A 10-year pullback in wildcat drilling has dropped conventional oil and gas discoveries to their lowest level in 70 years, and a major recovery is not expected, according to analysts with IHS Markit.
The stark decline was a response to lower crude oil prices and a shift in investment away from long-term, high-cost frontier projects, IHS senior analyst Keith King said.
"One of the main drivers here is the shift of investment by U.S. independents from international exploration to shale opportunities in the United States — shorter cycle-time projects — with greater flexibility to respond to changing market conditions," King said. "These operators can quickly turn an unconventional project off and stop or postpone drilling next month if oil prices fall."

While conventional discoveries are not expected to substantially rebound, there is some chance that trends in conventional drilling could reverse, King said.
"Offshore companies have been able to substantially reduce the costs of building and operating offshore facilities necessary to develop resources in deeper waters. This renewed competitiveness could rekindle interest in conventional exploration where larger discoveries are made," King said in the Oct. 1 report.
IHS market analysis shows that basins early in their life cycle — the frontier and emerging phases — have average discovery sizes of about 210 million barrels, or about 10 times greater than the average 25 million-barrel discoveries made in more mature basins.
The analysis also showed that average discoveries in deepwater and ultra-deepwater areas are on average five times greater than discoveries in shallow water and onshore.
Despite the higher potential for mammoth finds in deeper water and emerging basins, operators are drilling fewer new-field wildcats, which are exploratory oil wells drilled in unproven fields. IHS found that operators drilled only 68 new-field wildcats in deepwater and ultra-deepwater plays in 2018, down from 161 in 2014, while drilling in emerging-phase basins declined by a similar amount.
When drilling in mature basins, the industry prefers to do so near existing infrastructure, where operators can bring a project online in two to three years, King noted.
"The industry will likely continue to invest more in less costly, less risky, quicker cycle time projects in the onshore and shelf, with deep-water investment remaining constrained," King said. "There will be areas of intense activity in the deeper water depths and in frontier and emerging-phase basins as well, but overall, these areas will only see incremental gains."
