Economic Report 2016 - Oil & Gas UK

28 / 84

ECONOMIC REPORT 2016
28
5.2 Drilling Activity
Exploration and Appraisal
The downward trend in exploration and appraisal (E&A) activity continued in 2015 with just 13 exploration and
13 appraisal wells drilled. At the start of this year, Oil & Gas UK forecast a further decline in E&A activity with
seven to ten exploration wells expected to be spudded and six to nine appraisal wells in 2016 19. This remains
good guidance although there may be potential upside on the exploration forecast, particularly as a number of
companies may be under obligations to drill commitment wells as part of their licence agreement. By mid-2016,
six exploration and three appraisal wells had commenced drilling, with a similar number again expected in the
second half of the year.
Figure 16: Exploration and Appraisal Drilling
0
5
10
15
20
25
30
35
40
45
Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Wells Drilled Including Geological Sidetracks
Exploration
Appraisal
Source: OGA
There are a number of factors currently constraining E&A activity globally,
not least on the UKCS. Exploration budgets are under severe pressure and
companies have cut much of their discretionary expenditure to preserve
cash-flow. In some circumstances, companies have even postponed all
E&A activity until market conditions improve sufficiently and corporate
balance sheets recover.
19 Forecasts for 2016 activity can be found in Oil & Gas UK’s Activity Survey at
Exploration budgets
are under severe
pressure and
companies have
cut much of their
discretionary
expenditure to
preserve cash-flow.