A well drilled on the edge of a known field (just outside proven production), aiming to extend the field’s boundaries. It carries moderate risk by testing if the reservoir continues into adjacent areas.
A step-out well, also known as a developmental or appraisal well, is drilled near the perimeter of an established oil or gas field. It tests whether the productive reservoir extends into an area that hasn’t been proven yet but is close to known production. If the step-out well finds oil or gas, it can expand the field’s size and add new reserves with relatively low exploration risk. If it’s dry or underperforms, it likely means the field’s boundary has been reached. Step-out drilling has a moderate risk/reward profile: it's not as uncertain as a wildcat because it’s near a discovery, but it’s more risky than drilling in the center of a known field. Successful step-outs can significantly increase the value of a field by adding new acreage of production.
Step-out wells offer a balance between risk and reward. For investors, a developmental program that includes step-out drilling suggests there is known production nearby to underpin the investment, with the chance to add incremental value. This can be attractive as it’s less risky than pure exploration but still offers growth. Investors will want to know how much of a project’s success hinges on step-out wells proving additional reserves.
