E&P spending: Global capex to remain steady in 2025

STEPHEN RICHARDSON, Evercore ISI 

Following three years of consecutive growth, North American spending is anticipated to decline 1.9% overall, with U.S. spending decreasing by 3.2%, offset slightly by Canada, which is expected to see an increase of 6.8%, Table 1.  In NAM, independents and private operators play a significant role, contributing to around 70% of the region's capex. Following the COVID-19 pandemic, private operators were quicker to increase spending, whereas publicly traded independents were prioritizing larger shareholder returns. Evercore predicts a potential shift in this trend, as private operators practice fiscal discipline amid rising service costs. 

Based on our analysis, private operators’ capex increased 6.7% in 2024. This growth is expected to slow to a 4.3% increase in 2025, compared to a 5.7% decrease for independent operators. U.S. oil majors are expected to practice more restraint, with 1.6% growth, while major operators in Canada are projecting solid growth of 11.6% in 2025, although a slower rate from last year’s 14.2% increase. 

International spending is expected to increase 1.3% in 2025, with mixed growth. Lower commodity prices, deterioration in crude economics, and uncertain supply and demand dynamics are shifting priorities in select regions. India, Asia and Australia and Latin America are expected to increase 7.2% and 5.1%, respectively. We anticipate this growth is being driven by a recovery in offshore investments following years of low activity. Growth in other key regions, including the Middle East, Europe and Africa, is declining following robust growth in past years and is anticipated to fall 1.5%, 3.1%, and 6.6%, respectively, in 2025, Table 2.  

Saudi Aramco’s reduction in E&P capital spending is the key driver of the Middle East region’s lower spending levels, however, the UAE and Kuwait have seen robust growth. While Africa’s E&P spending for 2025 will decline, significant growth in the region in the latter half of the decade is expected, supported by the robust pipeline of FIDs and emerging offshore plays in West Africa. International spending is 20% below the historical peak in 2014. Asia remains the largest international market, followed by the Middle East and Latin America. Latin America's market is gradually approaching a size comparable to that of Russia/FSU, considering the ongoing shrinkage of the Russian market, due to the Ukraine-Russia War.  

Notably, the Middle East moved up to become the second-largest international market after consistently posting double-digit growth since 2022. After lagging behind the recovery seen in NAM during 2017-2018 by about a year, international capex reached its recent peak in 2019, albeit around 35% below the 2014 peak. However, two consecutive years of growth have successfully offset the 18% decline witnessed in 2020, positioning international spending to achieve a ten-year high in 2025. Evercore’s projections indicate that 2025's international E&P spending will narrow within 9% of 2015 levels and approximately 20% of the 2014 peak. 

Overall, global spending will be up just 0.4%, at $500.6, Table 2 and Fig. 1.  

Fig. 1. Putting all the regions together, global capital spending will be up just 0.4%.

Cash flow is king. For the ninth consecutive year, cash flow has remained the primary driver influencing E&P spending decisions. A record-high 94% of the survey respondents cited cash flow as the top spending determinant, up from 73% in 2024, and passing the previous record of 88% in 2023. Oil prices remain the second-leading factor influencing E&P spending with 63%, which rose from 60% last year. Cash flow has ranked first or second as the leading determinant of E&P spending in all but four of the past 26 years in Evercore’s survey history, while oil prices have ranked in the top three since 2009. 

Exploration activity. Approximately 65% of survey respondents maintained their exploration budget as a percentage of total E&P spending in 2024, while none reported an increase despite initially anticipating a rise of 20% for the year. Roughly 33% of survey respondents increased their exploration budget as a percentage of total spend in 2024, compared to 39% in 2022, and 35% in 2019. Looking ahead to 2025, 33% of respondents plan to increase exploration spending, with fewer than 10% anticipating cuts. This highlights a notable shift from 2024, when none of the respondents indicated an increase in exploration budgets as a percentage of total E&P spending. Despite uncertainties, which stem from potential shifts under the new U.S. administration, prolonged geopolitical unrest in the Middle East, and OPEC+’s decision to extend production cuts into first-quarter 2025, activity levels are expected to rise, with previously delayed projects resuming. 

OFS pricing. Survey results suggest a notable shift in expectations for oilfield service pricing in 2025, with 80% of respondents anticipating pricing to remain stable. Comparably, 10% expect a broad decline (and increase) in pricing across the oil field. In 2024, half of the survey respondents expected pricing to increase, while the remainder anticipated it to remain flat. For the fourth consecutive year, labor is leading, with 58% foreseeing pricing increases in 2025, a 17% decrease from 75% last year. However, survey respondents continue to anticipate more pricing decreases broadly in 2025, reflecting subdued activity in North America. A leading 81% of respondents selected fracturing/stimulation as the most important technology impacting 2025 spending plans. This is up 28% from 53% in 2024 and remains below the overwhelming 88% in 2018, with fracturing/stimulation ranking in the top two since 2004. 

Digital transformation. Only 13% of the 2025 survey respondents indicated plans to invest in and adopt new technologies, a significant decline from 27% in 2024. This is due, in part, to the constricted cash flow and risk-averse approach during a downturn, which compelled operators to prioritize production acceleration through established methods. A majority (73%) of survey respondents expressed intention to maintain a conservative approach in their decision-making process regarding testing and adopting new technologies. Foreseen factors in 2025, such as lower oil prices, prolonged geopolitical tensions in the Middle East, and weaker crude demand in some global markets, may slow or temporarily halt the adoption of new technologies.  

Oil and gas investment favored over renewables. North American-based operators remain firmly committed to oil and gas, with 100% of 2025 survey respondents indicating they are unlikely to expand their target resource base to include renewable energy, up from 93% of respondents unlikely in 2024. Evercore expects hydrocarbons will remain a meaningful part of the consumption mix for the foreseeable future, even as some companies begin to diversify their revenue stream into renewable and low-carbon energy. 

Industry consolidation. We expect 2025 to be another active year for E&P consolidation, driven by growth, geographical expansion and favorable valuations. However, limited acquisition targets and regulatory constraints continue to present challenges. Data show that 2023 and 2024 were big years for oil and gas consolidation, highlighted by a few key, major mergers: 1) ExxonMobil’s merger with Pioneer Natural Resources, 2) Chevron’s acquisition of Hess, and 3) ConocoPhillips’ acquisition of Marathon Oil. These transactions offer opportunities to optimize capital efficiency, consolidate assets to boost production, generate synergies, and drive free cash flow generation. Approximately 71% of survey respondents expect industry consolidation to become more likely in 2025, compared to 2024, while the remaining 29% anticipate consolidation levels will stay consistent.  

Commodity prices. Oil price expectations have declined since Evercore’s mid-year 2024 E&P outlook, with companies decreasing their WTI oil price assumptions 6.3% to around $70 on average (down from $74.7). E&Ps are quoting a WTI oil price that is nearly at the current spot price, and higher than the Evercore ISI forecast of $66/bbl for 2025. While survey participants expect oil prices in 2025 to trend at current spot levels, the extension of OPEC+ cuts, Iranian sanctions and global oil demand growth could provide an upside.  

The current spot price (at time of writing) for natural gas of $3.32/MMBtu is 20.7% above Evercore’s survey’s budgeted assumption of $2.75/MMBtu for 2025. Henry Hub price in our 2025 initial survey of $2.75/MMBtu is largely unchanged from our mid-year 2024 survey. Natural gas visibility is expected to improve in 2025, as producers ramp up output in response to increasing LNG export capacity and normalizing inventory levels. Evercore ISI forecasts gas prices to average $2.80 in 2025. 

REGIONAL BREAKDOWN 

North America. A decline in NAM capex of 1.9% is expected in 2025, following a previous downturn in 2024, and robust growth in 2023. Canadian spending is projected to increase for a fifth straight year (up 6.8% YoY), while U.S. spending is anticipated to decrease 3.2% year-over-year. In NAM, independents and private operators play a significant role, contributing to around 70% of the region's capex. Although private operators constitute roughly 15% of our estimated U.S. capex, they make up 46% of the rig count. This suggests that overall U.S. spending might exceed our estimations.  

Two robust years of capital spending growth in the U.S. (2022/2023) ended with a significant slowdown in 2024, as capital shifted to international and offshore markets. E&P spending in the US slowed to 1.6% in 2024, which compares to 2.2% growth from our initial survey and 3.4% decline from our mid-year survey. U.S. offshore production remained steady throughout 2024 but experienced a 5% YoY decline, reaching a year-to-date average offshore production of 1.8 MMbpd. Assuming no unforeseen disruptions, the offshore sector is poised to contribute to the EIA’s forecast of 0.30 MMbpd growth in U.S. crude oil production for 2025.  

Middle East. This year’s E&P spending is expected to decline in the Middle East region, ending a period of robust growth seen for the last four consecutive years. Spending by select Middle East operators held up relatively well during the COVID-19 pandemic and contracted the least from the 2014 peak, compared to other key regions, as the robust wellhead economics and the nature of NOCs are buffered against volatile oil prices. While a new spending record was anticipated in 2024, up 74% since the pandemic, spending is expected to decrease 1.5% in 2025. 

Saudi Arabia has shifted some of its strategy, deferring two projects to focus on natural gas production. These shifts, along with the new U.S. presidential administration, OPEC+ cuts and other global market factors, has resulted in a conservative capex budget for Saudi Aramco, the world’s largest oil-exporting company. Aramco is expected to drop E&P capex by 5.0% in 2025. 

The UAE announced plans at November’s ADIPEC event to boost its oil production capacity to 5.0 MMbpd, in a strategy to expand and meet energy needs despite global challenges. ADNOC Gas announced a strategy to raise capital expenditure to $15 billion by 2029 (up from $13 billion) to meet the growing demand for natural gas in the UAE. 

Latin America. Upstream spending in Latin America is expected to grow +5.1% YoY in 2025, largely driven by Petrobras, which is expected to allocate approximately $15 billion towards E&P next year. Evercore notes overall spending in the region will remain resilient, as majors and NAM independents continue with their investments in Guyana, Suriname, and Brazil, which we do not break out by region but lump together internationally. 

It is estimated that E&P spending by select Latin American companies slightly increased by 0.4% in 2024, down from 9.2% and 9.0% growth projected by our mid-year and initial surveys, respectively. Having contracted 62% from the 2014 peak to the 2017 trough, LatAm spending held up relatively well during the 2020 downturn, falling by 14% versus a 17% decline in International and a 44% collapse in NAM. While Petrobras and PEMEX drove the increase in 2024 spending, independents, such as Ecopetrol, YPF and Petro Rio, are retracting after a meaningful ramp-up in spending during 2022 and 2023. 

Africa. Spending by a select group of African companies was predicted to increase 19.5% in 2024, which decelerated from +20.1% from our mid-year survey and is above our initial +11.7% estimate. Evercore projects a decline of 6.6% in 2025 upstream spending, following three consecutive years of double-digit growth, primarily due to delays in FIDs. West Africa continues to gain traction from oil majors and NOCs, and investment in the region will accelerate in the second half of the decade, as major projects in the FID pipeline, primarily in Nigeria, Mozambique and Namibia, materialize and begin production. Interest in West Africa continues to build, which is reflected in increasing M&A activity, with both international NOCs (e.g., Petronas, CNOOC, ADNOC) and majors acquiring proven acreage. Notably, the African Energy Chamber suggests West Africa will lead the upstream spending in Africa this decade, contributing to ~50% of cumulative spending. 

Asia/Australia. E&P spending is expected to grow +7.2% YoY during 2025 for Indian, Asian and Australian companies, and could recover to within 11% of the historical 2013 peak. Evercore forecasts a significant uptick in spending during 2025-2028, as the region focuses on domestic developments and limiting its dependence on gas imports. The region’s reliance on offshore resources across both shelf and deepwater areas is also expected to grow. 

Spending was predicted to decrease 1.8% YoY in 2024, decelerating from +7.0% and +8.1% growth projected in our mid-year and initial surveys, respectively. With little change from 2016–2018, spending by select operators held up the best during the pandemic, down a modest 8% vs. International’s -17% and NAM’s -44%. Spending quickly rebounded to pre-COVID levels in 2021. After two robust years of growth in 2021 (+13.4%) and 2022 (+21.4%), E&P spending remained somewhat flat in 2022 and 2023. Despite years of little-to-no growth in spending, the region accounted for approximately 25% of total International E&P spending and 18% of global capex in 2023.  

Europe. Upstream spending is likely to decrease 3.1% in 2025, marking a reversal from four consecutive years of growth. We expected spending by select European companies to increase by 11.7% in 2024, accelerating from the +8.1% and +10.5% growth projected in mid-year and initial surveys, respectively. Four years of growth increased capex in 2024 by 22%, compared to pre-COVID 2019 levels and (5%) below the 2014 historical peak. Weakening global demand, accelerated energy transition (and tightening energy regulations), and continued geopolitical uncertainties are likely to drive stagnation in upstream spending in Europe. The windfall tax on oil and gas companies is disincentivizing for incremental investments in offshore UK. A deal reached in the EU to impose methane emissions limits on Europe’s oil and gas imports from 2030 will further drive away the appetite for investments. 

Norway is the exception in the region, with 2025 investment levels expected to remain robust, due primarily to upward revision of cost estimates for certain development projects. Statistics Norway cited total investments in oil and gas activity, including pipeline transportation, which are expected to reach $22.9 billion in Norway. This is an all-time high for oil and gas investments in the country (vs. $20.4 billion in 2014).  

Russia/FSU. We believe spending by select Russian and FSU companies declined in 2024 by 13%, in line with our mid-year spending survey and slightly down from 15% in our initial survey last year. While it has never been easy to obtain a clear picture of E&P spending and activity in Russia, we have reasons to believe E&P spending will continue to decline by 5% in 2025, as sanctions and prolonged geopolitical conflicts with Ukraine continue to persist. Gazprom’s investment program for 2025 is expected to decline 7%, to ~$15.2 billion (RUB 1.52 trillion) from ~$16.4 billion (RUB 1.64 trillion) in 2024. This program is expected to finance top-priority projects to support domestic and foreign markets, including further development of the gas production centers in eastern Russia and the Yamal Peninsula and gas infrastructure expansion projects in key Russian regions.