DEFINITION of 'Wildcat Drilling'
The process of drilling for oil or natural gas in an unproven area, that has no concrete historic production records and has been unexplored as a site for potential oil and gas output. The most successful energy companies are the ones with a very high rate of drilling success, irrespective of whether the wells are drilled in known areas of production.
Wildcat drilling is also known as exploratory drilling.
BREAKING DOWN 'Wildcat Drilling'
The term "wildcat drilling" probably has its origins in the fact that drilling activity in the first half of the 20th century was often undertaken in remote geographical areas. Because of their remoteness and distance from populated areas, some of these locations may have been, or appeared to be, infested with wildcats and other untamed creatures. Presently, with global energy companies having scoured much of the earth's surface, including oceans, for oil and gas, few areas remain unexplored for their energy potential.
Wildcat drilling amounts to a small proportion of the drilling activity of large energy companies. For small energy companies, wildcat drilling can be a "make-or-break" proposition. Investors in such companies can reap significant rewards if such drilling results in locating large energy reservoirs. Conversely, wildcat drilling that repeatedly results in dry holes can lead to adverse performance for a small-cap energy stock.