Oil Sector Managers Report Bleeding – Dallas Fed Survey
- A recent survey by the Federal Reserve Bank of Dallas reveals declining activity and production in key US oil-producing states, coupled with increasing pessimism among industry leaders regarding...
- Oil activity and production in major states - Texas, Louisiana, and New Mexico - experienced a slight decrease in the third quarter of 2023.
- According to the survey, 43% of Exploration & Production (E&P) companies anticipate a reduction in investment spending in the third quarter of 2023 compared to the same period...
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US Shale Industry Faces Growing Pessimism, Investment Cuts
Table of Contents
A recent survey by the Federal Reserve Bank of Dallas reveals declining activity and production in key US oil-producing states, coupled with increasing pessimism among industry leaders regarding the future of the sector.
Key Findings from the Dallas Fed Survey
Oil activity and production in major states – Texas, Louisiana, and New Mexico – experienced a slight decrease in the third quarter of 2023. this downturn coincides with heightened uncertainty surrounding oil prices and growing frustration with the policies of the US governance, specifically those enacted under President Donald Trump.
According to the survey, 43% of Exploration & Production (E&P) companies anticipate a reduction in investment spending in the third quarter of 2023 compared to the same period last year. Petroleum service companies plan a similar decrease of 42% over the same timeframe.
One E&P manager stated, “The United States is not lacking in oil, but certainly lack oil at 60 dollars per barrel.” This sentiment highlights the industry’s sensitivity to price fluctuations and the profitability threshold for shale production.
Price Concerns and Policy Impact
Industry leaders express concern that the current administration is targeting a gross barrel price of $40. Combined with customs duties on imported tubes – essential components for drilling – these factors are driving up input costs and potentially leading to a cessation of drilling activity. One E&P manager warned,”the administration is targeting a barrel of gross at 40 dollars,and with customs duties on imported tubes,input prices increase and the drilling will disappear.”
Companies surveyed predict a West Texas Intermediate (WTI) crude oil price of $63 per barrel and a Henry Hub natural gas price of $3.30 per million British Thermal Units (MBTU) by the end of 2025.
| Commodity | Forecast Price (End of 2025) |
|---|---|
| West Texas Intermediate (WTI) Crude Oil | $63 per barrel |
| Henry hub Natural gas | $3.30 per MBTU |
Global Expansion and the “Twilight of Shale”
While US shale faces headwinds, some companies are diversifying their operations internationally. EOG Resources, a Houston-based company, has recently entered the upstream oil sector in both Bahrain and the United Arab emirates this year. This move suggests a strategic shift towards regions with potentially more favorable regulatory environments and production costs.
A manager within the industry boldly declared,”We have started the twilight of the shale,” indicating a belief that the era of rapid shale oil growth may be coming to an end.
Further, exploration is occurring in other regions. Shale deposits have been identified in the Diyarbakir basin in Türkiye, potentially opening up new sources of shale gas and oil.
Survey Methodology
The survey data was collected between September 10 and September 18, 2023. the respondent pool comprised 9