North Sea Q3 2013 Drilling Eased But Outlook Positive

North Sea drilling activity eased during the third quarter of 2013 following an encouraging second quarter, according to the latest report into offshore activity from Deloitte, the business advisory firm.The report, compiled by Deloitte’s petroleum services group (PSG), found that although the number of new wells drilled on the UK Continental Shelf (UKCS) fell by around one third in comparison to Q2, the outlook for the North Sea remained positive.

A total of 11 exploration and appraisal wells were drilled in the UK during the third quarter of 2013 – five fewer than during Q2 and six fewer than the same period last year. Despite the fall in figures for the UKCS, the Norwegian Continental Shelf (NCS) has produced eight more wells during Q3 2013 than the same period last year.
 
Graham Sadler, managing director of Deloitte’s PSG, said a number of factors may have affected the UK drilling figures over the summer months. He said: “While the summer is often a peak period for drilling, the UKCS is a complex region, with a natural ebb and flow of activity across the North Sea industry.
 
“When bidding for exploration licences, companies make a commitment to the Government to drill a certain amount of wells within a certain timeframe.  Many companies have commitments from recent licensing rounds which are yet to be fulfilled, so we may well see these materialise in the coming months, drawing a more positive conclusion to the end of the year.”
 
However, while drilling offshore UK slowed, deal activity saw an upturn. During Q3 there were 14 deals reported, two more than during the same period in 2012.
 
Farm-in style agreements, where one company takes a stake in another company’s field - often to assist with drilling or development costs – accounted for more than half of Q3’s UKCS deal landscape.
 
Graeme Sheils, energy partner at Deloitte in Aberdeen, said the prospects for the region were strong. He said: “While the most recent drilling figures are lower than expected, one quarter does not tell the whole story.  Business confidence continues to be positive around the outlook for UKCS, with the oil service sector seeing high activity levels on the back of strong production.”
 
Smaller explorer companies have continued to show interest and enter the North Sea, which in part explains the prominence of the farm-in style deals the region has seen in both this and recent quarters. Sheils added: “These players, as well as others, have a vast number of considerations when planning drilling programmes and there is no doubt that these have altered as a result of the maturity of the UKCS and accessibility to finance.
 
He concluded: “The North Sea remains a focus for investment and we do not expect this to change in the very near future.”
 
Source: Deloitte Petroleum Services Group