The Texas upstream oil and gas economy contracted in November for the 24th consecutive month, according to the Texas Alliance of Energy Producers' Texas Petro Index (TPI).
A composite index based upon a comprehensive group of upstream economic indicators, the TPI fell 1% month-over-month to 148.1, down 26.4% from the November 2015 number (OGJ Online, Dec. 1, 2016). The TPI peaked at 313.5 in November 2014 and lost 52.7% of its value through November 2016.
Karr Ingham, economist and TPI creator, said November could be the low point in the current cycle given stronger crude oil prices and the resulting increases in drilling and permitting activity as well as stable industry employment.
"Of course, no one knows where prices are headed from here," Ingham said. "But momentum continued building during November for higher levels of exploration and production activity and higher prices in 2017 for both crude oil and natural gas."
Ingham calculated the November TPI based upon industry conditions that existed before an agreement by the Organization of Petroleum Exporting Countries and other non-OPEC producers to curtail 1.2 million b/d of production pushed oil prices above $50/bbl in late December.
"The market has clearly accepted that agreement at face value, but whether participating countries will hold to lower volumes has yet to be determined," Ingham said. "But in any case, the agreement will not permanently remove 1.2 million b/d of oil from the global marketplace. Ultimately, a significant portion of that volume will be produced elsewhere-Texas and the US most notably-and there is every possibility that prices will be held in check as a result."
Ingham noted that, regardless of what happens to prices, members of the agreement "in effect have ceded market share to competing producers in Texas and the US, and they'll take it gladly."
November indicators
Estimated crude oil production in Texas during November totaled 93.7 million bbl, down 8.3% from the November 2015 total. With oil prices in November averaging $42.06/bbl, the value of Texas-produced crude came to $3.94 billion, down 1.7% year-over-year.
Texas natural gas output surpassed 649.4 bcf, a year-over-year decline of 8.5%. With gas prices in November averaging $2.38/Mcf, the value of Texas-produced gas increased 7.3% to $1.55 billion.
The Baker Hughes Inc. count of active drilling rigs in Texas averaged 271, down 20.1% year-over-year. Drilling activity in Texas peaked in September 2008 at a monthly average of 946 rigs working before falling to a trough of 329 in June 2009. In the most recent economic expansion, which began in December 2009, the statewide average monthly rig count peaked at 932 in May and June 2012.
The number of original drilling permits issued in November was 673, down 2% from the November 2015 total. The number of permits issued this year through November, 7,104, represented a decline of 27.7% compared with the first 11 months of 2015.
An estimated 205,675 Texans remained on upstream industry payrolls during November based upon revised quarterly data from the Texas Workforce Commission. The total was down 12.1% year-over-year and down 32.8% from the estimated high of 306,020 in December 2014.
According to TPI estimates, the trough of upstream employment in Texas before the expansion ending December 2014 was 184,640 in October 2009. During the previous growth cycle, industry employment peaked at 225,965 in October 2008.
