The Dallas Fed conducts the Dallas Fed Energy Survey quarterly to obtain a timely assessment of energy activity among oil and gas firms located or headquartered in the Eleventh District. Firms are asked whether business activity, employment, capital expenditures and other indicators increased, decreased or remained unchanged compared with the prior quarter and with the same quarter a year ago. Survey responses are used to calculate an index for each indicator. Each index is calculated by subtracting the percentage of respondents reporting a decrease from the percentage reporting an increase. When the share of firms reporting an increase exceeds the share reporting a decrease, the index will be greater than zero, suggesting the indicator has increased over the previous quarter. If the share of firms reporting a decrease exceeds the share reporting an increase, the index will be below zero, suggesting the indicator has decreased over the previous quarter.
Data was collected Sept. 11–19, and 136 energy firms responded. Of the respondents, 91 were exploration and production firms and 45 were oilfield services firms.
Special questions this quarter focus on the impact of low Waha Hub natural gas prices on activity in the Permian Basin, whether E&P firms plan to ramp up completions once the natural gas pipeline bottleneck clears in the Permian and expectations regarding future pipeline bottlenecks for crude oil in the Permian. Also explored are firms’ plans for electrification of oil fields along with the lead time for electrical components, such as transformers, and the top challenges to electrification.
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In the report, oil and gas sector activity declined slightly in the third quarter of 2024, according to oil and gas executives responding to the Dallas Fed Energy Survey. The business activity index, the survey’s broadest measure of the conditions energy firms face in the Eleventh District, decreased from 12.5 in the second quarter to -5.9 in the third quarter. The business activity index was 0 for exploration and production (E&P) firms compared with -18.1 for services firms, suggesting activity was unchanged for E&P firms but declined for service firms.
According to executives at E&P firms, oil and gas production was mixed in the third quarter. The oil production index increased from 1.1 in the second quarter to 7.9 in the third quarter, suggesting slightly increased oil production. Meanwhile, the natural gas production index declined from 2.3 to -13.3, suggesting decreased natural gas production.
Costs rose but at a slower pace when compared with the prior quarter. The input cost index fell from 42.2 to 23.3 among oilfield services firms. Among E&P firms, the finding and development costs index declined from 15.7 to 9.9. Meanwhile, the lease operating expenses index edged lower from 23.6 to 21.3. Two of the three cost indexes trailed the series average, suggesting costs are growing slower than average.
The equipment utilization index for oilfield services firms turned negative, declining from 10.9 in the second quarter to -20.9 in the third. The operating margin index fell sharply from -13.0 to -32.6, suggesting margins declined at a faster pace. The prices received for the services index were relatively unchanged at -2.3.
The aggregate employment index was unchanged at 2.9 in the third quarter. While this is the 15th consecutive positive reading for the index, the low-single-digit result suggests little to no net hiring. The aggregate employee hours index declined from 8.1 to -2.3. Additionally, the aggregate wages and benefits index decreased from 24.0 to 18.6.
The company outlook index turned negative in the third quarter, plunging 22 points to -12.1, suggesting modest pessimism among firms. The overall outlook uncertainty index jumped 25 points to 48.6, suggesting mounting uncertainty.
On average, respondents expect a West Texas Intermediate (WTI) oil price of $73 per barrel at year-end 2024; responses ranged from $55 to $100 per barrel. When asked about longer-term expectations, respondents, on average, expect a WTI oil price of $81 per barrel two years from now and $87 per barrel five years from now. Survey participants expect a Henry Hub natural gas price of $2.62 per million British thermal units (MMBtu) at year-end. When asked about longer-term expectations, respondents, on average, anticipate a Henry Hub gas price of $3.24 per MMBtu two years from now and $3.89 per MMBtu five years from now. For reference, WTI spot prices averaged $70.82 per barrel during the survey collection period, and Henry Hub spot prices averaged $2.23 per MMBtu.
Next release: January 2, 2025
