Since 2009, the leading unconventional explorers have organically added commercial plays to their portfolios, creating a combined value of over US118 billion.The huge volumes they have discovered match the scale of their conventional exploration business, highlighting the increasing importance of unconventional assets.

However, unconventional value is concentrated both geographically and corporately. Virtually all value comes from North America – the few international plays that are online are marginal in NPV10 terms, whilst the great majority of non-US assets remain unsanctioned.

We have benchmarked the performance of 37 of the industry's leading explorers, with 23 of these firms having invested in unconventional plays. Together they have acquired acreage in more than 30 North American plays but only 15 have delivered positive returns.

The most successful explorers owe much of their achievement to their investments across the Eagle Ford, Niobrara, Wolfcamp and Bakken which together account for nearly 75% of total unconventional value. EOG holds a position in all four key plays and is ranked in overall first place.

The Eagle Ford holds the greatest value of any individual play and positions there have been established organically by 15 of the 23 companies, including all of the top five unconventional value creators.

But value creation is more complex than achieving a scalable position in one or more of the four key plays. The big winners in unconventional exploration all achieved their success through early entry, aggressive investment and/or timely farm-downs.

It's clear that screening underpins value creation. Many companies established positions while the plays were still at concept stage, prior to gross production from the play reaching 10,000 boe/d. This appears to be the trigger point for entry costs escalating, leaving the window of opportunity surprisingly narrow.

Being able to move early and capture opportunities before entry costs balloon is a valid strategy for companies considering future projects. Although this does not guarantee success, we believe it to be a necessary prerequisite.

Meanwhile, some companies will hope to break open virgin plays. For them, the cost of failure must be managed and success will depend on knowing when to drop struggling projects.

Legacy acreage positions could hold more potential than originally thought but operators will need to explore their existing positions to understand whether they could be one of the lucky companies to uncover unconventional value in their own back yard.
Source: Wood Mackenzie