The forces pushing for capital discipline are
already at work.
The collapse in oil prices over
the past two years has forced integrated groups
to commence the process of portfolio
repositioning more aggressively than might have
been the case.
Firms have done this by shredding capital
budgets, stripping out costs and simplifying
They have also placed a greater focus
on return on capital, free cash fow, and
positioning on the marginal cost curve. They
have also emphasised natural gas and near-field
exploration, as opposed to exploration on
resource frontiers, which has helped monetise
these discovered resources earlier than in the
Firms are undoubtedly in much better
shape now than they were just a few years ago
when oil traded above $100 per barrel.