U.S. shale oil producers are adapting to a challenging market as crude prices remain low. With current prices hovering around $60 per barrel, producers are reassessing their strategies and cutting capital expenditures while focusing on efficiency gains to maintain output. Despite the downturn, U.S. oil production continues to rise, but major players in the shale sector are signaling that production may have peaked.
The U.S. benchmark crude price, West Texas Intermediate (WTI), has persisted at levels about 13% lower than this time last year. Additional supply from the OPEC+ coalition, combined with fluctuating trade policies, has led to diminished investor confidence regarding a potential rebound in oil prices. As a result, producers are not rushing to expand drilling activities. Instead, they are strategically reducing operations and deferring well completions to manage costs effectively.
James Walter, director and Co-CEO of Permian Resources, emphasized the need for patience during the company’s Q2 earnings call, stating, “We’re being patient, we’re in wait-and-see mode.” This cautious approach reflects a broader sentiment among U.S. oil producers as they navigate the complexities of the current market.
Efficiency Gains Drive Production Strategies
Faced with market volatility, Permian Resources implemented a “downturn playbook,” which included share repurchases when market values dipped. The company reported significant efficiency improvements, achieving records for the fastest well drilled and the lowest completion costs. Similarly, Devon Energy has harnessed effective supply chain management to outperform expectations, reducing capital spending by 7% below guidance, as noted by CEO Clay Gaspar.
Devon Energy raised its oil production outlook for a second consecutive quarter while cutting capital expenditure by $100 million. Jeff Ritenour, Devon’s CFO, highlighted the role of artificial intelligence in enhancing capital efficiency, stating, “Our drilling and completion teams are leveraging artificial intelligence to drive capital efficiency.”
Other major players are also focusing on efficiency gains. Occidental Petroleum announced a reduced capital budget for 2025, with Sunil Mathew, Senior Vice President and CFO, noting that operational efficiencies have allowed for a budget decrease of $100 million without affecting overall production levels.
Future Production Projections
Looking ahead, Diamondback Energy also reduced its capital budget by approximately $100 million, citing synergies from recent mergers and lower service costs. CEO Kaes Van’t Hof expressed caution regarding increased activity, stating, “With volatility and uncertainty persisting, we see no compelling reason to increase activity this year.” The company plans to operate 13 to 14 rigs and five completion crews for the remainder of the year.
Despite current efficiency gains, the U.S. oil-directed rig count has experienced a notable decline, with around 60 rigs taken offline this year alone. The U.S. Energy Information Administration (EIA) projects that crude oil production could peak at approximately 13.6 million barrels per day (bpd) by December 2025. Nonetheless, falling prices are prompting producers to further limit drilling and completion activities.
As Vicki Hollub, president and CEO of Occidental Petroleum, indicated, the industry’s primary goal is now to conserve cash and return it to shareholders rather than pursuing aggressive production increases. The EIA’s latest projections suggest that U.S. crude oil production may decline to 13.1 million bpd by the fourth quarter of 2026, as producers adjust to the realities of a challenging market environment.
The current landscape underscores that while efficiency gains can temporarily sustain production, the ongoing drop in rig counts indicates a potential long-term impact on output levels in the U.S. shale patch.
