International oil companies, including Exxon Mobil, Chevron, BP, Shell, and TotalEnergies, have shifted their focus from increasing oil reserves to returning cash to shareholders. Since the 2020 price crash, these companies have collectively allocated over $100 billion annually to dividends and buybacks, accounting for nearly 80 percent of their combined earnings. This approach has led to a decline in exploration spending, despite the industry's historical emphasis on reserve growth.
The largest publicly traded US exploration and production companies have reduced capital expenditure by 49 percent year-over-year in 2025, according to Ernst & Young. Exploration spending declined by 11 percent to $4.8 billion, while acquisition spending plummeted by 70 percent. These 30 companies account for approximately 43 percent of total US oil and gas production. However, production reached an all-time high in 2025, with revenue increasing by seven percent, indicating that the industry has found ways to produce more while spending less.
The industry's shift in priorities is reflected in the decline of reserve replacement metrics. According to Matt Melnar, an analyst at EY, "One of the clearest signals in this year's study is that oil production and reserve replacement are moving in different directions." Producers are now engaged in a balancing act between production goals, shareholder returns, and long-term portfolio resilience when making investment decisions.
Shale operators have adopted new technologies to increase efficiency, including drilling longer horizontal wells and using simultaneous completions to reduce execution times and service costs. Advanced technologies, such as deep learning models and predictive analytics, have enabled more precise identification of high-permeability zones and optimized drilling trajectories. These innovations have broken the traditional linear relationship between capital spent and barrels produced.
The shale industry has also moved away from multi-year, capital-intensive offshore megaprojects, replacing them with wells that can be drilled, fracked, and producing within months. Producers have been drawing down their backlog of drilled-but-uncompleted wells, or DUCs, rather than committing to new drilling programs. The EIA reported that the US DUC inventory had fallen to approximately 4,972 wells, the lowest level since 2013.
The decline in reserve additions from discoveries and extensions has raised concerns about the industry's long-term sustainability. EY found that reserve additions fell by 11 percent year-over-year, the first time in five years that the industry has failed to fully replace the oil it pumped out of the ground. However, natural gas reserves bucked the trend, rising by 14 percent year-over-year, with discoveries jumping by 21 percent.
The growth in natural gas reserves is attributed to increasing demand for the fuel, driven by energy security, industrial competitiveness, and AI-related infrastructure investment. According to EY's Patrick Jelinek, "The strength we're seeing in gas reserves, discoveries, and revisions suggests producers are recognizing the opportunity and positioning for a future where natural gas plays an increasingly strategic role in the energy system."
Key points
- Oil majors prioritize shareholder returns over reserve growth
- Shale operators adopt new technologies to increase efficiency
- Natural gas reserves grow amid increasing demand
