U.S. shale producer Diamondback Energy (FANG.O) lowered its output forecast for 2025 on Monday and said that a combination of global economic uncertainty and rising OPEC+ supply has brought U.S. oil production to a tipping point.
On the same day, oil prices crashed to a four-year low after the OPEC+ producer group accelerated plans to reverse some of the deep supply cuts it made in recent years as output from some parts of the world, including the United States, surged to record highs.
Meanwhile, despite U.S. President Donald Trump's vow to unleash more U.S. oil drilling, his tariff policies have raised concerns of a global economic slowdown that could reduce commodity demand.
The country's near two-decade-old shale boom is also now in a more mature stage of development, with geological hurdles a major challenge to production growth at current oil prices, Diamondback said.
The company, which reported an 84.5% jump in first-quarter production to 850,656 barrels of oil equivalent per day following its $26 billion acquisition of private rival Endeavor Energy Resources, now expects full year output to average between 857,000 and 900,000 boepd.
In an earlier forecast, it said production would average between 883,000 and 909,000 boepd.
"Today, geologic headwinds outweigh the tailwinds provided by improvements in technology and operational efficiency," the company said in a letter to shareholders. "Therefore, we believe we are at a tipping point for U.S. oil production at current commodity prices."
Diamondback also slashed its capital budget for this year by about $400 million to between $3.4 billion and $3.8 billion. The company will drill and complete fewer wells and maximize free cash flow generation during this period of macro instability, it said.
Diamondback could reduce activity further if oil prices fall more, it added.
Higher output and a jump in natural gas prices helped Diamondback post an adjusted profit of $4.54 per share for the first quarter, beating Wall Street estimates of $4.13, according to data compiled by LSEG.
Its average price for natural gas during the quarter more than doubled year-over-year at $2.11 per thousand cubic feet.
Average natural gas prices have risen over the past few quarters and hit a two-year high on March 10, supported by record flows to liquefied natural gas export facilities and concerns over supply in the lead-up to the summer season.
