Understanding the Intrigue of Wildcat Drilling
Wildcat drilling, a form of high-risk exploratory drilling, is the process of drilling for oil or natural gas in unproven or fully exploited areas. These areas typically lack detailed historic production records or have been entirely exhausted for oil and gas output. The inherent uncertainty of this activity demands highly skilled and experienced drilling crews. Successful companies often boast a significant rate of drilling success, regardless of the well’s location.
Essential Insights About Wildcat Drilling
- Exploratory Nature: Wildcat drilling aims at tapping into unproven or highly risky areas in the oil and gas exploration process.
- Revamping Wells: Drillers might revive existing or older wells that are no longer economically viable for major oil companies.
- High Stakes: The practice often involves smaller firms and presents a scenario of high risk but potentially high rewards for stakeholders.
The Historical Significance
The term “wildcat drilling” likely stems from the early 20th-century U.S. when drilling was conducted in remote, unpopulated areas that appeared wild. Today, as global companies have ventured into most accessible land and even deep oceans, fewer areas remain untapped regarding energy potential.
The Business Dynamics
Wildcat drillers often acquire undesirable claims at relatively low costs; however, this approach results in more failures than successes, making operations expensive without significant hits. For large energy companies, such drilling constitutes a small fraction. In contrast, for small firms, wildcat drilling might be critical. Success can lead to discovering vast energy reservoirs, while repeated failures may detrimentally affect stock performance or lead to bankruptcy.
Special Considerations in Wildcat Drilling
A unique opportunity for wildcat drillers involves exploring oil fields that larger companies have fully exploited. Such fields might still harbor substantial oil reserves uneconomic for major corporations but profitable for smaller drillers. According to a 2008 study by MIT, even with high oil prices, approximately two-thirds of oil in known fields remains untapped due to current technology constraints, creating room for smaller drillers to step in.
Wildcat drillers might not influence market oil prices significantly; however, they play a crucial role in enhancing overall oil and gas output, underlining their importance in the energy market.
Related Terms: exploratory drilling, E&P companies, dry holes, energy production, oil reserves, high-risk investments
References
- MIT Technology Review. “Oil Left in the Ground”.
