This study examined the intricate capital structure and firm performance nexus, focusing on retained earnings in the Nigerian oil and gas industry. The determination of the appropriate capital structure mix between a firm’s debt and equity is the springboard of its profitability or collapse. The focus on Nigeria as a major player in the global oil and gas market provides an intriguing motivation for the investigation of the intricate dynamics between capital structure and firm performance metrics, particularly retained earnings, ignored in previous studies despite the significance of retained earnings in policy formulation, liquidity management, and market value of oil and gas firms in Nigeria. We used a sample of eight oil and gas firms and the pooled mean group autoregressive distributed lag model. The results revealed a positive long-run nexus among capital structure, retained earnings, market value, and performance from 2001 to 2022. The results showed that firms in the oil and gas trust on short-term debts for their operational and business activities. The nexus between retained earnings and the capital structure mix indicates that the higher a firm’s earnings retention is, the faster its growth chances. An inverse nexus was observed between long-term debts, retained earnings, market value, and performance. Generally, the findings of this study support the MM 1963 capital structure relevant proposition and are consistent with the trade-off theory and the pecking order theory.