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As part of the Sandstone Teams services, we offer a review of oil and gas deals for our clients. We gain valuable insights into actual data points across various fields in the U.S. One key aspect is examining the well economics for each well and how it impacts the entire group or deal. We are seeing strong oil demand, and Rystad has noted some issues on the supply side in its reporting. There is no oil glut, so the fear that OPEC+ may try to pick a fight with the U.S. shale business is funny. What sets the United States apart from the rest of the world is that 50% of the production comes from privately held companies that are working hard to deliver the lowest-cost energy to the US market. The public companies are doing that also to give back to their shareholders, but they are doing that on the global stage.
The U.S. oil and gas industry is hitting the brakes on drilling activity, with rig counts continuing to slide as West Texas Intermediate (WTI) crude prices hover around $60 per barrel, a level uncomfortably close to or below breakeven for many shale producers. According to the latest Baker Hughes rig count data released on May 30, 2025, the total number of active oil and gas rigs in the United States fell by 3 to 563, marking the fifth consecutive week of declines and the lowest count since November 2021. This is a significant drop of 37 rigs compared to the same time last year, reflecting a cautious industry response to weak oil prices and shifting market dynamics.
Why Are Drillers Pulling Back?
The primary driver behind this slowdown is straightforward: low oil prices. WTI closed at $60.28 per barrel on May 30, down $1 from the previous week, while Brent crude traded at $63.88, also down nearly $1. These prices are below the breakeven range of $61–$65 per barrel for many Permian Basin wells, as reported by the Dallas Fed and industry analysts. Natural gas prices, while slightly more resilient, remain lackluster, with Henry Hub averaging $2.21/MMBtu in 2024, discouraging aggressive gas drilling.
Beyond pricing, U.S. producers are prioritizing capital discipline—a stark departure from the boom-and-bust cycles of the early shale era. Companies like Diamondback Energy, a leading Permian operator, have slashed 2025 capital budgets by as much as $400 million, signaling a focus on shareholder returns, debt reduction, and profitability over growth. This shift is compounded by efficiency gains, with longer laterals and optimized well spacing allowing producers to maintain output with fewer rigs. However, as Diamondback and others warn, the exhaustion of Tier 1 drilling sites and rising costs for lower-quality wells could further curb activity.
Market pressures are also at play. OPEC+’s gradual easing of production cuts is increasing global supply, putting downward pressure on prices. Posts on X highlight industry sentiment that U.S. shale producers are unlikely to ramp up drilling at current price levels, especially with break-evens creeping higher. Additionally, uncertainties around trade policies and a new federal administration’s energy agenda add to the cautious outlook, despite promises of deregulation.
Current Rig Counts by Key Basins
The Baker Hughes rig count provides a snapshot of drilling activity across major U.S. basins as of May 30, 2025:
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Permian Basin (West Texas and Eastern New Mexico): The nation’s largest shale play saw its rig count drop by 1 to 278, down 32 from a year ago. The Permian, which accounts for 46% of U.S. crude oil production, is feeling the pinch of sub-$65 oil, with operators like Coterra Energy and Matador Resources reducing rigs in 2025.
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Eagle Ford (South Texas): The rig count rose by 1 to 43, but remains 8 below last year’s level. Operators like EOG Resources and ConocoPhillips are focusing on oil-rich zones, but low gas prices continue to limit gas-directed drilling.
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Williston Basin (Bakken, North Dakota, and Montana): Holding steady at 30 rigs, unchanged week-over-week but down slightly year-over-year. Continental Resources and Hess Corporation dominate here, maintaining stable but cautious operations.
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Cana Woodford (Oklahoma): Dropped by 2 rigs to 18, reflecting sensitivity to both oil and gas price weakness.
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DJ Niobrara (Colorado and Wyoming): Unchanged at 5 rigs, a small but stable contributor to U.S. output.
Nationwide, oil rigs fell by 4 to 461 (down 35 year-over-year), while gas rigs edged up by 1 to 99 (down 1 year-over-year). Miscellaneous rigs remained at 3.
Production Outlook: Efficiency Masks Slowing Growth
Despite the rig count decline, U.S. crude oil production remains robust, averaging 13.401 million barrels per day (bpd) for the week ending May 30, 2025, according to the Energy Information Administration (EIA). This is just 230,000 bpd shy of the all-time high of 13.631 million bpd set in December 2024. Efficiency gains, such as extended-reach laterals and improved completion techniques, have allowed producers to squeeze more oil from fewer wells. However, growth is slowing. The EIA projects U.S. crude production will rise modestly by 120,000 bpd to 13.5 million bpd by the end of 2025, a sharp deceleration from the 500,000 bpd growth in 2024.
Natural gas production, meanwhile, is expected to rebound slightly to 104.9 billion cubic feet per day (bcfd) in 2025, up from 103.2 bcfd in 2024, driven by anticipated demand from LNG export facilities. Yet, low gas prices continue to constrain drilling in gas-heavy basins like the Haynesville.
What’s Next for U.S. Drillers?
The current pullback in drilling activity reflects a pragmatic response to market realities. With oil prices languishing and global supply pressures mounting, U.S. producers are unlikely to revert to the “drill baby drill” mentality, even under a potentially deregulation-friendly administration. Industry experts on X and reports from Wood Mackenzie suggest U.S. shale production may have peaked or is nearing a plateau, particularly in the Permian, where declining well productivity and higher-cost drilling sites pose challenges.
For drillers, the focus is on high-spec rigs and technologies like electric frac equipment to maximize efficiency. Service providers face a tough road, with rig oversupply and declining day rates—down 6.19% year-over-year in 2024—squeezing margins. Consolidation, as seen with mergers like Nabors Industries’ acquisition of Parker Wellbore, may reshape the sector, favoring larger players.
The Bigger Picture
The U.S. oil and gas industry is at a crossroads. While technological advancements have kept production near record highs, the decline in rig counts signals a maturing shale sector that can no longer rely on endless growth. Low prices, capital discipline, and global competition are forcing drillers to adapt. As one X user put it, “Trump says ‘drill, baby, drill’—but that’s probably not gonna happen at these prices.” Whether prices rebound or producers continue to tighten their belts, 2025 will test the resilience of America’s shale patch.
As I review deals to allocate capital, they will be closely scrutinized by the team. Most of the good drilling locations we are seeing are in conventional plays, where the sound economics are more affordable to drill, but we don’t get the quick, high payback. However, the wells typically have a lower decline curve.
If you are in the Energy space or would like additional information, you can fill out any of the forms on Energy News Beat, and I will ensure that you are contacted.
Stay tuned to Energy News Beat for the latest updates on rig counts, production trends, and what’s driving the energy markets.
Sources:
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Baker Hughes Rig Count Reports
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Energy Information Administration (EIA) Data
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OilPrice.com Articles
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Reuters and Deloitte Insights
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Industry Sentiment on X
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