TAEP: Chances of near-term industry recovery in Texas eroded by abundant crude supply

Crude oil production in Texas during 2015 totaled 1.27 billion bbl despite dramatic declines in permitting, drilling, and completions, according to the Texas Petro Index (TPI) from the Texas Alliance of Energy Producers (TAEP).

A composite index based on a comprehensive group of upstream economic indicators, the TPI estimates crude production in Texas in 2015 outpaced that of 2014’s total by 11.5%.

While statewide crude output in each month of 2015 exceeded output in the same month a year earlier, the margin of year-over-year growth fell from about 24% in March to 1.9% in December.

Compared with peak levels established in 2014, the rig count is now down 68%, drilling permits are off 70%, and oil and gas well completions have each declined about 60%.

“The pace of production decline in Texas and the US should accelerate in 2016, and when that begins to occur we should start watching for crude oil in storage in the US to decline on a real and sustained basis, not just seasonally,” noted Karr Ingham, economist and creator of TPI.

The steep declines in upstream activity resulted in massive layoffs that caused total oil and gas industry employment to sink from a record 306,330 in December 2014 to about 246,150 in December 2015, a total of more than 60,000 jobs lost.

“If indeed over 60,000 industry jobs have been lost since December 2014, we’re probably looking at least another 10,000 per quarter in the first half of 2016 for a total of at least 80,000 jobs lost over the 18 months from December 2014 through June 2016,” Ingham projects.

“And even that may not be the end of it,” he warned. “The last time the price of crude oil was below $30/bbl, statewide direct industry employment was about 135,000. That is more than 110,000 jobs fewer than estimated industry employment at yearend 2015. The last time the rig count was below 300, oil and gas industry employment was below 125,000 jobs.”

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