Appropriate creativity and measurement in the deliberate search for stratigraphic traps
Authors: Citron G. P. , MacKay J. A. , Rose P. R. 
Published: April 2008

Global exploration over the past decade has been characterized by fewer large fields discovered relative to the previous decades, while the commercial success rate has remained constant at about 25%. Amidst the shrinking resource base, demand remains robust, thus signifying the clear need for enhanced efficiency in the deliberate search for stratigraphic traps.

Recent analyst reports substantiate the need for a re-invigorated exploration role to profitably replace production, rather than an over-reliance on acquisitions.

To meet this need, explorers are required to serve three main roles which, at times, may conflict with each other. First, they must be creative, to conceptualize and envision subtle traps. Second, they must measure them in a responsible, professional fashion for the benefit of the shareholders. Third, they must communicate the uncertainty and probability aspects associated with their characterization of the opportunity in a clear fashion to facilitate more informed decision-making and more predictive portfolio management.

We attempt to facilitate and enhance the renewal of the exploration role with lessons we have learned from the fields of systematic risk analysis of geologic trends, also known as play analysis, lessons from economics and risk aversion, and lessons from the analysis of complex traps.

Having observed firsthand how leading E&P companies are conducting their global exploration programs, we want to begin by reviewing some key aspects of creativity and measurement needed for ‘new-play’ exploration and, in particular, how it applies to the search for stratigraphic traps.

Starting with some background perspective on the exploration business, we focus on the importance and subsequent reaffirmation of the exploration role, and conclude with a number of lessons, or insights, to take away that we hope will inspire and assist in their deliberate searches for stratigraphic traps. These insights represent best practices we have observed in client companies, on creativity and opportunity-measurement in the pursuit of viable, profitable exploration opportunities.

Our information regarding the status of exploration comes courtesy of some global databases and some recently published analyst reports. These published reports support our contention that the exploration role needs to continue its renewal, and contribute more significantly to profitable production replacement relative to property acquisitions.

The path towards profitable production replacement often begins with the creativity provided by the exploration team associated with evaluating or generating new play concepts. Creativity at the regional level benefits by approaching subtle trap exploration through probabilistic play analysis. In this context, regional geological analyses can better pinpoint the critical elements, and systematically search for the footprint of active migration pathways provided by hydrocarbon shows. Explorers should take full advantage of thought-experiments that pose both outlandishly successful and embarrassingly meagre results (including failure) to promote characterization of the full range of outcomes consistent with the inherent uncertainty, and the likelihood of achieving various success states.

These regional efforts can then be integrated with the appropriate discount rate for a company’s economic valuation system. We also share some lessons learned regarding the business realities of a company’s dry hole tolerance to better plan for interim learnings and exit strategies. Similar considerations and open discussion of a company’s risk tolerance can lead to more appropriate diversification in the critical plays needed to achieve a business plan.

We also review chance-dependency issues among prospects and leads in plays. In particular, we note that measurement of subtle traps often requires special attention to the geological phenomena that indicate internal parameter dependencies and changes in the probability profile that need to be perceived, calculated and communicated for complete characterization of given opportunities. The more consistency and calibration that is achieved in prospect characterizations, the more predictable a company’s portfolio will become.