Drill, Baby Drill, Six Months In? Fewer Wells Drilled and Planned for the Rest of the Year

     Although Trump has often encouraged U.S oil & gas companies to “drill, baby drill,” after 6 months of the administration being in power, that is clearly not happening. There are several reasons for the lack of drilling, but there are also Trump moves that have made drilling more difficult. One is the doubling of tariffs on steel and aluminum imports to 50% from 25% in early June. Roughly a quarter of all steel used in the U.S. is imported, while half of all aluminum used in the U.S. is imported. This obviously makes drilling and casing wells more expensive. According to a Dallas Fed survey, as reported by Reuters, the news from the field is not good. The survey was done around the last week of June and included 91 E&P companies and 45 oilfield service firms.

“Almost half of the executives surveyed expect to drill fewer wells in 2025 than they planned at the start of the year, while a quarter said they expect the number of wells they drill to decrease significantly.”

“Twenty-seven percent of firms said the recent jump in U.S. steel import tariffs to 50% from 25% will lead to them drilling slightly fewer wells.”

"It's hard to imagine how much worse policies and D.C. rhetoric could have been for U.S. exploration and production companies," an exploration and production executive said. "We were promised by the administration a better environment for producers but were delivered a world that has benefited OPEC to the detriment of our domestic industry."

"The Liberation Day chaos and tariff antics have harmed the domestic energy industry," another executive said. "Drill, baby, drill will not happen with this level of volatility. Companies will continue to lay down rigs and frack spreads."

“The rising costs from steel and aluminum tariffs are being passed on to customers, an oilfield service firm executive noted.”

"The numerous negative tailwinds — tariffs, oversupply of oil, consolidation and turmoil surrounding economic policy — will have significant impact on the domestic energy sector," an oilfield service firm executive said. "A lengthy downturn is the logical outcome."

     It seems that these executives have no trouble condemning Trump policies behind the privacy of anonymous surveys, but very few will publicly complain, or at least I have not heard any complaints. The stated goal of “unleashing American energy” has yet to occur, and so far, the opposite has occurred. Most of the chatter among my oil & gas colleagues on LinkedIn seems to acknowledge that conditions for drilling are not good, without stating the obvious about policy. I expect some growth in natural gas drilling, perhaps later in the year or next year, as more LNG export facilities come online and more AI data center consumption begins, but that is also dependent on overall supply.  

     According to the Baker Hughes rig count, the total rig count on July 3, 2025, was down 46 rigs, or 8% below this time last year. According to a new report by Novi Labs, the drop in rig counts is being driven by efficiency gains, pricing pressure, and $1.8B in capex cuts. They note, as shown below, that the shale basins have dropped 25 net rigs this year, so far, with the Permian dropping the most, with small gains seen in the mainly gas basins, Haynesville and Appalachia, as well as the Midcontinent. 

     Below is a table from the July 3 rig count, showing year-over-year drops. Below that is a week-by-week table showing changes since Trump assumed office. The rig count briefly went up to a high of 593 in March but since then has dropped by 56 rigs, nearly 10%.

     The EIA revised downward their predictions for oil production by 50,000 Bbls per day for 2025, and oil prices are expected to remain low and likely drop further in 2026. They are predicting sub-$60 for WTI from late 2025 through 2026. Since oil is the major focus of U.S. drilling, accounting for 79% of drilling targets currently, that means that drilling is likely to drop further. On July 11, it was reported that the rig count dropped for the 11^th straight week, with rig levels down to September 2021 levels, which were still affected by the pandemic downturn.

     EIA explains the drop in drilling in their July 2025 Short-Term Energy Outlook:

“U.S. producers have slowed drilling and completion activity this year. In 1H25, well completions in the oil-producing regions of the Lower 48 states totaled 5,164 wells. This number excludes Alaska and the Gulf of America, which do not produce tight oil and are subject to different investment and production cycles. It also excludes Haynesville and Appalachia, which primarily produce natural gas. This year had the fewest completions in the first six months of any year since 2021.”

They also note that drilling fewer wells doesn’t always mean less production, since wells are drilled longer in many areas. Thus, lateral footage would be a better metric for comparison.

     In contrast, the market looks pretty good for natural gas over the next few years as AI data centers and LNG export demand ramp up. For consumers, that could mean reasonable gasoline and diesel prices, but possibly rising natural gas prices and power prices. It does not appear that any rally in natural gas drilling would be able to offset losses in oil drilling.

     Reuters reports:

“The independent exploration and production (E&P) companies tracked by U.S. financial services firm TD Cowen said they planned to cut capital expenditures by around 3% in 2025 from levels seen in 2024.”

“That compares with roughly flat year-over-year spending in 2024, and increases of 27% in 2023, 40% in 2022 and 4% in 2021.”

     The mantra for U.S. oil companies, at least for some of them, might be better stated as a more familiar one: ‘survive, baby survive.’

 

References:

 

Trump Is Creating ‘Chaos’ for US Energy, Quantum Founder VanLoh Says. David Wethe. Bloomberg. June 4, 2025. Trump Is Creating ‘Chaos’ for US Energy, Quantum Founder VanLoh Says

US Drillers Cut Ol, Gas Rigs for Eighth Week in a Row – Baker Hughes. Scott DiSavino and Anjana Anil. Reuters. June 20, 2025. US drillers cut oil and gas rigs for eighth week in a row - Baker Hughes

U.S. drilling rigs drop for ninth straight week, longest streak in five years. Seeking Alpha. June 27, 2025. U.S. drilling rigs drop for ninth straight week, longest streak in five years

Oil, gas activity contracted in Q2 on higher US steel tariffs, Dallas Fed survey shows. Georgina McCartney. Reuters. July 2, 2025. Oil, gas activity contracted in Q2 on higher US steel tariffs, Dallas Fed survey shows

US Shale to Slow Drilling as Trump’s Tariffs Rattle Executives. Emma Sanchez. Bloomberg. July 2, 2025. US Shale to Slow Drilling as Trump’s Tariffs Rattle Executives

US drillers cut oil and gas rigs for 10th week in a row, Baker Hughes says. Reuters. July 3, 2025. US drillers cut oil and gas rigs for 10th week in a row, Baker Hughes says

Q2/2025 L48 Cost Analysis. Novi Labs. Newsletter, July 3, 2025.

U.S. production growth to slow amid drilling decline, says EIA. Mia Gindis and David Wethe, Bloomberg. World Oil. July 8, 2025. U.S. production growth to slow amid drilling decline, says EIA

Short-Term Energy Outlook. Energy Information Administration. July 8, 2025. Short-Term Energy Outlook - U.S. Energy Information Administration (EIA) Full PDF steo_full.pdf

US Oil Rig Count Hits 3-Year Low – Baker Hughes. Baker Hughes. July 7, 2025. US Oil Rig Count Hits 3-Year Low – Baker Hughes – Oil Gas Leads

US oil/gas rig count down for 11th week to lowest since 2021, Baker Hughes says. Scott DiSavino. Reuters. July 11, 2025. US oil/gas rig count down for 11th week to lowest since 2021, Baker Hughes says