Wood Mackenzie highlights four US Lower 48 themes to look for in 2026

Wood Mackenzie's latest outlook "US Lower 48: four things to look for in 2026", indicates the US 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. Wood Mackenzie identifies four key themes shaping the US Lower 48 landscape in 2026:

Horizontal rig count will fall below 500

Oil-focused activity levels will decline as operators face macro headwinds, particularly in H1 2026. This sits below the US$60/bbl threshold that sparks questions around investment strategy.

However, 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. Operators are drilling faster, and cycle times are improving. Diamondback can now drill 26 wells per rig per year, up from 24 wells in 2024. Expand Energy delivers the same Haynesville production with seven rigs, compared to 13 rigs in 2023.

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. Lower costs help protect most of the new drill supply curve. Even at US$60/bbl Brent, more than 90% of US Lower 48 assets can cover their capex requirements, with all assets covering operating costs.

Core Permian plays produce over 50% of US onshore liquids

Lower 48 oil production will stall in 2026 for the first time since the pandemic. Rigs falling throughout 2025 and less activity in the year create this culmination. The Permian remains resilient and the powerhouse of US oil supply.

Combined 2026 production from the Delaware Wolfcamp, Bone Spring, Midland Wolfcamp, and Midland Spraberry will account for more than 50% of onshore US oil output for the first time ever. Delaware Wolfcamp oil will plateau for the first time post-pandemic, but associated gas production from the play will top 10 bcfd in 2026. Rising gas-oil-ratios and development shifting to gassier areas of the basin drive gas volume growth.

M&A market reorients itself with gas-weighted deals

US Lower 48 deal flow was lacklustre in H1 2025 but accelerated in Q4 2025. Momentum will continue, especially with gas-focused deals.

International players are looking at US gas assets for three core reasons: a value thesis on rising domestic demand, physical hedges against LNG export volumes and tools to help progress US trade negotiations. Motivated buyers will bid up assets. Wood Mackenzie expects a firm floor to build beneath a US$4/mcf implied long-term price.

Haynesville will see an acceleration of year-on-year growth. The play will surpass 16 bcf/d and hit 50 tcf of cumulative production. Private equity has a growing appetite for gas investment. Encap's recent US$2 billion funding for Penn Energy to continue Marcellus development illustrates this trend.

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

"LNG project developers face a critical supply chain challenge that will reshape US gas investment priorities," said Lydia Walker, Senior Research Analyst at Wood Mackenzie. "Permian gas alone cannot meet growing export demand, creating strategic opportunities for investors in complementary supply regions. The Eagle Ford and Austin Chalk offer longer reserve life and operational flexibility that LNG buyers increasingly value for long-term supply security."

Western Haynesville will be the highest impact new supply node. The existing fairway will deliver over 2 bcfd by 2035. Meanwhile, Deep Pennsylvania Utica has seen slow delineation efforts following CNX's Gaut well in 2015. In-basin demand growth in the Northeast could create a premium end market for deep, high pressure Utica gas.