American Oil and Gas Reporter - April 2021 - 72

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Dallas Fed Sees Strong Activity Surge
DALLAS-Activity in the oil and gas
sector expanded decisively in the first
quarter of 2021, according to oil and gas
executives responding to a survey by the
Federal Reserve Bank of Dallas. The business activity index-the Dallas Fed Energy
Survey's broadest measure of conditions
facing 11th District energy firms-soared
from 18.5 in the Q4 2020 to 53.6 in Q1
2021, reaching its highest reading in the
survey's five-year history. Exploration,
drilling, production and oil field services
firms both experienced a strong expansion
in activity, the Dallas Fed reports.
The survey indicates that production
company executives say oil and gas production increased. The oil production
index rose from 1.0 in Q4 2020 to 16.3
in the Q1 2021. Likewise, the natural gas
production index turned positive and increased 18 points to 15.9.
The index for capital expenditures increased from 12.5 to 31.0, the Dallas
Fed reports, indicating an acceleration in
capital spending among producers and
operators. Additionally, the index for the
expected level of capital expenditures
next year came in at 49.5, the survey

finds, signaling firms have increased their
capital spending plans for 2022.
Trending Upwards
According to the Dallas Fed, oil field
services firms reported improvement in
all indicators. The equipment utilization
index surged, jumping 57 points to 63.2
in Q1 2021. Operating margins improved,
with the index moving into positive territory-increasing from -31.9 to 14.0. The
index of prices received for services also
turned positive, jumping from -29.7 to
20.0. However, the index for input costs
also rose notably-from -4.3 to 36.0-suggesting mounting cost pressures.
After seven consecutive negative readings that pointed to contracting payrolls,
the aggregate employment index turned
positive, rising from -11.7 to 8.4. Employment growth was driven primarily
by oil field services firms. The employment
index was 23.5 for services firms versus
1.0 for production firms. The employee
hours index moved into positive territory,
rising from -6.9 to 22.8. The aggregate
wages and benefits index also turned positive, from -12.4 to 14.8.

Six-month outlooks improved notably,
with the index rising from 21.6 in Q4
2020 to 70.6, the highest reading in the
survey's five-year history, the Dallas Fed
says. Additionally, firms noted less uncertainty around the outlook in Q1 2021 than
Q4 2020, as the aggregate uncertainty
index fell eight points to -22.2. This is the
lowest reading for the uncertainty index
since its inception in first quarter 2017.
On average, survey respondents say
they expect a West Texas Intermediate
oil price of $61 a barrel by year-end
2021; responses ranged from $45 to $85
a barrel. Survey participants expect Henry
Hub natural gas prices of $2.80 an MMBtu
at year-end. For reference, WTI spot
prices averaged $64 a barrel during the
survey collection period, and Henry Hub
spot prices averaged $2.59 an MMBtu.
Special Questions
The Dallas Fed Energy Survey's addressed a few special questions for Q1
2021. Data was gathered March 10-18
and 151 oil and gas firms participated.
On the question of what WTI price a
producer needs to cover expenses for ex-

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American Oil and Gas Reporter - April 2021

Table of Contents for the Digital Edition of American Oil and Gas Reporter - April 2021

Contents
American Oil and Gas Reporter - April 2021 - Intro
American Oil and Gas Reporter - April 2021 - Cover1
American Oil and Gas Reporter - April 2021 - Cover2
American Oil and Gas Reporter - April 2021 - Contents
American Oil and Gas Reporter - April 2021 - 4
American Oil and Gas Reporter - April 2021 - 5
American Oil and Gas Reporter - April 2021 - 6
American Oil and Gas Reporter - April 2021 - 7
American Oil and Gas Reporter - April 2021 - 8
American Oil and Gas Reporter - April 2021 - 9
American Oil and Gas Reporter - April 2021 - 10
American Oil and Gas Reporter - April 2021 - 11
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American Oil and Gas Reporter - April 2021 - 15
American Oil and Gas Reporter - April 2021 - 16
American Oil and Gas Reporter - April 2021 - 17
American Oil and Gas Reporter - April 2021 - 18
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American Oil and Gas Reporter - April 2021 - Cover3
American Oil and Gas Reporter - April 2021 - Cover4
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