HOUSTON -- Mirroring the movement of oil prices over the last several years, the Texas Petro Index has recovered from its low point of May 2016 and continues to move upward, said Texas Alliance of Energy Producers economist Karr Ingham. Conducting a luncheon briefing for Houston-area energy journalists on Thursday, July 26, Ingham said that the Texas Petro Index, which tracks growth rates and business cycles in the Texas E&P economy, has improved from a cyclical low point in 2016 for the 19th straight month.
The index has risen 19.4%, from a mark of 170.3 in June 2017 to 203.4 in June 2018. “We’ve seen extraordinary expansions in Texas oil and gas activity over the 23-year history of the Texas Petro Index,” said Ingham. “What makes this one unique is the sheer amount of crude oil and natural gas produced in the state—and the growth rates in production—at lower levels of activity, compared to the peak levels from the previous growth cycle.”
Oil and gas prices, the statewide rig count, drilling permits, well completions and employment are all on the rise, but they continue to lag behind their peaks of 2014, explained Ingham. Nevertheless, crude oil production has moved into all-time record territory in 2018, surpassing 4.0 MMbpd, and both oil and gas output will easily set new annual production records in 2018.
The Texas oil production juggernaut is without peer, noted Ingham. He said that the state’s oil production surpassed 4.0 MMbpd in February and reached an estimated 4.3 MMbpd in June, a 27% jump compared to a year ago. This compares to a rate of 3.6 MMbpd in March 2015 and 3.11 MMbpd in September 2016. Midway through 2018, Texas operators have produced an estimated 745.2 MMbbl of oil, up 25% compared to the first six months of 2017. Meanwhile, the June monthly average crude oil price, while up more than 50% compared to year-ago levels at $63.75/bbl (WTI posted price), remains significantly lower than price levels of 2014.
Natural gas production has grown more slowly, said Ingham, mostly because producers are not actively drilling for gas in Texas. “About 92% of the active rigs in Texas are drilling for crude oil,” explained Ingham. “Natural gas production growth is largely accidental at this point, produced (as associated gas) from wells that are drilled to produce crude oil (as in the Permian basin).”
Looking at additional measures of the Texas E&P health, the statewide monthly average rig count has improved from a cyclical low point of 182 in May 2016 to 534 in June 2018. Nevertheless, the June 2018 figure is still 370 rigs fewer than the peak monthly average of 904 in November 2014. “It simply takes fewer rigs and fewer people to produce even higher amounts of crude oil and natural gas,” said Ingham.
The number of direct upstream oil and gas jobs (oil and gas extraction, service and drilling companies) stands at an estimated 228,600 in June 2018. Accordingly, as of mid-year, about 47,000 jobs have been added back to upstream oil and gas company payrolls following the loss of over 115,000 jobs over the course of the downturn. Yet, the June figure is still down by more than 68,000 jobs, compared to the peak employment level in late 2014.