Drilling activity, hiring increase in the Texas oil and gas industry

AP file photo.

The rally in the Texas oil and gas industry is now in its fifth straight month, according to the Texas Petro Index, with year-to-year gains in both crude and natural gas prices.

“Texas producers are responding to higher wellhead prices that have resulted from coordinated efforts by OPEC, Russia and others to curtail oil production,” said Karr Ingham, the economist who created the TPI and updates it monthly. “But in large part, production growth in Texas and the U.S. is keeping a lid on crude oil prices, which continues to frustrate parties to that agreement.”

In other words, the continued recovery of the American oil and gas industry isn’t sitting well with OPEC and the Russians - and that could mean that OPEC could rethink its pledge to limit production, in order to allow prices to rise.

But this frustration can work to the advantage of Texas.

“Producers in Texas and across the U.S. will gladly take the market share given up by nations that attempt to manage oil markets and prices by centralized decisions to manipulate production,” Ingham said.

The Texas Petro Index improved in April enough for the index to show its first year-over-year increase in 27 months.

“Estimated crude oil production in Texas totaled more than 99.55 million barrels, 2.3 percent more than in April 2016,” Ingham said in a news release. “With oil prices in April averaging $47.62 per barrel, the value of Texas-produced crude oil amounted to nearly $4.7 billion, about 27.9 percent more than in April 2016.”

But natural gas went the other direction.

“Texas natural gas output surpassed 651.8 billion cubic feet, a year-over-year decline of about 4.5 percent,” Ingham noted. “With natural gas prices in April averaging $2.95 per thousand cubic feet, the value of Texas-produced gas increased about 44.1 percent to about $1.92 billion.”

Still, Texas Railroad Commission Chair Christi Craddick said boom times are coming for the liquid natural gas (LNG) industry.

“U.S. proven natural gas reserves rank fifth in the world; and, as the U.S. has become one of the world’s largest natural gas producers - second, only behind Russia - the industry has been working as quickly as possible to transition LNG import terminals to export terminals,” Craddick said at an LNG conference last week. “The export of natural gas represents one of the most promising economic opportunities of the new American shale boom. LNG exports will reduce our trade deficit, increase government revenues, grow our economy and support millions of American jobs. And, as our country’s LNG export market grows, it will also help to position us as a global energy superpower.”

Hiring in the Texas Oilpatch is picking up, Ingham added.

“An estimated average of 204,550 Texans remained on upstream oil and gas industry payrolls, about 2.7 percent more than in April 2016 and about 33.2 percent fewer than the estimated high of 306,000 in December 2014,” he said.

And drilling activity is increasing. A total of 909 drilling permits were issued in April, up 33.1 percent over the 683 permits issued in April 2016.

“The Baker Hughes count of active drilling rigs in Texas averaged 425 units, 116.8 percent more units than in April 2016 when an average of 196 rigs were working,” Ingham said. “Drilling activity in Texas peaked in September 2008 at a monthly average of 946 rigs before falling to a trough of 329 in June 2009.”

Twitter: @tmt_roy

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