why surging oil prices haven’t sparked a Permian boom

Hello from Houston! 

Last week, I walked through a parking lot full of pick-up trucks to the expansive Kirby Ice House bar in Houston for a crawfish boil hosted by a Houston oil and gas networking group.

Sitting at a picnic table, Eric Schneider showed me the art of cracking into the cherry-red crustaceans, which are boiled in aromatic spices, butter and garlic.

“I’ve had a fair amount of crawfish,” said Schneider, using his hands to gently pry its head from its body. “You’ll have to work for it.”

As I struggled to extract the savoury meat from the tail, Schneider explained he is working at a law firm after several years as chief financial officer of a recently acquired midstream company.

He said the industry was still watching to see how the Iran crisis will play out. “No one is willing to commit,” he said about increasing production despite oil prices rising to over $100 a barrel. “You don’t want to do anything now that you can’t unwind quickly.”

At a nearby table, a grizzled board member at an international energy company echoed his sentiment. “People are wait-and-see,” he said. “Investors like us to be patient.” His friend added: “The world has changed but has it changed enough to spur new drilling? It’s still early days.” 

My first crawfish boil was unfortunately cut short after I was politely but firmly escorted out, with the organiser explaining that media were not welcome. I understood — after all, journalists can be troublesome — but I was left hungry for more.

The atmosphere of apprehension around Iran is a recurring theme since I arrived in Houston to start this role in early March. When I went up to Midland, America’s oil heartland, independent producers there said it was too early to start drilling and were concerned that the price of oil would fall as quickly as it rose.

Nearly two months later, producers are exercising a hard-won discipline after years of boom and bust cycles, with shareholder returns coming first. Call it returns before rigs. As one analyst said to me: “They have to have real confidence that this price is going to stick.”

Goldman Sachs analysts may have bolstered the case for increased production. They raised forecasts to project that Brent crude will trade at an average of $90 a barrel in the last three months of this year, up from an earlier projection of $80 — and that’s under the benign scenario that assumes “Gulf exports normalise by mid-June”.

ConocoPhillips, Chevron and ExxonMobil report earnings at the end of the week, as the price of Brent tops $120 — its highest price since 2022 — with US President Donald Trump signalling an extended Hormuz stand-off. Along with the impact of the disruption caused by the Iran conflict, analysts are watching for any indication on changes to capital expenditure, commentary on Permian production or adjustments to 2026 guidance.

Earlier this month, Halliburton provided a snapshot of how the capital discipline is playing out in the Permian. In their results, chief executive Jeff Miller said it was the “early innings” of an activity rebound. Smaller companies were making moves to increase production but no rigs had been added yet and the plans of larger operators were “less clear”. 

Santiago Garza, who works in oil and gas for Herc Rentals, an equipment rental company that works with drilling companies across Texas, said there had been “no movement”.

Garza, a 28-year veteran of the industry, has been working on existing contracts. “I think it’s just keeping people busy, we’re not having to worry about another crash coming.”

Power Points

Energy Source is written and edited by Jamie Smyth, Martha Muir, Alexandra White, Rachel Millard, Malcolm Moore, Ryohtaroh Satoh and Stephanie Findlay with support from the FT’s global team of reporters. Reach us at [email protected] and follow us on X at @FTEnergy. Catch up on past editions of the newsletter here.