American Oil and Gas Reporter - June 2018 - 128

Federal Banks Say Oil Activity Rising
Oil and gas activity across significant
portions of the Gulf Coast, Mid-Continent
and Western oil patches continued to
climb in first quarter 2018, according to
surveys conducted by Federal Reserve
banks in Dallas and Kansas City.
"Activity in the oil and gas sector
grew vigorously in the first quarter, with
our activity index coming in at its highest
level since first quarter 2017," gushes
Dallas Federal Reserve Bank Senior Economist Michael D. Plante of the 11th District survey released March 28.
He adds, "The expansion in activity
is leading to increased employment, and
also is pushing up wages and other costs
for firms."
The 11th District survey encompasses
companies in Texas, Louisiana and the
southern half of New Mexico, and was
conducted between March 14 and 22.
In the 10th Federal Reserve District,
which encompasses the western third of
Missouri, the northern half of New Mexico, and all of Kansas, Colorado, Nebraska, Oklahoma and Wyoming, "Energy
firms reported stronger growth in the
first quarter," according to Chad Wilkerson, Oklahoma City branch executive
and economist for the Federal Reserve
Bank of Kansas City.
The 10th District survey was conducted
March 15-30 and the results were announced April 13.
Wilkerson explains that the results of
the federal reserve banks' surveys are reported as diffusion indexes, i.e., the percentage of firms that indicate increases
minus the percentage that indicate decreases.
10th District Survey
The Kansas City Fed reports all quarterly indexes increased in the first quarter,
with the drilling and business activity
index climbing from 13 to 37.
The supplier delivery time index
jumped back into positive territory, going
from -4 to 19, while total profits, and
wages and benefits both "increased considerably," the bank continues. The total
profits index went from 29 in fourth
quarter 2017 to 50 in first quarter 2018,
while wages and benefits rose from 16
to 34.
Meanwhile, the revenues index improved moderately, according to the report,
going from 39 to 50, while the employee
hours and employment indexes were marginally higher. The employee hours index
rose from 19 in fourth quarter 2017 to 24
in first quarter 2018, while the number

of employees index went from 19 to 20.
The Kansas City Fed says the access
to credit index inched up from 0 to 3.
Most year-over-year indexes strengthened as well, according to the bank. It
says the year-over-year capital expenditures
index increased to its highest level ever,
going from 50 to 68.
After two quarters in negative territory,
the bank says its supplier delivery time
index rebounded from -7 to 19.
The total revenues, profits, and wages
and benefits indexes were moderately
higher, coming in at 68, 53 and 48, respectively, compared with 56, 38 and 34 a
year ago, the bank indicates. The yearover-year employee hours index edged up
from 27 to 30, while the drilling and business activity index remained flat at 54.
Conversely, the Kansas City Fed says,
its employment index fell modestly, going
from 40 to 31, while the access to credit
index declined from 7 to 0.
10th District companies reported the
average crude oil price they needed to be
profitable was $52 a barrel, which the
Kansas City Fed says is similar to the
$51 average reported in the first and third
quarters of 2017. The average natural
gas price needed is $2.92 an MMBtu,
which the bank says is its lowest level
since it has asked that question.
Meanwhile, oil prices companies expect
were up slightly since fourth quarter
2017. The Kansas City Fed reports the
average West Texas Intermediate price
expected was $63 in six months and $64
in one year.
However, the bank says natural gas
price expectations continued to deteriorate
because of the sizeable domestic oversupply and constraints on liquefied natural
gas exports. It says the average Henry
Hub gas price expected is $2.70 an MMBtu
in six months and $2.83 in one year.
11th District Report
The Federal Reserve Bank of Dallas
reports the business and activity index in
the 11th District advanced from 38 in
fourth quarter 2017 to 41 in first quarter
2018, and comments, "The increase was
driven primarily by an increase in the oil
field services side of the industry."
The Dallas Fed says oil and gas production increased for the sixth quarter in
a row. The oil production index ticked
up from 34 in fourth quarter 2017 to 34
in first quarter 2018. The natural gas production index, however, edged down from
27 to 25, according to the bank.
Utilization of oil field services firms'

128 THE AMERICAN OIL & GAS REPORTER

equipment increased at a faster pace than
in fourth quarter 2017, the Dallas Fed
goes on, with the corresponding index at
40, up 11 points. The index of input costs
jumped from 31 to 47, suggesting greater
cost pressures, according to the bank.
The index of prices received for oil field
services rose from 23 to 28.
The Dallas Fed says labor market indexes
continue to point to rising employment and
employee hours, with job growth primarily
driven by oil field services firms. It reports
its employment index was 37 for services
firms versus 9 for oil and gas operators.
The employee hours indexes also showed
a large gap: 42 for services firms versus 17
for E&P firms, according to the bank.
The aggregate wages and benefits
index advanced from 26 to 34, again
with most of the increase coming from
the oil field services side of the industry,
the bank reveals.
The Dallas Fed reports 11th District
respondents indicate that the break-even
prices needed to profitably drill wells
ranges from $47 to $55 a barrel, depending
on the region.
"The average break-even price across
the entire sample rose to $52 this year, a
4 percent increase relative to last year's
average of $50," Plante states. "As in
past years, there was significant variation
in individual responses, but major shale
areas such as the Permian continue to
have the lowest break-even prices."
The average break-even price in the
Permian Basin rose to $50 a barrel this
year from $48 last year, he says. Plante
adds that the vast majority of firms surveyed said they could profitably drill new
wells at current prices; 88 percent of responses were below the March 23 WTI
spot price of $66 a barrel.
r

Gulfport Wells Produce
700 MMcfe For 30 Days
OKLAHOMA CITY-In its report on
two SCOOP wells in Grady County, Ok.,
Gulfport Energy Corp. says during their
initial 30 days of production, its Lilly 315X10H cumulatively produced 395.5
million cubic feet of natural gas equivalent
and 9,600 barrels of oil, and the Lilly 415X10H produced 305.4 MMcfe of gas
and 8,300 bbl of oil.
Gulfport adds that a composition analysis of both of the Woodford wells shows
1,157 Btu gas, with yields of 43.3 barrels
of natural gas liquids per 1,000 Mcf of
gas and results in a natural gas shrink of
14 percent.
r

American Oil and Gas Reporter - June 2018

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