US onshore exploitation over exploration: a Q1 2016 outlook Report

Insight 01 February 2016

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Report summary

Onshore exploration in the Lower 48 has contracted massively, but that doesn't mean innovative projects have completely gone by the wayside. Stacked pay is a way for operators to explore in 2016, potentially mitigating the price-driven contraction in greenfield projects. Differentials are critical when margins are slim, so mature basins with developed infrastructure are preferred. In our view, the economics of new exploration are currently challenged, so large projects that are identified will likely end up in a holding pattern until prices approach US$60/bbl.

Executive summary
- No budget space for true exploration
  - An analysis of corporate cash flows to show why exploration rigs vacated the market
- Focus is on better work in existing plays
  - Future drilling scenarios to analyse remaining inventory in current plays
- Most prospects delayed, not dead
  - Breakeven analysis to predict where, and when, new plays will generate interest
  - For more information please download the attached PDF slide pack.