The Texas Petro Index (TPI) rose for the second consecutive month to 191.6, following a 14-month string of declines, said the Texas Alliance of Energy Producers. TPI rose from 188.2 in December to 189.1 in January to the latest TPI of 191.6 in February. However, the index remains 27.5% below its level of 264.4 a year ago.

Downward revisions of 2009 employment data, primarily in the drilling and service company sector, were partially offset by upward revision in crude oil and natural gas production volumes, and the TPI values for the affected months over the last two years have been revised accordingly.

“We are only two months into this recovery cycle, but the momentum suggests recovery is for real,” said Karr Ingham, the petroleum economist who created the TPI for the Texas Alliance. “After a sharp, punishing downturn, the near-term future looks bright, which is quite a contrast from a year ago when the industry’s economy was in the tank and no end was in sight.”

Texas natural gas production is likely to continue declining in 2010, just as demand is beginning to increase modestly in response to economic recovery, which provides reason to expect at least some support for gas prices over the course of the year, Ingham said. Additionally, finding costs have come down, even in the gas shale plays, said Ingham, lowering the threshold price for stimulating additional drilling activity.

A composite index based upon a group of upstream economic indicators, the index had rebounded in January to 189.1 from a low in December of 188.2, ending a sharp, 14-month downturn during which the TPI declined by 34%. The TPI peaked at 286 (revised upward from the original peak of 285.4 due to employment data revisions) in September and October of 2008.

Among leading TPI indicators during February:

Ingham cautioned that the oil and gas exploration and production business in Texas is only in the early stages of recovery and that recovery remains tentative, in part because economic recovery at the national level is tentative. Equally important, higher crude oil prices have keyed a resurgence of drilling rig activity and drilling permit applications in Texas, but considerable concern persists about the outlook for natural gas markets.

“Crude oil prices in February averaged $72.79/bbl, more than double the low of $35.87/bbl in February 2009, and that has had a noticeable effect on drilling and permitting activity,” Ingham said. By contrast, natural gas prices, while higher compared to year-ago levels, have had difficulty remaining above $5 and have averaged under $4 during the last 12 months.

©Copyright 2010Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.