Energy sector activity grew modestly in first quarter 2019, according to oil and gas executives responding to the Dallas Fed Quarterly Energy Survey.
Data were collected March 13–21, and 166 energy firms located or headquartered in the Eleventh District—Texas, southern New Mexico, and northern Louisiana—responded to the survey. Of the respondents, 104 were exploration and production firms and 62 were oilfield services firms.
The business activity index—the survey’s broadest measure of conditions facing Eleventh District energy firms—came in at 10.8 in the first quarter, up from 2.3 in the fourth quarter but well below the average level seen over the past few years. Oilfield services firms drove much of the increase, with their business activity index jumping from 0.0 to 16.1.
Positive readings in the survey generally indicate expansion, while readings below zero suggest contraction.
Oil and gas production increased for the 10th consecutive quarter, according to E&P executives. However, the oil production index fell from 29.1 in the fourth quarter to 21.1 in the first quarter, indicating a slower rate of growth. The natural gas production index also slipped, from 24.8 to 16.7.
Among oilfield services firms, the index for utilization of equipment jumped sharply to 16.4 in the first quarter, gaining 15 points. Input costs continued to increase but at a slower pace, with the index declining from 36.7 to 25.0.
Meanwhile, the index of prices received dipped into negative territory to -1.7, suggesting a minor decline in oilfield services prices from last quarter. The index for operating margins, at -6.6, indicates narrowing margins for oilfield services firms during the first quarter relative to the fourth quarter.
Employment and employee hours continued growing but at a slower pace than last quarter. The aggregate employment index dropped to 6.0 from 13.8. The aggregate employee hours worked index also edged down, from 12.1 to 9.7. The index for aggregate wages and benefits came in at 23.5, down from last quarter but still indicative of strong growth in wages and benefits.
The company outlook index rebounded into positive territory this quarter, jumping 34 points to 23.3. While uncertainty continues to intensify, markedly fewer firms noted rising uncertainty this quarter than last, and the index fell 24 points to 18.6.
Expectations for West Texas Intermediate (WTI) oil prices at year-end 2019 are roughly in line with current prices, with respondents on average projecting $60.19/bbl. That compares with the $59.10 average seen during the survey collection period. Responses ranged from $43 to $76.
On average, respondents expect Henry Hub natural gas prices to be $2.96/Mmbtu at the end of 2019. Responses ranged from $2.15 to $5.00. For reference, Henry Hub spot prices averaged $2.89/MMBtu during the survey collection period.
