Survey: Oil and Gas executives express optimism

Dallas Fed Energy Survey sees optimism jump in third quarter

Optimism among oil and gas executives jumped in the third quarter, according to the latest Dallas Fed Energy Survey.

According to the survey, the company outlook index moved into positive territory in the third quarter, jumping from -9.1 to 36.0. Optimism was more pronounced among E&P firms; the outlook index was 46.8 for E&P firms compared with 14.9 for services firms.

Activity in the oil and gas sector rose in third quarter 2023. The business activity index, the survey’s broadest measure of conditions energy firms in the Eleventh District face, increased from 0 in the second quarter to 10.9 in the third quarter. The increase was driven by the E&P side of the business. The business activity index for E&P firms jumped from 1.0 in the second quarter to 22.5 in the third quarter. However, the business activity index for oil and gas support services firms declined from -1.9 to -12.2.

The overall outlook uncertainty index remained positive but plunged 30 points to 6.8, suggesting that while uncertainty continued to increase on net, fewer firms noted a rise in the recent quarter.

Oil and natural gas production increased at a faster pace compared with the prior quarter, according to executives at E&P firms. The oil production index increased from 8.0 in the second quarter to 26.5 in the third. Meanwhile, the natural gas production index rose from 2.1 to 15.4.

Firms reported rising costs for an 11th consecutive quarter. Among oilfield services firms, the input cost index remained positive but declined from 41.2 to 33.4. Among E&P firms, the finding and development costs index edged up from 14.9 to 18.3. Additionally, the lease operating expenses index was essentially unchanged at 25.6.

Oilfield services firms reported continuing deterioration in most indicators. The equipment utilization index remained negative but edged up from -7.9 in the second quarter to -4.2 in the third. The operating margin index declined from -21.6 to -30.7. The index of prices received for services was relatively unchanged at 2.1.

The aggregate employment index posted an 11th consecutive positive reading but declined from 13.1 in the second quarter to 5.5 in the third. While the aggregate employment index was positive, the single-digit reading indicates employment was little changed from the prior quarter. The aggregate employee hours index was relatively unchanged at 9.6. Meanwhile, the aggregate wages and benefits index declined from 34.5 to 24.5.

On average, respondents expect a West Texas Intermediate (WTI) oil price of $88 per barrel at year-end 2023; responses ranged from $70 to $120 per barrel. Survey participants expect a Henry Hub natural gas price of $3.14 per million British thermal units (MMBtu) at year-end. For reference, WTI spot prices averaged $90.29 per barrel during the survey collection period, and Henry Hub spot prices averaged $2.68 per MMBtu.

Survey data were collected Sept. 13-21 and 147 energy firms responded.

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