Capital allocation issues alone are hard enough to handle in a cyclical industry like oil and gas. In years past, producers would set budgets based on commodity price forecasts, and oilfield service (OFS) companies would typically take their cue from customer budgets. Much would depend on how well price forecasts held up, helping determine later tightness or slackness in an OFS sub-sector.

Today, the issues are much more complicated. Commodity volatility is in full force--witness the collapse of crude late last year—and producers are increasingly embracing a mantra of capital discipline. And like their E&P counterparts, OFS companies are coming under mounting pressure to prioritize returns to investors as they plan higher capex budgets aimed at capturing greater market share.

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