Oil and Gas Trends

Upstream Industry Highlights

Kimmeridge & Mubadala Forge Integrated U.S. LNG Venture: Kimmeridge Energy Management, a U.S.-based private equity firm, is collaborating with Abu Dhabi’s Mubadala Investment to establish an integrated natural gas company. This venture encompasses production in the Eagle Ford Shale and plans for a liquefied natural gas (LNG) export facility in Louisiana by 2029. The strategy aims to streamline operations from upstream production to global LNG exports, reducing reliance on intermediaries and capitalizing on the growing global demand for LNG.

Australia Reviews Gas Policies Amid Supply Concerns: The Australian government is conducting a comprehensive review of its Domestic Gas Security Mechanism and the wholesale price cap to address projected domestic gas shortages by 2028. The review will consider measures such as a domestic reservation scheme and underwriting LNG imports. These potential policy shifts have raised concerns among LNG producers about the impact on exports and international investment, highlighting the delicate balance between domestic energy needs and global market commitments.

Chevron Expands Global Footprint with Hess Acquisition: In a significant move, Chevron Corporation completed its acquisition of Hess Corporation in an all-stock deal valued at $53 billion. This acquisition grants Chevron access to prolific oil fields in Guyana and strengthens its position in U.S. shale plays. The deal underscores Chevron's strategy to enhance its global upstream portfolio and capitalize on high-growth regions.

Digital Transformation Accelerates in Upstream Operations: Upstream oil and gas companies are increasingly adopting digital technologies to enhance efficiency and safety. Innovations such as artificial intelligence (AI), the Internet of Things (IoT), and digital twins are being integrated into exploration, drilling, and refining processes. These technologies enable real-time data processing, predictive maintenance, and improved decision-making, positioning companies to better navigate the complexities of modern energy production.

Navigating a Shifting Landscape

Upstream oil and gas professionals face a critical juncture as global forces reshape the industry's investment and production outlook. Recent data points to a cooling in U.S. production and a tightening of upstream capital expenditures, both driven by price volatility and shifting global energy dynamics. In this edition, we examine two pivotal trends redefining operational strategies and market confidence across the upstream sector.

Production Slowdown: U.S. Oil Hits a Post-Pandemic Turning Point 

The U.S. Energy Information Administration (EIA) forecasts a dip in U.S. crude oil production in 2026—marking the first annual decline since the COVID-19 crisis. After hitting an all-time high of 13.3 million barrels per day in 2024, production is expected to ease slightly due to declining well productivity and reduced rig activity.

As of early June, the active oil rig count had dropped to 442 rigs, the lowest since November 2021. This signals a notable shift in operator sentiment and potential headwinds for short-cycle shale producers.

Read more from the Financial Times:
US oil output set for first annual drop since pandemic

Economics at Play: Why the Decline?

The slowdown in production is tied to a complex mix of factors:

• Falling oil prices, triggered by economic uncertainty and weaker-than-expected global demand.

• Cost inflation, which continues to squeeze margins across shale basins.

• Investor pressure for returns, pushing operators toward fiscal discipline rather than growth-at-all-costs strategies.

This confluence is reshaping capital allocation models and may create ripple effects on service providers, drilling contractors, and midstream projects.

Upstream Investment: Global Spending Recalibrates

The International Energy Agency (IEA) projects a 6% decline in upstream investment in 2025, bringing global capex to approximately $570 billion. Notably, this drop is largely due to reduced spending on U.S. tight oil, underscoring a pullback from high-growth domestic plays.

The trend reflects broader caution among producers—especially independents—as they weigh commodity price uncertainty, rising financing costs, and supply chain disruptions.

Full analysis at Rigzone:
IEA Sees Oil Investments Falling 6 Percent in 2025

Strategic Implications for Upstream Leaders 

For upstream executives, this dual trend—lower production and tighter spending—presents both challenges and opportunities:

• Portfolio resilience becomes a key differentiator. Assets with low break-even costs will attract capital.

• Capital discipline remains paramount, particularly amid investor scrutiny.

• Efficiency-focused innovation, such as AI-driven drilling analytics and digital completions, may gain priority as firms seek to protect margins without ramping production.

Leaders should reassess project pipelines, risk profiles, and JV structures in light of these evolving signals.

Eyes on Resilience & Reinvention

The upstream sector is entering a phase of pragmatic recalibration. As production levels moderate and capital investments soften, operators who lean into operational efficiency, capital discipline, and technology-led innovation will be best positioned to weather volatility and capitalize on longer-term demand growth.

Now is the time to ask: Are your assets, strategies, and workforce ready for this next chapter?