The U.S. oil and gas industry is entering a period of retrenchment, marked by falling budgets, mass layoffs, and a slowdown in drilling activity. With oil prices hovering near breakeven levels for many producers and a wave of consolidation reshaping the sector, more than twenty publicly traded operators have announced capital expenditure reductions totaling about $2 billion. The cuts raise questions about whether the rapid production growth that propelled the United States to the top of global oil supply can be sustained.
At the same time, the Organization of the Petroleum Exporting Countries and its allies in the OPEC+ group are moving in the opposite direction. The cartel agreed this month to increase collective output by 137,000 barrels per day starting in October, in a bid to reclaim market share ceded to U.S. shale producers over the past decade. The timing could not be more challenging for domestic operators already struggling with weaker prices, rising costs, and investor pressure to maintain discipline.
Spending Cuts and Workforce Reductions
The most visible impact of the downturn has been the rapid scaling back of capital programs. Diamondback Energy alone reduced its 2025 capital forecast by just over $2 billion, the largest single cut among independent producers. ConocoPhillips followed with a $500 million reduction, while Devon Energy, Occidental Petroleum, and APA Corp trimmed their budgets by $400 million, $300 million, and $210 million respectively. Smaller operators such as EQT, Ovintiv, and Range Resources made more modest cuts, while only a handful, including EOG Resources and SM Energy, increased spending plans.
The spending pullback comes on top of significant workforce reductions. ConocoPhillips, the nation’s third largest producer, said last week it would cut up to one quarter of its staff. Chevron announced earlier in the year that it would shed 20 percent of its workforce, amounting to around 8,000 jobs. Oilfield service companies are following suit: SLB confirmed workforce reductions earlier this year, and Halliburton has also trimmed staff.
Lower commodity prices are the primary driver. Brent and West Texas Intermediate futures have declined roughly 12 percent this year, pushing prices close to breakeven levels for many operators. U.S. benchmark crude settled at $61.87 per barrel last Friday and was trading at $62.15 on Monday, well below the $70 to $75 range industry executives say is needed to encourage new drilling.
The slowdown is already visible in drilling activity. The Baker Hughes U.S. oil rig count has fallen by 69 units this year to 414, its lowest since the depths of the pandemic. The U.S. frac spread count, which tracks completion equipment, has dropped by 39 to 162, the weakest level since early 2021, according to consultancy Primary Vision.
“You cannot take 60 rigs and 20 to 30 frac spreads out of the Permian in a matter of months and not see a production response,” said Kaes Van’t Hof, chief executive of Diamondback Energy. “With volatility and uncertainty persisting, we see no compelling reason to increase activity this year.”
Production Growth at Risk
For more than a decade, U.S. shale producers have been the world’s swing suppliers, delivering rapid volumes that often offset OPEC supply management. But many analysts now believe that era of uninterrupted growth is ending.
Energy Aspects projects U.S. onshore output will decline by 300,000 barrels per day in 2025 compared with last year. Wood Mackenzie expects only a 200,000 barrel per day increase from the lower 48 states, the smallest gain since the 2021 COVID recovery period. Current production stands at about 13.4 million barrels per day, below the 13.6 million record set in late 2024.
“We have gone from drill, baby, drill to wait, baby wait in the Permian,” said Kirk Edwards, president of Texas-based Latigo Petroleum. He noted that without oil prices consistently above $70 per barrel, new drilling programs will remain on hold.
The production slowdown could reshape the balance of power in global energy markets. A plateau or decline in U.S. output would diminish the country’s ability to influence prices, while giving OPEC+ an opportunity to reassert dominance. That outcome would also challenge U.S. President Donald Trump’s pledge to maintain American energy dominance.
Some of the cost pressures are policy driven. Trump’s tariffs on imported steel and casings have raised the cost of well construction, with Diamondback estimating that casing costs will climb 25 percent this year. ConocoPhillips said controllable costs per barrel have risen from $11 to $13 over the past three years, complicating efforts to compete globally.
“Tariffs have introduced uncertainty, particularly around internationally sourced equipment, at the same time as inflationary pressures are hitting the industry,” ConocoPhillips said in its second quarter earnings call.
Outlook: Efficiency Gains Not Enough
To be sure, efficiency improvements have enabled operators to sustain production with fewer rigs. Longer laterals, faster drilling times, and better completion designs have all kept volumes steady even as equipment counts fall. But most analysts agree those gains are reaching their limits.
“Modest crude production growth will slow even more as upstream activity stabilizes at a lower level and operators focus on operational efficiency and capital discipline,” Energy Aspects analysts Jesse Jones and Paola Romero said in a recent note.
Labor market data from Texas confirm the broader trend. Oil and gas production jobs fell by 4,700 in the first half of 2025. Energy services jobs dropped by about 23,000 to 628,062 in August, according to the Energy Workforce & Technology Council.
That combination of rising costs, falling employment, and reduced spending paints a stark picture. Unless oil prices recover to a more sustainable level, U.S. production will stagnate, leaving OPEC+ with a stronger hand.
“Eventually, U.S. output growth will plateau and start to turn down,” said Edwards of Latigo Petroleum. “That oil will be made up by OPEC.”
For now, the message from producers is clear: after a decade of relentless growth, the U.S. industry is shifting from expansion to preservation. Budgets are being trimmed, workforces reduced, and rigs idled. While operators emphasize capital discipline and efficiency, the underlying trend is one of retrenchment. If oil prices remain subdued, the record production levels of 2024 may prove to be a high-water mark for U.S. shale.
