Dallas Fed: Oil and Gas Firms Start 2019 with Raised Uncertainty
Growth in the Eleventh District’s energy sector slowed significantly in fourth quarter of 2018 amid a decline in oil prices, according to results from the Dallas Fed’s quarterly energy survey released Jan. 3.
The survey of oil and gas executives from E&P and oilfield service companies in Texas, northern Louisiana and southern New Mexico revealed a business activity index that barely remained positive.
The business activity index, the survey’s broadest measure of conditions facing energy executives, plummeted from 43.3 in 3Q 2018 to 2.3 in 4Q 2018.
“Following a dramatic decline in oil prices, the oil and gas sector is entering the new year with heightened uncertainty and a bit of pessimism,” Dallas Fed senior economist Michael D. Plante, said a statement emailed to Rigzone. “While activity remains at a high level, growth stalled in the fourth quarter, and survey respondents reported much greater uncertainty surrounding their outlook.”
Survey results also pointed to moderation for both employment and work hours growth in the fourth quarter, particularly for oilfield services, while wage growth accelerated.
The Dallas Fed warned last week that job growth in Texas—home to the prolific Permian Basin—would weaken in the first half of 2019 if oil prices remain depressed.
Energy executives were also asked special questions related to their firms’ capital spending outlooks.
“Lower oil prices are also affecting spending plans for 2019, with 53 percent of respondents reporting they have reduced planned capital spending due to the recent price decline,” Plante said. “Despite this, many still expect capital spending to be higher in 2019 than in 2018, of which about 37 percent expect a slight increase and 16 percent a significant increase.”
The company outlook index posted its first negative reading since 1Q 2016, plummeting 57 points to -10.2 in the fourth quarter. This drop was most pronounced among oilfield services firms, with company outlook dropping 64 points to -17.2.
The uncertainty index jumped 34 points to 42.4, marking heightened uncertainty regarding firms’ outlooks. Almost 58 percent of firms reported greater uncertainty.
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