Dallas Fed sees cautious optimism in Texas oil and gas sector
Upstream employment in the Texas energy sector improved along with overall oil and gas recovery, though the Federal Reserve Bank of Dallas in surveys during the week beginning March 22 saw some signs of pessimism.
Recovering from a deep freeze that idled refineries and oil and gas production in February, the Dallas Fed reported March 25 the overall impact to the state economy was minor.
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“While activity dropped sharply the week of the storm in February, it bounced back the following week,” its report read. “Thus, the negative impact on employment and business activity appears to have been mostly transitory.”
A cold weather pattern from February 13 through February 17 left lingering scars on the Texas energy sector.
A survey from March 24, however, found employment in oil and gas remained strong. Following seven months of negative growth, the bank found payrolls were stimulated by new hires from oilfield services companies.
Special questions submitted to executives from 147 oil and gas firms from March 10 through March 18 revealed pessimism, meanwhile, about tighter regulations on oil and gas activity from president Joe Biden.
Biden since taking office in January revoked a permit for the long-awaited Keystone XL oil pipeline from Canada and paused drilling activity on federal lands.
“We do expect this change will force relocation of companies from those areas and cause a further oversupply of service equipment in the areas of state and private land drilling,” one respondent said. “This change is likely a positive for states like Texas, Oklahoma, Kansas, West Virginia, Ohio and Pennsylvania, as more E&P companies will shift budgets to those states not impacted by the federal moratorium.”
States will see varying impact from the restrictions. Texas, for example, has no federal leases, though neighbouring New Mexico has relatively large plots of federal land.
Respondents offered their take on where commodity prices would finish the year. For West Texas Intermediate, the US benchmark for the price of oil, the price varied from $45/b to $85/bl. Henry Hub, the US benchmark for the price of natural gas, is expected to hit $2.80/mnBtu by year’s end.
WTI was near $59/b on March 25, while Henry Hub was trading near $2.50/mnBtu.