Oil and gas companies are expanding activity at a “robust” pace despite supply disruptions and rising costs, according to a Federal Reserve Bank of Dallas survey of energy executives.
An index of oil activity in the U.S. Southwest was at the highest in six years, according to the quarterly report, which surveyed oil executives in Texas, New Mexico and Louisiana earlier this month.
Still, firms said that supply-chain issues are hurting their operations, and most expect they will take more than a year to ease, a Dallas Fed official said.
“We will shortly be ceasing investment in any new operations owing to the combination of rising costs, supply-chain slowness and our view that a recession is coming that will drop oil and natural gas prices significantly,” one executive told the Fed.
Executives surveyed by the Fed speak on the condition of anonymity.
Output continues to rise, with U.S. oil prices trading above $105 per barrel following Russia’s invasion of Ukraine and strong demand for fuel. Shale producers in Texas and New Mexico will pump 5.3 million barrels per day next month, a new peak, government data shows.
The supply delivery index, which measures how long it takes to receive materials and equipment, hit a record during the second quarter, while costs increased for a sixth straight quarter. For oilfield service firms, the input cost index rose to 88 from 77.1, also a record.
Some 66% of executives surveyed said it would take more than a year to get past supply-chain shortages, including steel tubular goods, such as drill pipes and casing.
About half the respondents said labor shortages and supply chain bottlenecks were driving uncertainty in their outlook.
The Biden administration’s energy stance, including blaming high gasoline prices on profiteering by energy firms, is another factor weighting on investment, they said. Some U.S. lawmakers have proposed an oil-profits tax on large producers.
“Government animosity toward our industry makes us reluctant to pursue new projects,” said another executive.
A third hoped “the industry can weather the outrageous current assaults” from the current administration.
The survey was conducted between June 8-16, and focused on firms in Texas, Louisiana and New Mexico, of which 85 were in exploration and production and 52 were oilfield service companies.