For an oil and gas company, which method is considered less risky for finding new reserves?

Acquiring another company with proven reserves is viewed as the less risky method for an oil and gas company to find new reserves. This approach allows the acquiring company to gain immediate access to existing, verified resources rather than speculating on unproven sites or relying on new technologies that may not yield successful results. When a company acquires another that has already demonstrated the capability to produce oil and gas from known reserves, it effectively reduces exploration and developmental uncertainties.

Acquisitions typically come with due diligence processes that shed light on the potential value and operational status of the reserves, thereby increasing confidence in the investment. This method capitalizes on existing assets and expertise, which can streamline operations and enhance production efficiency.

In contrast, exploring unproven sites carries inherent uncertainties and risks because there are no guarantees that these sites will yield economically extractable resources. Developing new drilling technology, while potentially innovative, involves substantial research and development and may not immediately lead to practical or profitable outcomes. Investing in renewable energy sources, while strategically important for sustainability, diverges from directly expanding oil and gas reserves and may not align with short-term profit motivations. Such alternatives typically involve different risk profiles and do not guarantee the same immediate access to reserves as an acquisition would.