Kunal Patel of the Federal Reserve Bank of Dallas talks in detail about their most recent Dallas Fed Energy Survey which involved about 200 oil and gas firms.
According to Patel, Activity in the oil and gas sector continued growing strongly in second quarter 2021, according to oil and gas executives responding to the Dallas Fed Energy Survey. The business activity index—the survey’s broadest measure of conditions facing Eleventh District energy firms—remained elevated at 53.0, essentially unchanged from its first-quarter reading.
Oil and gas production increased, according to executives at
exploration and production (E&P) firms. The oil production index
rose from 16.3 in the first quarter to 35.0 in the second quarter—its
second-highest reading since the survey’s inception in 2016. Similarly,
the natural gas production index increased 19 points to 35.0.
The index for capital expenditures increased from 31.0 to 42.4,
indicating an acceleration in capital spending among E&P firms.
Additionally, the index for the expected level of capital expenditures
next year came in at 53.0, up from 49.5 in the first quarter.
Costs are rising. Among oilfield services firms, the index for input
costs rose notably, from 36.0 to 56.0—a record high and suggestive of
significant cost pressures. No oilfield services firms reported a
decrease in input costs this quarter. Among E&P firms, the index for
finding and development costs jumped from 3.9 in the first quarter to
28.3 in the second. Additionally, the index for lease operating expenses
also increased, from -5.9 to 23.4.
Oilfield services firms reported improvement across all indicators.
The equipment utilization index remained positive, though slipping from
63.2 in the first quarter to 42.0 in the second. Operating margins
improved further, with the index increasing from 14.0 to 22.5. The index
of prices received for services rose from 20.0 to 30.0.
The aggregate employment index posted a second consecutive positive
reading, edging up from 8.4 to 9.9. Employment growth continues to be
driven primarily by oilfield services firms. The employment index was
25.5 for services firms versus 2.0 for E&P firms. The aggregate
employee hours index edged up from 22.8 to 24.0. The aggregate wages and
benefits index also increased, from 14.8 to 20.6.
Six-month outlooks improved notably, with the index moving up from
70.6 last quarter to 71.9—the highest reading in the survey’s five-year
history. While uncertainty continued to decline, the aggregate index
increased three points to -19.6.
On average, respondents expect a West Texas Intermediate (WTI) oil
price of $70 per barrel by year-end 2021; responses ranged from $49 to
$85 per barrel. Survey participants expect Henry Hub natural gas prices
of $3.10 per million British thermal units (MMBtu) at year-end. For
reference, WTI spot prices averaged $71 per barrel during the survey
collection period, and Henry Hub spot prices averaged $3.24 per MMBtu.
Next Dallas Fed Survey release: September 29, 2021
About the Dallas Fed Survey
The Dallas Fed conducts a quarterly survey of about 200 oil and gas firms located or headquartered in the Eleventh District—Texas, southern New Mexico and northern Louisiana—which operate regionall...
