Higher wellhead prices for oil and gas, more people and rigs on the job, and robust well permitting activity combined to help lift an index tracking oil and gas development in Texas.
The Texas Petro Index (TPI)—a composite index based on several upstream economic indicators that include production volumes, prices, rig counts, completions, drilling permits and employment— jumped to 164.8 in April, up from 160.4 in March, according to a June 5 news release from the Texas Alliance of Energy Producers.
The increase marked its fifth straight monthly gain.
“Texas producers are responding to higher wellhead prices that have resulted from coordinated efforts by OPEC, Russia and others to curtail oil production,” Karr Ingham, the economist who created the TPI and updates it monthly, said in the release. “But in large part, production growth in Texas and the U.S. is keeping a lid on crude oil prices, which continues to frustrate parties to that agreement.”
Nearly 100 million barrels (MMbbl) of crude oil was produced in Texas in April, just more than 2% higher than 2016’s amount produced.. The barrels were also worth more, considering oil prices in April averaged $47.22/bbl. That put the value of Texas crude at $4.7 billion, up about 28% from a year ago, the report said.
Likewise, the value of natural gas increased that month, skyrocketing about 44.1% to about $1.92 billion based on an average gas price of $2.95/Mcf. The feat came despite a 4.5% fall in production that month to 651.8 Bcf.
The report also showed a:
- 33.1% increase in original drilling permits issued, bringing the total to 909 for April;
- 116.8% increase in the number of active drilling rigs, which averaged 425 units; and
- 2.6% rise in the number of Texans on upstream oil and gas industry payrolls. The report said an average of about 204,550 people were on the payrolls.
In the past six months, upstream oil and gas companies have added more than 12,000 jobs in Texas, Ingham said. The workforce, however, is still about one-third smaller than it was in December 2014.
Like other parts of the world, Texas oil and gas companies continue to settle into leaner ways of operating as they work to find effective ways to grow profits in today’s commodity price environment.
Bountiful supplies surpassed demand more than three years ago to send oil prices down from more than $107/bbl in the summer of 2014 to below $27/bbl in January 2016.
Production restraints, mainly by OPEC producers who were later joined by a Russia-led non-OPEC group, have played a crucial role in improving market conditions—even as U.S. shale producers slowly increased oil production with the Permian in the driver’s seat.
OPEC and the other producers agreed to cut output by about 1.8 million barrels per day (MMbbl/d) through March 2018.
Oil prices had steadily rose through February when WTI was trading for just more than $54/bbl.
However, the recovery appears to have stalled, and oil prices have retreated.
Reuters reported June 7 that oil fell to $45.72/bbl, a one-month low, after “an unexpected increase” in U.S. inventories of crude, which U.S. Energy Information Administration data show jumped 3.3 MMbbl to 513 MMbbl, and “and gasoline fanned fears that output cuts by major world oil producers have not done much to drain a global glut.”
Velda Addison can be reached at firstname.lastname@example.org.