Key facts
- Major oil and gas companies have collectively spent over $100 billion annually on dividends and buybacks for the past five years.
- Capital expenditure by the 30 largest US exploration and production companies fell 49% year-over-year in 2025.
- Despite reduced spending, oil production by these companies reached an all-time high in 2025.
- Revenue for these companies increased 7% in 2025.
- Oil reserve additions from discoveries and extensions declined 11% year over year in 2025.
- Natural gas reserves increased by 14% and discoveries by 21% in 2025.
Major oil and gas companies have significantly shifted their operational strategy since the 2020 oil price crash, focusing on returning cash to shareholders through dividends and buybacks rather than capital expansion. Over the past five years, companies like Exxon Mobil, Chevron, British Petroleum, Shell, and TotalEnergies have allocated nearly 80% of their earnings, exceeding $100 billion annually, to these shareholder returns.
This strategic pivot has led to substantial cuts in capital expenditure. EY reported that capital expenditure by the 30 largest publicly traded US exploration and production companies fell 49% year-over-year in 2025, with exploration spending dropping 11% to $4.8 billion, representing only 3% of the group's total capital expenditures. Spending on acquisitions also decreased by 70%.
Remarkably, despite these spending reductions, the group achieved an all-time high in oil production in 2025, accompanied by a 7% increase in revenue. This suggests that reduced drilling investment has not negatively impacted their financial performance. According to EY's Matt Melnar, reserve replacement metrics alone are insufficient, as producers balance production goals, shareholder returns, and long-term portfolio resilience.
These production gains are attributed to increased drilling efficiency, technological advancements such as AI and machine learning for optimizing well performance, and a strategic focus on shorter-cycle, high-return assets. Shale companies are drilling longer horizontal wells and completing multiple wells simultaneously to reduce costs and execution times. AI is being used for seismic data analysis, predictive analytics for fracturing, and real-time geosteering to maximize yields.
However, the ability to maintain production through spending cuts may not be sustainable indefinitely. Some assets, like Exxon Mobil's deepwater projects, require significant upfront investment but less ongoing capital. Additionally, companies have been drawing down their inventory of Drilled but Uncompleted (DUC) wells, which reached a record low of approximately 4,972 wells in May, the lowest since 2013. Completing existing DUC wells is more cost-effective than drilling new ones.
The decline in oil reserve additions, failing to fully replace production for the first time in five years, indicates reduced flexibility for US shale producers to respond to sudden global supply disruptions or price spikes. Conversely, investment in natural gas production remains strong, with reserves increasing by 14% and discoveries by 21% in 2025, surpassing production growth. EY's Patrick Jelinek noted that US natural gas is strategically positioned due to energy security, industrial competitiveness, and AI-related infrastructure demands.