The shale boom is over, and oil companies have just one thing left to do (USO, OIL, WTI)

Shane Ferro

Morgan Stanley thinks U.S. shale is getting more efficient — because it has to.

After a conference in Houston with the oil and gas industry, MS's research team writes that the industry is weathering the downturn in oil prices by increasing efficiency. From a research note Monday:

A recurring theme across corporates in both the E&P and Services segments was the need to use the current crisis to resolve many of the inefficiencies that have developed through the good times and put the industry on a stronger footing for the future.This included the willingness by operators to look at new solutions, technologies and approaches to project development that perhaps would not have gained traction without the downcycle.

This is probably good for the industry as a whole, although it might not be great for the average oil and gas industry employee. While there seems to be some significant engineering work going into reforming the industry, "cost efficiencies" is more often than not a euphemism for "job cuts."

The industry has been shrinking since the third quarter of 2014, when the price of oil fell off a cliff.

But make no mistake: the boom is over.

Here's more from MS:

Within the outlook for improving returns, we heard a consistent message across US shale E&P's that the focus would be returns and profitability rather than a headlong rush back to volume at any price. In addition, we heard that capex for many shale operators would be limited to being funded by operating cash flow (rather than further borrowing). This suggests to us that the rebound in drilling activity may be more muted that expected.

Sounds like it's time to say goodbye to the shale boom.

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