The Texas Petro Index, a composite index based on a comprehensive group of upstream economic indicators, reached a record-high 289.8 in August, surpassing the previous record of 288.2 set in July (OGJ Online, Sept. 16, 2013). It was a 4.6% increase compared to the same month in 2012.
The TPI, released by the Texas Alliance of Energy Producers (TAEP), indicated that the rise is attributed to dramatic upward revisions of crude oil production in August along with strong crude prices and strengthening natural gas prices.
Additionally, the estimated number of workers on oil and gas company payrolls reached a record 282,700, according to statistical methods based upon Texas Workforce Commission estimates revised in March.
Crude oil production in Texas totaled 71.1 million bbl, up 16.7% compared with August 2012. Crude oil wellhead prices averaged $103.09/bbl, about 13.7% higher than August of last year. Production gains and higher wellhead prices combined to boost the value of Texas-produced oil by about 32.8% to nearly $7.33 billion.
Estimated Texas gas output was more than 645.3 bcf, a year-over-year monthly decline of 5.8%. Gas prices averaged $3.48/Mcf, 14.1% higher than in August 2012. Higher wellhead prices more than offset the production decline to boost the value of Texas-produced gas to more than $2.25 billion, 7.5% more than in August of last year.
“While still lower than during the gas-driven expansion of Texas E&P activity from 2003 to 2009, [natural gas prices] were solidly improved compared to year-ago levels and, thus, are providing upside support to the TPI rather than acting as a drag,” said Karr Ingham, economist and creator of the TPI.
Texas has experienced a slow and steady increase in rigs drilling this year, but Baker Hughes Inc.’s rig count in Texas averaged 848, 5.9% fewer than in August 2012, when 901 rigs on average were operating. Drilling activity in Texas peaked in September 2008 at a monthly average of 946 rigs before falling to a trough of 329 in June 2009.
About 1,606 drilling permits were issued by state regulators, the lowest August total since 2009 when oil and gas activity was in a steep decline. TPI indicated that the decline could exert downward pressure on upstream oil and gas activity in the coming months. Drilling activity edged down in August as well when compared to August 2012, although recent advancements in technology have enabled operators to drill several wells from the same rig, Ingham noted.
Ingham said, “Nevertheless, the rig count remains an important upstream economic indicator, however, simply because it clearly shows a positive correlation with price—when prices go up, so does the rig count, and when prices go down, the rig count does the same.”
He said, “Ultimately, crude oil pricing will determine the direction of the TPI over the coming months; if prices remain above $100/bbl—or even in the $90-95/bbl range—the rig count will continue its steady improvement, drilling permits will stabilize or increase, and the industry will continue to add jobs. And at this point, all of that seems very likely.”
Before the current economic expansion, the TPI’s previous all-time high of 287.6 occurred in September and October 2008, after which the TPI declined to 188.5 in December 2009 before embarking upon the current growth cycle, the TPI noted.