The Dallas Federal Reserve is ringing in the New Year with some good news about the Texas oil patch.
The Dallas Fed’s energy survey said activity leaped in the fourth quarter to 40.1 from 27.7 on the business activity index, which is the broadest measure of conditions facing energy firms in the 11th District the agency covers.
Positive survey readings indicate expansion, while negative generally show contraction. The Dallas Fed surveys oil and gas firm executives quarterly to obtain a timely assessment of energy activity.
Several other indicators also expanded for the first time in 2016, including employment and production, with a brighter outlook expressed, despite skepticism about OPEC’s recent agreement to cut production by 1.8 million barrels a day for six months. Fifty-eight percent of the oil and gas executives surveyed said they don’t expect it to be enforced.
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“The oil and gas sector is entering 2017 on a positive note, as activity continued growing in the fourth quarter and outlooks improved significantly,” Michael D. Plante, a senior economist at the Dallas Fed, said in a prepared statement.
The Dallas Fed’s district includes Texas, southern New Mexico and northern Louisiana, and the survey includes oil and gas companies with national and global operations.
If we can’t make it with the new administration, we are not going to make it,
anonymous comment from energy executive in Fed report
Labor market indexes turned positive for the first time all year, despite the fact that most of the companies continued to report unchanged headcounts. The employment index was 3.4, with 18 percent reporting net hiring while 15 percent indicated there were layoffs.
The oil production index surged nearly 20 points to 9.0 and natural gas production was at 3.1, up from a negative 20.6 in the third quarter, the survey reported. And in the important category of capital spending in the coming year, the index trended upward by 38 points to 57.1, the survey indicated.
“We are hearing about increased levels of activity in all of our shale operations in Texas, even the Barnett, which is gas-driven, all coming our way in 2017,” said one executive’s anonymous comment from an oil and gas service firm.
It comes as no surprise that some of the executives responding to the survey were enthused about President-elect Donald Trump’s administration, given that he’s expressed a drill, baby, drill attitude. The Dallas Fed itself did not take any postion regarding future energy policies.
“I am excited about the new president and his pro-business attitude. We may finally have a domestic energy policy,” an exploration firm executive said. Another leader in the service sector added that talk “about lowering the federal tax rate are encouraging and will dip more for our business than anything else.”
But it all wasn’t roses when it came to Trump, with this realistic note.
“I expect the new administration to be great for business, but I have no idea what it will do for the price of oil,” said a manager from a service firm. Another one offered this little bon mot: “If we can’t make it with the new administration, we are not going to make it.”