Oil executives expect drilling expenses to climb in 2024, Federal Reserve Bank of Dallas reports

(Bloomberg) – According to the latest energy report by the Federal Reserve Bank of Dallas, most oil executives surveyed now expect drilling and fracing expenses to climb next year, the bank said Wednesday. At the same time, 84% of the executives — who operate firms in Texas, New Mexico and Louisiana — expect the number of rigs drilling for oil to remain the same six months from now.

“We are required to increase what we charge our customers for our services, which so far we have been able to do because of impending shortages of available equipment needed in our industry,” an unidentified respondent said in the report. “Bottom line, inflation pressures are not abating and are far from transitory.”

The world’s most prolific shale region — the Permian basin in West Texas and New Mexico — has seen 50% cost inflation since 2021, but is expected to see a 9% deflation in those costs next year, according Citigroup Inc. In addition, Devon Energy Corp. said this week that it plans to spend less to hold its output flat in 2024.

The Dallas Fed survey is a quarterly report that’s widely read for its anonymous comments that offer an unfiltered view of the current U.S. presidential administration. In addition to expressing concerns regarding costs, executives continued to criticize President Joe Biden for his energy policy that many see as intended to run them out of business.

“Increased regulation is affecting our business,” another respondent said. “In a business full of uncertainty, one thing is certain, and that is the administration wants to destroy the American oil and gas independent producer.”