Texas has forever been a power house energy producer. If considered as a separate nation, Texas would fall in the top ten of oil producing countries in the world. At one point it was projected due to Permian basin production, Texas would pass Kuwait as one of the top five crude producers. But with the current oil glut and commodity price hit, Texas has yet to hit these lofty projections. Texas oil production has still continued above average compared to that of other states and national averages despite the downturn. This will prove beneficial for the state offering faster rebounds in production, investment, and exploration.
Texas is still feeling the woes of the current market situation. The Dallas Federal Reserve cites job growth at only 1.2% compared to the 3.6% from the previous year. Looking at state-wide employment, the number of Texans still working in the energy industry is down 17.8 percent from last year. These employment prospects along with decreased wages and capital investment tell the same story seen around the world.
But production from Texas tells a different story. From June 2014 to June 2015, the state witnessed a shocking 45% decrease in wellhead prices but an increase of 15.8 million barrels of production. This 17.8% increase in production came mainly from shale oil production from the Permian and Eagleford formations. Similar trends were observed in natural gas prices and production as well. Economist Karr Ingham of the Texas Petro Index, stated “the rate of growth has yet to indicate a significant slowdown.” This attests to the resiliency of the Texas energy industry.
Given that current WTI crude prices are flirting at $35 per barrel, the giant of petroleum production that is Texas has stumbled slightly. Production rates have shown a 5 to 8 percent decrease in the past three months. Metrics presented by Texas Petro Index also show decline in the health of the energy sector for the 11th straight month ending October. Texas has also played stage to significant decreases in rig counts and a 30 to 40 percent drop in capital expenditures.
However Texas does still have its ace in the hole, the Permian basin: where 20 of the US top 100 oil fields are located. Oil production from the Permian basin has increased 50 percent in the last three years giving Texas a cushion to weather out this storm. Current production from the Permian basin averages around 2,000 thousand barrels per day, resulting in a net +14 thousand barrels/day month over month. These trends were mirrored in gas production with current rates at 6,000 million cubic feet per day. While rig counts have significantly decreased from 550 to 200 within the last year, legacy oil production is still adding value to the field.
Given Texas’s resiliency, even in the current oil glut, this may indicate a faster turnaround for the state’s energy industry. Early projections show a positive growth as early as the fourth quarter of 2016. Robert Steven Kaplan, president of the Dallas Federal Reserve stated that not until that point “should demand be sufficient [enough] to begin working down this high level of inventory”.
Texas still has 10,468 million barrels of crude and 90,349 billion cubic feet of dry gas proved reserves, representing 31.4 and 26.7 percent of the nation’s total reserves respectively.