In latest Dallas Fed Energy Survey, oil and gas executives report improving outlook, less uncertainty

For Immediate Release: December 28, 2017

DALLAS—Oil and gas business activity gained momentum in the fourth quarter, according to executives responding to the quarterly Federal Reserve Bank of Dallas Energy Survey.

The business activity index—the survey’s broadest measure of conditions among Eleventh Federal Reserve District energy firms—climbed from 27.3 in the third quarter to 38.1 in the fourth, with the increase driven by the exploration and production (E&P) side of the industry.

Positive readings in the survey generally indicate expansion, while readings below zero generally indicate contraction.

“The energy sector is going into 2018 on a positive note,” said Dallas Fed Senior Economist Michael D. Plante. “Growth in activity rebounded a bit relative to last quarter, outlooks improved greatly and there was a modest decline in uncertainty about the future. Responses were strong for both E&P and support services firms this time around, a notable change from recent surveys when many indexes for E&P firms were flagging.”

The index measuring uncertainty about firms’ outlooks declined, registering its first negative reading since the index was introduced in first quarter 2017. This reduced uncertainty was particularly prominent among oilfield services firms.

This quarter’s survey includes a series of special questions about outlooks for rig count, capital spending and long-term crude oil prices. Fifty-one percent of executives said they expect the number of U.S. rigs drilling for oil six months from now to be higher than current levels, while 46 percent said they would be near current levels.

“Oil prices appear to be high enough to support some additional drilling in 2018, but not high enough to significantly boost activity just yet,” Plante said. “A little more than half of respondents think the rig count will be higher six months from now but almost all respondents think West Texas Intermediate crude prices need to be more than $60 to see a substantial increase in the oil rig count.”

Other Survey Highlights:

Oil and gas production increased for the fifth quarter in a row, with responses suggesting production rose at an accelerated rate. The oil production index leaped from 19.3 in the third quarter to 33.7 in the fourth quarter. Likewise, the natural gas production index rose from 17.3 to 26.6.

The company outlook index posted a seventh consecutive positive reading and soared more than 20 points to 52.0 in the fourth quarter.

On average, respondents expect West Texas Intermediate (WTI) oil prices to be $58.98 per barrel by year-end 2018. Expectations for WTI prices three to five years from now centered around $60 to $69 per barrel, with the average response across all executives at $66.16 per barrel, according to responses in the special questions.

The survey samples oil and gas companies headquartered in the Eleventh Federal Reserve District—Texas, southern New Mexico and northern Louisiana. Many have national and global operations.

Data were collected Dec. 13-21, and 134 energy firms responded to the survey. Of the respondents, 77 were exploration and production firms and 57 were oilfield services firms.

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Media contact:
Jennifer Chamberlain
Federal Reserve Bank of Dallas
Phone: (214) 922-6748
E-mail: jennifer.chamberlain@dal.frb.org