In this week's edition of Let's Talk Energy, Tracey Henderson, Executive Vice President of Exploration at APA Corporation, joins Noah to look at the growing resurgence in oil and gas exploration. Stream the full episode now: How a decade of underinvestment is reshaping the global hunt for oil

NB: Why did you become an exploration geophysicist, and what still gets you up in the morning? 

Tracey Henderson: “What I learned in my first job was that exploration is really like putting together a big geoscience puzzle, where you’re looking for places that have a source rock, that have reservoir rock buried to the right depth, and that you’ve had the right processes take place that you can actually trap it. My career has been learning, in certain places, what works, trying to export that to other places. But it’s still about finding where all the puzzle pieces are, and how we can continue to build on that and open up new plays and new ideas, even in our existing positions in Egypt and Alaska and Suriname and Uruguay. There’s nothing like finally putting all those puzzle pieces together and going out and testing it. The one thing that gets me up every day is being able to go out and test concepts and test ideas and then see where we can go from there.” 

NB: How have the standards of success in exploration changed over your career? 

TH: “The idea of success has changed a bit because one of the things I think that we have seen introduced within the conversation is discipline and value. Where the story used to be about growth for growth’s sake and just delivering production, now everybody is schooled on the fact that not all barrels are created equal and they have different values. So there’s a much bigger focus on capital discipline and the value of those barrels that we’re actually searching for. And I think that’s been the fundamental shift. The other thing that’s aligned in this is you want to be able to deliver a portfolio that covers from what we need today to what we’re going to need in 10 years from now — with a core you can support through time, optionality for growth, and ultimately still working on those big opportunities that will be value-accretive in the future.” 

NB: APA kept exploring when most of the industry pulled back. What was behind that decision? 

TH: “It’s been a huge differentiator for Apache. It was really based in a belief, even as we talked about what was happening in 2018, 2019, that the demand for oil and gas was going to be there much longer than the majority of people were responding to or believing at that time. We’re an oil and gas company and we’re going to be an oil and gas company, and staying completely committed to that. That allowed us to build a portfolio when much of the other industry was pulling back, and retaining the capability to do that. It allowed us to explore and now move towards a development in Suriname, which is going to be a really significant milestone for Apache. It also allowed us to bring Alaska into the portfolio, bring Uruguay into the portfolio, when much of the industry was not active. And the fact that we have retained the talent to do that gives us a significant leg up on a lot of the competitors.” 

NB: Alaska has quickly become one of the hottest exploration areas in the world. What has APA found there, and why does the Sockeye discovery matter for the play as a whole? 

TH: “We see a significant opportunity in Alaska. You had the Pika discovery in 2013, and that was a play-opening well — immediately you’ve got a catalyst, no one had explored for this play, where else might it work? And what we’re doing now is basically exporting that play to the other side of Prudhoe Bay. You’re starting to see a lot of other people acknowledge that, especially now on the heels of our Sockeye discovery, because we’ve effectively opened that play up on the other side of Prudhoe Bay. You have other operators coming in and saying, where else might that Brookian play work? The most successful lease sale they’ve ever had was the last lease sale, and part of that is really driven by the fact that you’ve got a new play that’s been opened up.” 

NB: Uruguay has been explored before without success. What makes you optimistic that this time is different? 

TH: “I’m going to start from the African side, actually. Namibia was the one thing that really was a mover in recent times. Venus by Total and the Graff well by Shell in the Orange Basin both proved we had a working source rock further south on the West African margin. And that was a big puzzle piece. We play conjugate margin exploration, have done that for decades. The coast of Brazil basically links up with the coast of West Africa — source rocks that exist on one side exist on the other. But that conjugate margin concept had not been proven as far south as Namibia in the Orange Basin. Now that we have a source rock proven on the West African side, the conjugate margin of that should be Uruguay. The previous well drilled — the Raya well — tested a very shallow concept and never really tested the same play you saw at Graff and Venus, or the source rock. In our view, it didn’t test the play. We really needed to go in and look at what is the analog for Venus, where do those reservoirs sit on the Uruguay side — that’s the place we need to go test. And that’s what we’re going to do.” 

NB: Global discovery volumes have fallen sharply over the past decade. Is there an exploration crisis, or is this simply another cycle? 

TH: “I really think it’s another cycle in a cyclical world. If you separate out where wells are being drilled and plays that are being tested — from exploring in proven basins to emerging basins and frontier basins — there are plays that are being opened up. The success rates in the emerging basins has actually been better. If you think about what we’ve done over the last 10 to 15 years — opening up Guyana-Suriname, opening up the Orange Basin in Namibia, the Eastern Med, and now Alaska — there are plays that are being opened and resources that are being added. But the underinvestment in exploration over the last decade is going to have a significant impact. That’s why you’re seeing such a renewed interest in exploration today — supermajors out hoovering up acreage along the West African coast again, companies trying to get into the hot basins like Namibia, Suriname, Alaska. The view is definitely shifting from renewables and diminishing value to: we’ve got a big demand gap now that we need to meet between now and even 2050, based on the IEA stats. We’ve sort of moved from an ILX mentality in the early 2020s now to: we actually need to replenish these portfolios and give ourselves some long-term optionality for growth.” 

Stream the full episode now: How a decade of underinvestment is reshaping the global hunt for oil

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