The U.S. shale industry is unlikely to embrace President-elect Donald Trump’s signature “drill, baby, drill” stance as it did during his first term. The industry, now more consolidated and disciplined, is focused on returns to investors rather than aggressive production growth.
Consolidation and Market Maturity Shape Strategy
The U.S. shale landscape has changed significantly since Trump’s first term, especially after the Permian Basin saw a wave of mergers and acquisitions (M&A) under President Biden. Many private producers have sold their operations to large publicly traded companies, which have realigned their strategies following the demand and price crash of 2020. These public firms now prioritize higher earnings and shareholder returns over rapid production growth. As the Permian’s drilling locations are now largely controlled by large firms, investor pressure for strong returns is outpacing the drive for more oil production.
The shale industry is still drilling but with a different focus. Companies are drilling to increase profits for shareholders, not to flood the market with oil. Efficiency and capital discipline have become the industry’s top priorities, with financial stability now at the forefront. With larger companies dominating the sector, they are less likely to respond to price spikes by ramping up production, which could lead to an oversupply and drive prices down.
This shift represents a significant change from the pre-2020 era, when many smaller producers focused on maximizing output to capitalize on rising oil prices. However, as companies have matured and balance sheets strengthened following record profits in 2022, a wave of consolidation took hold in 2023. The larger companies, now controlling a larger share of the U.S. shale market, are focused on growing by acquiring top-tier assets, rather than aggressively increasing production.
Gone are the days of uncontrolled drilling and the “drill, baby, drill” mentality that once characterized the shale boom, according to both industry leaders and analysts.
No More ‘Explosive Growth’
ExxonMobil’s Richard Dealy, who oversees the company’s Permian business, acknowledged that explosive growth is no longer in the cards for the shale industry. Speaking to The Wall Street Journal, he said, “We’re not going to have the explosive growth that we’ve seen.”
This statement echoes previous comments from ExxonMobil’s Upstream President, Liam Mallon, who in November said, “We’re not going to see anybody in ‘drill, baby, drill’ mode.” Mallon added that a radical change in production strategies is unlikely, as most companies are focused on the economics of their operations.
Chevron, another U.S. oil giant, has also dialed back its spending plans for 2025. The company announced that its capital expenditure would be lower than in 2024, with upstream spending expected to be around $13 billion. Of this, about two-thirds will be directed toward its U.S. portfolio, including the Permian Basin, where spending is expected to range between $4.5 billion and $5 billion. This reflects a shift towards generating free cash flow rather than pursuing high growth in production.
Efficiency Drives Production
Despite a decline in the number of active drilling rigs in recent years, companies operating in the Permian Basin have made significant efficiency gains. According to the U.S. Energy Information Administration (EIA), increased rates of production from new wells have offset declines from older wells, leading to overall higher crude oil and natural gas output.
These productivity gains are a result of technological advancements in drilling and completion processes. As a result, the Permian is expected to see slower, but still steady, growth. Goldman Sachs projects that Permian crude production growth will slow from 6% in 2024 to 4% in 2026. While growth rates are expected to decrease, the increase in efficiency will continue to drive production in the region.
The Future of Drilling: Price and Market Signals Matter
The future of U.S. shale drilling will depend on oil price signals, drilling economics, and market fundamentals. While a supportive administration that eases energy infrastructure permitting could help U.S. producers, it is unlikely to lead companies to abandon the disciplined approach they’ve adopted in recent years.
In the end, “drill, baby, drill” is no longer the primary focus for shale producers. The industry’s shift toward financial stability and shareholder returns, driven by years of experience and market lessons, is now shaping the direction of U.S. shale oil production.
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