US Oil Industry Prioritizes Returns Over Growth

oil production, reigniting debates over the nation’s energy policy. However, the prevailing trends in the energy sector suggest that such initiatives may face strong resistance, not from regulators or environmentalists, but from the oil industry itself, according to CFRA Research. U.S. crude oil production has already surged by 50% since 2014, reaching 13.2 million barrels per day (mmb/d) in September 2024, just 1.2% shy of the all-time high recorded in August of the same year. The U.S.

remains the top crude oil producer globally, outpacing Saudi Arabia and Russia. This production growth has occurred despite relatively modest investments in new drilling. Improved technology has enabled companies to extract more oil from existing resources efficiently, rendering extensive capital spending less critical.Companies have shifted their focus from aggressive growth to shareholder returns, with dividends and buybacks accounting for 36% of capital spending by oil-focused exploration and production firms (E&Ps) in 2024. This figure represents a significant increase from 23% in 2014, signaling a clear priority shift away from reinvestment in oilfield development. “If anything, U.S. oil producers are diverting a smaller share of cash flow toward new production – and production is doing just fine,” CFRA said in the note.Fracking techniques have become more efficient, with a smaller number of fracs delivering the majority of output. This efficiency, while beneficial to producers like EOG Resources (NYSE:Instead of ramping up drilling, many E&Ps are turning to mergers and acquisitions to boost production. Recent deals, including Diamondback Energy’s $26 billion acquisition of Endeavor Energy, highlight the industry’s preference for inorganic growth. “We think the turn toward inorganic growth is sensible in an environment where investors are penalizing firms that suggest robust organic spending growth,” CFRA continue

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