Oil and gas production in Texas, Louisiana and New Mexico decreased in the first quarter of 2024, the Federal Reserve Bank of Dallas said on Wednesday in its quarterly survey of energy activity.
The survey of executives at 147 energy firms suggested a small decline in production. A natural gas production index also turned negative and oilfield services firms reported a modest deterioration in business activity, the Dallas Fed reported.
The fall in production however did not lead to a major change in activity. A broad measure of business activity was essentially unchanged from the fourth quarter last year, the Dallas Fed reported.
Oil prices have trended higher this year with the U.S. benchmark oil prices trading at $81.36 per barrel in early trading on Wednesday.
On average, respondents expected a West Texas Intermediate (WTI) oil price of $80 per barrel at year-end 2024, the survey of company executives showed.
When asked about longer-term expectations, respondents on average expected a WTI oil price of $83 per barrel two years from now and $90 per barrel five years from now, the survey showed.
Companies need $64 per barrel on average to profitably drill a new well, up $2 a barrel from the average estimate a year ago, the survey said.
Natural gas prices have been among the lowest for years and some companies are planning to reduce the number of gas wells they will be drilling.
“One thing that was noticeable is that the natural gas production index was more negative than the oil production index and this suggests that the decline was bigger,” said Dallas Fed economist Kunal Patel at a news conference after the release of the data.
He said at the time of the survey the Spot price for natural gas was $1.44 per million British thermal units (mmBtu) which would have influenced production levels.
“A lot of them responded that the gas prices are low and they need higher prices and how these low prices impact their activity,” said Patel.
Survey participants expected a Henry Hub natural gas price of $2.59 per mmBtu at year-end and $3.18 per mmBtu in two years.
The Environmental Protection Agency’s proposed methane fee for emissions above a certain level will be “slightly negative,” said 46% of survey respondents, with another 34% rating the fee significantly negative. The fee is part of the guidance released with the U.S. Inflation Reduction Act.
Costs have increased at a slightly faster pace for both oilfield services and E&P firms, the Dallas survey also showed.
(Reporting by Curtis Williams in Houston, Editing by Franklin Paul and Jane Merriman)