U.S. drilling: Fiscal discipline and regulatory shifts are influencing moderate, controlled growth in 2025
Ivy Diaz, Digital Editor, World Oil
During second-half 2024, many factors were at play affecting U.S. drilling activity. Oil and gas companies are rapidly implementing advanced technology, such as AI, electronic hydraulic fracturing, and automation to streamline operations with fewer rigs. The industry’s digital transformation has enabled improved drilling and completion techniques and reduced rig downtime, while providing advanced analytics to help future growth.
Several U.S. operators have strategically slowed their drilling and production growth in favor of cash flow, as a reaction to OPEC+ stemming its output and in anticipation of an oil supply glut during 2025 and beyond.
Ushering in a more oil-and-gas-friendly administration, President Donald Trump formally took office on Jan. 20, favoring fossil fuels and issuing a rallying cry to “drill, baby, drill.” However, it is early days to tell how swiftly his energy policy changes will affect drilling volume. According to ExxonMobil’s upstream president, Liam Mallon, U.S. operators will favor weighing the economics of increased drilling against their current inventory, rather than falling in line with Trump’s immediate desire to ramp up drilling at all costs. Bloomberg analysts back up this sentiment, suggesting that many U.S. oil majors are taking a long-term approach to production, strategizing on when to bring certain wells online.
U.S. MARKET FACTORS
Mergers & acquisitions (M&A). During 2024, several major mergers and acquisitions were announced. Notably, the ConocoPhillips-Marathon $22 billion mega-merger officially closed in November 2024, adding approximately 2 Bbbl of oil resources to ConocoPhillip’s U.S. inventory. The Chevron-Hess $53 billion merger is still locked in arbitration, as Chevron disputes with ExxonMobil over right of first refusal for offshore Guyana assets. `
Also announced in third-quarter 2024 was Devon Energy’s acquisition of EnCap-funded Grayson Mill Energy in the Williston basin for $5 billion. Enverus Intelligence® Research’s (EIR) third-quarter 2024 “Upstream M&A Activity Report” stated that “following 12 months of heightened consolidation in oil and gas, the pace of deals significantly slowed in the third quarter of 2024, with $12 billion in announced deals, the lowest quarterly total since 1Q23.” Enverus analysts attributed the drop in M&A value to a pause in public company consolidation in addition to less-open opportunities for large deals in the Permian basin.
Last year saw the after-effects of many multi-billion-dollar deals between public E&P companies, which in turn results in a quieter period for M&A, as these previously announced mergers take shape or are held up in closing details. Enverus’ analysis also noted that the Federal Trade Commission may cause additional delays for companies doing the buying like Chevron, ConocoPhillips, Diamondback Energy and ExxonMobil, as it reviews transaction details.
2024 presidential election. The U.S. has just undergone a major political shift, with President Trump defeating now-former President Joe Biden to secure a historical second, non-consecutive term, Fig 1. Energy policies and oil and gas regulations were highly discussed topics for both candidates throughout the race, with Biden making moves to restrict drilling in favor of environmental concerns, and Trump rallying support to “drill, baby, drill.” Several of Trump’s appointments will influence the drilling market in 2025, most notably newly minted Secretary of Energy Chris Wright and former North Dakota Governor Doug Burgum, serving as Secretary of the Interior.
In his final days in office, President Biden made a highly questionable move to ban offshore drilling activity in the majority of U.S. waters, much to the dismay of oil and gas industry leaders throughout the nation. Biden signed an order to remove millions of acres of U.S. ocean from potential oil and gas drilling, barring the sale of new oil and gas leases along the Atlantic coast, the Pacific coast, the eastern Gulf of Mexico and portions of the northern Bering Sea. The action was short-lived, however, as President Trump signed an executive order on Day One (Jan. 20) of his administration to reverse the ban. Several prominent U.S. oil and gas organizations, including IPAA, API and NOIA, have voiced their support for Trump’s swift and decisive actions in his first days in office to “unleash American energy,” and bolster the economy.
Upstream innovations. Several notable technological advances have been made in the upstream realm. Halliburton has been a strong proponent of electric fracing technology and automation to advance drilling performance. In January, Halliburton and Coterra announced a launch of the first fully automated hydraulic fracturing program in North America. Diamondback Energy, Halliburton and VoltaGrid also recently entered into a landmark agreement to deploy four advanced electric simul-frac fleets across the Permian basin, Fig. 2. SLB recently launched an autonomous geosteering tool to improve drilling performance and well placement.
Artificial intelligence. Oil and gas companies continue to develop and implement AI and GenAI in a push to drive production efficiency and accuracy. According to a report published last month by law firm Lathrop GPM, they believe that besides M&A, artificial intelligence and carbon reduction initiatives are among the top trends that will shape oil and gas activity in 2025. U.S. operators are weighing these shifting trends, as well as ongoing economic and regulatory uncertainty to make decisions and drive efficiency.
LNG outlook. In a long-anticipated regulatory shift, President Trump lifted the pause on U.S. LNG export permitting in the early days of his second administration. The U.S. continues to be the world’s largest exporter of LNG, after surpassing Australia and Qatar in 2023.
Much has been said in recent days about plans to “unleash American energy,” and President Trump is delivering on that campaign promise. He just greenlighted an export permit for Commonwealth LNG, paving the way for its planned 9.5-MMtpa Louisiana facility. This approval is the first one since lifting the pause on LNG exports, with Commonwealth’s project having waited the longest for regulatory approval. The Trump administration also signed an executive order to create a new National Energy Dominance Council, with the goal to expedite various permits, approvals and the flow of U.S.-produced oil and gas to global markets. Interior Secretary Doug Burgum and Energy Secretary Chris Wright will take on leading roles in the new energy council.
Carbon reduction. Several oil majors have made recent shifts away from renewable projects in favor of conventional oil and gas and its higher profit margins. Shell recently paused new investments in offshore wind, and BP has pulled back from many of its planned renewable projects, as it looks for ways to slash operating costs. It would appear that President Trump’s strong stance in favor of fossil fuels is rapidly influencing oil companies to shift their strategy on drilling and spending activity for 2025, as well as their carbon reduction targets.
PRODUCTION/PRICES
We don’t expect any major movement of U.S. oil production, as well as global oil prices this year. Having said that, there is always the chance of an unexpected event that could alter this outlook.
Oil production. According to the EIA, at the end of third-quarter 2024, U.S. oil production. rose to 13.3 MMbpd, up about 100,000 bpd from second-quarter 2024. For the entire year, EIA said that U.S. oil production, including condensate, rose 300,000 bpd to 13.2 MMbpd. At World Oil, we believe that when all the numbers are more finalized, the U.S. average for 2024 oil output may have grown more. Our own calculations, mixing state agency figures with EIA data, indicate an increase of about 344,000 bopd.
As of Feb. 12, 2025, the EIA expects U.S. oil production to increase further to 13.6 MMbpd for all of 2025. If so, this would be yet another consecutive, new annual record that represents growth of 400,000 bpd in one year. That would be more growth than last year, which was an unexpected stretch, due solely to improvements in technology. We think this is a highly questionable forecast by EIA, given that there are a number of reasons why this ought not happen, including very little growth in rigs and well count. EIA finally sees things slowing down to just 100,000 bpd of growth in 2026. Again, however, there are all kinds of political and market factors that could change that scenario.
EIA says that increased output in several regions has driven the production growth experienced in 2024.
Oil prices. The EIA forecasts Brent crude prices to average $74/bbl in 2025, representing an 8% drop from 2024. The EIA also expects U.S. WTI prices to average $70/bbl in 2025.
World Oil projects these numbers to be slightly higher, at $74.80 for Brent in 2025, and $71.50 for WTI. Of course, any drastic decisions made by the Trump administration could have a shifting effect on these predictions.
Natural gas prices. In the EIA’s February 2025 Short-Term Energy Outlook report, U.S. natural gas prices are forecasted to rise significantly, with Henry Hub averaging $3.80/MMBtu, up from a low of around $2.20/MMBtu, as seen in 2024. We are slightly less optimistic at $3.65. In either case, that’s better than it was a year ago.
Natural gas supply/demand. The EIA expects demand to increase faster than supply in 2025. This is due to increases in domestic consumption and exports. The EIA also expects storage inventories to fall below the five-year average in the third quarter of 2025. Last, but not least, EIA expects LNG exports to increase, which will put upward pressure on prices.
U.S. RIG COUNT
It has now been five years since the Baker Hughes U.S. rig count was last over 800. Back at the end of 2022, we thought it might break that magical number, but it didn’t, and it hasn’t since. There were various reasons for this, and they still apply—everything from fiscal discipline by operators to costs for equipment and services that are still too high, to the need for fewer rigs and wells, thanks to technology innovations and greater efficiencies.
The U.S. rig count last year remained in the narrow range of between about 630 and 570, without much deviation. And while it lost roughly 6% in the first half of 2024, it actually gained about one-and-a-half per-cent between mid-2024 and the end of the year.
U.S. WELLS FORECAST/TRENDS
The above-mentioned factors, along with World Oil’s surveys of operators and state agencies, have all shaped this U.S. forecasting process. Accordingly, World Oil predicts that U.S. drilling will increase by 1.7% in 2025, to over 17,700 wells, Table 1. Also, we expect footage drilled to improve by the same small rate, to over 270 million feet of hole.
U.S. GULF OF MEXICO
The U.S. Gulf of Mexico remains a critical area for U.S. oil production, out-performing much of the U.S. onshore sector in terms of ROI, due particularly to deepwater projects. In 2024, 14% of total U.S. crude oil production and 2% of natural gas output came from the Gulf of Mexico. Talos Energy recently discovered commercial quantities of oil and natural gas at its Katmai West #2 well in the Ewing Bank area. Shell and Chevron began oil production from their Whale deepwater semisubmersible platform.
Shell reached a Final Investment Decision (FID) on the Phase 3 Silvertip project, which will deliver two wells to boost production at the Shell-operated Perdido spar, Fig. 3. These wells, located in the Silvertip Frio reservoir (Shell 40%, operator; Chevron 60%), are expected to collectively produce up to 6,000 boed at peak rates. First production is expected in 2026. Transocean secured a one-year deepwater drillship contract with an undisclosed operator in the U.S. Gulf of Mexico. The contract is expected to commence in October 2025 and contribute approximately $193 million in backlog.
The Bureau of Ocean Energy Management (BOEM) released its Draft Programmatic Environmental Impact Statement (EIS) for oil and gas leasing in the Gulf of Mexico, signaling a crucial step forward for the 2024-2029 offshore leasing program. However, the Trump administration is likely to amend or completely redraw this program.
In 2024, a legal decision to vacate the Biological Opinion for Gulf of Mexico Oil and Gas activities (BiOp) without allowing enough time for NMFS to issue a new one temporarily threatened to shut down oil and gas operations in the Gulf of Mexico. In October 2024, a federal court decided against the decision, allowing oil and gas activity in the Gulf to continue.
In a positive more for the industry, the Trump-led BOEM on Feb. 20 rescinded its Notice to Lessees and Operators (NTL), "Expanded Rice's Whale Protection Efforts During Reinitiated Consultation with NMFS.” “The NTL was the direct result of a July 2023 Stipulated Stay agreement between the Biden administration and activist groups—crafted behind closed doors without input from experts, stakeholders, or Congress,” said National Ocean Industries Association President Erik Milito. “This kind of backroom policymaking ignores the best available science, contradicts congressional directives, and undermines America’s energy independence.”
Considering these and additional factors, World Oil expects drilling to increase by 6% in the GOM region, with an 11.4% increase in footage.
TEXAS
In Texas, World Oil anticipates eight of the 12 Railroad districts to be up during 2025, and four Railroad districts are expected to be down.
Last year at this time, our forecast predicted Texas to be down approximately 1%, which was true and then some. In 2025, World Oil expects drilling will post a 0.7% increase, with footage to see the same small increase. Texas will account for 42% of all U.S. drilling in 2025, with a well count of 7,466. State footage drilled should top 119.3 MMft of hole. During 2024, Texas comprised 44% of U.S. oil production, with output averaging 5.884 MMbpd.
Permian basin. Chevron announced plans to slow its 2025 Permian production growth in favor of cash flow. Chevron will reduce capex in the 7 basin to between $4.5 billion and $5 billion in 2025, a drop of as much as 10%. Furthermore, Chevron told employees on Feb. 12 that it would lay off up to 20% of its workforce over the next two years. This means that as many as 8,000 of Chevron's global employees will be impacted.
Coterra Energy recently closed its $3.9-billion acquisition of Permian assets. Kimbell Royalty Partners recently completed its $230 million acquisition of Midland basin mineral and royalty interests held by a private seller in a cash transaction.
ExxonMobil remains the biggest producer in the Permian region after its $60 billion acquisition of Pioneer Natural Resources Co. in 2024. The company said its cost savings from the Pioneer deal will total $3 billion, which is 50% more than its previous projections.
Although the pace of M&A activity in the Permian is slowing due to less consolidation opportunity, Diamondback Energy just formally announced its $4.1 billion acquisition of Double Eagle, proving the prolific region has yet to see the last of its major assets and merger opportunities, Fig. 4.
We see drilling in the Permian districts (7C, 8 and 8A) as remaining nearly completely flat. Wells will be up just three, to 4,944, or up 0.1%. Footage in the Permian will total 83.693 MMft of hole, up 0.3%.
Activity in the Eagle Ford shale region of Texas has been ramping up, with several large acquisitions announced. Crescent Energy announced an agreement to acquire Eagle Ford assets from Ridgemar Energy for upfront consideration of $905 million. TotalEnergies signed an agreement with Lewis Energy Group to acquire a 45% interest in dry gas producing assets.
World Oil’s forecast calls for a 2.8% gain in wells drilled in the Eagle Ford districts (1, 2 and 4) to 1,610. Footage in the Eagle Ford will rise a bit more, gaining 3.9% to 25.693 MMft of hole.
SOUTHEAST
The Southeastern region has an eclectic mix of oil and gas plays. This trend continues to produce a mixture of results. Haynesville major producers Chesapeake Energy and Southwestern Energy completed their $7.4 billion merger, rebranding as Expand Energy. Company leaders stated the merger positions them as the largest U.S. natural gas producer. Chesapeake Energy last year reduced capital spending by 20% in the Haynesville, and Expand Energy has announced it will drop two rigs in the first quarter of 2025.
The Gulf Coast has seen an uptick in liquefied natural gas activity—Venture Global's Plaquemines facility achieved its historic first LNG production in Louisiana last month, and Cheniere recently produced first LNG at its Corpus Christi Stage 3 project. Louisiana’s drilling, overall, will be flat, with activity in both the North and South portions unchanged. Footage will tick up 0.2% in the North and rise 0.1% in the South.
World Oil anticipates Arkansas’ 2025 drilling activity taking a sharp decline, with the number of wells and total footage drilled both decreasing by 70%. However, this is reflection of a very small number of total wells in the state. Tennessee will see a 14% increase in total wells, and Mississippi drilling will jump more than 50% in 2025. But again, these percentages are relative to small total numbers for these states. Alabama will be up two wells to nearly a couple of dozen, which remains far below its historical average.
NORTHEAST
The Marcellus and Utica shales continue to drive activity for the Northeast region, with copious amounts of natural gas production. New York is expected to triple its small activity rate, despite regulatory challenges.
Nevertheless, New York’s legislature expanded its fracing ban in 2024 (originally installed in 2014), with the state’s focus remaining on renewable energy production, such as offshore wind and solar projects.
Ohio (Fig. 5) and West Virginia drilling activity is expected to remain level in 2025, while World Oil forecasts a 10.1% increase in Pennsylvania. Accordingly, Pennsylvania’s footage drilled will rise 10.0%.
CNX Resources Corp. announced its acquisition of Apex Energy in the Appalachian basin for $505 million, in a move to expand its presence in the Marcellus and Utica shale regions. The acquisition was closed and finalized Jan. 27, 2025.
Over the entire region, we see drilling increasing 10.6%, to 1,025 wells, due mostly to the gain in Pennsylvania. Regional footage drilled will rise 5.3%, to 16.353 MMft of hole.
MIDWEST
Illinois (Fig. 6) accounts for about half of Midwestern drilling activity, and World Oil expects a 1% drop in this state for both total wells and footage. Indiana drilling activity is expected to increase slightly in 2025, with a 4.0% and 6.5% increase in total wells and footage drilled, respectively. In Michigan, we expect to see better gains in 2025, with nearly 8% increase in wells and footage drilled, while over in Kentucky, we anticipate a 16% decline. Ohio will remain level.
Overall, Midwestern drilling will be down 2.2%, while footage will slip 0.9%.
MID-CONTINENT
The Mid-continent will have one of the healthier areas of activity in the U.S. this year. This continues to be a strong producing region, with last year’s increased activity in North Dakota’s Bakken shale (Fig. 7) remaining intact. Several major M&As were announced in 2024, including most recently in December 2024, when Vitesse Energy agreed to acquire Lucero Energy for $222 million to expand its Bakken footprint.
Oklahoma (Fig. 8) could see an uptick in production with the closure of the $22 billion ConocoPhillips-Marathon deal, as both oil majors have strong ties to the state. As of now, World Oil forecasts virtually no change in Oklahoma’s well count for 2025, although there will be a 3.3% increase in footage drilled, due to greater depth per well.
Kansas is expected to see a slight increase in 2025, with 1.1% more wells, and a 4.4% increase in footage. On its own small scale, Nebraska will see a substantial increase this year, with a 48% rise in both number of wells and total footage drilled. Regionwide, drilling will be up 0.9% at 3,064 wells, while footage will rise 1.4% to 40.759 MMft of hole.
ROCKY MOUNTAINS
In Utah, Zephyr Energy continues to develop its Paradox basin project, having announced strong initial results from production tests in July 2024. Zephyr’s flagship asset is an operated 46,000-acre lease holding, which has been assessed to hold 2P reserves of 2.6 MMboe, 2C resources of 34 MMboe and 2U resources of 270 MMboe. Ovintiv last month announced the closing of its $2 billion sale of Uinta assets in Utah to FourPoint Resources. The sale of virtually all of its Utah assets is a move to shift focus to development in the Permian basin. Considering these and other factors, World Oil’s forecast predicts Utah well count to increase by nearly 20%, with nearly 19% more footage drilled.
New Mexico continues to be the top producer in this region, contributing approximately 14% of total U.S. crude oil production, according to the U.S. EIA. The state is also a top 10 natural gas producer, with about 7% of U.S. natural gas output (EIA). Nevertheless, World Oil expects New Mexico drilling to remain steady with no significant change.
In Colorado (Fig. 9), the region’s second-biggest driller, World Oil anticipates a 2.5% gain in both wells and footage. We have no doubt that activity in the state could go higher on its actual merits, if it were not for regulatory interference from headline-grabbing liberal lawmakers and some misinformed residents.
Wyoming is expected to see a 3% increase in wells and footage drilled during 2025, while Montana will see a bigger jump, with 13% more wells, and 15% more footage.
WEST COAST
California is consistently a contentious state for oil and gas operations, with strict regulations and a focus on renewable energy and environmental causes. Carbon capture and decarbonization initiatives have been increasing in the state, with the U.S. Environmental Protection Agency (EPA) recently greenlighting the state’s first carbon capture and storage (CCS) project before the change of administrations in Washington, D.C.. The EPA, now led by former New York congressman Lee Zeldin, is considering rescinding the California emissions curb enacted by the Biden sdministration. World Oil predicts onshore drilling will see a 15% increase in 2025, while offshore will add 10% more wells and 14% more footage. However, these numbers reflect California coming back up from rock bottom and should not be misconstrued as a harbinger of more increases to come.
In the wake of the 2024 U.S. presidential election, Alaskan oil drilling (Fig. 10), its ethics and challenges have been prominent topics with a lot of push-pull. Oil companies in January declined to bid in a U.S. government auction for rights to drill in the debated Arctic National Wildlife Refuge, despite President Trump stating he would reinstate ANWR drilling.
Biden also advanced legislation in his final days in office to ban further activity in the area. In the latest action, the Interior Department proposed new “special area” designations that would restrict drilling and other activities across more than 3 million acres of the Indiana-sized reserve in northwest Alaska. The move comes on top of an existing policy, finalized last year, that barred drilling across nearly half of the NPR-A. Considering regulatory, environmental and additional factors, World Oil expects Alaska drilling to stay steady with little to no change in 2025.
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FROM THE ARCHIVE
- Subsea technology- Corrosion monitoring: From failure to success (February 2024)
- Applying ultra-deep LWD resistivity technology successfully in a SAGD operation (May 2019)
- Adoption of wireless intelligent completions advances (May 2019)
- Majors double down as takeaway crunch eases (April 2019)
- What’s new in well logging and formation evaluation (April 2019)
- Qualification of a 20,000-psi subsea BOP: A collaborative approach (February 2019)
