07-05-2025
A top CEO declared the U.S. oil industry has ‘peaked'
A record-breaking but maturing U.S. oil industry has 'peaked' and already begun its decline as it struggles under the weight of tariffs and lower oil prices, the CEO of the Permian Basin's top pure-play producer said.
Crude oil prices have fallen this week to new four-year lows since the pandemic amid recession fears and unexpected production hikes from OPEC nations and their allies. As a global slowdown spreads throughout every industry, U.S. oil producers are quickly pivoting to drop drilling rigs and cut costs with prices now below the levels for profitability, including key Texas Permian producers Diamondback Energy and Coterra Energy, both of which held their earnings calls May 6.
'We believe we are at a tipping point for U.S. oil production at current commodity prices,' Diamondback chairman and CEO Travis Stice said in a needle-moving shareholder letter prior to the call. 'As a result of these activity cuts, it is likely that U.S. onshore oil production has peaked and will begin to decline this quarter.
'This will have a meaningful impact on our industry and our country,' Stice added. As the global economy goes, so to does oil demand.
Diamondback, the largest oil producer focused only on the Permian, has grown into a key bellwether for the industry. Stice's warning was, in effect, a wake-up call to anyone in the industry yet to heed what was already underway.
The company said it will reduce its drilling rig count by three and cut one of its well completions, or fracking, crews. Diamondback lowered its 2025 midpoint capital expenditure guidance by $400 million down to $3.6 billion, although oil volumes are only expected to fall by 1% because of efficiency gains.
Steel tariffs have increased downhole well costs by more than 10% and contribute to the declining activity levels, Stice said.
'We're a little over 100 days into this new administration and, 'Good Lord.''
Coterra chairman and CEO Tom Jorden said it is likely 'tied together' as certain OPEC nations led by Saudi Arabia, and their allies announced a second straight unexpected hike in their production quotas on May 3—at a time when President Trump wants lower oil prices to push gasoline costs down.
'We're a little over 100 days into this new administration and, 'Good Lord,'' Jorden said in the May 6 earnings call. 'There's been a tremendous amount of volatility introduced, whether we're talking about the oil markets or tariffs and our relations around the world. All of these converge on forecasts for oil price. The president is trying to do a lot of difficult things up front, and the White House is in a hurry. We have some sympathy for that sense of urgency.'
