WoodMac Flags ‘Key Themes’ Shaping Lower 48 in 2026

Wood Mackenzie (WoodMac) identified several “key themes shaping the U.S. Lower 48 landscape” next year in a statement sent to Rigzone recently.

Among these was a projection that the horizontal rig count will fall below 500.

“Oil focused activity levels will decline as operators face macro headwinds, particularly in H1 2026,” WoodMac said in the statement.

“This sits below the $60 per barrel threshold that sparks questions around investment strategy,” it added.

WoodMac said in the statement, however, that declining rig count is no longer the needle mover it once was.

“Major strides in operational efficiency have reduced the number of active rigs required to maintain base business,” the company stated.

“Operators are drilling faster, and cycle times are improving,” it added.

WoodMac went on to note in the statement that “the activity taper will create deflationary pressures on costs”.

“Wood Mackenzie expects to see a modest reduction in drilling and completion costs across the Lower 48 in 2026, including tariffs,” it said.

“Lower costs help protect most of the new drill supply curve. Even at $60 per barrel Brent, more than 90 percent of U.S. Lower 48 assets can cover their capex requirements, with all assets covering operating costs,” it continued.

Another theme was a projection that core Permian plays produce more than 50 percent of U.S. onshore liquids next year.

“Lower 48 oil production will stall in 2026 for the first time since the pandemic,” WoodMac warned.

“Rigs falling throughout 2025 and less activity in the year create this culmination. The Permian remains resilient and the powerhouse of U.S. oil supply,” it added.

“Combined 2026 production from the Delaware Wolfcamp, Bone Spring, Midland Wolfcamp, and Midland Spraberry will account for more than 50 percent of onshore U.S. oil output for the first time ever,” it continued.

“Delaware Wolfcamp oil will plateau for the first time post-pandemic, but associated gas production from the play will top 10 billion cubic feet per day in 2026. Rising gas-oil-ratios and development shifting to gassier areas of the basin drive gas volume growth,” WoodMac went on to state.

Another theme was that the mergers and acquisitions market will “reorient… itself with gas-weighted deals”.

WoodMac noted in the statement that U.S. Lower 48 deal flow was lackluster in the first half of this year but accelerated in the fourth quarter.

“Momentum will continue, especially with gas-focused deals,” WoodMac said.

“International players are looking at U.S. gas assets for three core reasons: a value thesis on rising domestic demand, physical hedges against LNG export volumes, and tools to help progress U.S. trade negotiations,” it added.

The statement went on to project that “step-outs evolve into more important supply areas”.

“2026 will be an important year in appraisal delivery as operators target emerging appraisal areas to build inventory for long-term commitments to power or LNG end markets,” WoodMac noted in the statement.

“Regions ripe for increased activity include Western Haynesville, southwest Eagle Ford, deep Pennsylvania Utica and various Rockies gas plays,” it added.

WoodMac summarized in its statement that its latest outlook “indicates the U.S. Lower 48 will experience a tale of two commodities next year”.

“Oil focused regions will face price headwinds and see less activity. Liquids production will fall versus 2025. But gas focused regions are positioned for growth, driven by surging demand from the next wave of LNG projects and power buildout,” it added.

Rigzone has contacted industry body the American Petroleum Institute (API) and the U.S. Department of Energy (DOE) for comment on WoodMac’s statement. At the time of writing, neither have responded to Rigzone.

In its latest short term energy outlook (STEO), which was released on November 12, the U.S. Energy Information Administration (EIA) projected that Lower 48 states, excluding the Gulf of America, will produce 11.26 million barrels of crude oil per day, including lease condensate, in 2025. The EIA forecasts in its report that this figure will drop to 11.13 million barrels per day in 2026. In its report, the EIA highlighted that this figure stood at 11.03 million barrels per day in 2024.

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