An increase in crude oil prices in Texas to $43.38/bbl in May from $27.08/bbl in February couldn’t prevent the tally of upstream job losses from surpassing 100,000, according to the Texas Alliance of Energy Producers’ latest Texas Petro Index (TPI).
Total upstream jobs in the state during May averaged 205,100, down 21.2% from the May 2015 average and 33% from the estimated high of 306,020 in December 2014. Estimates from the TPI show the trough in upstream employment before December 2014 was 184,640 in October 2009. During the previous growth cycle, industry employment peaked at 225,965 in October 2008.
“The last time industry employment was this low was in late 2010, as the [most recent] expansion of upstream oil and gas activity in Texas was just beginning to take off,” noted Karr Ingham, economist and creator of the TPI.
A composite index based on a comprehensive group of upstream economic indicators, the TPI in May was 159.9, down 39.7% year-over-year. Before the current economic downturn, the TPI peaked at a record 313.3 in October and November 2014, which marked the zenith of an economic expansion that began in December 2009 when the TPI stood at 187.4.
Less drilling, but rebound ahead?
Other TPI indicators revealed the upstream economy in Texas continued to deteriorate in May. The number of drilling permits granted by the Texas Railroad Commission totaled 606, the fewest for the month in the history of the TPI, which dates back to 1995. The number of permits issued year-to-date through May totaled 2,883, the fewest in the first 5 months of the year since 1999.
The Baker Hughes Inc. count of active drilling rigs in Texas during May averaged 182, down by just more than half year-over-year. However, the count for the week ended June 24 rose for the fourth consecutive week, gaining 21 units during that time (OGJ Online, June 24, 2016).
“Dramatically lower demand for drilling, oil-field services, and even labor appear to have driven down costs enough that some operators calculate they can develop some properties profitably with oil prices at current levels,” said Ingham. “But there still is a lot of work to do to bring global oil supply and demand into line with one another.”
Crude oil production in Texas during May totaled an estimated 103.7 million bbl, down 5.1% compared with the May 2015 total. The value of Texas-produced crude totaled nearly $4.5 billion, falling 26.4% year-over-year.
Estimated Texas natural gas output was 721.4 bcf, a year-over-year monthly decline of 3.1%. With natural gas prices in May averaging $1.76/Mcf, the value of Texas-produced gas fell 37.5% to $1.27 billion.