U.S. Shale Giants Hold Back on Drilling Despite Higher Oil Prices | OilPrice.com
Tsvetana Paraskova
What I Cover Tsvetana Paraskova is an energy and commodities journalist who has contributed to Oilprice.com for nearly a decade, covering global energy markets, commodities,…
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By Tsvetana Paraskova – Nov 05, 2026, 6:00 PM CST
- U.S. shale giants resist drilling expansion despite WTI crude averaging nearly $87 per barrel in 2026, over $20 higher than last year.
- Diamondback and ExxonMobil prioritize capital discipline, using strong cash flows to reduce debt, reward shareholders and improve efficiency rather than aggressively boost production.
- Smaller producers may increase drilling, but major shale operators remain cautious despite higher-for-longer oil price expectations.
The biggest U.S. shale producers have remained conservative in spending on drilling this year despite the spike in the average WTI crude price by $20 per barrel compared to last year.
While signs have emerged that smaller independents have started to take advantage of the higher oil prices to increase drilling, the biggest shale producers are keeping their powder dry amid unprecedented uncertainty in global markets.
One of the top shale producers and the biggest Permian-only focused driller, Diamondback Energy, signaled this week that it will not be splashing on materially increased drilling activity next year as uncertainty remains too high.
So far this year, the WTI Crude price has averaged $86.72, more than $20 per barrel compared to the 2025 average of $64.94.
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Cash Flow Boon
The price spike alone is not a reason for loosening capital spending discipline, according to the biggest shale producers, including Diamondback.
“I wouldn’t say I’m unnecessarily cautious personally, but I think it’s always good to prepare the company for a swing to the downside,” Diamondback’s chief executive Kaes Van’t Hof told analysts on the Q3 earnings call earlier this week.
“It’s not a good way to run an E&P just to be a perma bull.”
Diamondback boosted third-quarter earnings, raised its 2026 dividend, and revised up slightly its production outlook for this year, as it generated $2.1 billion in free cash flow for Q3.
“Base dividend growth remains a core tenet of the value proposition at Diamondback and our base dividend is now up over 9x since initiating at $0.50 per share in 2018,” Van’t Hof wrote in the quarterly letter to shareholders.
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Diamondback has used excess cash to repurchase bonds and shares and reduce debt in recent months, while it remains cautious about splashing on boosting production.
“The macro backdrop is almost exactly as we described last quarter: highly volatile and impossible to predict. The timing of the eventual global oil supply normalization is anyone’s guess, and we therefore expect the current volatility to continue,” Van’t Hof told shareholders.
“Through this volatility, our priorities remain unchanged: execute with the best capital efficiency in the industry and allocate Free Cash Flow appropriately to maximize long-term stockholder value.”
Discipline in Turbulent Times
At the earnings call, the executive said he was leaning into the ‘higher-for-longer’ camp of oil price expectations, “but we prepare the business to keep our cost structure low and execution in perfect shape because the inevitable can happen.”
Van’t Hof noted that “There’s just still some uncertainty over the next couple months, and there’s just not a need for us to put out a formal 2027 plan because we always end up doing that in February.”
The macro picture is so muddied right now that not only Diamondback, but all other U.S. shale producers are unlikely to jump the gun on a significant drilling spree next year just because oil prices are high now.
So far this year, U.S. oil production has increased slightly, but not at any scale to offset the massive disruption of supply from the Middle East. The Hormuz crisis has hiked crude oil futures prices and created a shipping crisis with record-high freight rates that raised the actual physical cost of bringing crude oil to refineries.
Supermajor ExxonMobil, with its huge Permian position, is not focused on volumes too much, either, despite hitting its production target earlier this year.
“We’re not real focused, as you know, on necessarily the volume target. It’s really around making sure that we’re executing it efficiently, deploying the capital efficiently, and then very importantly, leveraging the technology work that we’ve been doing to maximize the value of that development project,” Exxon’s CEO Darren Woods said on the Q3 earnings call last week.
In the shale patch, smaller and privately-held operators would be more inclined to drill more amid the oil price surge this year, according to Nathan Nemeth, Wood Mackenzie’s director of Lower 48 Upstream research.
Production is rising with a lag to the price spike from eight months ago, but most large-scale operators dominating the shale basins are reluctant to commit to major increases in output amid a volatile and highly uncertain environment, according to WoodMac.
“The volatility in the oil price makes companies cautious,” Wood Mackenzie’s Nemeth said. “One tweet can drop crude by US$20 a barrel.”
The energy consultancy reckons that “The oil Majors and larger independents, which have built their appeal to shareholders on disciplined capital management and reliable dividends, are particularly reluctant to commit to increased spending that may seem unjustified if prices fall.”
The volatility and uncertainty are making many publicly traded shale companies cautious just as they are preparing their 2027 outlook and capital and drilling guidance.
“It is very challenging to select a planning price or budgeting price,” one E&P executive said in comments to the latest Dallas Fed Energy Survey in September, while another one simply noted, “It sure would be nice to have a less volatile market.”
By Tsvetana Paraskova for Oilprice.com
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