Diamondback Energy expects U.S. oil production to peak and then decline this year due to low prices.
CEO Travis Stice warned that falling production threatens jobs, GDP growth, the nation's trade balance and U.S. energy security.
Energy security at risk
The shale revolution over the past 15 years has transformed the U.S. into the largest fossil fuel producer in the world, with the country pumping more oil and gas than Saudi Arabia and Russia combined, the CEO said.
"This has transformed our economy and given the United States a level of energy security not thought possible at the beginning of this century," Stice told investors. "Today's prices, volatility and macroeconomic uncertainty have put this progress in jeopardy," the CEO warned.
The number of crews fracking shale for oil and gas has already fallen 15% this year with crews in the Permian Basin down 20% from a peak in January, Stice estimated, warning that number of crews will likely decline further.
Rigs focused on oil production are expected to decline nearly 10% by the end of the second quarter and fall further in the third, the CEO said.
Diamondback has cut its capital budget by about $400 million to $3.4 billion to $3.8 billion this year. Trump's steel tariffs are the biggest cost headwind the oil producer is currently fighting, Stice said. Those tariffs have increased well costs by about 1% or $40 million annually, the CEO said. Efficiency gains are expected to offset rising costs as activity slows in the coming quarters, he said.
"To use a driving analogy, we are taking our foot off the accelerator as we approach a red light," Stice said. "If the light turns green before we get to the stoplight, we will hit the gas again, but we are also prepared to brake if needed."
CNBC
U.S. oil production has likely peaked and will start to d...
U.S. crude oil prices rose more than 4% to $59.56 per barrel Tuesday as domestic production is expected to decline.
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