Production Declines Loom, Despite Prospective Outlike From Oil Majors In 2027 — Wood Mackenzie
Global leader in energy data and analytics, Wood Mackenzie has hinted that most large oil and gas companies would enter 2027 with gearing below 20 percent following accelerated deleveraging in 2026, setting up a five percent rise in investment and a fresh wave of M&A.
According to Wood Mackenzie’s Corporate Strategic Planner Oil & Gas 2027, that financial position creates a fresh wave of M&A and the resource renewal aimed at sustaining production into the 2030s.
It noted that strong balance sheets provide strategic optionality just as the need to sustain oil and gas production through the next decade grows more pressing. Excluding Middle Eastern national oil companies (NOCs), production across Wood Mackenzie’s five peer groups is projected to decline by 31 percent, or 18 mmboe/d, between 2030 and 2040. According to Wood Mackenzie, that decline is the structural driver behind the 2027 push for M&A and upstream business development.
“Balance sheets are in good shape. But a 31 percent production decline between 2030 and 2040 means companies will have to manage rising tension between capital discipline and upstream portfolio renewal in 2027. That dilemma is the defining feature of the 2027 planning cycle,” said Tom Ellacott, senior vice president, Corporate Research, Wood Mackenzie.
Capital discipline will hold, even at Brent prices above Wood Mackenzie’s US$73 per barrel base case.
Reinvestment rates in 2027 will average 50 percent of operating cash flow, according to the report, while distributions account for 43 percent, split 32 percent dividends and 11 percent buybacks. The group will require US$55 per barrel on average to break even after investment and dividends, the report says, providing some resilience to lower prices.
Companies will need to plan for a volatile year, building in action plans for both upside and downside scenarios, according to Wood Mackenzie. Operating cash flow in 2027 is forecast to remain 14 percent above 2025 levels at base-case pricing. At US$90 per barrel, that figure rises by a further 18 percent, or US$104 billion. A fall to US$50 per barrel would cut operating cash flow by 24 percent, or US$138 billion, with US Majors, Large Cap US, and Large Cap International facing declines of 28 percent to 29 percent.
Upstream’s share of total capital is up eight percentage points since 2021 as Power and Renewables spend, which peaked in 2024, continues to fall, according to the report. Two-thirds of upstream capital for Wood Mackenzie’s peer group flows to the Middle East and the Americas, where tight oil, deepwater, and LNG are the dominant growth themes.
M&A activity levels will depend on whether volatility falls enough for buyers and sellers to align on price, the report notes, while rising equity valuations give some companies a financing advantage in equity-led deals.
“Capital allocation constraints and the pressure to rebuild upstream portfolios for the next decade are already triggering more NOC-IOC partnerships and strategic ventures. Geographic diversification, particularly toward the Americas, will be front of mind as companies respond to shifting geopolitics in 2027,” said Neivan Boroujerdi, head of Corporate NOC Analysis at Wood Mackenzie.
Downstream is diverging, according to the report. Refining closures continue in Europe and California, but 2026 exposed how thin the system has become, making the pace of exits a more deliberate question.
In chemicals, near-term overcapacity is separating those committing through the trough from those exiting entirely, with feedstock advantage the dividing line. Wood Mackenzie says fundamentals haven’t changed, but the 2027 question is no longer just how fast to shrink — it’s how much flexibility is worth retaining while the system stays tight.
The transition picture has shifted, according to Wood Mackenzie. NOCs’ low-carbon spend is now double that of the Euro Majors following the latter’s strategic recalibration. Most large IOC and NOC low-carbon budgets are converging on percent to 10 percent of total spend, compared with prior estimates of up to 50 percent from some Euro Majors at peak ESG guidance levels.
However, the report notes that some players will continue to build out their low-carbon businesses, with TotalEnergies focused on integrated power and Eni leveraging its strategic ventures Plenitude and EniLive.
