Activity levels rise modestly, Dallas Fed Energy Survey finds

DALLAS—Oil and gas activity showed modest growth in second quarter 2024, according to oil and gas executives responding to the Federal Reserve Bank of Dallas Energy Survey.

The business activity index—the survey’s broadest measure of conditions facing Eleventh District energy firms—rose from 2.0 in the first quarter to 12.5 in the second.

“Activity in the upstream oil and gas sector grew in the second quarter, although overall production and employment were essentially unchanged,” said Kunal Patel, Dallas Fed senior business economist. “Respondents were mildly optimistic about the energy sector’s near-term prospects, though uncertainty appeared to temper responses.” [download audio clip]

Key takeaways:

• The oil production index was 1.1 this quarter, an increase of 5.2 points. The near-zero value suggests production was essentially unchanged compared to last quarter.
• Costs rose at a slower pace for E&P firms. The finding and development costs index declined from 24.2 to 15.7. Also, the lease operating expenses index declined from 33.7 to 23.6. Meanwhile, costs rose at a slightly faster pace for oilfield services firms.
• The equipment utilization index of oilfield services firms turned positive, increasing from -4.2 in the first quarter to 10.9 in the second. The positive index points to an increase in utilization when compared to the previous quarter.
• Employment remained close to last quarter’s level. The employment index was 2.9, down slightly from 3.4 in the first quarter of 2024. Employee hours increased slightly, with its index at 8.1.
• The wages and benefits index decreased from 32.8 last quarter to 24.0. The reading means wages and benefits grew at a slower pace than last quarter.

“About half of executives at large exploration and production companies reported using some form of artificial intelligence. The share was smaller among support services firms and significantly smaller among small E&P companies,” Patel said. “Among the executives indicating use or planned use of AI in the next 12 months, E&P firms were more likely than services firms to note expected benefits from AI.” [download audio clip]

Additional takeaways from the special questions:

• When asked regarding benefits experienced or expected to experience from AI, the most-cited response was "increase(d) productivity" (62 percent of respondents) followed by “access to better or more timely information” (53 percent) and “reduction in costs” (47 percent).
• When asked what impact on U.S. oil production would they expect if there were continuing industry consolidation in the U.S. E&P sector over the next five years, the most selected response was “slightly lower” (48 percent of respondents), followed by “no impact” (22 percent) and “slightly higher” (22 percent).
• More than half of executives at exploration and production firms expect low Waha Hub natural gas prices to affect their firm’s drilling and completion plans in the Permian for the rest of 2024. Forty-three percent expect a slightly negative impact, and 14 percent expect a significantly negative impact.
• Five percent of executives said their firm is currently doing work related to extracting lithium from oil field brine. Six percent said their firm is very likely to do work in this space in the next five years, and an additional 17 percent note their firm is somewhat likely to do so in the next five years.

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

Data were collected June 12–20, 2024, and 138 energy firms responded. Of the respondents, 90 were exploration and production firms, and 48 were oilfield services firms.

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Media contact:
James Hoard
Federal Reserve Bank of Dallas
Phone: 214-922-5307
Email: james.hoard@dal.frb.org