Oil and gas activity showed robust growth in first quarter 2022, according to oil and gas executives responding to the Federal Reserve Bank of Dallas Energy Survey. The business activity index—the survey’s broadest measure of conditions facing Eleventh District energy firms—rose to 56 from 42.6 the previous quarter.
“Our latest survey results point to strong growth in activity, employment and production in the oil and gas sector. Additionally, survey respondents reported markedly higher costs for a variety of inputs, including labor,” said Michael Plante, Dallas Fed senior economist and advisor.
Key takeaways from this quarter’s survey:
- Business activity experienced robust growth in the first quarter. The activity index rose to 56 from last quarter’s 42.6 reading.
- Input costs continue rising. The input cost index rose to 77.1, breaking last quarter’s record 69.8 reading.
- Wages and benefits continued rising amid further growth in employment.
- On average, respondents expect the price of West Texas Intermediate (WTI) oil to be $93 per barrel by year-end 2022. There was an exceptionally wide range of forecasts, with a low of $50 and a high of $200 per barrel.
In a series of special questions, firms were asked about break-even prices by basin, expected firm growth in crude oil production, anticipated changes in employee head counts for 2022, the oil price needed to return publicly traded producers to a growth mode and the primary reason publicly traded producers are restraining production growth despite high oil prices.
“According to our survey respondents, firms need an average of $56 per barrel to break even on a new well. With the jump in oil prices, almost all firms in the survey can profitably drill a new well at current prices,” Plante said.
