Our Take: US Shale to Maintain Capital Discipline

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Leading US shale producers are not cracking on capital discipline, as companies reaffirm their spending plans and set their production schedules for mid-$40s oil despite its recent rise above $60 per barrel. We believe this discipline will hold in 2021. Many management teams remain mindful of Opec-plus’ significantly inflated spare production capacity, while investors are sending strong messages that spending creep will not be tolerated. Heading into fourth-quarter results season, we were on the look-out for signs of slipping capital discipline at US shale producers, given crude’s strong performance since October (EIF Jan.27'21). Since then, benchmark West Texas Intermediate (WTI) oil prices are up another 12% at around $61.50. But shale executives have been unequivocal: additional revenues from higher prices will go to debt repayment, dividends and/or share buybacks; not growth.

Shale, Corporate Strategy
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