Dallas Fed Energy Survey

Price Forecasts

West Texas Intermediate Crude

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Henry Hub Natural Gas

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Special Questions

Data were collected Dec. 6–14; 141 oil and gas firms responded to the special questions survey.

All Firms

What are your expectations for your firm’s capital spending in 2024 versus 2023?

Reponses varied widely among executives. The most selected response was “increase slightly,” selected by 33 percent of executives. The second most selected response was “remain close to 2023 levels,” selected by 26 percent, followed by “decrease slightly,” selected by 18 percent. Another 13 percent selected “decrease significantly,” while 10 percent selected “increase significantly.”

Responses differed depending on the firm’s size and type. A breakdown of the data for large and small exploration and production (E&P) companies and oil and gas support services can be found in the table below. E&P firms were classified as small if they produced fewer than 10,000 barrels per day (b/d) or large if they produced 10,000 b/d or more. The most selected response from executives of both small E&P firms and service firms was “increase slightly” at 32 percent and 34 percent, respectively, whereas the most selected response from executives at large E&P firms was “remain close to 2023 levels” at 35 percent.

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What West Texas Intermediate crude oil price is your firm using for capital planning in 2024?

For this special question, executives were asked to provide the WTI price they used for planning capital expenditures in 2024. The average response was $71 per barrel, with the median and the mode at $70 per barrel. The average price used is relatively close to the price used in the budget in 2023 at $73, but higher than prior years (2019, $54; 2020, $54; 2021, $44; 2022, $64).

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In October 2023, acquisitions of two E&P companies valued at $50 billion or more were announced. Do you expect more deals of this size to occur in the next two years?

Of the executives responding, 77 percent said they expect more acquisitions of $50 billion or more to occur in the next two years. The remaining 23 percent don’t anticipate such transactions.

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Exploration and Production (E&P) Firms

Which of the following plans does your firm have? (Check all that apply.)

E&P firms were first asked to define their size based on fourth quarter 2023 crude oil production. They were then asked if they had any of the following plans: reduce carbon emissions; reduce methane emissions; reduce flaring; recycle/reuse water; invest in renewables. Respondents could choose more than one answer for this special question.

In the U.S., small E&P firms are greater in number, but large E&P firms make up the majority of production (more than 80 percent). For the large firms, 53 percent of executives said their firms plans to reduce CO₂ emissions, 68 percent indicated plans to reduce methane emissions, 79 percent to reduce flaring, 42 percent to recycle/reuse water and 11 percent to invest in renewables.

For the small firms, 22 percent of executives said their firms plan to reduce CO₂ emissions, 34 percent anticipate reducing methane emissions, 18 percent plan to reduce flaring, 27 percent plan to recycle/reuse water and 4 percent to invest in renewables. Among the smaller firms, 51 percent said they have no mitigation plans, compared with 11 percent of large E&P firms.

Which of the following is your firm’s primary goal in 2024?

Executives from E&P firms were presented with eight potential goals for 2024 and asked to select their firm’s primary one. The most-selected response among large firms was "acquire assets" (35 percent of respondents) followed by “reduce debt” (20 percent of respondents.) At the same time, the most-selected response among small firms was “grow production” (41 percent of respondents) followed by “maintain production” (25 percent of respondents.)

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Special Questions Comments

Exploration and Production (E&P) Firms

• OPEC's failure to secure binding oil production cuts by certain members is a concern. The price postings of crude have gone down since the OPEC announcement of additional voluntary cuts. Also, the oil price seems to be immune to the Israel/Hamas hostility and the possibility of a wider conflict, which should lead to higher prices. In general, the price level of all commodities is trending lower reflecting a market-perceived worldwide economic slowdown which would reduce the demand for hydrocarbons as supply exceeds demand. My fear is that Saudi Arabia will flood the market with crude to punish non-conforming OPEC members and U.S. producers, similar to the events of 2014.
• With $175 billion of merger and acquisition activity this year, we have eclipsed the three prior years combined. Majors are explicitly investing on the thesis that the back end of the forward curve for oil is just plain wrong. Whatever Excel model they are using to justify these prices isn't going to align with their consolidate-and-cut operations. Inventory for U.S. onshore will be extremely valuable in five years as shale inches toward death and moves to terminal decline. Prices are likely closer to $150 than $50 at the end of the decade. The young folks in energy need to learn offshore and international exploration quickly.
• Proposed federal rules and regulations are deterring capital investments in the industry. The new proposed Environmental Protection Agency rules and regulations are not based on historically documented factual information. The entire EPA green process is simply an attack on an industry because it is the popular thing to do. Never mind the facts and true science. 
• World events will continue to put upward pressure on hydrocarbon commodity prices.

Oil and Gas Support Services Firms

• The further consolidation of E&P companies looms large for service and/or equipment providers. I see it as a negative for the industry and the communities in the Permian Basin.
• Industry consolidation is inevitable when buying reserves and production and is cheaper than organically growing them. With the significant number of privately held operators looking for exits and value expectations balancing between buyer and seller, we should expect more public companies buying the privates to continue.
• Major oil companies’ passion for consolidating purchasing and procurement of major services to one or two vendors (drilling contractors) will eventually cost them dearly. 
• The acquisitions occurring in the oilfield are not helpful.

Additional Comments »

Historical data are available from first quarter 2016 to the most current release quarter.

Business Indicators: Quarter/Quarter

Business Indicators: Year/Year

Activity Chart

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Comments from Survey Respondents

These comments are from respondents’ completed surveys and have been edited for publication. Comments from the Special Questions survey can be found below the special questions.

Exploration and Production (E&P) Firms

• The big question is will OPEC+ be able to keep the price of crude oil up?
• The rumored thawing of investor appetite has yet to be seen by our firm. Many, or most, large scale institutional investors have abandoned energy on moral grounds, which is difficult, if not impossible, to reverse. Less capital is available to E&P firms, which will restrict supply materially relative to global demand (recent supply notwithstanding). Simply put, no one wants to invest. It's hard to blame them.
• Weakening oil prices below $70 per barrel and near-zero residue gas prices in the Permian, along with weak natural gas liquids prices, will limit capital investment in 2024, as it is determined by operating cash flow.
• We are still worried about the current political climate and turmoil in the Middle East.
• Significant downward pressure and volatility in commodity prices since February 2022 without commensurate decreases in service costs is driving margin erosion and difficulty in budgeting and/or planning.
• Access to goods and services has improved, albeit at a higher cost. The hidden costs of doing business are going through the roof. Regulations, insurance, etc. The real hidden cost is the political football we have become. This is nothing new, except now it's a full-time political sport. Further, it's not like the old days when people simply griped about the price of gasoline. They are now calling for the complete elimination of one of the most critical components of our economy. While I know it isn't possible, and will not happen, it provides a stiff headwind for small operators today like myself in raising new capital for new projects. Those are the most serious costs we currently face. I've done this for 47 years and have seen many price and/or cost cycles, and I can predict the future: No capital deployed to replace production leads to shortages and price hikes, which appear overnight. It's a classic commodity cycle, but now with the artificial injection of taxpayer and/or ratepayer money, which confuses capital markets, you don't have to be an economist to know that this has absolutely no potential to end well.
• The administration’s continued war on the petroleum industry has an effect for sure, but we're seeing that the real word needs our industry, and the public is trumping the downward pressure the administration is trying to maintain.
• Increases in interest rates are starting to affect activity. We see demand as normal, but oversupply is more of an issue that has downward pressure on the price of oil around the world. 
• Natural gas prices are very soft. Natural gas demand and the pipeline network need to significantly increase.
• The policies of the administration continue to present significant headwinds especially for smaller independents. Access to capital is constrained for small projects less than $50 million in size. Natural gas prices are a big wet blanket on cash flow, and cash flow is what fuels small independent producers. 
• World economic outlook, OPEC+ behavior and weather are all significant overprints on our business.  Public policy is also a growing concern, particularly as it relates to U.S. Environmental Protection Agency mandates and U.S. Securities and Exchange Commission climate disclosure. These are regulatory detours rather than critical business roadblocks. Overall, poorly crafted energy policies will be good for our business in the long term and bad for the consumer.
• The cost to operate has increased. Field activity costs are up. The labor market is thin, and that puts pressure on wages. Due to lower rig counts, our workers are of a higher quality and experience level.
• The significant fluctuations in oil and gas pricing cause smaller operators a bit of hesitation in planning for the future. There is no significant change in costs yet. Future plans are based on oil recovery.

Oil and Gas Support Services Firms

• The consolidation of operators will impede the growth and sustainability of the oilfield service sector.  This will lead to the demise of small independent oil and gas operators, as they will be unable to obtain reasonable pricing from the few remaining service providers. Valuable hydrocarbon assets will be stranded, thus denying local communities a stable tax base. Large recent acquisitions should only allow for the top 80 percent of core properties of the company’s assets and/or leases to be purchased, leaving the bottom 20 percent in the selling company for a more efficient management of those assets. The Federal Trade Commission should adopt a policy that would stop the wholesale purchases of these large companies as it is detrimental to the energy health of the nation and economic stability to our communities.
• Consolidation by the producers and/or oil companies has had a direct impact on the rig count and need for our services.
• Inflationary pressures continue for capital cost and labor. Supplier lead times are not improving ─ in fact, supply chain issues continue to be problematic. Increased interest rates and/or cost of equity capital, when coupled with increased new asset costs, require substantial increases in what we charge for our services. We are slowing growth to de-lever the balance sheet, which is further straining access to available equipment. This will lead to further increases in the cost of what we charge for our services in the future. Inflationary pressures and serious supply chain bottlenecks remain.
• Fourth quarter 2023 has been slower than expected. Merger and acquisition activity by the big players has made smaller operators, which are our target customers, more cautious in their decisions. This has slowed new business growth. We also saw existing customer work slow when customers were acquired. We are optimistic for second quarter 2024 and cautiously optimistic for first quarter 2024.
• As usual, pricing for our products is in someone else's hands. Political uncertainty is the biggest variable, but the honeymoon with electric vehicles is over, and the recognition of reliance on fossil fuels will be in our favor.
• The outlook is good, and work is continuing in leasing.
• The recent decline in the oil price and a more negative economic outlook are possible headwinds for clients’ budgets in 2024.
• Uncertainty remains the largest obstacle to mid-term and longer-term industry investment. It is difficult to see past six months, and the U.S. presidential race is likely to keep the issues obscured in the media clouds. Though production remains resilient, with seemingly lower investment per barrel of oil equivalent produced, the reality might be obscured by the lower cost of working through drilled but uncompleted well inventory and new production from large projects sanctioned pre-COVID. Eventually, both pools will run dry without new investments.
• Onshore seismic continues to provide value throughout the energy complex, be it exploration, production or now CCUS. Exploration seems to be returning to the oil patch. Data and information are still key to minimize risk and optimize return.
• Regulatory policies in the U.S. continue to have negative effects on demand for our services and rising operating costs.