Survey: Oil price in 5 years and thoughts on service cost changes

By Staff | April 19, 2017

Following last week’s Q&A piece based on input from oil and gas firms in Texas, we thought it would be appropriate to provide similar information from Oklahoma. The Federal Reserve Bank of Kansas City, which represents Oklahoma, Wyoming, the northern half of New Mexico, Colorado, Kansas and parts of Missouri, has issued its first quarter energy survey for this year. You can view the survey in its entirety here.

The survey provides some great insight into the regional mood regarding oil prices for increased activity, the job market and even what oil prices need to be or will be in five years.

Here are three questions from the survey.

What price is currently needed for drilling to be profitable for oil and natural gas, and what do you expect the WTI and Henry Hub prices to be in six months, one year, two years and five years?

Respondents to the survey mostly agreed that the price of oil in five years would be $69/b. The profitable price consensus was at $51/b and the price in 6 months, 1 year and 2 years was $51/b, $54/b and $60, respectively.

With the rise in oil prices and activity, how have oilfield service costs changed since Q1 2016?

Less than 10 percent of respondents believed prices have increased significantly. Roughly 5 percent actually think prices have decreased slightly. The majority felt prices have increased slightly—roughly 65 percent. Just over 25 percent of respondents said there has been no change in oilfield service costs.

Are you concerned about labor or physical capital shortages limiting near-term growth in activity?

Approximately 36 percent of survey respondents said that, yes, they were concerned about labor. For both capital and labor and capital, 10 percent of the respondents said they were concerned. And, more than 40 percent said they had no concerns at all.