Some of the largest US oil companies are dialing back capital spending in the country’s shale basins, choosing to channel high crude price windfalls into shareholder returns and debt reduction rather than accelerating production growth.
Chevron and ConocoPhillips each cut capital expenditure in the Lower 48 by 10% in the first half of 2026, while Occidental Petroleum reduced spending in the Permian Basin by 20%, according to earnings reports. APA Corp., Matador Resources, and HighPeak Energy are also on track to spend considerably less on drilling and fracking in the US than a year ago, creating a broad pullback across the industry.
Efficiency Gains Offset Spending Cuts
Lower spending does not automatically translate into reduced output, as advances in drilling and fracking techniques allow most operators to produce more oil for every dollar spent. However, the trend is dampening US crude supply growth at a time when President Trump has publicly pressured the industry to bring down gasoline prices. The US is forecast to grow production by about 200,000 barrels per day this year to 13.8 million barrels per day, a fraction of the roughly 1.1 million barrels per day added in 2023 after Russia’s invasion of Ukraine sent oil prices soaring.
Occidental CFO Sunil Mathew told analysts that investors should expect relatively flat companywide production in 2027, assuming a similar capital budget. ConocoPhillips incoming CEO Andy O’Brien said future investments would target modest growth at a structurally lower reinvestment rate than the current level.
The Plateau Strategy
Chevron has emerged as the leading proponent of what the industry calls a plateau strategy. Its Permian Basin production has hovered around 1 million barrels of oil equivalent per day for five quarters, while its DJ Basin output in Colorado has been flat for 10 quarters. The Permian, DJ, and Bakken basins are expected to generate $7 billion per year in free cash flow through at least 2030, enough to fund half of Chevron’s annual dividend.
The business model represents the opposite of the pre-COVID US shale era, when the industry burned through an estimated $350 billion prioritizing production growth over profits. Chief Financial Officer Eimear Bonner said operators are seeing huge efficiencies with the new approach, growing free cash flow rather than production volumes.
Not all companies are pulling back. Diamondback Energy plans to increase capital spending to the top of its guidance range after the Iran war sent oil prices surging, while ExxonMobil increased output 12.5% to 1.8 million barrels per day in the second quarter and plans to boost production a further 40% by 2030. However, the overall industry trend toward capital discipline is reshaping the US shale landscape.
Sources: Bloomberg via EnergyNow (August 15, 2026); US Energy Information Administration Short-Term Energy Outlook; company earnings reports (Q2 2026)
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