Will Forbes
3 October 2017

Revealing Big Oil hurdle rates

Pemex farm-outs indicate lower end of returns appetite

Our analysis on cost of capital tends to focus on small/mid cap E&Ps as these are companies we traditionally model and where the deals are material enough to investors that get good visibility on deal metrics. The analysis indicates that costs of capital (as implied by buyers’ IRRs) are perhaps higher than many would expect - in the range of 15-20%.

These deals are often characterised by a capital-constrained seller and therefore often a buyer’ market. How the deals stack up when deals are made with other large companies or NOCs are probably different and should illustrate the lower end of returns that the buyers are willing to accept.

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Elaine Reynolds
26 September 2017

Fatala well latest disappointment offshore West Africa

Results from Hyperdynamics’ Fatala-1 are the latest in a number of disappointing wells drilled offshore West Africa. It joins Ophir’s Ayame-1X well in Cote d’Ivoire and ExxonMobil’s Liberian well Mesurado-1 as highly anticipated exploration wells that have failed to deliver over the last year in an effort to extend the successes seen in Mauritania, Senegal and Ghana.

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Elaine Reynolds
18 September 2017 · 3 min read

Partridge and Verbier fail to find oil

Key wells fail

Azinor Catalyst’s Partridge and Statoil’s Verbier wells were each targeting over 100mmbbls in well drilled areas of the North Sea and were rare examples of exploration in the region with independent involvement. Jersey Oil and Gas (JOG) held 18%WI in Verbier, having successfully attracted Statoil to farm-in to its original 60% WI in 2016, while Azinor held a 100% WI in Partridge (subject to back in options with third parties).

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Elaine Reynolds
12 September 2017

Drombeg adds to Druid disappointment

The Druid/Drombeg frontier exploration well, 53/6-1, is currently being plugged and abandoned after encountering porous water bearing reservoir across both target intervals. Operator Providence Resources announced the results from the deeper Drombeg target this week, following on from similarly disappointing results from Druid in August.

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Will Forbes
29 August 2017

Factors in US shale balances - Declines vs DUCs

Negatives of declines in Permian vs increases in DUCs

There have been a number of developments in recent months in US shale.
We examine two key factors to see their effect on market data and sentiment - the levels of inventories and the quantity of drilled, uncompleted wells (DUCs).
Increasing decline rates in the Permian could have significant long-term effects on US shale production expectations, while increasing numbers of DUCs in Permian should give bulls pause for thought on meaningful, near-term increases in oil prices.

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Elaine Reynolds
29 August 2017

Korpfjell disappoints in the Barents

One of the most anticipated exploration wells of 2017, Korpfjell, has proven a small non-commercial gas volume in the frontier southeast region of the Barents Sea. The Statoil operated well had been targeting oil in a large structure that was estimated by partner Lundin to be over four times the size of that seen in the giant 1.9 - 3bnbbl Johan Sverdrup field.

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