Energy firm activity accelerated in the final three months of 2016 and the “future activity outlook also improved considerably” across the Midcontinent, the Federal Reserve Bank of Kansas City (Fed) said Friday.

In its 4Q2016 survey results, compiled Dec. 15-30, operators said they would need, on average, oil prices of $60/bbl and natural gas prices of $3.98/MMBtu to increase activity “substantially.” “Regional oil and gas firms said they returned to profitability in the fourth quarter for the first time in over two years,” said Fed economist Chad Wilkerson, based in Oklahoma City. “Companies began hiring again and increased their drilling programs further.”

Current New York Mercantile Exchange strip prices for oil and gas “has spurred drilling on our acreage,” one respondent said in the latest survey. “We will participate and lock in these prices over the next year via hedging.”

U.S. producers will “continue to produce where economic,” another survey respondent said. “As prices rise, there will be more areas that are economic and there will be less infrastructure required to address the growth given that some of the first areas back will be areas where infrastructure is new and relatively underutilized.”

The quarterly Tenth District survey provides information on current and expected activity by oil and gas-related firms located and/or headquartered in the district, with results based on total firm activity. The Tenth District encompasses Kansas, Colorado, Nebraska, Oklahoma and Wyoming, as well as the western third of Missouri and the northern half of New Mexico.

Survey results reveal changes in several indicators of energy activity, including drilling, capital spending and employment. Firms also indicate projections for oil and gas prices. All results are diffusion indexes — the percentage of firms indicating increases minus the percentage of firms indicating decreases.

The findings mirror survey results issued in late December by the Eleventh District, which covers most of Texas and southern New Mexico.

“The drilling and business activity index increased from 26 to 64, the highest reading in the three-year history of the survey,” the Tenth District survey said. “The total revenues index climbed from 5 to 62, and the total profits index jumped from minus 10 to 42, its first positive reading in over two years.

“The employment, employee hours, and wages and benefits indexes also increased modestly back into positive territory. The access to credit index rose from minus 5 to 0, while the supplier delivery time index inched higher but remained negative.”

According to the survey, year/year indexes improved considerably, with drilling and business activity, revenues, profits and capital spending indexes back into positive territory for the first time since 2014. Employee hours and wages and benefits indexes also turned positive. The employment and access to credit indexes rose modestly but remained negative, while the supplier delivery time index edged lower.

Future expectations indexes also increased considerably, with the future drilling and business activity index jumping from 21 to 73. The future revenues index rose from 6 to 67, and the future total profits index also picked up moderately.

The future capital spending index jumped to 79, while the future employment and employee hours indexes were moderately higher. The access to credit index rose from minus 6 to 3.

“Price expectations for oil and gas were mostly higher,” according to the Tenth District. The expected oil prices index rose from 49 to 72, while the natural gas liquids price index also picked up moderately. “Conversely, the expected natural gas prices index fell from 44 to 26.”

Respondents were asked various questions, including one about whether acreage is “overvalued in the Permian Basin and elsewhere given reports about recent transactions.” Most firms thought that acreage prices were overpriced, and they expect the trend to continue for some time.

“Permian acreage is overvalued,” said one respondent. “At near-term oil prices, it would be difficult to pay the prices some are paying today…”

Another respondent said, acreage prices “have gotten completely out of hand,” not only in the Permian, but in Oklahoma’s myriad stacked reservoirs as well. “Oil and gas prices will have to improve significantly in order to justify the current prices being paid.”

Most firms also said they do not expect the Organization of the Petroleum Exporting Countries to comply with a lower oil production target.