War in Iran is unfolding against an already fragile backdrop in the Middle East, with immediate consequences for people across the region as well as for energy flows and the oil and gas sector. It is adding fresh volatility to a market already shaped by geopolitical disruption and fragmentation.

For executives determining how to guide their companies through the uncertainty, two imperatives rise to the top:

• Narrowing attention to a few critical fundamentals. Organizations need a reliable, no-regrets playbook for the short, medium, and long term.
• Proactively managing uncertainty and volatility. Leaders need pragmatic scenarios, clear signals, and proactive management systems to help them respond appropriately as conditions evolve.

This is neither a perspective piece on events in the Middle East nor a toolkit for managing uncertainty and volatility. Our objective is to discuss the critical few fundamentals that will shape success in 2026 and beyond, despite the current conditions. In this moment, leading companies are focusing on strengthening their portfolios, capital efficiency, cash flow, and capabilities.

Portfolio: Scale and resilience

Exploration: Hydrocarbon demand is expected to remain resilient for the foreseeable future, making exploration a critical need for nearly every producer. Yet for more than 10 years, exploration has been deprioritized. Headcount reductions and portfolio high-grading have diluted internal capability, leaving teams smaller and less experienced—even as geological challenges are becoming more subtle and complex.

Unlike prior cycles, the industry does not currently benefit from step-change technology advancements—such as 3D Seismic, amplitude vs. offset/direct hydrocarbon indicator, and wide-azimuth towed streamer subsalt imaging—that materially improved success rates over the past 30 years. Digital and AI technologies have yet to unlock step-change innovations in exploration.

Ramping up exploration and converting activity into commercial discoveries will be slower, costlier, riskier, and far more competitive than many expect, and we are unlikely to see substantial increases in exploration capex. Building a high-quality, modern exploration capability is a critical differentiator, and potentially an existential need. Companies that explore successfully in the next decade will dramatically outpace peers in portfolio quality and capital efficiency. Those that fail will be forced to pay escalating premiums to acquire resources, while those lacking both capability and balance sheet flexibility will face more fundamental risk.

M&A: Scale independents and specialized players have been attractive targets for the majors. Several national oil companies (NOCs) have substantial global portfolio aspirations, M&A appetites, and funds.

Inorganic competition for scarce tier-1 resources is always fierce. Current industry dynamics—including shortfalls in medium-term economic reserves and underdeveloped exploration pipelines and capabilities—will further escalate competition. US supermajors and large NOCs are emerging as master consolidators across the value chain. However, there is a real risk of overpaying to add or replenish scale in 2026–2027. Attractive targets are growing scarce, and proven reserves are fully valued, making it more difficult to find value-accretive acquisitions. In this environment, the best acquirers stick to the fundamentals: a clear investment thesis and integration discipline. Value creation requires finding assets that improve or transform the portfolio, not simply add reserves or capacity.

Smart combinations: Beyond M&A, players are combining assets into non-operated ventures to capture the benefits of local scale. This allows for leaner portfolios and increased cash flow from aging assets, with the potential to become new growth vehicles. Spin-offs and independent joint ventures can find value in low-production, low-growth (or negative-growth) assets. International oil companies (IOCs) and NOCs are finding functionally independent exploration and production structures useful for creating scale, reducing overhead, increasing productivity, and expanding access to capital.

New collaborations: Leading NOCs, IOCs, and the largest infrastructure funds should collaborate globally. Each participant typically approaches the industry with a different mandate, which shapes their priorities, behaviors, and definitions of value creation. Collaboration models can use these differences, allowing each party to optimize its benefits from assets or projects. For example, IOCs can pursue profit upside, while NOCs monetize reserves and infrastructure funds generate stable returns. Setting a clear collaboration agenda can help companies identify how to benefit from these opportunities.

Capital efficiency: Quality projects, productive execution

Opportunity and concept quality: In major capital projects, much of the value creation (or destruction) is pre-cast by early-stage decisions, such as portfolio decisions that enable access to quality opportunities or concept selection decisions that lock in risk, infrastructure design, customization vs. standardization approaches, and commercial parameters. This is particularly acute upstream, where each project seems more technically challenging and higher risk than the last—and where teams may lack the experience or technical capability of their predecessors.

Early-stage investment decisions made this year will shape returns for years to come. In the short term, companies have two ways to create value: first, re-challenging 2026–2027 capital allocations with a cross-functional team to ensure planned investment is sufficiently skewed toward the highest-quality early-stage opportunities, and second, conducting rapid sprints on in-flight concept selection decisions to stress-test the option set and commercial assessment. Even well-designed execution strategies may offer opportunities for improved cash flow; for example, through additional phasing, earlier production, or creative financing from suppliers or customers.

Project execution: Project performance is just as important to cash flow as operational performance. We consistently see opportunities in post-final investment decision projects to de-bottleneck the critical path, deploy AI tools, and optimize capital costs—without compromising risk, process, or personal safety—within the confines of the predetermined concept selection. Even the most experienced developers and late-stage projects can find opportunities to uncover additional value.

Cash flow: Volume, cost, and commercial excellence

Performance playbooks: Performance drivers such as reliability, availability, unit costs, and price realization attract significant attention today. But there’s a difference between performance improvement and performance leadership.

Achieving today’s benchmark rarely creates future leadership. Instead, it converges performance toward the mean and often leads to a sprawling list of initiatives. A more powerful approach is to assess the full potential of each operated asset based on its unique operating environment. Drawing on first-principles modeling, organizations can:

• Identify the critical few initiatives that will materially improve production efficiency, recovery, uptime, cost position, or price realization in 2026.
• Embed AI where it supports the most important value tactics, rather than launching multiple pilots and use cases.
• Sequence resources behind those priorities, rather than spreading effort across a long list of marginal improvements.

Trading and flexibility: Trading is taking on greater strategic and performance importance—as a volatility buffer, a complement to upstream portfolios, or a profit center. Many players are seeking to strengthen their trading systems, capabilities, and portfolios. They’re also rethinking monetization from assets such as logistics, which are well positioned to react quickly and capture arbitrage opportunities. Geopolitical uncertainty and short-term price volatility in oil, liquefied natural gas, and refined products are extremely high right now—and so is the potential for value creation from a skilled trading function with short-term flexibility.

Organization: Competitive advantage vs. cost center

Talent: Most major oil and gas companies have revisited operating model design and headcount reduction in the last 12–18 months. That is not the same as talent strategy. In some cases, recent workforce changes run counter to the talent needs of the future (we’ve commented above on gaps in exploration, major projects, and trading, as examples). For many companies, how technical work gets done is changing too—with migration of core work to global capability centers, and with the application of AI across technical workflows. The critical question now is where to invest more in talent this year and next, without reversing cost discipline.

AI capability: In our recent global survey of energy executives, fewer than 20% of respondents reported measurable impact from AI. The primary reasons were a lack of clarity on the link to business value and a shortage of expertise and talent. Overcoming these bottlenecks requires combining business with technical capabilities and internal with external capabilities. In 2026, companies are balancing speed to value with future-proofing competitive advantage.

Many organizations are wrestling with the right partnership strategy for the digital and AI ecosystem. Oil and gas companies must determine where they can find competitive advantage and value in an ecosystem that has access to increasingly commoditized industry data and cutting-edge models and analytics. How can they access scalable, leading-edge capabilities without creating dependencies or ceding value?

Proprietary data—such as reservoir, operational, and project execution data—is a prized asset for oil and gas companies. For many NOCs, that data may be more valuable than comparable IOC data because it typically is not publicly disclosed and is therefore less well understood outside the company. The critical questions become: Where is the hidden value in their proprietary data? And which partnerships, internal capabilities, or resourcing efforts will unlock real business value in 2026?

Exploration is a prime example of where technology could unlock significant value and competitive advantage. A small number of high-value deployments in the right areas is more likely to deliver results than further proliferation of disconnected experiments.

The future requires disciplined focus on a few fundamentals

Executing on these fundamentals with discipline in 2026 will build both near-term and long-term success. Performance focus is no longer cyclical and corrective; it should become a permanent objective for management teams.

In 2026 and beyond, oil and gas companies that strengthen their portfolios, deploy capital efficiently, and drive cash flow leadership will be better positioned to achieve and sustain results.