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Page added on June 4, 2013
A ‘Culture Shock’ Is Coming For Oil Drillers
What happens to oil drillers when there’s too much supply and not enough demand?
Answer: “culture shock.”
In a new note, a Morgan Stanley led by Ole Slorer says exploration and production spending is poised to decelerate from past-decade highs of around 16% annually to just 5%.
Basically, it’s getting harder to get more cash from the average barrel of oil drilled
Team Slorer:
We believe that the industry could face a culture shock as it shifts from high octane growth to one more focused on returns and cash flow generation. Scale will become an even bigger differentiator in the ability to generate returns, particularly internationally, in our view. Meanwhile, technology that speeds up development or reduces cost will be another key differentiator as oil companies are increasingly challenged on the marginal cost per barrel. We also believe that the ability to execute will be an increasingly important focal point for investors.
The team says companies with lots of offshore oil drilling exposure will be best positioned post “shock.”
8 Comments on "A ‘Culture Shock’ Is Coming For Oil Drillers"
Mike on Tue, 4th Jun 2013 10:45 am
Well, we should give this anomaly a name, I’m going for something like “peak oil”? what do you guys reckon?
Arthur on Tue, 4th Jun 2013 10:57 am
“What happens to oil drillers when there’s too much supply and not enough demand?”
I would not use the term culture shock. Rather it is the classic…
http://en.wikipedia.org/wiki/Pork_cycle
BillT on Tue, 4th Jun 2013 11:01 am
Perhaps it should be called “Peak Consumability”, where the cost exceeds the market’s ability to pay.
Beery on Tue, 4th Jun 2013 11:04 am
It’s called ‘demand destruction’. It’s a symptom of peak oil.
GregT on Tue, 4th Jun 2013 3:18 pm
We can only turn the natural Environment into ‘cash’ for so long, eventually we will run out of both.
Gurgle on Tue, 4th Jun 2013 3:36 pm
Ancient fisherman: We can only fish this sea for so long. Eventually we will run out of both.
PrestonSturges on Tue, 4th Jun 2013 7:24 pm
I just wanted to say, Nice comments!
shortonoil on Tue, 4th Jun 2013 8:02 pm
When about 70% of what you produce is only good for mixing with Canadian road tar extract, how could demand be down? They talk about new technology to speed things up. How about technology to turn a pigs ear into a silk purse; that should fix the problem?