Dallas Federal Reserve survey shows contraction on oil field getting better for Q4

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ODESSA, Texas (Nexstar) – Energy sector activity declined modestly in the third quarter 2020, according to executives responding to the Dallas Fed Energy Survey.

The business activity index—the survey’s broadest measure of conditions facing Eleventh District energy firms—remained negative but improved from -66.1 in the second quarter to -6.6 in the third quarter.

Production indexes rose significantly but remained negative. The oil production index rose from -62.6 in the second quarter to -15.4 in the third, according to exploration and production (E&P) executives. The natural gas production index increased 38 points to -10.1.

“The oil and gas sector continues to be negatively impacted by low prices, although the situation has improved relative to the previous quarter,” said Michael Plante, Dallas Fed senior research economist. “Most indicators, including business activity, employment, and capital spending, contracted again; however, the rate of decline was much slower than what was seen in the last survey.”

Michael Plante, Dallas Fed senior research economist

Locally, producers are also skeptical to say the comeback is coming. Kirk Edwards of Latigo petroleum says he doesn’t see the activity being any better than it has been.

(The) Best indicator of activity is the drilling count in the Permian. It’s still at rock bottom today.”

Kirk Edwards, CEO of Latigo Petroleum

The President of the Permian Basin Petroleum Association offered this statement as a response to the survey.

“Ongoing uncertainty makes it difficult for operators to invest, and although these times are tough, we are sensing positivity in the industry. While demand has been slow to rise, growth has occurred as people begin to travel more for work and leisure. Although we’d all like to see more certainty, we are cautiously optimistic that there are signs that point to growth for the industry moving forward. Of course that is all contingent on the health of Americans during the pandemic and decisions in the world markets, and these will continue to be the greatest indicators for domestic production in the coming months.”

Ben Shepperd, President of the P.B.P.A.

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