The year 2015 saw a record 101 exploration wells spudded in deepwater areas, including water with depths between 1,000 ft and 5,000 ft and ultra-deepwater with depths greater than 5,000 ft in the U.S. Gulf of Mexico (GoM). That’s 21 more than in 2014, when the oil price collapse started (Figure 1.1). Deepwater exploration drilling dropped after the downturn, starting in 2016.
Source: Stratas Advisors
However, operators still managed to spud 78 deepwater exploration wells, which is on par with 2014. Exploration in shallow water (water depth less than 1,000 ft) bears the most impact by the low oil price. Only two and three exploration wells were drilled in shallow water in 2015 and 2016, respectively, significantly down from the high of 23 in 2014.
On the development drilling side, deepwater wells drilled in 2016 had been cut by half to 26, compared with the 51 wells drilled in 2014 (Figure 1.2), signaling a bigger impact by company spending cuts than exploration drilling. Shallow-water development drilling has experienced a similar fate. Operators only drilled 23 development wells in shallow water in 2016 compared with a high of 172 in 2014.
Source: Stratas Advisors
As the oil price slowly recovered back to more than $50 per barrel in 2017, there is a sign of rejuvenated exploration drilling activities in the GoM—especially in deepwater, based on drilling permit applications. The recovery is expected to be slow as operators are still very cautious about the recovery.
Stratas Advisors expects exploration well counts to jump to about 95 in 2017, from 81 in 2016, and reach 120 by 2021. Most of them will be in deepwater.
On the development drilling side, activities will not start to recover until 2019, with some deepwater projects getting into the construction stage. However, we will not see a full recovery on shallow-water development drilling in the next five years. The shallow-water well counts will remain at about 30, far below the 170 wells drilled in 2014.
For the full report, visit Stratas Advisors.
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