In the first-ever Texas Petroleum Index, which covers oil and natural gas production, drilling, rig counts and employment numbers for the state, economists found signs of solid improvement, but also signs of transformation. The state’s energy sector is once again moving up, but moving away from oil production and toward natural gas, buoyed by sustained higher gas prices.

Karr Ingham, an Amarillo-based economist who has performed forecasts for a variety of Texas industries in the past, including energy, was given the task of completing a first-ever oil and gas index by the 2,000-member Texas Alliance of Energy Producers and Wells Fargo Bank, which has energy offices in Houston, Dallas and Midland. The index basis begins with January 1995, which was given a value of 100.

Using its basis numbers, Ingham said the results found that the state’s energy economy is in “full recovery from the oil economy crash of 1998 and the recession of 2002,” and could sustain strong performance accomplished from August 2001 through at least 2003. The data show that the state’s oil and gas sector has gained 10% since a downturn in November 2002.

With “decades” of production still in the state, Ingham noted that oil output in Texas has fallen an average of 2-4% a year — sometimes as much as 10-12% with lower prices. However, natural gas production continues to grow, boosted by sustained pricing. The “smart companies” are making investments to import liquefied natural gas, which indicate what they think the gas outlook will be, said Timothy Murray, Wells Fargo’s energy group manager.

Ingham noted that gas production in Texas will remain on an upward curve as long as pricing remains in the $4-5/Mcf range — and it is higher than that now. In March, the value of Texas’ natural gas production was up 239.7% from the same period of 2002. The gas price, measured as the first-of-month spot index, was up 257.9%. For oil, the value of March production was up 36.4% from a year ago.

Also included in the index is employment information for the oilpatch. While on an upward trend, employment still is lower than it was a year ago. The state still has not recovered from the loss of 26,000 energy sector jobs between January 1998 and July 1999, Ingham said. Drilling permit information also is factored in. Permits are up 51.3% from the same period a year ago. The rig count for Texas in March was up 32.2% from March 2002.

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