Eve is here. If you look at “no worse than promised” as a positive, there seems to be some good news on the environmental front. President Trump has promised to lower U.S. energy prices through more ambitious shale production. The shale industry has other ideas.
Author Irina Slav is a writer for Oilprice.com with over 10 years of experience writing about the oil and gas industry. It was first published in crude oil price
- President Trump will encounter a very different mindset from shale executives in 2025 than he did in the late 2010s.
- A disciplined and pragmatic approach to balancing production growth and shareholder returns is likely to be maintained in the industry.
- Major shale companies are cutting capital spending and are unlikely to receive any incentives to meaningfully increase capital spending.
The U.S. oil and gas industry finally got what it has wanted since 2020. The US president has backed the sector and promised to fix the regulatory burdens that have built up over the past four years.
President-elect Trump has been shouting “drill, baby, drill,” but the priorities of the U.S. oil industry have changed significantly since Trump’s first term.
By 2025, President Trump will likely see a significant change in the way shale executives think compared to when he was last president in the late 2010s.
usa shale patch teeth We’re drilling, but we’re drilling because we want to distribute more profits to our shareholders. We have made great strides in improving capital discipline and efficiency, and our results continue to grow. Our current priorities are returns to investors and a financial base that can withstand fluctuations in oil prices.
U.S. oil production continues to increase and will continue to do so in the near future. But analysts say just because Mr. Trump is president, there are no expectations for the impressive growth from 2018 to 2019, when industry increased U.S. oil production by 1 million barrels per day (bpd) each year. It is said that it should not be done.
During the October campaign, the president-elect pledged supporter In North Carolina, “We’re going to cut energy prices in half, by 50 percent.”
“We’re going to train those guys. They’re wild. They’re tough and wild. They’re crazy. They’re going to do an awful lot of digging,” Trump said.
“Those guys” are pushing ahead with the industry, including permitting reform to spur energy infrastructure development, President Biden’s lifting of the moratorium on LNG export project permits, and easier access to financing when U.S. oil and gas is not condemned. There is definitely a possibility of support. Left and right.
But they will likely want something different from President Trump’s statement at the same North Carolina rally: “If they corner management, I don’t care, do you?”
A disciplined and pragmatic approach to balancing production growth and shareholder returns is likely to be maintained in the industry. A recent wave of mergers and acquisitions has seen major publicly traded companies acquire the bulk of U.S. shale production and the remaining commercial resources in the Permian region, the largest shale operation with the most dramatic production growth in recent years. is held. These companies will continue to aim to improve returns for investors and, through increased capital discipline and efficiency, will want to avoid a repeat of the oil price crash and losses of 2016 and 2020.
Chevron, for example, believes Permian capital spending will likely peak this year. CEO Mike Wirth said: Third quarter financial results announcementsaid just days before the U.S. presidential election, “I think this year will probably be the peak of Permian capital spending.”
“We’ll start to see a decline as well, and that’s where free cash flow will really grow,” Wirth added. We intend to manage this with an eye toward even stronger free cash flow in the future. ”
It’s not exactly a “drill, baby, drill” plan.
Chevron’s capital spending is now more than half that, from $40 billion a decade ago to about $18 billion.
“We are operating in a much more capital efficient manner than we have in the past,” Wirth said.
Efficiency gains and advanced technology have helped Exxon double the supersize’s constant-price earnings per barrel of oil equivalent, compared to $5 per barrel of oil equivalent in 2019. Since the beginning of 2024, prices have reached $10 per barrel. Kathryn Michels, ExxonMobil’s chief financial officer, said: Financial report.
Despite the rhetoric and policy platform, the U.S. tight oil sector is “expected to continue to see steady growth, driven more by market forces and corporate strategy than government policy,” says Rystad Energy’s Upstream Research division. senior analyst Matthew Bernstein said in a paper. analysis Before the US presidential election.
The U.S. industry’s new priority of increasing cash returns to shareholders means that “production is decoupled to some degree from oil and gas prices, so even if prices rise, companies can potentially increase spending significantly.” Bernstein said this suggests that the
“As a result, the traditional relationship between high prices and increased drilling activity has weakened, and companies have instead focused on maintaining capital discipline and maximizing profits.”
