Texas oil and gas activity stable with modest growth
HOUSTON -- The leading indicator of upstream oil and gas economic health in Texas increased modestly but steadily during the first half of the year, beginning July a scant 1.2 percent from matching the peak index achieved nearly five years ago.
“Midway through 2013, the Texas oil and gas exploration and production economy is enjoying stability at a high level of activity, modest increases in aggregate activity levels, and impressive employment growth,” said Karr Ingham, the economist who created the Texas Petro Index (TPI) and maintains it monthly. “The industry continues to provide fuel to statewide economic growth, and at this point all signs are pointing to a continuation of those trends through the balance of 2013.”
Ingham pointed out that estimates of the volumes of crude oil and natural gas produced in Texas continue to be revised sharply upward, although the latter still shows a net decline since mid-2012. “Compared to the first six months of 2012, estimated crude oil production in Texas is up by about 15 percent midway through 2013, which in turn was up by about 35 percent compared to the same period in 2011,” he said. “Gas production estimates have been revised upward sharply, as well, which is surprising considering persistent low wellhead prices and the dramatic decline in the number of wells drilled specifically for gas.”
Ingham said a deeper look at the data revealed upward revisions of Texas natural gas production are being driven by increasing volumes of associated gas produced as a byproduct of oil wells, so-called “casinghead gas.” Midway through 2013, the estimated volume of gas produced by wells drilled to produce gas trailed June 2012 output by about 11 percent; meanwhile, casinghead gas production skyrocketed, increasing by nearly 20 percent. “Overall, statewide gas production has declined by 7 percent or 8 percent through the first six months of the year, but clearly the decline would be much greater absent gas produced from wells drilled primarily for crude oil,” he said.
Although the count of active drilling rigs in Texas ended first half 2013 with about 90 fewer rigs working than at the end of June 2012--and still lags the TPI peak of 946 active rigs in September 2008 by more than 100 units, Ingham said the Texas oil and gas exploration and production industry continues to add high-paying jobs at an impressive pace, providing a big boost for the statewide economy.
“The oil and gas industry played a huge role in Texas' standing in 2012 as the second-fastest growing economy in the country, achieving an annual growth rate of 4.8 percent based upon gross state product,” Ingham said. “Only North Dakota achieved a higher rate of growth--13.4 percent--which was virtually driven entirely by oil and gas activity in the state.
Despite North Dakota’s “spectacular” growth rate in 2012, Ingham noted that the Texas economy is much more diverse and is about 30 times the size of North Dakota’s economy.
A composite index based upon a comprehensive group of upstream economic indicators, the Texas Petro Index in June 2013 increased to 284.2, up 3.4 percent from the same month in 2012. The TPI reached an all-time high of 287.6 in September and October 2008 and then declined to 188.5 in December 2009 before embarking upon the current growth cycle. The June TPI represents the peak in the current cycle.
Among TPI indicators during June:
• Crude oil production in Texas totaled an estimated 64.6 MMbbl, about 8.97 MMbbl (16.1 percent) more than in June 2012. Crude oil wellhead prices averaged $92.08/bbl, about 16.4 percent more than in June 2012. Production gains and higher wellhead prices combined to boost the value of Texas-produced crude oil by about 35.2 percent, to nearly $5.95 billion.(Crude oil production in first half 2013 totaled an estimated 372.2 million bbls, about 15 percent more than in first half 2012. The value of Texas-produced crude oil increased 10.4 percent to nearly $33.7 billion.)
• Estimated Texas natural gas output was about 603 Bcf, a year-over-year monthly decline of 6.8 percent. Natural gas prices averaged $4.14 per Mcf, about 64.6 percent more than in June 2012. Higher wellhead prices more than offset the production decline to boost the value of Texas-produced gas to nearly $2.5 billion, 53.5 percent more than in June 2012.
(Estimated natural gas production in first half 2013 totaled nearly 3.68 Tcf, about 7.6 percent less than in first half 2012. The value of Texas-produced natural gas increased 40.5 percent to more than $13.5 billion.)
• The Baker Hughes count of active drilling rigs in Texas averaged 841, 9.8 percent fewer than in June 2012, when 932 rigs on average were operating. Drilling activity in Texas peaked in September 2008 at a monthly average of 946 rigs before falling to a trough of 329 in June 2009.
(The count of active drilling rigs in Texas averaged 834 during first-half 2013, about 20 rigs more than at the beginning of 2013 but down 9.8 percent compared to the first half of 2012.)
• The number of Texans estimated to be on oil and gas industry payrolls reached a record 274,300, according to statistical methods based upon Texas Workforce Commission estimates revised in March. Industry employment in Texas dropped to a low of 179,200 in October 2009 after reaching a high of 223,200 in November 2008 during the previous growth cycle. (During first-half 2013, the number of Texans employed in the upstream oil and gas industry averaged 271,283, about 7 percent more than during first-half 2012.)