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 March 13–21; 144 oil and gas firms responded to the special questions survey.

Exploration and production (E&P) firms

In the top two areas in which your firm is active: What West Texas Intermediate (WTI) oil price does your firm need to cover operating expenses for existing wells?

The average price across the entire sample is approximately $39 per barrel, up from $37 last year. Across regions, the average price necessary to cover operating expenses ranges from $31 to $45 per barrel. Almost all respondents can cover operating expenses for existing wells at current prices.

Large firms (with crude oil production of 10,000 barrels per day or more as of the fourth quarter of 2023) require prices of $26 per barrel to cover operating expenses for existing wells, based on the average of company responses. That compares with $44 for small firms (fewer than 10,000 barrels per day).

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In the top two areas in which your firm is active: What WTI oil price does your firm need to profitably drill a new well?

For the entire sample, firms need $64 per barrel on average to profitably drill, higher than the $62-per-barrel price when this question was asked last year. Across regions, average breakeven prices to profitably drill range from $59 to $70 per barrel. Breakeven prices in the Permian Basin average $65 per barrel, $4 higher than last year. Almost all firms in the survey can profitably drill a new well at current prices. (The WTI spot price was $83 per barrel during the survey period.)

Large firms (with crude oil production of 10,000 barrels per day or more as of the fourth quarter of 2023) require a $58-per-barrel price to profitably drill, based on the average of company responses. That compared with $67 for small firms (fewer than 10,000 barrels per day).

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All firms

How do you expect the number of employees at your company to change from December 2023 to December 2024?

While the the most-selected response among E&P firms was for employment to “remain the same” in 2024, the most-selected response of support service firms was for employment to “increase slightly.” Only a small percentage of executives expect the number of employees at their firms to decrease. (See table for more detail.)

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The U.S. Environmental Protection Agency released guidance earlier this year regarding the methane charge from the Inflation Reduction Act. What net impact will the methane charge have on your firm?

The most-selected response among E&P firms was “slightly negative,” chosen by 46 percent of respondents. Another 34 percent selected “significantly negative,” while 19 percent selected “neutral,” and 1 percent expect a positive impact. Meanwhile, the most-selected response among support services firms was “neutral,” chosen by 41 percent of respondents. The next most-popular response was “slightly negative,” selected by 27 percent of support service firms, followed by “significantly negative,” 20 percent. A small group, 11 percent, expect a “slight positive” impact.

When considering small and large E&P firms, executives at small E&P firms were more likely to report a significantly negative impact, 38 percent for small versus 20 for large. (See table for more detail.)

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

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Business Indicators: Year/Year

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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

• Until the next administration is decided, we're in a state of flux when it comes to making certain business decisions.
• Growth in renewable electricity in the West Texas ERCOT region has led to less efficacy in the system due to intermittency. In turn, this had led to a higher heat load base, and as a result, power prices are increasing modestly even as natural gas fuel input pricing is historically low.
• Investor apathy will continue for the energy sector until it’s too late. The impending shale supply fiasco (drainage!) will be front-page news within the next two years, and inflation will be very hot again. Shale will likely be unable to help for round two, when oil prices are greater than $120 per barrel. Why do you think there's been $250 billion of merger and acquisition activity in 12 months? Because the majors believe long term is $60 per barrel of oil? OPEC is back in the driver’s seat.
• Natural gas prices remain challenged, primarily due to the overhang of storage and lack of winter demand. Crude oil markets have continued to be constructive. We have decreased capital investments in our natural gas portfolio and increased capital investments in our oil portfolio.
• The volatility in geopolitical risk is more concerning than a year ago. Domestic political uncertainty has increased — no confidence in either party to lead.
• I can't recall a more uncertain time with disturbing world conflicts and the choice we have to make in the U.S. presidential election.
• The strength of the market has increased, but the methane detection enforcement procedures for small producers is a looming crisis.
• Continued governmental and regulatory stipulations have an increased bearing on project selection.
• Washington continues to pick business winners and losers, and this practice hampers cooperation and fairness across all sectors. The open denigration and policy blocking of hydrocarbons, a vital part of energy, needs to stop. Soundbites to undermine an entire industry that is critical to our country's standing in the world do no one any good.
• Natural gas is currently pricing at or below costs of production.
• Permits to drill and operate on private land are too difficult to obtain from regulatory authorities in certain states such as Florida, California and Colorado. With respect to Federal leases, which are administered by the Bureau of Land Management, there is too much uncertainty surrounding future changes in regulations and permitting requirements. Such factors limit the ability of small petroleum companies to expand and grow.
• The Great Turnover (wave of retirements backfilled by greenhorns) is continuing to result in elementary mistakes in land work, division orders, and, thus, revenue distributions from oil and gas purchasers. I am seeing increased joint interest billings errors. Collectively, this is causing a diversion of staff time. The greenhorns in the positions making these mistakes are defensive and insisting they are right even when confronted with the facts. Washington’s war against domestic oil and gas is winning. Accounting firms don’t want oil and gas firms as clients, preferring only clients in a so-called reputable industry. Bankers are stiff-arming discussions. 
• Natural gas is the primary commodity for our industry in East Texas. This makes our activity depend on pricing for natural gas. The low prices we are experiencing now are causing us to tuck it in and keep our powder dry. The administration's efforts to curb the liquified natural gas (LNG) build-out has hurt our industry. America has lost jobs due to this. This climate change agenda is destroying GDP as well.

Oil and Gas Support Services Firms

• Customer consolidation is an issue affecting our business.
• Access to capital continues to challenge the industry.
• There are many factors negatively impacting the U.S. oilfield services sector. One major issue is that there are too many small, undercapitalized companies. This is leading to an overly competitive and undisciplined market. This creates a short-lived benefit for oil and gas companies, which will quickly begin to see a deterioration in oilfield service quality, safety and stability. The oilfield services industry needs to follow the same consolidation and efficiency path as the oil and gas drillers. Otherwise, we will continue to see a weak oilfield services industry that is not able to match the scale and professionalism of their oil and gas customers.
• The administration’s pause in approving or reviewing LNG export facilities sent a chill through our industry.
• The first quarter of 2024 was surprisingly quiet, especially compared with the first quarter of 2023. We attributed the quiet first quarter 2024 to operators waiting to understand the landscape as heavy merger and acquisition activity continued. It feels like second quarter 2024 is seeing glimmers of increased activity and third quarter 2024 has the potential to be stronger. We are optimistic for the third quarter of 2024.
• Uncertainty of the election outcomes and related policy changes have most oil and gas operators just making minimal investments to maintain production levels. The recent suspension of LNG export permits is also negatively impacting an already oversupplied gas market resulting from associated gas production. We are once again entering an unnecessary period of uncertainty due to inept energy policies.
• Costs of labor and goods are certainly challenging our bottom line and making margins thinner than before. Company men are holding the line on rate increases even though they are enjoying record profits from higher commodity prices. We have to find a way to educate them on what’s affecting our company and get them to buy in to the need for higher rates to keep good companies like ours performing for them.
• Lower natural gas prices combined with E&P consolidation, and their unrelenting focus on capital and operational efficiencies, are causing U.S. lower 48 rig count to remain flatish. The outlook for the first half of 2024 is for U.S. lower 48 rig count to move sideways and for an increased rig count in the second half of 2024 driven primarily by private E&P incremental rig adds in oily basins. Until gas-directed activity rebounds, however, U.S. lower 48 rig count will remain more muted. There are reasons for optimism later this year and especially for 2025.