Wood Mackenzie: Strong Balance Sheets Set 2027 Up for Oil and Gas Portfolio Renewal

Most large oil and gas companies will enter 2027 with gearing below 20%, following accelerated deleveraging driven by surging prices and margins in 2026, according to Wood Mackenzie's Corporate Strategic Planner Oil & Gas 2027. That financial position creates the platform for a 5% rise in investment, a fresh wave of M&A, and the resource renewal aimed at sustaining production into the 2030s.

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 NOCs, production across Wood Mackenzie's five peer groups declines by 31%, or 18 mmboe/d, between 2030 and 2040. 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% 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% of operating cash flow; distributions account for 43%, split 32% dividends and 11% buybacks. The group will require US$55 per barrel on average to breakeven after investment and dividends, 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. Operating cash flow in 2027 is forecast to remain 14% above 2025 levels at base-case pricing. At US$90 per barrel, that figure rises by a further 18%, or US$104 billion. A fall to US$50 per barrel would cut operating cash flow by 24%, or US$138 billion, with US Majors, Large Cap US, and Large Cap International facing declines of 28% to 29%.

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. Two thirds of upstream capital for our 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. 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,” said Neivan Boroujerdi, Head of Corporate NOC Analysis at Wood Mackenzie. “Geographic diversification, particularly toward the Americas, will be front of mind as companies respond to shifting geopolitics in 2027.”

Downstream is diverging. 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. 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. 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 5% to 10% of total spend, compared with prior estimates of up to 50% from some Euro Majors at peak ESG guidance levels. But 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.

Key findings

• Most large oil and gas companies will enter 2027 with gearing below 20%, following accelerated deleveraging driven by surging prices and margins in 2026.
• Excluding Middle Eastern NOCs, production across Wood Mackenzie's five peer groups declines by 31%, or 18 mmboe/d, between 2030 and 2040.
• Reinvestment rates in 2027 will average 50% of operating cash flow; distributions account for 43%, split 32% dividends and 11% buybacks.
• The group will require US$55 per barrel on average to breakeven after investment and dividends.
• 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.
• NOCs' low carbon spend is now double that of the Euro Majors following the latter's strategic recalibration.
• Most large IOC and NOC budgets are converging on 5% to 10% of total spend, compared with prior estimates of up to 50% from some Euro Majors at peak ESG guidance levels.

Background

The Corporate Strategic Planner Oil & Gas 2027 is Wood Mackenzie's annual capital allocation toolkit. Covering 35 of the world’s largest oil and gas companies, this edition is the first to reflect the 2026 price and margin cycle and to model post-2030 production decline implications across all five peer groups. It draws on the Corporate Resilience and Sustainability Indices (CoRSI), Corporate Financial Models (CFM), the Upstream Benchmarking Tool, and the Guidance Tracker. CSAS subscribers access company-level data via the Lens Direct API at woodmac.com.