A new Kansas City Federal Reserve Bank survey found that energy activity in Oklahoma and other states that make up the district took a sharp drop in the fourth quarter and things are not likely to improve in the next six months.
The quarterly Energy Survey showed companies in the states that make up the 10th District of the Federal Reserve want higher prices in order to make any profit. The Federal Reserve Bank of Kansas City is located in Kansas City, Missouri, and covers the 10th District of the Federal Reserve, which includes Colorado, Kansas, Nebraska, Oklahoma, Wyoming, and portions of western Missouri and northern New Mexico. It is second only to the Federal Reserve Bank of San Francisco in size of geographic area served.
“Our company is not making money at current oil prices. We do not see that current reserve development is warranted,” replied one company representative while another declared, “We need help in prices.”
Firms reported that oil prices needed to be on average $61 per barrel for drilling to be profitable, and $75 per barrel for a substantial increase in drilling to occur. Natural gas prices needed to be $3.80 per million Btu for drilling to be profitable on average, and $4.89 per million Btu for drilling to increase substantially.
“Tenth District drilling and business activity decreased to its lowest level since 2020,” said Cortney Cowley, assistant vice president and Oklahoma City Branch executive at the Federal Reserve Bank in Kansas City.
“One reason for these declines was that WTI oil prices fell below District firms’ average profitable price of $61 per barrel in Q4 2025. Moving forward, the outlook for investment in 2026 is mixed, with similar shares of firms planning to increase investment, decrease investment, or leave it unchanged.”
Fourth quarter energy survey results showed that Tenth District energy activity fell sharply, with further contraction expected in the next six months. Firms reported that oil prices needed to be on average $61 per barrel for drilling to be profitable, and $75 per barrel for a substantial increase in drilling to occur. Natural gas prices needed to be $3.80 per million Btu for drilling to be profitable on average, and $4.89 per million Btu for drilling to increase substantially.
Summary of Quarterly Indicators
The bank’s quarterly indicators showed quarter-over-quarter drilling and business activity was down and revenues and profits fell “further from their lowest levels in two years.” Drilling activity also decreased from this time last year as revenues and profits fell further. Firms also anticipate further declines in drilling activity.
Summary of Special Questions
Firms were asked what oil and natural gas prices were
needed on average for drilling to be profitable across the
fields in which they are active. The average oil price needed
was $61 per barrel, while the average natural gas price needed was $3.80 per million Btu.
Firms were also asked what prices were needed for a substantial
increase in drilling to occur across the fields in which they
are active. The average oil price needed was $75 per barrel, and the average natural gas price needed was $4.89 per million Btu.
Firms reported what they expected oil and natural gas
prices to be in six months, one year, two years, and five
years. The average expected WTI prices were $57, $62, $69,
and $73 per barrel, respectively. The average expected
Henry Hub natural gas prices were $3.69, $4.05, $4.35, and
$4.93 per million Btu, respectively.
Firms were asked their expectations for capital spending
and employment levels for 2026 compared to 2025 (Chart
4). Expectations for capital expenditures were mixed, with
9% expecting a significant increase, 29% a slight increase,
34% expecting similar levels to 2025, 17% expecting a
slight decrease, and 11% expecting a significant decrease. A
majority of firms (60%) expect employment to remain close
to 2025 levels, while 3% expect a significant increase, 9%
expect a slight increase, 25% expect a slight decrease, and
another 3% expect a significant decrease.
Contacts were also asked how they expect rising U.S.
power demand to affect natural gas demand, prices, and
drilling activity relevant to their firm over the next five
years. A majority of firms (62%) expect it will modestly
increase demand and support somewhat higher prices and
drilling activity, and another 29% expect it will materially
increase demand and support substantially higher prices and
drilling activity. Only 9% expect little effect on demand,
prices, or drilling activity.
Selected Energy Survey Comments
“Our company is not making money at current oil prices. We do not see that current reserve development is warranted.”
“We need help in prices.”
“Lots of uncertainty but better long-term prospects.”
“High OPEC production pushing down global oil price.”
“I am hopeful if oil prices fall below $55, that Permian producers will cut back and that will lower supply and we can see a rebound late 2026.”
“It looks like demand should build slowly.”
“Low capital investment will eventually lead to tighter supply. Inflation drivers will push prices up.”
“The sweet spot for oil prices where companies make acceptable profits, but it’s not too high to impact economic activity is $70-$80/barrel.”
“AI energy requirements will create more demand for natural gas.”
“Adequate supply to meet forecasted demand.”
“The shoulder months with lower demand have weak pricing, and I think we keep seeing that until data center and LNG demand is large enough to compete with injections.”
“A lot of new demand with LNG and electric generation, but gas is plentiful and fairly quick to bring online. Infrastructure seems to be catching up.”