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Oil & Gas Discoveries Hit 4-Year High: What Does it Imply?

Kaibalya Pravo Dey

Worldwide oil and gas discoveries reached new heights last year, marking a successful milestone for hydrocarbon explorers. Per Rystad Energy, upstream energy companies discovered 12.2 billion barrels of oil equivalent (BOE) reserves last year, marking the highest since 2015’s 20-billion BOE. Most of these new findings are located in offshore regions. Of the total discoveries, 26 have more than 100 million BOE deposits.

ExxonMobil Leads the Way

Energy behemoth Exxon Mobil Corporation XOM led the discoveries with four new findings offshore Guyana in 2019. The company, along with is partners Hess Corporation HES and CNOOC Limited CEO, made a total of 15 discoveries in the Stabroek Block in the country. In the past few months, the largest publicly-traded energy mammoth has increased reserve estimates in the block to more than 6 billion barrels of oil equivalent. Notably, London-based Tullow Oil PLC TUWOY had also made discoveries in the region last year.

Moreover, ExxonMobil found natural gas in the Glaucus-1 well, located off the coast of Cyprus. The company’s initial interpretation of well data suggested that the discovery might comprise 5-8 trillion cubic feet of natural gas resource. Markedly, the Zacks Rank #3 (Hold) company constitutes 9% of global hydrocarbon finds last year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.  

Other Significant Findings

The single largest and deepest discovery of 2019 was made by energy major BP plc BP in the Orca gas field, offshore Mauritania. It is expected to hold recoverable resources of around 1.3 billion BOE. The company is expected to build another LNG hub in the region. Markedly, Russian Gazprom made two discoveries, namely Dinkov and Nyarmeyskoye, in the Kara Sea. The Dinkov discovery is ranked as 2019’s second-largest global discovery. The company’s discoveries of 2019 are expected to hold a total of 1.5 billion BOE of recoverable resources.

Tread With Caution

While so many significant discoveries were reported last year, some of the wells failed to deliver. Notably, more than 10 billion barrels of estimated pre-drill volumes were supposed to come from high-profile wells, which failed. Moreover, the current capital spending is much lower than 2014 price crash levels, which can work as a barrier for upstream companies. However, this does not shift the focus from the new hydrocarbon encounters.

Markedly, the higher discovered volumes on a global level minimize threats to supply levels. This will likely improve the reserve replacement ratio for oil and gas companies. At the same time, the success of global upstream players to build up the resource base for future demand will set the tone for a new round of oil and gas price weakness.

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Tullow Oil PLC (TUWOY) : Free Stock Analysis Report
 
CNOOC Limited (CEO) : Free Stock Analysis Report
 
BP p.l.c. (BP) : Free Stock Analysis Report
 
Exxon Mobil Corporation (XOM) : Free Stock Analysis Report
 
Hess Corporation (HES) : Free Stock Analysis Report
 
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