In the sudden oil glut and price drop of the past months, major budget cuts have been made across the board of Big Oil companies.
Well-known names like Royal Dutch Shell (NYSE: RDS-A) and Exxon Mobil (NYSE: XOM) have stalled exploration projects and fallen back on trades and refineries to stay profitable. Western Europe’s Statoil (NYSE: STO) canceled a contract with China Oilfield Services 13 months ahead of schedule.
Above is a photo of a set of desolate West Texas rigs that have been stacked, or shut down. In the U.S., oil and gas rigs have dropped for 29 straight weeks for a loss of 61% since last October. Even though the drop is slowing and may soon be at a bottom, it will take time to recover the lost rigs and profits.
Luckily, this leaves the window wide open for smaller companies to build themselves up.
Drilling fees have been cut in half due to the drop in oil prices, and offshore deepwater drilling prices have dropped 44%.
Small companies who need lower rates of return than Big Oil names are taking advantage of this discount.
Mediterranean Sound Oil Plc already has funding for their first three drills and exploration into fields in Morocco and Italy. Cairn Energy Plc and Savannah Petroleum Plc are planning to drill in West Africa.
“As demand for oil isn’t going to fall off a cliff, it’s us who are going to make new discoveries again, not the large companies,” says Savannah Petroleum’s CEO Andrew Knott.
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