U.S. oil and gas producers are expected to increase output mainly through improved efficiency rather than new drilling or higher spending, Baker Hughes (NYSE:BKR) CEO Lorenzo Simonelli told Reuters on Monday. His view aligns with Exxon Mobil’s (NYSE:XOM) Upstream President Liam Mallon, who recently dismissed the idea that U.S. producers would significantly boost production if Donald Trump returns to the White House.
“I think a radical change is unlikely because the vast majority, if not everybody, is primarily focused on the economics of what they’re doing,” Mallon said last week at a conference in London.
Falling oil prices this year have squeezed profits, making it harder for major oil companies to increase spending. Two years ago, the Biden administration urged U.S. producers to pump more oil to lower fuel prices. At the time, crude prices hovered around $100 per barrel, and oil companies were enjoying record profits. However, non-OPEC+ supply growth has slowed sharply, dropping from 2.46 million barrels per day (mb/d) in 2023 to 0.79 mb/d in 2024. This decline was mainly due to lower U.S. liquids growth, which fell from 1.605 mb/d in 2023 to 734,000 barrels per day (kb/d) in 2024. Lower oil prices have discouraged additional drilling. Standard Chartered forecasts this trend will continue, with U.S. liquids growth slowing to 367 kb/d in 2025 and further declining to 151 kb/d in 2026.
Over the past five years, oil and gas companies have prioritized shareholder returns over expansion, distributing large portions of their profits through dividends and stock buybacks. As oil prices declined in the last two years, many of these companies turned to borrowing to maintain investor payouts. In October, Bloomberg reported that four of the world’s five oil “supermajors”—ExxonMobil, Chevron (NYSE:CVX), TotalEnergies (NYSE:TTE), and BP (NYSE:BP)—had borrowed heavily to fund buybacks. According to Bloomberg’s analysis, these companies lacked enough cash to cover both shareholder returns and increased capital expenditures for new drilling.
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