Every component of the Texas Petro Index (TPI) was down again in September -- except for crude oil and natural gas production volumes. And the economist who compiles the TPI warned that industry job losses could be even greater than his previous estimates.
The TPI fell to 226.2 in September, nearly 28% below its October 2014 record of 313.0. But Karr Ingham, who compiles the index, said he's concerned that upstream job losses might be higher than previously thought, based on data from the Texas Workforce Commission (TWC).
"We use two data sets from the TWC's Current Employment Statistics (CES) series in calculating the TPI because it is monthly and timely and reflects the industry standard for reporting monthly employment data," Ingham said. "The CES, when a seasonal adjustment is applied, indicates the upstream oil and gas industry lost about 30,000 jobs through September since peaking in December 2014 at 305,000.
"That's certainly significant enough, but it appears to be inaccurate when compared to the TWC's Quarterly Census of Employment and Wages (QCEW), which measures jobs at the county level and sums up by industry."
Evidence of steeper job cuts than indicated by the TPI can be found in the QCEW's most recent estimate of upstream oil and gas employment, which totaled 258,200 as of the end of the second quarter 2015, Ingham said. That was about 47,800 fewer jobs than the 306,000 jobs indicated by the QCEW at the end of fourth quarter 2014, which was "amazingly close to the 305,000 jobs estimated by the TPI in December," Ingham said. "The loss of nearly 48,000 jobs in just six months is staggering, and again, that only represents industry employment loss through the second quarter of this year.”
Although the TWC has not yet reported QCEW data through the third quarter, Ingham said, "It is certain that job losses have continued." Extrapolating from the QCEW estimate at the end of second quarter, Ingham said he "conservatively estimates" upstream oil and gas job losses at 56,000.
"When the upstream oil and gas economy in Texas entered into the current contraction, we estimated jobs lost over the length of the downturn could total 40,000-50,000 jobs," Ingham said. "We now appear to be well beyond that estimate, and the end is not in sight.
"Ultimately, the TPI will be revised downward when CES employment data are corrected early next year," Ingham said. "So the contraction is actually worse than the Texas Petro Index presently indicates as well."
A composite index based upon a group of upstream economic indicators, the TPI in September was 226.2, 27.4% less than in September 2014. Before embarking upon the current economic downturn, the TPI peaked at a record 313.0 in October 2014.
Among leading TPI indicators during September:
Crude oil production in Texas totaled nearly 104.9 million bbl, about 9.9 million bbl (10.5%) more than in September 2014. With crude oil prices averaging $45.50/bbl, the value of Texas-produced crude oil totaled about $4.77 billion, 43.9% less than in September 2014.
Estimated Texas natural gas output was nearly 728.5 Bcf, a year-over-year monthly increase of 2.6%. With natural gas prices in September averaging $2.59/Mcf, the value of Texas-produced gas decreased 31.9% to about $1.89 billion.
Drilling activity in Texas peaked in September 2008 at a monthly average of 946 rigs before falling to a trough of 329 in June 2009. In the most recent economic expansion, which began in December 2009, the statewide average monthly rig count peaked at 932 in May and June 2012. The Texas rig count is down substantially since then, hitting 340 in the most recent count by Baker Hughes Inc. (see Shale Daily, Nov. 6).