The Texas Petro Index (TPI), a composite index based on a comprehensive group of upstream economic indicators released by the Texas Alliance of Energy Producers (TAEP), set well-permitting and employment records in October, resulting in another record high score overall.
West Texas Intermediate crude on the Plains Pipeline system fell to a posted price of $62.50/bbl following the decision by the Organization of Petroleum Exporting Countries to maintain current production quotas.
“At this point a contraction is unavoidable,” said Karr Ingham, economist and TPI creator. “But other than the direct impact on the value of Texas crude oil production, lower wellhead prices in October did not appear to affect other upstream oil and gas indicators.”
Ingham said upstream oil and gas activity in Texas, as reflected by the TPI, likely would peak later this year or very early in 2015 and enter into a state of decline for some period of time, depending on what happens to crude prices. However, he isn’t forecasting total doom and gloom.
“Regardless of the depth or duration of an economic decline, producers in Texas might be better positioned to weather that storm than most might think as a result of declining tight-oil production costs.
“Production costs can be expected to moderate as lower oil prices undermine demand for many wellsite supplies and services, and service companies and suppliers compete for dwindling business opportunities by lowering fees and prices,” Ingham predicted.
Crude oil production in Texas totaled an estimated 98.2 million bbl, 22.1% more than in October 2013. With crude oil prices in October averaging $80.94/bbl, the value of Texas-produced crude oil totaled $7.95 billion, 1.7% less than in October 2013.
Estimated Texas natural gas output was 702.1 bcf, a meager year-over-year monthly increase of 0.3%. With natural gas prices in October averaging $3.87/Mcf, the value of Texas-produced gas increased 12.7% to $2.7 billion.
Baker Hughes Inc.’s Texas rig count averaged 899, increasing 9.6% from 820 active rigs in October 2013.
The number of Texans on oil and gas industry payrolls averaged a record 312,200, 10.3% more than in October 2013, according to statistical methods based upon Texas Workforce Commission estimates.