A new report by Wood Mackenzie projects drilling activity levels will rebound in 2016 as costs fall.

Upstreams have slashed 2015 exploration spends by an average 30 percent, Wood Mackenzie said.

The report published Thursday found that drilling activity will bounce back to 2014 levels as day rates and other expenses drop in response to spending cuts.

UK-based Wood Mackenzie projects exploration deflation will average 33 percent by 2016 and like-for-like costs will drop by 19 percent, Rigzone said.

“Only about half of these gains will be enjoyed during 2015 as contracts unwind and operators take time to adopt new practices,” Wood Mackenzie’s VP of exploration research Dr. Andre Latham said.

Upstreams are expected to reap the full benefit of the expense drops in 2016 unless oil prices recover faster.

The projected deflation rate will allow companies that keep drilling spends flat into 2016 to fund 50 percent more exploration projects than in 2014, the report said.

“Even those with cuts of around the average 30 percent may see their 2016 activity bounce back to 2014 levels,”  Latham added.


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