Leading U.S. oil producer gives the ‘green’ signal for more oil drilling during the Iran war

(SeaPRwire) –   A leading U.S. oil and gas producer in the Permian Basin of West Texas has given a “green” signal to the hesitant American energy sector to begin increasing output amid the ongoing conflict with Iran and historically high crude prices.

Based in Midland, Texas, Diamondback Energy—the third-largest operator in the Permian Basin behind Exxon Mobil and Chevron—announced it is expanding both hydraulic fracturing crews and drilling rigs in the region. Major oil companies have been cautious about committing to long-term investments due to concerns that the war’s impact may be temporary. However, as the conflict continues, the effects of elevated prices are expected to persist for months after its conclusion. The U.S. benchmark for oil reached $105 per barrel on May 4, marking an 85% increase since the start of the year.

Diamondback, widely regarded as a key indicator of trends in the U.S. shale industry, introduced a “stoplight” framework one year ago when it warned of an impending “red light,” suggesting that U.S. shale production had likely peaked amid President Donald Trump’s tariff policies and rising OPEC output.

Over the past year, OPEC’s production has faced constraints due to the effective closure of the Strait of Hormuz, through which typically 20% of the world’s oil and liquefied natural gas flows.

“While our ‘stoplight’ model helped clarify the macro environment over the last year, we are now setting it aside as the situation has shifted to a ‘green light,’” Diamondback CEO Kaes Van’t Hof stated in a letter to shareholders on Monday. “Diamondback is prepared to respond effectively to the current market conditions.”

In the first quarter, Diamondback’s Permian oil production averaged 521,000 barrels per day—surpassing even its highest guidance figure of 512,000 barrels. The company expects to sustain daily output at 520,000 barrels or more for the remainder of the year, up from its previous midpoint forecast of 505,000 barrels.

“Physical crude oil and refined product prices have risen further still, with certain global regions already experiencing shortages and signs of demand destruction,” Van’t Hof wrote. “We see a clear supply-demand imbalance, and this pricing signal presents the necessary incentive to expand production.”

“Thanks to our strategic positioning, readiness, and this price environment, we are moving quickly to bring additional barrels to market,” he added.

Last year, Diamondback reduced its number of active drilling rigs from 17 to 13 as part of its response to the approaching “red light.” After operating 15 rigs earlier this year, Van’t Hof announced plans to increase the fleet to between 17 and 18 rigs.

The company will also raise its well completion—or fracking—crew count from four to five.

An initial priority involves completing previously drilled but uncompleted wells (DUCs) to rapidly boost oil production. At the same time, Diamondback plans to add more drilling rigs to restore activity levels and replenish its inventory of DUCs.

Since the onset of the war, the overall rig count across the industry has remained relatively unchanged. While some independent producers, such as Continental Resources, have ramped up drilling and fracking operations, most major publicly traded companies have maintained their existing capital expenditure plans.

However, Diamondback has decided to modestly increase its 2026 capital expenditures from $3.75 billion to $3.9 billion.

Including natural gas, Diamondback projects total production of at least 972,000 barrels of oil equivalent per day this year—up from its prior midpoint guidance of 944,000 barrels. This would place Diamondback just behind Chevron, which is keeping output near 1 million barrels of oil equivalent per day.

Exxon, the dominant player in the Permian, was already planning to grow its output from 1.7 million barrels per day to 1.8 million this year, with targets to reach 2.5 million barrels by 2030.