Oil Exploration Companies Scramble to Cut Costs


LONDON—When oil prices started falling last summer, Genel Energy PLC, a small exploration company listed here, asked the government of Ethiopia to extend its exploration license, so it could put off drilling and save some cash.

Across the industry, international wildcatters like Genel—which got an 18-month extension in Ethiopia—are renegotiating drilling commitments, selling off stakes in licenses and canceling plans to drill exploration wells, in an attempt to pare back budgets that once hinged on expensive drilling programs.

“When capital becomes very scarce, you end up having sensible discussions with governments about how to re-phase activity to reflect the realities of the day,” said Tony Hayward, former chief executive of BP PLC and now chairman of Genel, in an interview.

The move by these exploration companies reflects a much broader scramble by the industry—from the world’s biggest integrated oil companies to state-owned giants—to cut costs.

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