By Avi Salzman

The U.S. shale boom has peaked, according to Diamondback Energy, one of the most prominent shale-oil producers. President Donald Trump had said he wanted to preside over an American oil boom, but it now looks as though the domestic oil industry could shrink this year -- allowing Saudi Arabia, Russia, and other foreign players to take U.S. market share as those countries ramp up output.

Diamondback told shareholders in a letter along with its first quarter earnings report on Tuesday that production is bound to come down in America's shale fields because of sinking oil prices and economic uncertainty. "We believe we are at a tipping point for U.S. oil production at current commodity prices," wrote Diamondback CEO Travis Stice, who plans to step down this year. "This will have a meaningful impact on our industry and our country."

Diamondback is one of the biggest players in the Permian Basin, an area of Texas and New Mexico that accounts for nearly half of America's oil production.

Stice said that the shale boom, which has made the U.S. the top oil and natural-gas producer in the world, has been a boon for the state of Texas and the country. But its growth is about to tail off. "Today's prices, volatility and macroeconomic uncertainty have put this progress in jeopardy," Stice wrote.

U.S. oil prices have fallen about 15% since Trump's Liberation Day tariffs. Even though Trump has paused some of the tariffs, oil has also been hurt by a decision from OPEC and its allies to increase output. Prices rose on Tuesday because of production cuts from Diamondback and others, rising 4.3% to $59.60 per barrel.

Diamondback expects to reduce its capital budget by about 10%, or $400 million, this year. It's also reducing how many rigs it uses by about 10%, leading to a likely decline of about 1% from its prior guidance. Other producers, such as Coterra, Matador Resources, and EOG, have also said they plan to pull back.

If oil prices rebound to $65 or above, Diamondback could restart some production, the company said. But Stice wrote that the company is less able to prepare for a price rebound because "our largest drilling input cost, casing, has increased over 10% in the last quarter due to steel tariffs."

In a survey of oil company executives taken by the Federal Reserve Bank of Dallas this year, other shale operators had similar complaints.

One analyst speculated that Stice's letter may have been directed at a wider audience.

"We can't help but wonder if the last 'letter to stockholders' written by outgoing CEO Travis Stice was intended as much for government leaders in Washington, DC as it was for Diamondback shareholders," wrote Tim Rezvan, an analyst at KeyBanc Capital Markets.

Write to Avi Salzman at avi.salzman@barrons.com

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May 06, 2025 14:37 ET (18:37 GMT)

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