Texas oil production leads recovery in 2017, record output predicted in 2018

WICHITA FALLS and HOUSTON -- Twenty-seventeen was an important year of growth and recovery for the upstream oil and gas industry in Texas, according to the Texas Petro Index, which marked its 13th consecutive increase in December by improving to 188.8, nearly 25% higher than then December 2016 TPI of 151.2.

"The TPI has now expanded by 27.4% compared to the low point of 148.2 in November 2016," said Karr Ingham, the economist who created the TPI and updates it monthly. He told the media gathering in Houston yesterday that it remains down by some 40% compared to its pre-downturn peak of 314.2 in November 2014. The TPI declined by more than 50% during that two-year period thanks to an 80% collapse in crude oil prices."

At $53.75/bbl in December, Ingham said crude oil prices in Texas, according to the TPI, still were about 50% less than peak prices of about $100/bbl during mid-2014. But Ingham thinks the "heavy lifting" that occured in the run-up to the record TPI in November 2014 has set the stage for high and growing production at lower prices and lower levels of activity than prior peaks, when crude prices were in the $100/bbl range, more than 900 drilling rigs were running statewide, and more than 300,000 Texans were working in the upstream oil and gas industry.

"Daily posted prices, which are typically about $4/bbl below the most-often quoted futures prices, surpassed $60/bbl in January, and these recent prices increases will undoubtedly stimulate additional rig count growth, higher numbers of drilling permits, and perhaps a quickened pace of industry employment growth," Ingham said. "Also, importantly, it will continue to push Texas and U.S. production ever upward."

Noting that predictions of future crude oil prices "are all over the map," Ingham said, "at this point, there is every reason to believe 2018 will be another year of general growth and expansion in the Texas upstream oil and gas economy, characterized by increasing rig counts, higher numbers of wells drilled, and continued growth in industry employment.

"There is also the solid chance--likelihood, even--that all prior crude oil production records for Texas and the U.S. will, indeed, fall this year." Ingham said that the Texas record is 1.263 Bbbl produced in 1972, and his prediction is for 1.423 Bbbl in 2018.