It was only a few months ago that booming times in the Texas oil and gas patch moved the Texas Alliance of Energy Producers to gather a handful of energy reporters at Houston's Petroleum Club to tout the industry's success, the market's wisdom and to speak out against higher taxes. Things have changed a bit since that meeting in July.
The Alliance's Texas Petro Index declined in October, albeit modestly, from the record score achieved a month earlier. The trend reversal could signal the beginning of the end of a sustained expansion of state oil and gas exploration and production (E&P) activity, which has been shielding the Texas economy from the national recession, according to the Alliance, the nation's largest state association of independent oil and gas producers.
"The upstream oil and gas expansion since fall 2002 has tripled the industry's share of the total Texas economy, added tens of thousands of high-paying jobs to Texas payrolls, and contributed billions of dollars to the state's tax coffers," said petroleum economist Karr Ingham, who created the Petro Index. "The October Petro Index (at 282) is still the second highest on record. But if the slowdown of the Texas E&P economy as represented by the Petro Index continues in coming months, that could erode the buffer that the upstream oil and gas industry has been providing for the economy of this state."
Oh, were it only still summer when the index was still on the ascent. At midyear the index stood at 271.4, representing a 17.8% increase from 2007 and a 176.1% increase from the index's base of January 1995 (see NGI, July 28). The index in October declined to 282 from a record 282.3 in September, nearly 44 points higher than the composite score of 238.2 reached in October 2007.
The index is composed of oil and gas prices paid to producers, the state's rig count, drilling permits, well completions and the volume and value of Texas oil and gas production, as well as industry employment. Crude oil prices across Texas during October led declining indicators, notching the first year-over-year decline since wellhead prices began dropping last summer. However, other indicators appeared undisturbed:
At its most recent low ebb, the Petro Index declined to 116.8 in August 2002 before beginning an unprecedented six-year climb.
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