Third-quarter oil and gas activity in the Eleventh Federal Reserve District encompassing Texas, southern New Mexico, and North Louisiana expanded for a sixth straight quarter, but growth slowed compared with the second quarter, according to the latest Federal Reserve Bank of Dallas Energy Survey of upstream industry executives in the region.
The survey's business activity index-its broadest measure of conditions among Eleventh Federal Reserve District industry firms-fell to 27.3 in the third quarter from 37.3 in the second quarter. Positive readings in the survey generally indicate expansion, while readings below zero generally indicate contraction.
"Oil prices continued to be depressed this quarter relative to the start of the year, and this has restrained growth in the sector," said Dallas Fed Senior Economist Michael D. Plante. Firms also were impacted by Hurricane Harvey.
A little more than half of responding oil and gas executives said the storm had a slight negative impact on their business. However, most respondents expect that their business will not be negatively affected 6 months from now.
"When asked about the broader energy sector-which includes refineries-many believe there will be some minor lingering effects 6 months from now," said Plante.
When asked about where they think US crude oil production will stand at the end of 2018, 30% of respondents said they see it between 9.5-9.99 million b/d, and 39% said they see it between 10-10.49 million b/d.
Third-quarter oil and gas production, meanwhile, increased for a fourth quarter in a row, according to executives at exploration and production firms. The survey's oil production index rose to 19.3 in the third quarter from 10.2 in the second quarter, while the natural gas production index rose to 17.3 from 10.6.
Labor market indexes point to rising employment and employee hours, albeit at a slower pace than last quarter, the survey indicated. Growth in employment was driven primarily by oil field services firms. The employment index was 24.6 for services firms vs. 5.2 for E&P firms.
The company outlook index posted a sixth consecutive positive reading and rose to 28.2 in the third quarter from 20.3 in the second quarter. The uncertainty index regarding the outlook plunged to 4.9 from 35. Just 22.5% of firms reported increased uncertainty about the future, down from 46.7% last quarter.
On average, respondents expect West Texas Intermediate oil prices to be at $50.20/bbl by yearend, with responses ranging from $40/bbl to $63/bbl. WTI spot prices averaged $49.91/bbl during the survey collection period.
Survey data were collected Sept. 13-21. Of the respondents, 78 were E&P firms and 65 were oil field services firms.
