The Texas upstream energy industry -- oil and gas, but mostly oil -- had one of its most successful years last year, according to industry barometer the Texas Petro Index (TPI).
The index set its fourth consecutive monthly record in December during a year in which growth was driven by robust oil production and recovering natural gas prices.
The TPI, a composite index based upon a group of upstream economic indicators, reached 295.0 in December, which is the fourth consecutive month that the TPI has reached new heights. The previous record was set in September-October 2008.
The Eagle Ford Shale and the Permian Basin get the credit for the banner year in Texas. While dry gas-directed drilling remains off, oil plays are throwing out plenty of associated gas, and the prices for gas recovered somewhat last year.
"The statewide upstream oil and gas economy in July finally recovered fully from the nadir of December 2009 and surpassed the previous peak TPI (287.6) achieved in the late fall 2008," said Karr Ingham, the economist who created the TPI and maintains it monthly. "Although most indicators of industry activity were higher at year-end 2013 compared to the prior year, the story of the year was crude oil production in Texas.
"By our estimates, statewide crude oil production grew by about 21% in 2013 compared to 2012, which in turn was up more than 34% compared to the prior year," Ingham said. "And those increases are part of a trend that has been under way for several years.
"Crude oil production in Texas in 2013 totaled 856.8 million bbl about 120% greater than the 389.9 million bbl of oil produced in Texas in 2007. In fact, the volume of oil produced in Texas in 2013 accounted for about 31% of all U.S. oil production and is the highest statewide total since 1985."
The TPI ended last year up 6.7% compared to December 2012. During 2013:
- The Texas working rig count averaged 835, about 7.1% less than in 2012;
- The Railroad Commission of Texas issued 21,471 drilling permits, compared with 22,479 issued in 2012;
- Producers recovered an estimated 856.8 million bbl of crude oil, a 21.2% year-over-year increase, marking the sixth consecutive year in which statewide production increased;
- The estimated value of Texas-produced crude oil increased by 27% to about $81 billion, with wellhead prices increasing slightly (4.2%) and production up by nearly 150 million bbl;
- The estimated value of Texas-produced natural gas increased 29.6% to $28.56 billion as wellhead prices increased 31.8% to reach $3.60/Mcf while production declined slightly (1.0%); and
- About 276,092 Texans were employed in the oil and gas production, drilling and service sectors, up about 6.4% compared to 2012 (average of 259,575). Upstream industry employment reached a record 282,700 in August before declining during the remainder of the year.
During a briefing with energy reporters in Houston Wednesday, Ingham said the combined value of Texas oil and gas produced last year, about $109.6 billion, easily surpassed the previous record of $102.5 billion set in 2008. Production data could still be revised, but that would only send last year's total higher, Ingham said.
While it used to be that natural gas production contributed the lion's share to the value of oil and gas produced in Texas, the two commodities have flip-flopped as gas prices fell and producers ramped up production of higher-value oil. Still, "we're producing gas accidentally," Ingham said, in the form of casinghead gas associated with oil production.
Last year's Texas crude oil production of 856.8 million bbl was the highest annual production level since 1985, according to Ingham.
Oil and gas production levels and commodity prices, drilling permits rig counts, well completions and industry employment levels are all used in calculating the TPI.