Special Q&A posed to E&P execs yields input on rigs, spending

By Staff | January 02, 2018

The Federal Reserve Bank of Dallas has completed a survey of oil and gas executives working in Texas, New Mexico and Louisiana. Included in this new survey is a set of special questions. The special questions can been seen below, along with the release from the Dallas Fed team on its latest survey.

Special Questions:

Do you expect the number of U.S. rigs drilling for oil six months from now to be higher, lower or near current levels?

According to the respondents, more than half said they expect the number of U.S. rigs targeting oil six months from now to higher than current levels. Only three percent of executives said they expect the oil-directed rig count to be lower six months from now.

At what WTI crude oil price would you expect the U.S. oil rig count to substantially increase?

If crude oil increases to a range of $61/b to $65/b, 42 percent of executives surveyed believe rig count would “substantially” increase. While only 7 percent of survey respondents said prices below $60/b are sufficient for a substantial increase, roughly half of executives believe $70/b oil will bring substantial rig count increases.

What are your expectations for your firm’s capital spending in 2018 versus 2017?

Less than 8 percent of all executives believe they will spend less in 2018 versus 2017. More than half said they will spend slightly more this year, and 19 percent of respondents said they will spend “significantly” more this year as opposed to last year’s budget.

 

Information on the survey:

Oil and gas business activity gained momentum in the fourth quarter, according to executives responding to the quarterly Federal Reserve Bank of Dallas Energy Survey.

The business activity index—the survey’s broadest measure of conditions among Eleventh Federal Reserve District energy firms—climbed from 27.3 in the third quarter to 38.1 in the fourth, with the increase driven by the exploration and production side of the industry.

Positive readings in the survey generally indicate expansion, while readings below zero generally indicate contraction.

“The energy sector is going into 2018 on a positive note,” said Dallas Fed Senior Economist Michael D. Plante. “Growth in activity rebounded a bit relative to last quarter, outlooks improved greatly and there was a modest decline in uncertainty about the future. Responses were strong for both E&P and support services firms this time around, a notable change from recent surveys when many indexes for E&P firms were flagging.”

The index measuring uncertainty about firms’ outlooks declined, registering its first negative reading since the index was introduced in first quarter 2017. This reduced uncertainty was particularly prominent among oilfield services firms.

This quarter’s survey includes a series of special questions about outlooks for rig count, capital spending and long-term crude oil prices. Fifty-one percent of executives said they expect the number of U.S. rigs drilling for oil six months from now to be higher than current levels, while 46 percent said they would be near current levels.

“Oil prices appear to be high enough to support some additional drilling in 2018, but not high enough to significantly boost activity just yet,” Plante said. “A little more than half of respondents think the rig count will be higher six months from now but almost all respondents think West Texas Intermediate crude prices need to be more than $60 to see a substantial increase in the oil rig count.”

Other Survey Highlights:

Oil and gas production increased for the fifth quarter in a row, with responses suggesting production rose at an accelerated rate. The oil production index leaped from 19.3 in the third quarter to 33.7 in the fourth quarter. Likewise, the natural gas production index rose from 17.3 to 26.6.

The company outlook index posted a seventh consecutive positive reading and soared more than 20 points to 52.0 in the fourth quarter.

On average, respondents expect WTI oil prices to be $58.98 per barrel by year-end 2018. Expectations for WTI prices three to five years from now centered around $60 to $69 per barrel, with the average response across all executives at $66.16 per barrel, according to responses in the special questions.

The survey samples oil and gas companies headquartered in the Eleventh Federal Reserve District—Texas, southern New Mexico and northern Louisiana. Many have national and global operations.

Data were collected December 13 through 21, and 134 energy firms responded to the survey. Of the respondents, 77 were exploration and production firms and 57 were oilfield services firms.

Next release: March 28, 2018