Question by Reality has a Liberal Bias: Does oil “exploration” include drilling?
This description says YES:
“Here’s a way to make millions of dollars from the oil boom with little money down (and a lesson in the economics of oil exploration). Step 1: Start an independent exploration company. Raise $ 10 million with a listing on the Toronto Stock Exchange or London’s Alternative Investment Market (AIM).
Step 2: Negotiate an exploration license with a national government to DRILLS WELLS off the Gulf of Mexico, in Papua New Guinea, or in another far-off locale. Governments are keen to cash in on the high price of oil and lack the expertise to develop their reserves themselves, so they are fond of royalty agreements or production-sharing agreements, which require them to put no capital down, and encourage investment in exploration, in exchange for a share of revenues once production is underway.
Step 3: DRILL four wells at a cost of $ 2.5 million each (the average cost of drilling a well in 2006).
Step 4: Suppose a 50% success rate for prospective WELL-DRILLING, which means you’ve got two successful WELLS on your hands. In 2006, the average successful well DRILLED by “independents” contained 160 mboe (million barrels of oil equivalent), so you’ve now got 320 mboe in reserves. These reserves are under the ground, without any equipment to extract them or pipelines to distribute them.
Step 5: Sell your WELLS to a “major” (e.g., Exxon Mobil (XOM), BP (BP), ChevronTexaco (CVX), Royal Dutch Shell). The typical selling price, depending on location and degree of certainty in reserves, is roughly $ 10 per boe of proven reserves. At 320 mboe, your two successful WELLS are worth $ 320 million.
You’ve turned $ 10 million into $ 320 million in as little as a year!”
Answer by Malignant Narcissist
It can. It also can lead to finding a big pile of rocks in the middle of a mountain range.
So why don’t you ask that question next.
Know better? Leave your own answer in the comments!