While Texas natural gas production, prices and revenues fell in 2011, the state’s oil production, prices and revenues more than made up the difference, driving a 15% increase in industry employment, according to the Texas Petro Index (TPI) year-end numbers for 2011.

The TPI ended 2011 at 259.1, marking the 24th consecutive monthly increase. The rate of expansion was 13.8% during 2011. Oil prices rose 20.4% in 2011, and oil prices in Texas averaged $91.05/bbl, making 2011 the first year since 2008 in which the average annual price exceeded $90/bbl.

On the other hand, natural gas prices declined 7.6% in 2011 to average $3.99/Mcf. By the end of the year, natural gas prices fell below $3 and closed on Jan. 25 at $2.55. The estimated value of Texas-produced natural gas declined by 13.5% to $28.2 billion as production declined 6.5% to an estimated 7 Bcf, according to the index.

The number of Texans employed in the oil and gas production, drilling and service sectors increased by an estimated 29,616, expanding industry employment by an estimated 15.2%. The number of Texans on oil and gas industry payrolls reached an estimated 237,500, according to the Texas Workforce Commission, ending a five-month string of record-setting reports that lifted estimated employment to 238,300 in November. The previous high — an estimated 223,200 workers following a revision to reflect new industry employment data for 2009 and 2010 — occurred in October 2008.

“The powerful effects of supply and demand on the Texas upstream oil and gas economy were dramatic in 2011,” Karr Ingham, economist and author of Texas Petro Index, said. “Strong oil prices provided producers with an incentive to continue developing and producing more crude oil, while a glut of new natural gas supplies on North American markets drove down wellhead prices for gas and discouraged producers from investing in new gas capacity.”

The statewide working rig count averaged 838, increasing by more than 27% from December 2010 to December 2011. Also, the Railroad Commission of Texas issued 22,480 drilling permits, which was up 24.7% from the prior year.

One of the most remarkable statistics, according to Ingham, is that Texas has turned around a 30-year decline in crude oil production. Producers recovered an estimated 453.3 million bbl of crude oil, a 7% year-over-year increase. Annual oil production in Texas increased for the fourth consecutive year in 2011. The estimated value of Texas-produced crude oil production increased by nearly 29% to $41.5 billion as prices increased by $15.53/bbl and production grew by 29.7 million bbl.

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