In another sign that the oil and gas industry has turned to thoughts of recovery, the Oklahoma Energy Index posted positive gains for the first time since October 2014, Stillwater, OK-based Bank SNB said last week.
The August release of the index increased to 157.6 from 153.9 the previous month, a welcome uptick after sustained declines during the downturn.
“The increase in the index would support the belief that a bottom may possibly be forming for this cycle, but that is not a given,” said Chris Mostek, senior vice president of energy lending for Bank SNB. “Customers continue to be understandably cautious given the price volatility and global economic uncertainty.”
Increases to both crude oil and natural gas prices put positive pressure on the index in May, as did sustained rig activity and a decrease in employment contractions within Oklahoma’s energy sector.
This slowdown in headcount reductions “lends hope that the state’s leading oil and natural gas producers are close to stabilizing both balance sheets and payrolls,” according to Bank SNB.
These early signs of optimism leave plenty to be cautious about, according to Russell Evans, executive director of the Steven C. Agee Economic Research and Policy Institute. He pointed to a downturn in commodity prices at the end of July combined with concerns about the U.S. economy as a whole moving into 2H2016.
“The U.S. economy is anticipated to have expanded robustly in the second quarter, but warning signs are developing that the second half of the year may disappoint,” Evans said. “It remains to be seen how much of the U.S. economic concerns are real and how much is simply a reflection of the anxiety caused by a Brexit vote and a particularly tumultuous U.S. election season.”
The Oklahoma Energy Index is a project of Bank SNB in partnership with the Oklahoma Independent Petroleum Association and the Steven C. Agee Economic Research and Policy Institute.
In discussing results from 2Q2016, a number of Oklahoma oil and gas operators signaled their confidence in the long-term economic viability of the state’s STACK (the Sooner Trend of the Anadarko Basin, mostly in Canadian and Kingfisher counties) play.
Newfield Exploration Co. signed two separate deals to unload its assets in the Eagle Ford Shale in Texas in order to focus its capital on the STACK (see Shale Daily, Aug. 3).
Continental Resources raised its 2016 production guidance based on the strength of its results from wells targeting the Meramec formation in the STACK (see Shale Daily, Aug. 5).
Meanwhile, Gastar Exploration Inc. divested its Appalachian Basin assets earlier this year and now plans to focus capital on a nine-well drilling program to delineate its STACK acreage (see Shale Daily, Aug. 10).
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