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Oil and gas activity firmly back in growth mode
For the first time since crude prices began falling in late 2014, Permian Basin oil and gas activity is exceeding year-ago levels. The Texas Permian Basin Petroleum Index achieved the milestone of year-over-year increases in February, according to Karr Ingham, the Amarillo economist who prepares the index. He said the index was up sharply from January levels and is 2.4 percent higher than the February 2016 levels.
Ingham also cited sharp improvements in crude oil price averages, rig count, drilling permits and oil and gas employment compared to year-ago levels. February crude prices were just over $50 a barrel, up 84.7 percent from the $27.08 averaged the previous February. This is the first time prices have topped $50 a barrel since June 2015, according to Ingham. He said activity may slow in the near future barring an unforeseen event that sends prices significantly higher. The rig count, which had more than doubled since last summer, has seen its growth curve flatten over the last couple of weeks, both in the Permian Basin and statewide, Ingham said.
“How far will $50 take us? I don’t know the answer but it will take us ahead for the foreseeable future,” he said. While the industry has momentum at the moment, he said the outlook bears watching. “We’ll see where oil prices land,” he said. “At some point there will be a plateau. The rig count may already be stalled right now, and drilling permits indicate strong activity for now. Assuming we don’t get a significantly higher oil price in 2017, at what point do we reach an activity level incentivized by $50 oil?” he said.
As oil prices began their 85 percent surge, so did the rig count, Ingham said. The February rig count averaged 252 rigs, the first time it has topped 250 since March 2015 and was a 66.9 percent rise from the 151 rigs averaged last February. Reflecting that growth in activity, estimated direct oil and gas employment in Midland-Odessa recorded a year-over-year increase of almost 700 jobs, or 2.4 percent, the first such increase since February 2015.
The Railroad Commission issued 564 drilling permits in February, up 79.6 percent from the 314 issued last February. In the first two months of the year, the commission has issued 1,051 permits, up 84.7 percent from 569 in the same period of 2016. Operators reported 245 oil completions in February, down 40.8 percent from the 414 reported last February and have completed 489 oil wells so far this year, down 42.9 percent from the 856 completed at this time last year.
Crude production volumes rose 3.2 percent compared to February 2016 and are up 3.5 percent so far this year. Natural gas continued to mirror crude oil, reporting higher prices and production volumes. Natural gas averaged $2.61 per Mcf in February, up 45 percent from $1.80 last February. Producers reported only nine natural gas completions in February, down 69 percent from 29 last February and have completed 14 wells so far this year, down 72 percent from 50 a year ago. Natural gas volumes from Permian Basin wells was up 3.3 percent over last February and is up 4.6 percent so far this year. Curtis Lazar Womens Jersey
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