What is Wildcat Drilling?
Let me explain wildcat drilling directly: it's a high-risk form of exploratory drilling where you drill for oil or natural gas in areas that are unproven or have been fully exploited, meaning they lack concrete historic production records or have been exhausted as sites for output.
This uncertainty means your drilling crews need to be skilled, experienced, and attuned to what the well parameters reveal about the formations. You'll find that the most successful energy companies maintain high drilling success rates, whether in known production areas or not.
Key Takeaways
Understand that wildcat drilling is exploratory drilling in the oil and gas process, focusing on unproven or high-risk areas to exploit potential resources.
As a wildcat driller, you might also revisit existing or older wells that larger oil companies no longer find profitable.
This practice typically involves smaller firms, offering both high risk and high reward for stakeholders involved.
Understanding Wildcat Drilling
Exploration and production form the initial stages of energy production, where you search for and extract oil and gas. An E&P company handles finding and extracting these raw materials for the energy sector.
The term 'wildcat drilling' likely comes from early 20th-century drilling in remote areas, often in the American West, where wildcats or other creatures roamed. Today, with global energy companies having explored much of the Earth's surface, including deep oceans, few areas remain untouched for energy potential.
Since wildcat drillers target claims others deem undesirable, you can acquire them cheaply. However, this exploratory drilling leads to more misses than hits, making operations costly without successes.
Wildcat drilling represents only a small part of large energy companies' activities. For small companies, though, it can be a make-or-break endeavor. If you're an investor, successful drilling into large reservoirs brings significant rewards, but repeated dry holes can cause poor stock performance or bankruptcy for small-cap firms.
Special Considerations
Another key aspect involves small producers exploring fields already exploited by larger oil companies. These fields may hold sizable oil pockets that are uneconomic for big players due to scale, but they're viable for agile wildcat drillers.
A 2008 MIT study estimated that even with high oil prices, about two-thirds of oil in known fields is left underground because existing technologies, which could extract up to 75 percent in some fields, aren't widely used by large companies. This opens a market for smaller wildcat drillers.
Wildcat drillers don't significantly affect oil market prices, but they play an essential role in enabling greater oil and gas output than would occur without them.
