RE: Question27 May 2019 21:13
Tier, no expert, and not in industry, but will have a go at the basics:
First you need to know whether it is pure exploration (nothing yet found) or appraisal (a previous well has found stuff, but another well is needed to give a better idea of how much is down there and how will it flow).
Some drills are both exploration of one level and appraisal at another level (eg UJO's current drill)
Exploration wells are 'wildcat' when CoS is about 5 - 15% as CJG suggests. The PetroMatad wells last year were of this order.
A very good COS is 40% or above. Check out website Upcoming Drills and do further research. ECO and EME are both over 40%. They get such a high CoS through doing a large amount of seismic work and other analysis first, de-risking the prospect as much as possible before drilling. [Note - I've got strong stakes in both these companies].
Seismic work is very expensive - (sometimes better to go for less seismic and lower CoS).
Too, the difference between onshore and offshore is the expense of drill - offshore much more expensive. Too, the deeper the drill, the more expensive. Too, the cost of getting the product to infrastructure. All these add up to whether a project will be commercial. So, if you can drill a well at $2m at a CoS of 20%, in theory it might be better to drill 5 of those wells than one well that has a CoS of 50% but costs $30m to drill - you get the picture? Of course, it all depends on the prize you are drilling for - all part of the risk/reward calculation.
SAVP's wells have a crazy CoS (off the top of my head, about 80%+). This is because each time they go through about 7 different layers by which they have a chance of hitting something. They are also cheap to drill as onshore and near the surface. Quite an outstanding prospect and the reason why so many of us invested before the Nigerian venture (from which the share expansion massively diluted our reward - and frustrated many of us).
This is all very basic stuff, and you pick it up as you go along, and doing your research. But hope it helps.
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