Newest Fed Survey says Oil Activity Up, but Slower
Oil and gas activity essentially unchanged; optimism wanes as uncertainty jumps.
Activity in the oil and gas sector was essentially unchanged in fourth quarter 2023, according to oil and gas executives responding to the Dallas Fed Energy Survey. The business activity index, the survey’s broadest measure of conditions energy firms in the Eleventh District face, remained positive but slipped from 10.9 in the third quarter to 3.6 in the fourth quarter. The business activity index was 7.5 for E&P firms versus -4.2 for services firms, suggesting activity slightly grew for E&P firms, but declined slightly for service firms.
Oil production increased but at a significantly slower pace compared with the prior quarter, according to executives at E&P firms. The oil production index remained positive but fell from 26.5 in the third quarter to 5.3 in the fourth. Meanwhile, the natural gas production index edged up from 15.4 to 17.9.
Among oilfield services firms the input cost index remained positive, but slipped from 33.4 to 21.3. Among E&P firms, the finding and development costs index rose from 18.3 to 24.4. Meanwhile, the lease operating expenses index moved down from 25.6 to 22.6.
Oilfield services firms reported modest deterioration in nearly all indicators. The equipment utilization index moved down from -4.2 in the third quarter to -8.4 in the fourth quarter. The operating margin index was relatively unchanged at -32.0. The index of prices received for services turned negative and fell from 2.1 to -6.2.
The aggregate employment index was relatively unchanged at 4.2 in the fourth quarter. The aggregate employee hours index remained positive but fell from 9.6 in the third quarter to 2.8 in the fourth quarter. Meanwhile, the aggregate wages and benefits index edged down from 24.5 to 21.2.
The company outlook index turned negative in the fourth quarter and plunged 48 points to -12.4, suggesting some pessimism among firms. The company outlook for E&P firms changed more drastically, as the company outlook index for these firms fell sharply from 46.8 to -9.0. The overall outlook uncertainty index jumped 39 points to 46.1, suggesting mounting uncertainty.
On average, respondents expect a West Texas Intermediate (WTI) oil price of $78 per barrel at year-end 2024; responses ranged from $51 to $110 per barrel. Survey participants expect a Henry Hub natural gas price of $3.09 per million British thermal units (MMBtu) at year-end. For reference, WTI spot prices averaged $69.77 per barrel during the survey collection period, and Henry Hub spot prices averaged $2.48 per MMBtu.
Data were collected Dec. 6–14, and 144 energy firms responded. Of the respondents, 96 were exploration and production firms and 48 were oilfield services firms.
E&P firms were first asked to define their size based on fourth quarter 2023 crude oil production. They were then asked if they had any of the following plans: reduce carbon emissions; reduce methane emissions; reduce flaring; recycle/reuse water; invest in renewables. Respondents could choose more than one answer for this special question.
In the U.S., small E&P firms are greater in number, but large E&P firms make up the majority of production (more than 80 percent). For the large firms, 53 percent of executives said their firms plans to reduce CO2 emissions, 68 percent indicated plans to reduce methane emissions, 79 percent to reduce flaring, 42 percent to recycle/reuse water and 11 percent to invest in renewables.
For the small firms, 22 percent of executives said their firms plan to reduce CO2 emissions, 34 percent anticipate reducing methane emissions, 18 percent plan to reduce flaring, 27 percent plan to recycle/reuse water and 4 percent to invest in renewables. Among the smaller firms, 51 percent said they have no mitigation plans, compared with 11 percent of large E&P firms.
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