TAEP: Texas upstream economy contracted in August for 21st straight month
The upstream oil and gas economy in Texas contracted in August for the 21st consecutive month, according to the Texas Alliance of Energy Producers’ Texas Petro Index (TPI).
A composite index based upon a comprehensive group of upstream economic indicators, the TPI during the month was 150.5, down 52% since peaking in November 2014 at 313.5, which marked the zenith of an economic expansion that began in December 2009 when the TPI stood at 187.4.
Karr Ingham, economist and creator of TPI, sees the steep decline of upstream oil and gas activity as an orderly and logical process that has surpassed some important milestones.
Crude oil prices have stabilized at $40-50/bbl since posting a low of $27.08/bbl in February. In August for the first time since the contraction commenced, the average monthly crude price in Texas of $41.49/bbl exceeded the average price of $39.67/bbl in the same month a year earlier.
Drilling rig activity has been increasing since May in response to higher oil prices, although Ingham expects rig-count growth to stall in the near future absent another oil-price increase.
Estimated statewide total upstream oil and gas employment in Texas increased by 800 jobs in August compared with the updated July employment estimate, marking the first addition to upstream oil and gas employment in Texas since December 2014.
Ingham said the changes “suggest the industry is no longer hemorrhaging in terms of price, the rig count, and jobs.” However, he cautioned that “as long as the TPI continues to decline, the upstream oil and gas industry in Texas will not begin to transition to an expansionary mode.”
August industry stats
Crude production in Texas totaled 96.3 million bbl, down 9% from the August 2015 total. With oil prices in August averaging $41.49/bbl, the value of Texas-produced crude totaled nearly $4 billion, 4.9% less than in August 2015.
Estimated Texas natural gas output surpassed 700.1 bcf, a year-over-year decline of 6%. With natural gas prices in August averaging $2.69/Mcf, the value of Texas-produced gas declined 7.7% to $1.88 billion.
The Baker Hughes Inc. count of active drilling rigs in Texas averaged 231, down 40% from that of August 2015. Drilling activity in Texas peaked in September 2008 at a monthly average of 946 rigs before falling to a trough of 329 in June 2009. In the most recent economic expansion, which began in December 2009, the statewide average monthly rig count peaked at 932 in May and June 2012.
The number of original drilling permits issued was 660, down 23.6% from the August 2015 total. The number of permits issued this year through August, 4,830, is down 34.8% compared with the first 8 months of 2015.
An estimated 204,125 Texans remained on upstream oil and gas industry payrolls, down 19.3% from August 2015 and 33.3% fewer than the estimated high in December 2014. According to TPI estimates, the trough of upstream oil and gas employment in Texas before the expansion ending December 2014 was 184,640 in October 2009. During the previous growth cycle, industry employment peaked at 225,965 in October 2008.