Low Oil Prices Leading to Drop in Texas Energy Production

Alan Scaia
March 25, 2020 - 1:06 pm
Oil Rig

zhengzaishuru/GettyImages

DALLAS (KRLD) - Oil and gas production has dropped to its lowest level since the Dallas office of the Federal Reserve started surveys of companies in the sector four years ago. At noon Wednesday, West Texas Intermediate was trading at $24.58 a barrel, up $.57 from Tuesday.

Since the last survey three months ago, the price of oil has fallen from about $60.

oil chart
Federal Reserve Bank of Dallas

"Relative to last quarter, business activity levels plunged, firms cut capital spending, and outlooks became extremely pessimistic," says Michael Plante, senior research economist at the Dallas Fed.

The survey found 62.1% of companies have seen a decrease in their level of business activity over the past three months, 31 percent reported a drop in employment and 36.5% reported a drop in employee hours.

In the survey, 82.9% of companies reported a "worsened outlook."

oil activity
Federal Reserve Bank of Dallas

"The survey also asked industry executives about how the coronavirus outbreak has changed their firm's area for key areas in 2020," Plante says. "The majority of firms have revised down their expectations for their firm's oil production, capital expenditures, and company outlook."

The survey found the average well operator in the Eagle Ford Shale needs oil to sell for at least $23 to cover operating expenses of current wells; the Permian basin would need oil at $26.

Plante says most companies reported a "break-even" price for new wells at about $50, but the survey found the average prediction for the price of oil at the end of this year to be $40.50.