Texas upstream oil and natural gas employment ticked up in July for the first time in 19 months, according to the Texas Petro Index (TPI), but not enough to end the severe economic contraction afflicting Texas producers.
"The reversal of the employment-loss trend is an encouraging sign that the deep contraction in the Texas upstream oil and gas economy is in the process of coming to an end," said Karr Ingham, the economist who created and maintains the TPI. "However, a reversal of the TPI, itself -- which has not yet occurred -- will truly pinpoint the end of the cycle of decline."
The TPI in July declined to 152.2, down 37.5% from 243.7 in July 2015 and more than 48.5% lower than the all-time high of 313.5 in November 2014.
Among TPI indicators in July, the number of Texans working in the upstream oil and gas industry increased by 100; the number of active drilling rigs in Texas surpassed 200 units for the first time since March; and the posted price for crude oil averaged $41.55/bbl, staying above $40/bbl after a four-month-long rally that lifted prices to $45.19/bbl in June from $28.07/bbl in February.
But those positive trends were more than offset by issuance of fewer drilling permits, completion of fewer wells, and continuing declines of both crude oil and natural gas production.
"As long as the TPI continues to decline, the upstream oil and gas industry in Texas will not begin to transition to an expansionary mode," Ingham said. "However, it appears the rebound of posted oil prices in Texas has turned the rig count around and stopped the decline of industry job losses."
A composite index based upon a comprehensive group of upstream economic indicators, the TPI in July was 152.2, 37.5% lower than in July 2015. Before the current economic downturn, the TPI peaked at a record 313.5 in November 2014, which marked the zenith of an economic expansion that began in December 2009, when the TPI stood at 187.4.
In July, Texas crude oil production totaled an estimated 98.7 million bbl, 7.8% less than in July 2015. With oil prices in July averaging $41.55/bbl, the value of Texas-produced crude oil totaled about $4.1 billion, 20% less than in July 2015.
Estimated Texas natural gas output was more than 708.9 Bcf, a year-over-year monthly decline of about 5.2%. With natural gas prices in July averaging $2.68/Mcf, the value of Texas-produced gas declined 9.3% to nearly $1.9 billion.
The Baker Hughes Inc. count of active drilling rigs in Texas averaged 206 during July, 44.2% fewer units than in July 2015 when an average of 369 rigs were working. 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 number of original drilling permits issued in July was 631, 35.5% fewer than the 979 permits issued in July 2015. The number of permits issued this year through July, 4,170, is down 36.3% compared to the first seven months of 2015.
An estimated 203,425 Texans remained on upstream oil and gas industry payrolls, down about 19.5% from July 2015 and 33.5% fewer than the estimated high of about 306,020 in December 2014. According to TPI estimates, the trough of upstream oil and gas employment in Texas before the expansion ending December 2014 was 184,640 in October 2009. During the previous growth cycle, industry employment peaked at 225,965 in October 2008.