North Sea consultancy Hannon Westwood released today its ‘Special Report: 2005-2006 UKCS E&A Drilling Activity’ – an analysis of two years of UKCS well activity. The report covers 116 E&A well spuds in 2005-2006, and indicates that despite popular industry perceptions, UKCS E&A well activity has returned to levels not seen since before 1998.

The report highlights several trends in UKCS activity, including the re-emergence of true wildcat drilling in 2005, the significant inroads made by oil majors into more material reserves in frontier prospects, and the ongoing effect of the UK Government’s Fallow (inactive) Initiative pushing acreage into the market.

Jim Hannon, Hannon Westwood Founding Partner comments, “The well count during the past two years exceeds the 50 or so wells per year that are necessary to adequately explore and appraise the remaining potential of the UKCS at a reasonable pace. Our two years of drilling intelligence demonstrates that many companies were extremely successful finding and appraising UKCS oil and gas reserves, and that there are still significant volumes of oil and gas to be found as long as the pace of drilling is maintained.”

Highlights of the Report:

• 2005-2006 Reserves Replacement: 116 Exploration wells found an estimated 1.2 billion boe plus 1,415 mmboe confirmed/progressed through appraisal vs 2.3 billion boe produced over the two years

• 2005-2006 Finding Rate: an average of 41 mmboe per successful well

• 2005-2006 Finding or Appraisal Progression Costs: $1.3 per boe – an overall rate competitive on the worldwide stage

• Success Rate: 41% - 79% for finding through exploration well & progressing through appraisal wells – competitive internationally, particularly high success rates for the two years and above historical success rates

• Fallow acreage wells significantly outperformed traditional farm-in wells

• Promote and Fallow acreage continue to generate deals and drilling activity

Andrew Vinall, Hannon Westwood Technical Director comments,“Of more than 3,600 individual working interests on UKCS acreage, 37% are under Fallow, Frontier or Promote pressure to generate early ‘Significant Activity’ or return the property for re-licensing. Fallow wells are important as they tend to examine riskier but larger structures, compared to traditional joint ventures targeting near-field accumulations. We have seen farm-in exploration wells on Fallow acreage outperform regular joint-venture funded wells by a significant margin.”

Chris Bulley, Hannon Westwood Executive Director adds,“The fact that over the period 2005-2006, reserves replacement is running annually at about 600 mmboe for new reserves and 700 mmboe of appraised reserves progressing towards development, demonstrates a significant contribution to long-term reserves replacement for the UKCS – indicating that we are far from a mature oil and gas basin.”

The report also highlights the impact of new entrant companies (those who were not active in the UKCS before 2003). These companies made the biggest impact in progressing discovered reserves through appraisal wells, with over half of 2005-2006 UKCS wells funded wholly or in part by these companies.

The report is based on continuous scouting and analysis of over 100 prospects and discoveries drilled in the past two years. The undrilled prospects and discoveries remaining in the Hannon Westwood intelligence database, suggest the estimated risked remaining potential in the UK North Sea to be about 24 billion boe.