The deal flow in the farm-out market was at an all-time low in 2020 although the success rates from wells drilled were at a 5-year high. This is according to Westwood Global Energy Group who said in a new report that the 2020 oil price crash and pandemic were the catalysts for a 56% decrease in farm-out deals, compared to 2019.
Areas of significant interest and activity remain Suriname, with the largest farm-out discovery last year, and Guyana, where blocks with billion-barrel potential adjacent to the prolific Stabroek continue to drive exploration interest.
“The farm-out market had been showing signs of recovery since the low in 2016, until the events of 2020 resulted in the number of completed exploration farm-outs dropping to the lowest level in the last decade,” Westwood said.
Small companies often farm-out acreage to raise capital
Twenty-nine farm-outs were reported as completed in 2020. Deepwater and onshore deals decreased by 70% and 60% respectively whilst shallow water deals were the most resilient, dropping by 24%, dominated by deals in maturing / mature plays in northwest Europe.
“The commercial success rate from farm-out drilling in 2020 was at a 5-year high at 38%,” Westwood said. “Ten commercial successes came from the 26 wells that were drilled that had seen equity transfer through farm-out. The largest farm-out discovery was at Maka Central-1, offshore Suriname where French super-major Total accessed Block 58 via a 50% farm-in to Apache.”
Maka Central-1 successfully tested for the presence of hydrocarbons in multiple stacked targets in the upper Cretaceous-aged Campanian and Santonian intervals and encountered both oil and gas condensate.
In Guyana, Total farmed into Guyana’s Orinduik block in 2018 after exercising its option to purchase a 25% working interest for US$12.5 million. Total decided to exercise the option following a Competent Persons Report (CPR) that said the Orinduik block could potentially hold 2.9 billion barrels of oil equivalent, identified across a total of 10 leads.
In May 2019 authorities in Guyana announced that government approval was granted for the farm-in joint venture agreement between CGX Energy and Frontera Energy Corporation for exploration in the Corentyne and Demerara offshore blocks. CGX is slated to drill prospects on these blocks this year and recently secured the Maersk Discoverer for these forays.
Then in November 2020, Guyana’s Minister of Natural Resources, Vickram Bharrat, told OilNOW government was finalizing Qatar Petroleum’s entry into two blocks offshore the South American country.
President of Moyes and Co., Chris Moyes has said farm-ins are routine in the oil and gas industry with ‘first movers’ taking major risks to secure acreages.
In Guyana there are several such ‘first movers’, including Mid-Atlantic Oil and Gas Incorporated and their partner JHI Associates; Cataleya Energy Corporation with their partner Ratio Petroleum, and Eco-Atlantic Oil and Gas Limited with their partner Tullow. These three groups have acquired the Canje, Kaieteur and Orinduik blocks, respectively. ExxonMobil is the operator of the Canje and Kaieteur blocks.
