What is exploration and appraisal spend?
Conventional exploration spend, also referred to as the fully-loaded cost of exploration, is an accurate way of capturing the true expenditure on oil and gas exploration.
Why consider exploration and appraisal spend?
Spend allows users to quantify exploration performance, such as discovery costs . It helps us answer the fundamental question of whether a companies discoveries are worth more than they cost to find.
How
To calculate spend we follow a ‘top-down, bottom-up' approach. Wood Mackenzie analyses company costs incurred in exploration from annual Securities Exchange Commission (SEC) filings.
Exploration costs incurred are typically made up of well costs and other, non-drilling costs. These include:
G&G = Geology & Geophysics, including seismic costs
G&A = General & Administrative, including staff and office costs
Other spend, including pre-feed costs or spend on unconventional activities
We reconcile reported exploration costs (‘top-down’) with net well costs (‘bottom-up’) for the top exploration companies.
Companies typically disclose their exploration and appraisal costs on a regional basis. Wood Mackenzie allocates this regional figure by basin. This allocation is based on:
The number and estimated cost of net exploration and appraisal wells in which each company has participated in each basin in each year
An estimate of material seismic and other non-drilling costs
In any year where a company did not provide SEC disclosure, local company reports or an estimate for exploration costs based on the Wood Mackenzie database of net wells drilled in this period by the company is used to generate an estimate of the exploration investment in the basin in each period.
Find our spend dataset via the Exploration view in Lens Subsurface Modelling:
