The Rising: Texas Energy’s Outlook

Oil and gas production, use of oilfield equipment, and jobs and employee hours were all on the rise in the first quarter.

Texas’ energy sector continues to improve, according to the Federal Reserve Bank Dallas’ first-quarter Energy Survey.

Oil and gas production and use of oilfield equipment showed improvements, and jobs and employee hours grew.

The survey’s business activity index — the survey’s broadest measure of conditions facing energy firms in the Fed’s Eleventh District — grew to 40.7 percent in the first quarter from 38.1 in the fourth. That was driven, the Fed said, by oilfield services. Positive readings in the survey generally indicate expansion, while readings below zero indicate contraction. “Almost all indexes in the latest survey reflected expansion on a quarterly basis,” the Fed Bank Dallas said.

Oil and gas production increased for the sixth straight quarter, according to executives at exploration and production firms, the survey said. “The oil production index ticked up slightly from 33.7 in the fourth quarter to 34.3 in the first. Meanwhile, the natural gas production index edged down from 26.6 to 25.0.”

Utilization of oilfield equipment “increased at a faster pace than in the fourth quarter, with the corresponding index at 40.4, up 11 points,” the survey said. “The index of input costs jumped from 30.9 to 46.8, suggesting greater cost pressures. The index of prices received for oilfield services rose more modestly, from 22.6 to 27.9.”

On the labor side, indexes “continue to point to rising employment and employee hours, with job growth primarily driven by oilfield services firms,” the survey said. “The employment index was 37.1 for services firms versus 9.0 for E&P firms. The employee hours indexes also showed a large gap: 41.9 for services firms versus 16.9 for E&P firms. The aggregate wages and benefits index advanced from 25.5 to 33.8, with most of the increase coming from the oilfield services side of the industry.”

The company outlook index posted its eighth straight positive reading but fell nine points to 43.2 in the first quarter. “Uncertainty regarding firms’ outlooks was roughly unchanged this quarter,” the survey said.

On average, survey respondents expected West Texas Intermediate oil prices to be $63.07 per barrel by year-end 2018, with responses ranging from $45 to $77 per barrel. Crude spot prices averaged $62.72 per barrel during the March 14-22 survey period, with 140 firms responding to the survey, the Fed said. Of the respondents, 78 were exploration and production firms, and 62 were oilfield services firms.