Big Oil's Surging Production Masked by Declining Reserve Replacements
Big Oil's production continues to soar despite significant spending cuts over the past five years. According to EY, the top US oil and gas companies have prioritized returning more cash to shareholders through dividends and buybacks, with a total of $100 billion spent annually. This has left them with little room for capital expenditure (capex), which fell 49% year-over-year in 2025.
Oil production by the group hit an all-time high in 2025, while revenue increased 7%. However, reserve replacement metrics have not kept pace, declining 11% year-over-year. This has raised concerns about Big Oil's ability to quickly ramp up output during supply crunches or oil price spikes.
The shift towards shorter-cycle, high-return assets and the use of drilling efficiency gains, technological advancements, and AI-driven geosteering systems have contributed to this trend. Shale oil companies are drilling longer, horizontal wells that allow a single surface rig to tap more oil-bearing rock, slashing execution times and service contract costs.
Natural gas production has seen a significant increase, with natural gas reserves up 14% year-over-year and discoveries increasing by 21%. This suggests that US producers are recognizing the opportunity for natural gas to play an increasingly strategic role in the energy system.