Publication When growth no longer pays: re-thinking value for oil and gas companies
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Executive Summary
Over the past fifteen years, the energy sector has underperformed every other MSCI sector. The major oil and gas companies are pledging a new era of "capital discipline" to create long-term value.[1] Yet while their shareholder distributions have risen as a share of cash use over the past 10 years, company strategies remain firmly anchored to continuing exploration and growing production.
Building on recent research that focused on BP's value-erosive strategy,[2] ACCR assessed ten major oil and gas companies. We tested whether exploration and production growth is really the best way for these companies to deliver value. For each company, we compared the value of proceeding with planned upstream investment to returning capital to shareholders. In every case, we found that returning capital delivered greater value.
Global conventional oil and gas exploration is becoming less successful, more expensive and is taking longer. Project execution – a critical driver of value – has typically been poor, with projects delivered late and over budget. The addressable market for oil and gas is diminishing as more sectors electrify. Despite this, the oil and gas majors are assuming that oil prices in 2030 will be around 17% higher than those implied by the forward curve.
While ceasing upstream investment comes with significant complexities – many beyond the financial – this research provides a compelling case for ending exploration and sharply curtailing investment in discovered fields. It is intended to support investors in their discussion about how to steward the oil and gas industry, in the face of increasing uncertainty, and with fewer options for creating shareholder value.
Key findings
Our analysis of ten oil and gas companies shows that ceasing conventional upstream exploration and development is more valuable than continuing it. Looking at these companies’ conventional exploration and development portfolios planned to 2035, we found:
- ceasing exploration and development and returning cash to shareholders would create a $78 billion[3] uplift in net present value (NPV)
- across all ten companies, avoided exploration costs are the largest source of potential value
- all ten companies would be more valuable as a production company than as an exploration and production company.
If all ten companies analysed ceased developing new conventional projects, they would remain large oil and gas producers for decades. Cumulative production would reduce by 10% to 2050, compared to continuing a BAU strategy.
The financial case for exploration is weak and getting worse. We found that, on average, every $1 spent on global conventional exploration by the sector since 2000 has eroded $0.71c. Conventional exploration is five times more expensive and taking almost twice as long compared to three decades ago.
Download a PDF of When growth no longer pays: Re-thinking value for oil and gas companies | 10/12/25
See slide 23 for more detail. ↩︎
ACCR, Moving BP from rhetoric to action on capital discipline, November 2025, https://www.accr.org.au/research/moving-bp-from-rhetoric-to-action-on-capital-discipline/ ↩︎
All $ currency values are USD. ↩︎
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