A high-risk exploratory well drilled in an unproven area, far from existing production, aiming to discover a new oil or gas field where none is known to exist yet.
A wildcat well is drilled in frontier or geologically speculative areas without proven reserves. It is essentially a shot in the dark—geologists may have indirect evidence (seismic data, geology) suggesting oil or gas, but there is no guarantee any will be found. Wildcat wells carry the greatest risk of failure (becoming "dry holes" with no commercial find), but if successful, they can open up entirely new fields or plays and yield very high returns. Because of the uncertainty, only a small percentage of wildcat wells result in discoveries. Companies often pursue wildcats to significantly grow reserves, but they require substantial risk capital and usually form part of a broader portfolio to manage the odds.
Investing in wildcat wells is speculative. Such ventures can lead to significant discoveries and large returns, but the probability of a total loss is high. Prudent investors typically allocate only a small portion of their capital to these high-risk exploratory projects and make sure to balance them with lower-risk investments. Recognizing a deal as a wildcat prospect helps an investor set appropriate expectations and demand commensurate potential rewards.
