Texas Oil, Gas Producers Reined In Drilling, Development In April
By CASEY MURPHY
Texas oil and gas producers reined in drilling and development in April as falling crude oil prices fed anxiety about growing economic uncertainty, possibly leading to a halt to a 28-month expansion of the Texas oil and gas economy, the Texas Alliance of Energy Producers announced.
"The average monthly posted price for crude in Texas was down in April year-over-year for the first time since October 2009," said Karr Ingham, the petroleum economist who created and updates the monthly Texas Petri Index, or TPI. "As a result, the TPI was unchanged from March to April at 271.0, the first time since December 2009 that the index did not post a month-to-month increase."
Ingham said a retreat from higher crude prices earlier this year was not entirely unexpected and was even desirable for consumers, but the rate of oil price decline caught producers by surprise. Repercussions of European debt woes and economic slowdown in Asia on the U.S. economy for the remainder of 2012 are weighing heavily on crude oil markets, fueling uncertainty about underlying support for crude oil pricing, he added.
"Producers don't have a solid sense about where the bottom may be, and that is making them a bit gun shy and perhaps trigger happy to curtail exploration and development drilling," Ingham said. "The TPI is designed to be on the leading edge of trend changes in the state's oil and gas exploration and production economy."
He said that even though some indicators continued to increase through April, it is possible "we're on the cusp of a slowdown in upstream oil and gas activity."
A composite index based on a comprehensive group of upstream economic indicators, the Texas Petro Index in April was 271.0 - following a revision by Ingham in the method used to calculate the index. Based on the new method, the index reached a low of 188.5 in December 2009, and peaked at 287.8 in October 2008.
Leading index indicators in April reported by Ingham include:
Estimated crude oil production in Texas totaled nearly 41.75 million barrels, about 3.13 million barrels, or 8.1 percent, more than in April 2011. The value of Texas-produced crude oil totaled $4.15 billion, about $25 million, or 0.6 percent, more than a year ago.
Estimated Texas natural gas output totaled more than 576.36 billion cubic feet, a year-over-year monthly decline of about 8.5 percent. With natural gas prices in April at $2.07/Mcf, trailing prices of $4.23/Mcf in April 2011 by more than 51 percent, the value of Texas-produced gas declined about 55.2 percent, to about $1.19 billion.
The Baker Hughes count of active drilling rigs in Texas averaged 923, a 17 percent increase from April 2011, when the average active rig count was 789. Drilling activity in the state peaked in September 2008 at a monthly average of 946 rigs, before falling to a low of 329 in June 2009.
The number of Texans estimated by the Texas Workforce Commission to be on oil and gas industry payrolls continued to climb, totaling 249,000, an increase of 14.9 percent from the same time a year ago. Industry employment has grown from a low of 179,200 in October 2009, after reaching a record 223,000 jobs in October 2008.
The Texas Petro Index is a service of the Texas Alliance of Energy Producers, the nation's largest state association of independent oil and gas producers.