MORGAN STANLEY: 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."