The Texas natural gas and oil economy in January took a "noticeable turn" for the better, with its first month-to-month gain in 16 months, according to the Texas Petro Index (TPI).
The TPI is a service of the Texas Alliance of Energy Producers, the nation's largest state association of independent oil and gas producers. The monthly composite index is based upon a comprehensive group of upstream economic indicators.
The index rose to 189.4 in January, up from 188.4 at year-end 2009. The TPI had peaked at 285.4 in September and October of 2008.
"An increase in the TPI is big news, even though the January index remains more than 30% lower than in January of 2009," said petroleum economist Karr Ingham, who created the upstream indicator. "It is encouraging because it likely represents the end of the current downward cycle and the beginning of recovery from a deep industry contraction."
Although economic data compiled for the TPI suggest that the Texas energy industry is on the cusp of a recovery, Ingham cautioned that an annual revision of state employment statistics, to be completed by mid March, could alter monthly employment numbers as far back as 2008, "potentially forcing a downward revision of the January TPI."
In addition, despite steady recovery of oil-directed activity in Texas in the past year, a recovery of the Texas oil and gas economy in 2010 will be more dependent upon a rebound of natural gas markets, Ingham said.
Natural gas prices in Texas averaged $5.77/Mcf in January, up $1.29/Mcf compared to December 2009 and about 12.5% higher than in January 2009. Texas crude oil prices averaged $74.60/bbl, nearly 94% higher than in January 2009.
"There have been some encouraging signs as to natural gas consumption," Ingham said. "But natural gas demand for electric power generation and industrial usage is dependent upon general U.S. economic activity, and the jury is still out on U.S. economic recovery in 2010."
According to the TPI indicators for January, Texas natural gas output totaled an estimated 652.6 Bcf, which was 5% lower compared with January 2009. The wellhead value of Texas-produced gas in January totaled $3.77 billion, up almost 7% year/year (y/y). Crude oil production in Texas in January totaled an estimated 33.6 million bbl, almost 4% less y/y. The value of Texas-produced crude oil topped $2.5 billion in January, 86.4% more y/y.
The Baker Hughes Inc. count of active drilling rigs in Texas averaged 519 in January, down from 701 in January 2009, but "up considerably from the rig count of 329 in June 2009," Ingham noted. Drilling activity in Texas peaked in August 2008 at 958 rigs.
In addition, the TPI noted that the number of people employed in the state's gas and oil industry averaged 210,500 in the first month of this year, recovering from a nadir of 201,800 in August 2009 after reaching 240,200 in December 2008.
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