Oil and gas expansion hits its stride, says Dallas Fed Energy Survey
For Immediate Release: June 27, 2018
DALLAS—Energy sector activity expanded strongly in second quarter 2018, according to executives responding to the 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—rose from 40.7 in the first quarter to 44.5 in the second—the highest level since the survey began in 2016. The increase was driven by both exploration and production (E&P) and oilfield services firms.
Positive readings generally indicate expansion, while readings below zero generally indicate contraction. Almost all indexes in the latest survey reflected expansion on a quarterly basis.
“Growth in the oil and gas sector remained robust in the second quarter, with our activity index coming in at its highest level since the Dallas Fed Energy Survey launched,” said Dallas Fed Senior Economist Michael D. Plante. “Survey responses also point to a healthy labor market, with labor-related indexes indicating more rapid growth in employment and longer work hours in the sector.”
This quarter, respondents were asked special questions about labor market issues in the oil and gas sector and constraints impacting activity in the Permian Basin and other areas.
“Although activity in the oil and gas sector continued to grow at a rapid clip, some respondents noted potential impediments that might limit activity in the near-term future,” Plante said. “These concerns were particularly strong in the Permian Basin, where many executives mentioned limited crude oil pipeline capacity and problems finding workers as issues that might constrain activity. Cost inflation was also mentioned frequently, both inside and outside of the Permian Basin.”
Survey highlights include:
Oil and gas production rose for the seventh quarter in a row, according to executives at E&P firms. The oil production index advanced from 34.3 in the first quarter to 39.0 in the second, and the natural gas production index moved up from 25.0 to 33.4. Both indexes are at their highest levels since the survey began.
Labor market indexes pointed to more rapid growth. The employment index was 44.1 for services firms and 11.6 for E&P firms—the highest levels for both indexes since the survey began. The hours worked indexes were at or near all-time highs.
Costs continue to rise. Utilization of oilfield services firms’ equipment increased at a slightly faster pace than in the first quarter, with the corresponding index at 42.1. Input costs continued rising but at a slower pace than last quarter as the index of input costs fell from 46.8 to 36.3. The index of prices received for oilfield services ticked down from 27.9 to 23.2.
Many firms report no trouble hiring. Among all executives, 31 percent noted that their firm was having problems hiring, while 69 percent noted that their firm was not having problems hiring. Among support services firms, 47 percent of executives responded that they were having problems hiring, while only 18 percent of E&P firms noted problems hiring. Many firms report they are increasing wages and/or benefits to recruit and retain employees.
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 June 13–21, and 137 energy firms responded to the survey. Of the respondents, 78 were exploration and production firms and 59 were oilfield services firms.
Next release: Oct. 1, 2018
-30-
Media contact:
Jennifer Chamberlain
Federal Reserve Bank of Dallas
Phone: (214) 922-6748
E-mail: jennifer.chamberlain@dal.frb.org