US oil reserve additions from field extensions and new discoveries fell 11% year over year in 2025, despite oil production reaching new highs, according to a new US oil and gas reserves and production study released by Ernst and Young (EY) in September.
EY tallied up 3.7 billion bbl of crude production in 2025, which was 12% higher than the prior year.
However, the study also found that the decline in new discoveries drove the US reserve replacement ratio below 100% for the first time since 2021, though the shortfall was modest at 1%.
Meanwhile, domestic industry capital spending fell 49% as exploration spending dropped by 11%. The new exploration efforts by US companies accounted for only 3% of total upstream investment in 2025, or about $4.8 billion.
The analysis is based on 5 years of data from the 30 largest publicly traded US producers, based on reserves. Their combined year-end reserves represent about 43% of total US oil and gas production.
Among the study’s key findings is that the value of mergers and acquisitions (M&A) dropped by 70% in 2025 compared with the year prior.
“The highlight that jumps out right away in the study is around the consolidation,” said Matt Melnar, EY’s Americas oil, gas, and chemicals assurance leader. “The M&A activity was substantially higher in 2024 because of many of the megadeals that occurred.”
Melnar added that while there was still meaningful transaction activity in 2025, it was “clearly not even close to the same levels.”
Looking at all the acquisitions over the past 2 years, Melnar said cost synergies from lower general and administrative expenses were “highlighted across the board.” However, he added that the deals were also driven by other considerations, including reducing per-BOE costs through the combination of contiguous acreage positions and creating more efficient field operations.
“We talk a lot about scale and the synergies that come with it. When acreage and operations are concentrated in the same areas, as was the case with many of the acquisitions in well-established reservoirs and basins, companies can operate more efficiently,” he explained. “I think that was a major focus, and we saw BOE costs come down a bit. Going forward, reducing operational costs will continue to be a key focal point for management teams.”
EY is not overinterpreting the decline in the 2025 reserve replacement ratio. Melnar characterized the 1% drop as “an indicator,” rather than a warning sign.
“It indicates where the focus may have been throughout the year,” he said, referring to the industry's push to improve efficiency and develop existing positions. “But I do think it's an indicator that we need to monitor to see how markets react as we look at 2026 and maybe 2027 as well.”
EY’s 2025 benchmarking study also examined the role of natural gas in the US upstream sector, finding that total annual production reached 17.9 Tcf, up 18% from 2024. Gas reserves also increased 14% year over year to 202.5 Tcf, ending a 2-year decline.
The growth in reserves was driven in part by field extensions and new discoveries, which added a combined 19.3 Tcf, up 21% from the previous year.
Stronger commodity prices also played a significant role. Henry Hub, the US benchmark for natural gas, averaged $3.62/MMBtu in 2025, nearly two-thirds higher than in 2024. Meanwhile, US liquefied natural gas (LNG) exports reached 15 Bcf/D as additional export capacity came online.
Looking ahead, EY said geopolitical disruptions, particularly concerns surrounding the Strait of Hormuz, have reinforced the importance of secure and flexible US oil and gas supply. The report added that increased federal support for upstream development, including streamlined permitting and expanded infrastructure approvals, is helping create a more favorable environment for investment.
