The Texas Petro Index (TPI) declined in October for the 11th straight month to 212.3, down 32.2% from October 2014 when the TPI reached a record 313.2.
The Texas Alliance of Energy Producers (TAEP) noted that all indicators in the composite index excluding crude oil and natural gas production again showed hefty year-over-year declines (OGJ Online, Nov. 13, 2015).
“It seems the most optimistic outlooks expect the beginning of meaningful recovery to appear no sooner than the latter half of 2016,” commented Karr Ingham, economist and TPI creator. “But we simply do not know how that will look at this point.”
Estimated crude production in Texas totaled 107 million bbl, up 7.1% from October 2014. With oil prices averaging $42.90/bbl, the value of Texas-produced crude totaled $4.59 billion, down 43.3% year-over-year.
Although the TPI shows oil production in Texas peaked in mid-2015, Ingham noted that statewide crude output in October still exceeded the volume of oil recovered in October 2014, “and amount of crude oil in storage continues to rise rather than decline.”
Ingham said, “Until crude oil production actually begins to decline meaningfully and the volume of oil in storage begins to contract rather than expand, there is little reason to expect prices to recover and activity levels to begin to increase.”
Estimated Texas natural gas output was 753.4 bcf, a year-over-year monthly increase of 1.7%. With gas prices in October averaging $2.31/Mcf, the value of Texas-produced gas fell 36.7% to about $1.75 billion.
Baker Hughes Inc.’s count of active drilling rigs in Texas averaged 349, compared with 899 in October 2014.
According to statistical methods based on the Texas Workforce Commission’s Quarterly Census of Employment and Wages, the number of Texans on oil and gas industry payrolls averaged an estimated 250,230, down 17.8% from October 2014 when the TPI estimate was based upon the TWC’s Current Employment Statistics (CES) series.
Calculations based upon CES data indicate a record 306,000 Texans held oil and gas industry jobs in December 2014.
Regarding the extent of the TPI decline in the past year, Ingham said, “At this point it has become apparent that the low point of 187.5 in the previous economic cycle—prior to the expansion that began in January 2010—is in jeopardy.”
He believes the TPI is “almost certain” to fall below that trough in coming months. “In fact, if the TPI loses at least 40% of its value—as we predicted in January—it would mark the first time the low point of a contraction falls below the nadir of the previous cycle.
“At this point, the end of the current contraction is not known and cannot be foreseen,” Ingham said. “But we know this much: It will be the deepest and longest in the history of the TPI, which is based in January 1995.”