OFS Activity in US 11th Dist. Continues Decline in 4Q
Oil and gas activity dipped again in the fourth quarter, but saw slight improvements from the third quarter, according to results from the Dallas Fed’s 4Q Energy Survey.
The business activity index for oil and gas firms in the 11th District (Texas, northern Louisiana and southern New Mexico) was -4.2 in the fourth quarter, up from -7.4 in the third quarter. This suggests that the pace of the industry’s contractions has been lessened.
The oilfield services sector’s woes continued as its business activity dropped to -22.1, down slightly from -21.8 in the third quarter.
Oilfield services firms reported falling equipment utilization, operating margins and employment since the third quarter.
There was a bit more positivity among E&P firms, who saw their business activity index increase from 0 to 5.4 in the fourth quarter. Indexes for oil and natural gas production increased as well.
Industry forecasts were mixed, according to the survey. While the company outlook index for E&P firms increased to 15.4 in fourth quarter from 7.6 in third quarter, the company outlook index for oilfield services firms decreased from -14.8 in third quarter to -22.4 in the fourth quarter.
This suggests modest improvement in outlooks for E&P firms and worsening outlooks for oilfield services firms.
Regarding capital spending, 41 percent of all firms expect to decrease capital spending either significantly or slightly next year.
“Looking ahead to next year’s capital spending plans, few firms expect to significantly increase expenditures, reflecting a mediocre price environment and greater attention to capital discipline,” Michael Plante, Dallas Fed senior research economist, said in an email to Rigzone. “When asked about what West Texas Intermediate oil price firms are using for capital planning, $55 per barrel was cited most frequently.”
To contact the author, email Valerie.Jones@Rigzone.com
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