Are crude oil prices high enough for new drilling?
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Many regional oil and gas exploration companies say crude oil prices are high enough for new drilling in some parts of the major Texas, Oklahoma and Louisiana oil fields. On the other hand, there are some parts that won’t open back up until the prices get a lot higher. And more companies say they’ll be shedding employees this year than say they’ll be adding jobs.
The information comes from a new survey of oil and gas companies that the Dallas Fed started recently. About 200 such companies operate in the Dallas Fed region that takes in Texas, southern New Mexico and northern Louisiana. All of the results from the second quarter will be released on June 29, but answers to three specific questions were released today.
The chart at the top shows some of the range of good news and bad. At the moment, the wholesale price of crude is a bit under $48 a barrel.
Here’s the chart that shows what the company executives think will happen with jobs for the rest of the year:
Again, some good news and bad news. But Dallas Fed senior research economist Michael Plante has a glass-half-full view of those numbers.
“I thought there would be more companies telling us they would be laying off employees this year,” he said.
And as for the ones saying they expected to add positions? “I was expecting no one.”
The Dallas Fed project is one more data collection process for an industry with a data glut. From the federal Energy Information Administration to private groups like Baker Hughes with its famous rig count to any number of analysts, there are lots of places to look for numbers. What will the Dallas Fed add to the mix?
Plante said the hope is to get data directly from the companies that will include some forward-looking questions that aren’t commonly asked. Plus special questions each quarter, like the ones whose results were released today.
“There is an unusually large amount of data available,” Plante said. “But there is always data that people would like to have available that is not.”
The third question released today? About what the price of oil needs to be to cover expenses from existing wells. Across the board, the break-even point for most of those wells is under today’s crude oil price.
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