DEFINITION of 'Exploratory Well'
A deep hole, in the earth, that a petroleum or natural gas company drills in the hopes of locating a new source of fossil fuel. An exploratory well represents a risk for the company drilling it, because it is not known, before investing in the well, how much oil or natural gas it might contain. The well may turn out to be a profitable new source of fossil fuel, or it may contain noncommercial quantities of fuel that aren't worth extracting; in the latter case, the well may be plugged and abandoned.
Also referred to as a "wildcat well."
BREAKING DOWN 'Exploratory Well'
For accounting purposes, the costs of drilling an exploratory well are considered capital expenditures. Petroleum and natural gas companies must incur these costs if they want to thrive and grow, because any producing reservoir contains a finite amount of fossil fuel and will eventually be depleted.