Index: Texas oil and natural gas production industry on the mend

Paula Dittrick
Senior Staff Writer
HOUSTON, May 19 -- The Texas oil and natural gas production industry has fully recovered from the 2002 recession and is positioned for growth throughout 2003, indicated a newly released Texas Alliance-Wells Fargo Petroleum Index.

The index reflects numerous Texas oil and gas production and exploration indicators incorporating commodity prices, rig counts, drilling permits, oil and gas completions, production volumes, and industry employment. Statistics include figures from the Baker Hughes Inc. rig count and the Texas Railroad Commission.

The Texas Alliance of Energy Producers organized the index, and Wells Fargo Bank NA sponsored it. The alliance is a statewide organization representing 2,000 members. The alliance was created in 2000 with the merger of the North Texas Oil & Gas Association and the West Central Texas Oil & Gas Association.

The index, released at a Monday news conference, has been under development for a year.

"The index typically has a lot of momentum behind it, too, which means growth should continue for at least the balance of 2003, " said Karr Ingham, an oil industry economist who created the index, which will be released monthly. He is president of the Amarillo, Tex.-based Ingham Economic Reporting.

Price cycles
Price instability is the enemy of both producers and consumers of petroleum products, Ingham said, adding the petroleum index has recorded the nature of cyclical price swings in Texas oil and gas production.

The index is based at 100 in January 1995. The state's petroleum economy experienced strong growth through the fall of 1997 when prices began to retreat and oil patch activity rapidly followed. The index topped at 119.6 in November 1997, and then began a 19-month, 30% slide.

"The oil production industry in Texas has experienced some vicious cycles, particularly in 1998 and early 1999. However, the state's petroleum economy has improved over 50% since June 1999, the lowest point of the index (83.7), and some 10% since the most recent downturn was completed in November 2002," Ingham said. The index for March 2003 was 128.1.

The composite nature of the index proved its value in 2002 as prices recovered and stabilized above $20/bbl on the New York Mercantile Exchange. But drilling activity failed to follow last year despite favorable prices.

"Exactly why this occurred is educated guesswork, but it seems apparent that Texas producers, having become more sophisticated about the nature of price movements realized that prices in 2002 contained something of a 'war premium' and were based less on market realities than on speculation about what might happen in the Middle East," Ingham said.

As strong prices held steady late in 2002, activity began to increase, resulting in the current strong upward move in the index, he said.

Index uses
Timothy H. Murray, Wells Fargo executive vice-president and energy group manager, said he believes the index will be "a more insightful index" than others already available because this one compiles so many elements into its composite number.

"It evaluates the risk of investing in this industry whether it's financial capital or human resources capital," Murray said. He said it would be helpful to bankers, particularly smaller community banks.

Producers also can learn about industry trends from the index, said Roy Pitcock Jr., Texas Alliance chairman. Having a family oil and gas business in Graham, Tex., Pitcock said he particularly was interested in the employment figures and the drilling permit statistics.

More emphasis on gas
Ingham said data covered by the index from 1995 until now shows mostly peaks and valleys with very few level periods that lasted for very long. "A gas-driven economy could be the stabilizing factor," he said. Traditionally, Texas has been very responsive to oil prices, but he said he has seen the industry place a greater emphasis on natural gas in the last 18 months.

Murray said he is bullish on gas prices, adding that Wells Fargo predicts that NYMEX gas prices are unlikely to drop below $4/Mcf anytime this year. Some people are saying gas prices are unlikely to drop below $5/Mcf this year, he added.

"Depend on storage levels, we could see a dilemma this fall," Murray said. A gas supply shortage would drive up prices.

"We could see a pretty dramatic drop in oil prices," Murray acknowledged, adding it depends upon what happens with Iraq production.

Ingham said he expects to see "vibrant" industry activity throughout 2003. He said NYMEX oil prices of $20-25/bbl and gas prices of $4-5/Mcf "create a price environment that is good" for both consumers and producers.
Contact Paula Dittrick at

Related Articles

PHMSA proposes pipeline accident notification regulations

07/02/2015 The US Pipeline and Hazardous Materials Safety Administration has proposed new federal oil and gas pipeline accident and notification regulations. ...

BHI: US oil rig count rises for first time in 30 weeks

07/02/2015 A sudden 12-unit jump in oil-directed rigs during the abbreviated week ended July 2 represented their first rise since Dec. 5, 2014, and helped lif...

FourPoint Energy to acquire Anadarko basin assets from Chesapeake

07/02/2015 FourPoint Energy LLC, a privately owned Denver company, plans to acquire oil and gas assets from Chesapeake Energy Corp. subsidiaries Chesapeake Ex...

Puma Energy completes purchase of Murco’s UK refinery, terminals

07/02/2015 Singapore-based Puma Energy Group Pte. has completed its purchase of UK midstream and downstream assets from Murco Petroleum Ltd., a subsidiary of ...

BP to settle federal, state Deepwater Horizon claims for $18.7 billion

07/02/2015 BP Exploration & Production Inc. has agreed in principle to settle all federal and state claims arising from the 2010 Deepwater Horizon inciden...

MARKET WATCH: NYMEX oil prices plummet on crude inventory build, Iran deadline extension

07/02/2015 Oil prices plummeted more than $2/bbl July 1 to settle at a 2-month low on the New York market after a weekly government report showed the first ri...

API to issue recommended practice to address pipeline safety

07/01/2015 The American Petroleum Institute expects to issue a new recommended practice in another few weeks that addresses pipeline safety issues, but the tr...

Shell Midstream Partners takes interest in Poseidon oil pipeline

07/01/2015 Shell Midstream Partners LP has completed its acquisition of 36% equity interest in Poseidon Oil Pipeline Co. LLC from Equilon Enterprises LLC, a s...

Shell makes FID on Appomattox deepwater development in Gulf of Mexico

07/01/2015 Royal Dutch Shell PLC has taken a final investment decision (FID) on the Appomattox deepwater development, authorizing construction and installatio...
White Papers

Definitive Guide to Cybersecurity for the Oil & Gas Industry

In the Oil and Gas industry, there is no single adversary and no single threat to the information tech...

UAS Integration for Infrastructure: More than Just Flying

Oil and gas companies recognize the benefits that the use of drones or unmanned aerial systems (UAS) c...

Solutions to Financial Distress Resulting from a Weak Oil and Gas Price Environment

The oil and gas industry is in the midst of a prolonged worldwide downturn in commodity prices. While ...
Sponsored by

2015 Global Engineering Information Management Solutions Competitive Strategy Innovation and Leadership Award

The Frost & Sullivan Best Practices Awards recognise companies in a variety of regional and global...
Sponsored by

Three Tips to Improve Safety in the Oil Field

Working oil fields will always be tough work with inherent risks. There’s no getting around that. Ther...
Sponsored by

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by
Available Webcasts

Better Data, Better Analytics, Better Decisions

When Tue, Oct 27, 2015

The Oil & Gas industry has large amounts of data stored in multiple systems which are purpose built for certain tasks. However, good decisions require insights based upon the data in all of these systems. These systems in turn do not talk to each other. So the process of analyzing data, gaining insights, and making decisions is a slow one and often a flawed one. Good decisions require accurate analytics and accurate analytics require superior/sustainable data quality and governance. This webinar focuses on:

  • The importance of data quality and governance
  • How technological advances are making data quality and governance sustainable in order to get the accurate analytics to make solid decisions.

Please join us for this webcast sponsored by Seven Lakes Technologies and Noah Consulting.


Operating a Sustainable Oil & Gas Supply Chain in North America

When Tue, Oct 20, 2015

Short lead times and unpredictable conditions in the Oil & Gas industry can create costly challenges in supply chains. By implementing a LEAN culture of continuous improvement you can eliminate waste, increase productivity and gain end-to-end visibility leading to a sustainable and well-oiled supply chain.

Please join us for this webcast sponsored by Ryder System, Inc.


On Demand

Leveraging technology to improve safety & reliability

Tue, Sep 22, 2015

Attend this informative webinar to learn more about how to leverage technology to meet the new OSHA standards and protect your employees from the hazards of arc flash explosions.


The Resilient Oilfield in the Internet of Things World

Tue, Sep 22, 2015

As we hear about the hype surrounding the Internet of Things, the oil and gas industry is questioning what is different than what is already being done. What is new?  Using sensors and connecting devices is nothing new to our mode of business and in many ways the industry exemplifies many principles of an industrial internet of things. How does the Internet of Things impact the oil and gas industry?

Prolific instrumentation and automation digitized the industry and has changed the approach to business models calling for a systems led approach.  Resilient Systems have the ability to adapt to changing circumstances while maintaining their central purpose.  A resilient system, such as Maximo, allows an asset intensive organization to leverage connected devices by merging real-time asset information with other critical asset information and using that information to create a more agile organization.  

Join this webcast, sponsored by IBM, to learn how about Internet of Things capabilities and resilient systems are impacting the landscape of the oil and gas industry.


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!


Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected