Wildcat Drilling

Key takeaways

• Wildcat drilling (wildcatting) is exploratory drilling in unproven or previously exhausted areas to find oil or natural gas.
• It carries high risk and high potential reward, and is often undertaken by smaller, agile firms.
• Wildcatters also rework older fields or marginal wells that larger companies deem uneconomic.
• Although a small portion of total industry drilling, wildcatting expands overall oil and gas output and can uncover recoverable reserves left by major producers.

What is wildcat drilling?

Wildcat drilling is the practice of drilling for oil or natural gas in areas without established production records or in fields considered depleted by larger companies. Because these locations lack reliable data, outcomes are uncertain: many wells are dry, but successful discoveries can be highly valuable.

The term originates from early 20th-century drilling in remote regions where activity appeared risky or untamed—hence the “wildcat” label. Today, with most obvious reserves explored, wildcatting focuses on marginal, overlooked, or technically challenging targets.

How it works

• Exploration: Geologic studies, seismic surveys, and other exploratory techniques identify promising but unproven prospects.
• Claim acquisition: Wildcatters often acquire inexpensive leases on claims that larger companies ignore.
• Drilling and evaluation: Skilled crews drill and monitor well parameters to assess formations in real time.
• Development or abandonment: A successful well can lead to further development; unsuccessful attempts are plugged and abandoned.

Smaller operators rely on nimble decision-making and cost-effective operations to make marginal plays viable.

Risk and reward

• Risk: High probability of dry holes, large upfront costs, and financial volatility—repeated failures can cause severe losses or bankruptcy for small firms.
• Reward: A significant discovery can yield outsized returns for the operator and investors, especially if a large reservoir is found.

For large integrated companies, wildcatting is a minor part of activity. For independent and small-cap firms, it can determine their survival or growth.

Special considerations

• Reworking older fields: Many oil fields still contain substantial recoverable oil that major companies leave undeveloped because of scale or technology choices. Smaller operators can profitably extract pockets left behind.
• Recovery gap: Research indicates a notable portion of oil remains in known fields due to underused extraction technologies, creating opportunities for specialists.
• Market impact: Wildcatters rarely move global oil prices but play a crucial role in maximizing resource recovery and local production.

Conclusion

Wildcat drilling is a high-risk exploration strategy that fills gaps left by larger producers and helps unlock additional oil and gas resources. It demands experienced crews, careful geological assessment, and a tolerance for uncertainty. For investors and operators, the potential rewards are significant but come with substantial risk.