Moderate oil and gas industry growth reported in Texas but increased costs too

A third quarter report from the Dallas Federal Reserve Bank found moderate growth in the oil and gas industry in Texas.

It was the conclusion of the Dallas Fed Energy Survey which measures conditions faced by energy firms in the Eleventh District. The report said the increased energy activity was driven by the exploration and production side of the business.

While the business activity index for E&P firms jumped from 1.0 in the second quarter to 22.5 in the third quarter, the business activity index for oil and gas support services firms declined from -1.9 to -12.2.

The survey also found oil and natural gas production increased at a faster pace compared with the second quarter. Firms also reported rising costs for an 11th consecutive quarter.

Oilfield services firms reported continuing deterioration in most indicators. The equipment utilization index remained negative but edged up from -7.9 in the second quarter to -4.2 in the third. The operating margin index declined from -21.6 to -30.7. The index of prices received for services was relatively unchanged at 2.1.

Special questions this quarter focus on the energy transition’s expected impact on the price of oil, anticipated global oil consumption in 2050 relative to current levels, the short-term outlook for U.S. oil rigs, cost expectations for next year, impacts on lead times for interconnecting new well pads with the electricity grid in the Permian Basin, and competition with oil and gas support firms for hiring and retaining employees.

Source: press release