Oil and Gas Trends

Upstream Industry Highlights

Australia Opens New Exploration Acreage in Victoria: The Australian state of Victoria has offered new offshore and onshore petroleum exploration acreage in its key gas-producing regions, signaling government support for upstream investment and exploration activity in a traditionally under-served Australian basin. This move could attract both domestic and international players looking for new basin entry points. (upstream)

Cenovus Energy Forecasts Higher 2026 Output After MEG Acquisition: Cenovus Energy announced its upstream capital budget and forecast for increased oil production in 2026 following its acquisition of MEG Energy. The company expects production close to 945,000–985,000 boe/d, driving growth in oil sands and offshore developments. (Reuters)

Major Gulf of Mexico Lease Sale Draws Strong Industry Bids: The first Gulf of Mexico offshore oil and gas lease sale under the current federal administration raised hundreds of millions of dollars from major players including BP, Chevron, and Shell. Companies are signaling continued interest in deepwater frontier acreage despite oil price volatility and changing regulatory dynamics. (FinancialTimes)

Planning for a Critical Inflection Point

As we close out 2025, upstream operators face a shifting mix of production strength, supply volatility, and tightening capital discipline. With U.S. production reaching record highs, new projects in frontier regions progressing, and evolving macro-economic pressures, 2026 will demand agility, strategic planning, and exacting execution. This edition walks through the key developments upstream professionals need to monitor heading into next year.

U.S. Production Strength: Record Output, Record Pressure

Recent data from the U.S. Energy Information Administration (EIA) show that U.S. crude output surged to a record 13.84 million barrels/day in September 2025. (Reuters)(WorldEnergyNews)

• Onshore production continues hitting high marks, while offshore Gulf output also remains strong. (eia)

• However, this output surge increases pressure on global supply balances just as demand signals remain uncertain.

What to watch in 2026: Supply discipline, buffered capex plans, flexible hedging strategies, and careful evaluation of marginal-cost fields if prices soften.

Capital Spending & Upstream Strategy: Efficiency Over Volume

With output high but pricing pressure lingering, upstream companies are likely to emphasize capex discipline, efficiency gains, and asset-level optimization rather than broad expansion. This trend arises from uncertain pricing, unpredictable demand, and the competitive cost pressures that come with abundant supply. (iea)(Rigzone)

Operators should prioritize:

• Projects with the lowest breakevens

• Tight cost control on drilling and completion

• Smart spend on high-return assets (e.g., proven basins, enhanced recovery)

• Flexible budgeting to pivot quickly if market conditions change

Global Growth Opportunities: Frontier Plays & Emerging Regions

Even as U.S. production remains strong, many long-cycle growth opportunities lie overseas: new offshore developments, frontier basins, and LNG-export potential. The next 12–24 months may provide chances to lock in value before market cycles turn. Recent upstream licensing and investments in frontier regions underscore this trend. (eia)(Valuechain)

Implication: Firms with capital discipline and global ambition may look to blend stable domestic assets with growth plays abroad, giving them diversified exposure.

Technology, ESG & Operational Resilience as Decision Drivers

In 2026, operators will increasingly weigh not just geology and production volume, but efficiency, emissions performance, and operational resilience. Technologies that reduce costs, enhance automation, optimize drilling/completions, or reduce emissions will likely get more priority when budgets are tight.

The benefits of this are two-fold: stronger returns on capital, and improved resilience to ESG & regulatory pressures.

Strategy Over Volume: The Upstream Mindset for 2026

As 2025 closes, upstream operators stand at a crossroads: continue chasing volume or recalibrate for value. With record production in the U.S., uncertain macro conditions, and shifting global demand, the tactical playbook for 2026 is clear: prioritize cost efficiency, targeted investment, operational flexibility, and strategic exposure to global growth regions. Operators who adapt now will be positioned to thrive, even in a turbulent market.