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Higher NatGas Prices Help Nudge Texas Petro Index Up
Texas oil and gas activity is looking up after months of declining rig counts and stagnant natural gas prices, nudging an industry barometer, the Texas Petro Index (TPI), up in March.
Crude oil production, natural gas prices and industry employment all posted year-over-year gains, said Karr Ingham, the economist who created the TPI and maintains it monthly.
After seven straight months of decline, the statewide rig count rose once again in February and March, crude oil prices have stabilized, and natural gas prices, while still not favorable to significant increases in activity, have improved considerably compared to year-ago levels, he said.
The TPI increased to 277 from 275.2 in the previous month (see Daily GPI, April 4). The number of Texans estimated to be on oil and gas industry payrolls reached a record 271,000, according to Ingham’s analysis of Texas Workforce Commission estimates, which were revised in March. Industry employment in Texas dropped to a low of 179,200 in October 2009 after reaching a high of 223,200 in November 2008 during the previous growth cycle.
Crude oil production in Texas totaled an estimated 50.2 million bbl, about 6 million bbl (11.5%) more than in March 2012. Crude oil wellhead prices averaged $89.73/bbl, about 12.7% less than in March 2012.
Estimated Texas natural gas output was about 627.6 Bcf, a year-over-year monthly decline of 3.4%, Ingham said. Texas natural gas prices averaged $3.30/Mcf, about 38.2% more than in March 2012.
The Baker Hughes count of active drilling rigs in Texas averaged 833, 9.8% fewer than in March 2012 when 924 rigs on average were operating. 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.
“The TPI has been generally flat at a high level for some nine months or so,” Ingham said. “After four straight months of slight decline to finish out 2012, the index has increased for three straight months this year, indicating moderate expansion in the Texas upstream oil and gas economy.
“It’s difficult to say how long this period of relative prosperity will persist, but we should never assume the prices underpinning current levels of activity will always remain favorable.”
Some indicators — the record number of drilling permits issued by the Railroad Commission of Texas, or higher natural gas prices during the first quarter — indicate expanded activity to come. But Ingham said recent upward revisions of estimated Texas crude oil production could be market-moving in some scenarios.
The real story in the Texas upstream oil and gas industry continues to be the dramatic increase in Texas crude oil production, and the degree to which the state is leading the way in the drive toward U.S. energy independence, Ingham said.
“The volume of crude oil being produced in Texas continues to be revised upward in huge chunks,” he said. “Current estimates now suggest crude oil production increased by about 117 million bbl in 2012 compared to 2011; that would amount to an increase of about 22%, on top of a 22% increase in 2011 (over 2010).”
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