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Baker Hughes Dashes Hopes That Oil Producers Will Increase 2025 Spending
U.S. oil and gas producers are likely to boost output primarily from improved efficiencies rather than new drilling and higher spending, Baker Hughes (NYSE:BKR) chief executive Lorenzo Simonelli told Reuters on Monday. Simonelli’s sentiments mirror those of Exxon Mobil’s (NYSE:XOM) Upstream President Liam Mallon who recently dismissed the notion that U.S. producers will dramatically increase output under a second Trump term.
“I think a radical change is unlikely because the vast majority, if not everybody, is primarily focused on the economics of what they’re doing,” Mallon said last week at a conference in London.
With oil prices falling in the current year, profits are likely to shrink, further limiting Big Oil’s spending power. Two years ago, the Biden administration urged U.S. companies to increase production in a bid to bring down fuel prices. Back then, oil prices were hovering around $100 per barrel and oil companies were raking in record profits. However, last year witnessed a sharp slowdown in non-OPEC+ supply growth from 2.46 mb/d in 2023 to 0.79 mb/d in 2024, primarily caused by a reduction in U.S. total liquids growth from 1.605 mb/d in 2023 to 734 kb/d in 2024, with low oil prices disincentivizing more drilling. StanChart expects this trend to continue, with U.S. liquids growth expected to clock in at just 367 kb/d in 2025 before slowing down further to 151 kb/d in 2026.
Over the past five years, oil and gas companies have been returning a big chunk of their profits to shareholders in the form of dividends and share buybacks. With oil prices declining over the past two years, these companies have resorted to borrowing more to keep their shareholders happy. Indeed, Bloombergreported in late October that four of the world’s five oil “supermajors” borrowed heavily to fund share buybacks. According to a Bloomberg analysis, ExxonMobil, Chevron (NYSE:CVX), TotalEnergies (NYSE:TTE), and BP (NYSE:BP) wouldn’t have enough cash on hand to cover the dividends and share buybacks their investors are demanding, let alone increase their capital expenditure to drill more.
By Alex Kimani for Oilprice.com
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Alex Kimani
Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com.
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George Doolittle on March 10 2025 said:
Massive new natural gas facility upon in North Dakota that will include carbon capture and that will most definitely sustain even grow oil production upon in North America the bulk of that energy being refined in the USA still. Also as well Tesla and SpaceX remain a huge wildcard for offshore oil drilling as the computer systems needed to manage some complex systems let alone now The AI …Baker Hughes might be getting left in the dust big time here. Long $slb slumberger strong buy. Fuel prices very much set to plunge if Delta Airlines suddenly goes BK.
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