, but were not too prominent in 2013.”

 1Derrick/Derrick Petroleum Services, is an independent oil and gas research firm with offices in London, Singapore and Bangalore. Derrick provides functional, comprehensive and cost-effective oil and gas sector M&A Databases and Global Business Development reports.

Media Contacts:

Danny Ghale: Danny.Ghale@1Derrick.com

Mangesh Hirve: Mangesh.H@derrickpetroleum.com

Source: 1Derrick


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