By Benoît Morenne and Collin Eaton

President Trump, who promised to uplift oil and gas, is set to preside over a decline in shale production.

Drillers that made the U.S. the world's top oil producer say they are hitting the brakes to weather a period of low crude prices and that the gusher has likely peaked. Some of the largest producers, including Diamondback Energy, recently told investors that they would be spending less this year and plan to drop rigs.

The U.S. is on track to see crude oil production modestly increase in 2025 -- in part because of growth in fields offshore -- before declining next year by 1% to 13.33 million barrels a day, according to S&P Global Commodity Insights. That would mark the first year-on-year decrease in roughly a decade, outside the Covid-19 pandemic.

"We believe we are at a tipping point for U.S. oil production at current commodity prices," Travis Stice, chief executive of Permian driller Diamondback, said in a letter to shareholders last week.

Trump had promised that his administration would bring a new dawn for America's frackers by killing regulations and allowing them to build new pipelines. But even before he took office, U.S. oil production was on track to flatten out and fall by the end of the decade.

Now, the upheaval in the global economy induced by his tariffs, coupled with the Organization of the Petroleum Exporting Countries and its allies' decision to pump more oil, have likely compressed that timeline, crude-oil CEOs say. The disruption has been most notable in the Permian Basin, the country's biggest oil field.

Oil prices have fallen to $62.49 a barrel, down about 13% since Trump's early April tariff blitz. That price is roughly equivalent to about $45 in 2015 dollars -- below the average price that sent the oil industry into a painful downturn that year.

"On an inflation-adjusted basis, current prices are at amongst the lowest they've ever been," Paul McKinney, CEO of Permian driller Ring Energy, said in an interview. Prices should be around $85 a barrel to encourage companies to drill, he said.

Although companies boast having healthier balance sheets than they did during previous price drops, they have also committed to return cash to shareholders. Because shale wells taper off quickly, any meaningful drop in production would be hard to reverse, as doing so would funnel cash out of shareholders' pockets and into the field.

"The amount of capital required to get back to 13 million barrels a day or 6 million barrels a day in the Permian might be an untenable lift for the business model that we put in place," Stice told analysts.

In just 15 years, shale companies have increased U.S. oil production by about 8 million barrels of oil a day. The boom reduced the country's reliance on foreign oil and saved American consumers billions of dollars via lower gasoline prices. But in recent years, signs that the era of shale dominance is coming to an end have multiplied.

Production growth in the Permian is slowing. The region's output grew by fewer than 200,000 barrels a day over the past 12 months, compared with average annual growth of more than 630,000 barrels a day since it started booming in 2017, according to the Energy Information Administration.

The next two largest onshore U.S. oil fields, the Bakken Shale in North Dakota and the Eagle Ford Shale in South Texas, never fully recovered after the 2020 pandemic. Production there has flatlined for years.

Companies have made strides in how efficiently they drill and frack wells. ConocoPhillips and Occidental Petroleum recently said they plan to spend less this year -- and still hit their production targets. But much of the improvement has now played out, and there is only so much firms can do to wring more crude from the aging shale fields, analysts say -- barring any technological breakthrough.

Others say shale companies could eventually push the Permian's output higher if prices surged from current levels, even as the region's rock quality declines. That is in part because their costs are lower after years of building infrastructure to ferry crude to market.

The most recent oil-price drop shaved about 150,000 barrels a day from consulting firm Rystad Energy's forecast for oil-production growth in the contiguous U.S. this year. If companies keep their current spending cuts, several are likely to see production declines in 2026, said Amber McCullagh, an analyst at Rystad. "The obvious first lever is for those Permian growth ambitions to be trimmed," she said.

One reason for the slowdown in activity is that companies are reluctant to drill through low prices when their inventory of premium wells is shrinking.

EOG Resources, one of the pioneers of shale, has about three to four years worth of high-quality locations to drill wells that could perform as proficiently as its current slate of wells, according to estimates by analytics firm FLOW Partners.

After that inventory is drilled, EOG will have to keep finding ways to cut costs as the quality of its inventory declines, said Tom Loughrey, FLOW's president. For the past few years, EOG has grown largely by striking private land deals. But because of the size of the inventory it needs to replace, it might eventually need to buy a competitor outright. "Corporate M&A is the problem solver," he said.

EOG declined to comment.

Houston-based EOG, which unlocked troves of natural gas in South Texas 15 years ago, is one of the companies looking abroad as U.S. shale regions age. It recently signed an agreement with Bahrain's Bapco Energies to evaluate a gas exploration prospect in that country.

Another shale pioneer, Continental Resources, helped turn North Dakota into a leading oil and gas producer. Earlier this year, it said it would be joining with Turkish Petroleum, Turkey's national oil company, to explore and produce shale oil and gas in that country.

Write to Benoît Morenne at benoit.morenne@wsj.com and Collin Eaton at collin.eaton@wsj.com

(END) Dow Jones Newswires

May 17, 2025 05:30 ET (09:30 GMT)

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