During the last four years, more than 20 companies have had positive returns on Norwegian Continental Shelf exploration spend. ConocoPhillips is in its own league as return on exploration expenditure has been around 10 times what the company has invested since 2018.
This is evident from analyses made by Wittemann E&P Consulting (WEPC) based on exploration results the last four years (2018-2021). “ConocoPhillips is top performer due to large discoveries with high interests (Slagugle 80%, Warka 65%). In addition, their exploration spend is also moderate relative to amount of drilling activity, likely capitalising on its NCS legacy,” Wittemann says.
Return on exploration spend is the estimated value of the discoveries relative to the amount of exploration spend, both after tax. If the return is 1x, then the value of discoveries is equal to the exploration spend and no net value was created.
It is noteworthy that many of the smaller companies do very well as their return on exploration spend is higher than the NCS average, including Petrolia NOCO, Mime, Source Energy, Concedo and Pandion. These companies do, however, have limited activity and spend during this period.
For absolute value creation, sustained performance with large spend matters, not just whether the return is high or above average. The leaders on this metric are Equinor, Vår, Aker BP, Wellesley and Wintershall Dea.
During the session «Exploration Performance and Value Creation» at NCS Exploration Strategy, November 17-18 , Camilla Aamodt (Equinor) and Arild Dybvig will moderate a panel discussion including Anders Wittemann, Kjersti Dale Grov (NPD) and Linn Katrine Høie (Petrolia NOCO).
HALFDAN CARSTENS
