Key Takeaways
Geopolitical disruption and renewed energy security concerns materially shifted first quarter 2026 upstream commentary from cautious rebalancing toward a more constructive outlook for domestic investment and supply development.
Management teams broadly maintained capital discipline despite stronger commodity signals, favoring selective oil-weighted growth, portfolio reallocation, and operational efficiency over aggressive expansion.
Infrastructure ownership and integrated operational capabilities increasingly emerged as strategic differentiators, with companies emphasizing export access, logistics networks, and physical delivery systems as critical drivers of long-term value creation.
Introduction
In our ongoing review of quarterly earnings calls across the Exploration and Production (“E&P”) and Oilfield Services (“OFS”) companies, first quarter 2026 commentary reflected an industry moving from positioning to response. Management teams entered the year expecting continued discipline and gradual rebalancing, but the quarter’s geopolitical disruption and tightening global supply backdrop shifted the tone across calls toward energy security, selective growth, and the ability to physically deliver supply to end markets both domestically and internationally.
Several themes emerged consistently across the calls. Executives emphasized that geopolitical disruption and energy security concerns have improved the outlook for domestic upstream investment, highlighted a disciplined but more constructive approach to oil-weighted activity, and pointed to infrastructure and integrated service capabilities as increasingly important differentiators. Together, these themes suggest a sector still committed to capital discipline, but now more willing to respond where commodity signals, asset quality, and operational capacity support attractive returns.
Geopolitical Disruption Puts Energy Security Back in Focus
A defining theme of first quarter commentary was the renewed emphasis on energy security as the Iran conflict tightened global supply and shifted the industry’s near-term outlook. Rather than describing 2026 as simply a year of rebalancing, several management teams pointed to geopolitical disruption, tighter global supply, and the need for reliable oil and gas sources as factors supporting a more constructive investment environment.
Halliburton framed the shift most directly, emphasizing that recent supply disruption had elevated energy security from a policy talking point to a more immediate consideration for investment:
“Energy security is no longer simply a talking point. It demands action by every nation to ensure a reliable supply of oil and gas. I expect we will see increased investment in localized oil and gas developments and urgency to diversify sources of oil and gas for those countries without their own resources.”
— Jeffrey Miller, Chairman, President, & CEO, Halliburton Company
The company also tied the shift to a tighter commodity backdrop and a more constructive outlook for upstream activity:
“Big picture, this means the world is fundamentally tighter oil and gas than it was 60 days ago. In my view, that supports a durably stronger commodity environment and a far more constructive backdrop for upstream investment in oilfield services activity.”
— Jeffrey Miller, Chairman, President, & CEO, Halliburton Company
NOV echoed this view, contrasting the expected supply overhang entering 2026 with the materially tighter market that emerged during the quarter:
“Today, the world looks dramatically different and the market outlook has shifted materially. The conflict in the Middle East has resulted in approximately 10 million barrels per day of shut-in production and damaged key energy infrastructure, shifting the market from a modest surplus to a meaningful deficit and requiring drawdowns of strategic reserves worldwide.”
— Jose Bayardo, President, CEO & Chairman, NOV Inc.
EOG similarly pointed to geopolitical disruption as the central macro development of the quarter, highlighting the impact on crude supply, inventories, and risk premiums:
“The conflict involving Iran is the most significant development impacting our business and the broader energy markets. Disruptions to crude supply and flows through the Strait of Hormuz are estimated to remove approximately 900 million barrels from global markets through June 2026. Even in a scenario where the conflict is resolved relatively quickly, rebuilding global inventories back to 5-year average levels will provide ongoing support for oil prices.”
— Ezra Yacob, CEO & Chairman, EOG Resources
Together, these comments reflect a meaningful shift from the prior quarter’s rebalancing narrative. While management teams remain disciplined in how they allocate capital, first quarter commentary suggests that energy security, supply disruption, and producing inventory replenishment have become more immediate considerations in upstream investment discussions.
Selective Growth, Discipline Intact
The second theme we identified within first quarter commentary was a more constructive activity outlook, but with capital discipline still firmly intact. As seen in prior commodity price cycles, management teams generally did not frame higher commodity prices as an invitation for unconstrained activity growth. Instead, operators emphasized selective oil-weighted development in the short term, capital efficiency, balance sheet flexibility, and the ability to respond only where asset quality and returns justify incremental investment.
Diamondback provided one of the clearest examples of this shift. Management described its move from a “yellow light” to a “green light” framework, supported by both macro conditions and the company’s advantaged Permian position:
“If that isn't a signal to grow production in an advantaged area like the Permian Basin, then I don't know what is… with the best inventory quality and depth in North America being executed at the best cost structure, if this isn't the time to grow now, then I don't know when it is.”
— Matthew Kaes Van’t Hof, CEO, Diamondback Energy
At the same time, Diamondback stressed that the growth response remains measured and capital efficient:
“I think the general consensus was yes, I think a little growth in the plan will differentiate Diamondback and makes a lot of sense. I just don't want you to do it in a capital inefficient manner… staying capital efficient is probably the priority, and I think the reinvestment rate becomes the output of that.”
— Matthew Kaes Van’t Hof, CEO, Diamondback Energy
EOG took a more measured approach, reallocating capital from gas to oil-weighted assets rather than adding activity or increasing total spending:
“For the full year 2026, we are increasing oil production guidance by 2,000 barrels per day and NGL production guidance by 6,000 barrels per day while keeping total capital expenditures flat at $6.5 billion. The added oil and NGL volumes are driven by reallocating capital across the portfolio rather than increased activity levels.”
— Jeffrey Leitzell, Executive VP & COO, EOG Resources
Select Water Solutions described what it was hearing from customers:
“We are having conversation now, and we are hearing from the market that the commodity price that we all watched ramp and the effects of that, they are pulling both the intensity at which they're completing the wells or bringing new oil online… we're also seeing customers that, let's say, they had 4 frac crews running [that] they were going to drop in the second quarter. They're not dropping it now.”
— John Schmitz, President, CEO & Chairman, Select Water Solutions
The responses varied meaningfully across operators. The common thread was discipline, but the degree of response differed considerably.
Infrastructure & Integrated Capabilities as Strategic Differentiators
A third theme of first quarter commentary was the growing importance of infrastructure and integrated capabilities as sources of competitive advantage. Across E&P and OFS calls, management teams increasingly framed value creation not only around resource ownership or activity levels, but around owning and operating the physical systems, whether export terminals, water networks, or power platforms, that allow them to deliver differentiated solutions to end markets and customers.
Antero highlighted the importance of market access across both LNG and NGLs, emphasizing that its export-oriented strategy positions the company to benefit from rising global demand for U.S. energy:
“We have the highest LNG exposure among Appalachian producers, selling 2.3 Bcf per day of production to sales points along the LNG Fairway. At the same time, we are the largest producer/exporter of NGLs in the U.S., selling the majority of our LPG, which includes propane and butane into international markets.”
— Michael Kennedy, CEO, Antero Resources
Diamondback highlighted how infrastructure constraints, particularly in Permian associated gas, can directly impact realized value even in a strong commodity environment:
“Every molecule we've produced has moved. It's just moving at a negative price.”
— Matthew Kaes Van’t Hof, CEO, Diamondback Energy
As markets grow more complex and capital-intensive, companies with infrastructure and integrated capabilities appear better positioned to capture value across the energy chain.
Conclusion
First quarter 2026 earnings calls reflect a sector shifting from preparation to selective response. Geopolitical disruption and energy security concerns have made the outlook more constructive, while operators varied in their responses, ranging from decisive growth to careful reallocation to cautious observation. Physical infrastructure and integrated capabilities are becoming increasingly important differentiators as companies across the energy value chain position for a tighter and more complex energy market.
Mercer Capital has its finger on the pulse of the upstream market. As the oil and gas industry evolves through pivotal times, we take a holistic perspective to bring you thoughtful analysis and commentary regarding the full hydrocarbon stream. This includes E&P operators, mineral aggregators, and ancillary service companies crucial to starting and maintaining the stream’s flow. For more targeted energy sector analysis to meet your valuation needs, please contact a professional on the Mercer Capital Oil & Gas Team for further assistance.