Adam Ferrari of Ferrari Energy describes the strategic approach to oil and gas exploration to help businesses optimize their likelihood of success.
The oil and gas industry has experienced a systemic shift over the last several years as companies have faced considerable periods of volatility and sharp price declines. To survive, companies need to learn how to develop a strategic plan to respond to the environment’s ever-changing conditions.
One of the first steps before creating a strategy is identifying what stage of the life cycle the respective company is in. Is the business at the beginning of the process in selecting basins to access or playtesting in exploration? Depending on which stage a company is in will determine what steps are necessary to implement a strategy for existing business conditions.
Many forces impact the industry ranging from technical advances, the economy, and current/upcoming political policies. Events such as an economic recession, presidential election, or shortage/surplus of oil can dramatically impact a company from production to sales.
As part of a strategic approach, companies must consider all of these factors and take note of business opportunities such as identifying new basin or drilling opportunities and conducting play assessments. All of these factors should be evaluated together and ranked based on different risk categories. From a comprehensive ranking and analysis, companies can better determine and plan for succession based upon existing risk factors in the current environment and how to best adapt.
Recent studies have shown four common themes for exploration paths an oil and gas company can take when planning for exploration strategies. The first of these themes is high-impact deepwater exploration. This strategy has typically resulted in large discoveries and higher success; however, the associated costs are exponential. The next theme is high-impact onshore and shelf exploration. This approach allows companies to yield low exploration costs and development costs. Another method is near-field conventional exploration. Lastly, there is also an unconventional exploration.
Ultimately, each of these exploration strategies will come down to what resources a company has, the current economic climate, and the initial capital outlay a company wishes to undertake. Some strategies offer high-risk high-reward, while other methods are more of a lower cost, conservative approach. Each of these strategies may also be deployed at different points in the business life cycle. Whether a company is in early exploitation, main exploitation, or maturity stages, the type of exploration activities required will also play an essential factor.
About Adam Ferrari
Adam Ferrari is the founder of the mineral acquisitions company Ferrari Energy. He is a chemical engineer by degree and is an accomplished petroleum engineer by profession. He also has experience in the financial sector through his work at an investment banking firm. Under his leadership, his company supported organizations including: St. Jude Children’s Hospital, Freedom Service Dogs, Denver Rescue Mission, Coats for Colorado, and Next Steps of Chicago.