About half of oil field service firms in the oil patch region plan to cut spending in 2020, the Federal Reserve Bank of Dallas concludes in its quarterly energy survey.
Oil and gas activity and employment dipped in the fourth quarter in the Dallas Fed region, which includes north Louisiana, Texas and southern New Mexico.
U.S. oil prices have hovered below $60 a barrel for most of the year, prompting many energy firms to cut staff and reduce budgets, even as major oil exporting countries have curbed production. Survey respondents aren’t projecting conditions to improve in the coming year. They are projecting a West Texas Intermediate oil price of $58.54 per barrel by the end of 2020, with responses ranging from $48 to $75 per barrel. Survey participants expect Henry Hub natural gas prices to be $2.51 per million British thermal units at the same time.
Sixty-six percent of respondents say their capital spending in 2020 will either remain close to 2019 levels or decrease either slightly or significantly. Only 34% anticipate growth.
The survey also addressed a reported growth in natural gas flaring in the Permian Basin this year. The practice reached a new all-time high in the third quarter, averaging more than 750 million cubic feet per day, according to Rystad Energy. Respondents, who were able to select more than one answer, cited multiple factors: 73% blame it on a lack of pipeline takeaway capacity for gas; 49% on a lack of gathering and processing capacity. Some 45% noted that the fees to process and transport natural gas also exceed the value of the gas.
Some 170 energy firms responded to the survey. Of those, 111 were exploration and production firms; 59 were oilfield service firms.