Oil and gas activity showed a slight uptick in the first quarter of 2025, according to executives who participated in the Dallas Fed Energy Survey. However, there are signs of growing uncertainty within the industry.
The company outlook index fell by 12 points, dropping to -4.9, indicating a mild sense of pessimism among firms. Meanwhile, the outlook uncertainty index surged by 21 points, reaching 43.1.
Oil and gas production saw modest growth in the first quarter, with exploration and production firms reporting higher output. The oil production index increased from 1.1 in the fourth quarter of 2024 to 5.6 in the first quarter of 2025. Similarly, the natural gas production index improved from -3.5 to 4.8, moving into positive territory.
Costs grew faster than in the previous quarter. For oilfield services firms, the input cost index rose from 23.9 to 30.9. For exploration and production firms, the finding and development costs index climbed from 11.5 to 17.1. Additionally, the lease operating expenses index rose sharply, from 25.6 to 38.7.
The equipment utilization index for oilfield services firms remained nearly unchanged at -4.8. However, the operating margin index decreased further, falling from -17.8 to -21.5, reflecting a slight worsening of profit margins. On a more positive note, the prices received for services index turned positive, rising from -13.0 to 7.1.
Employment levels in the sector remained stable. The aggregate employment index dropped slightly from 2.2 in the fourth quarter to zero in the first quarter, suggesting no change in overall staffing. Similarly, the aggregate employee hours index remained steady at 0.7, while the aggregate wages and benefits index showed little movement, holding at 21.6.
Looking ahead, executives expect the West Texas Intermediate (WTI) oil price to average $68 per barrel by the end of 2025, with estimates ranging between $50 and $100 per barrel. For the longer term, survey respondents anticipate a WTI price of $74 per barrel in two years and $82 per barrel in five years. As for natural gas, participants expect the Henry Hub price to be $3.78 per million British thermal units (MMBtu) by the end of 2025. In comparison, WTI spot prices averaged $67.60 per barrel and Henry Hub spot prices averaged $4.10 per MMBtu during the survey period.
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