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The First Sign the U.S. Oil and Gas Sector Is Pulling Back

Three weeks after “Liberation Day,” Matador Resources says it’s adjusting its ambitions for the year.

Money and an oil rig.
Heatmap Illustration/Getty Images

America’s oil and gas industry is beginning to pull back on investments in the face of tariffs and immense oil price instability — or at least one oil and gas company is.

While oil and gas executives have been grousing about low prices and inconsistent policy to any reporter (or Federal Reserve Bank) who will listen, there’s been little actual data about how the industry is thinking about what investments to make or not make. That changed on Wednesday when the shale driller Matador Resources reported its first quarter earnings. The company said that it would drop one rig from its fleet of nine, cutting $100 million of capital costs.

“In response to recent commodity price volatility, Matador has decided to adjust its drilling and completion activity for 2025 to provide for more optionality,” the company said in its earnings release.

In February, Matador was projecting that its capital expenditures in 2025 would be between $1.4 and $1.65 billion. This week, it lowered that outlook to $1.3 to $1.55 billion. “We’re very open to and want to have reason to grow again,” Matador’s chief executive Joseph Foran said on the company’s earnings call Thursday. “This is primarily a timing matter. Is this a temporary thing on oil prices? Or is this a new world we live in?”

Mizuho Securities analyst William Janela wrote in a note to clients Thursday morning that, as the first oil exploration and production company to report its earnings this go-round, Matador would be “somewhat of a litmus test for the sector: we don't believe the market was expecting E&Ps to announce activity reductions this soon, but MTDR's update could signal more cuts to come from peers over the next few weeks.”

West Texas Intermediate crude oil prices are currently sitting at just below $63, up from around $60 in the wake of President Donald Trump’s “Liberation Day” tariff announcements. While the current price is off its lows, it’s still well short of the almost $84 a barrel crude prices were at around this time last year.

The price decline could be attributable to any number of factors — macroeconomic uncertainty due to the trade war, production hikes by foreign producers — but whatever the cause, it has made an awkward situation for the Trump administration’s energy strategy.

The iShares U.S. Oil & Gas Exploration & Production ETF, which tracks the American oil and gas exploration industry, is down 9% for the year and more than 13% since “Liberation Day,” while the rest of the market has almost recovered as the Trump administration has indicated it may ease up on some of his more drastic tariff policies.

If other drillers follow Matador’s investment slowdown, it could imperil Trump’s broader energy policy goals.

Trump has both encouraged other countries to produce more oil (and bragged about lower oil prices) while also exhorting American drillers to “drill, baby, drill,” with enticements ranging from kneecapping emissions standards to a reduced regulatory burden.

As Heatmap has written, these goals sit in conflict with each other. Energy executives told the Federal Reserve Bank of Dallas that they need oil prices ranging from $61 to $70 a barrel in order to profitably drill new wells. If prices fall further, “what would happen is ‘Delay, baby, delay,’” Wood Mackenzie analyst Fraser McKay wrote Wednesday. “We now expect global upstream development spend to fall year-on-year for the first time since 2020.”

A $65 per barrel price “dents” margins for drillers, meaning “growth capex and discretionary spend will be delayed,” McKay wrote.

Matador also announced that it had authorized $400 million worth of buybacks, and its stock price rose some 4% on the earnings announcement, indicating that Wall Street will reward drillers who pull back on drilling and ramp up shareholder payouts.

“We’ve got the tools in the toolbox, including the share repurchase, to make Matador more value quarter by quarter,” Foran said. Rather than “blindly” pouring capital into growth, Matador would aim for a “measured pace,” he explained. “And if you mean what you say about a measured pace, that means when prices get a little lower, you take a few more moments to think about what you’re doing and don’t rush into things.”

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