Texas Alliance of Energy Producers

Texas Petro Index Declines for 3^rd Consecutive Month

Results indicate a contraction in the Texas upstream oil and gas Industry

AUSTIN, Texas – May 25, 2023 – The Texas Alliance of Energy Producers Texas Petro Index (TPI) declined for the third straight month in April, retreating to 176.9 for the month. This is down from 177.8 in March, but up by 12.3% compared to the April 2022 TPI of 157.6.

Once again, weak pricing for crude oil and natural gas are largely responsible for the decline, with downward pressure on the index coming from prices themselves, as well as the falling value of crude oil and natural gas production.  Drilling permits are the other TPI component to register year-over-year negatives for April and the first four months of the year.

Nominal (unadjusted for inflation) crude oil prices (posted WTI) increased in April, averaging $75.22 for the month. This is up from $69.28 in March but still down 23% compared to year-ago levels. In real (inflation-adjusted) terms, the April crude oil average is down by nearly 27% year-over-year. 

Nominal natural gas prices are down a sharp 71% in April compared to year-ago levels, and in real terms were off by close to 73%.  That means that, even though production continues to climb, the real value of that production is down by over 20% for crude oil, and nearly 60% for natural gas production through the first four months of the year.

The rig count increased in April to an average 377, and that was the weekly high for the month as well.  That was short-lived, however, and the rig count has retreated in May. The monthly average rig count achieved its post-COVID high of 379 in January of this year, and its pre-COVID cyclical high of 533 in October and November 2019.

Statewide crude oil production continues to climb, though our production estimates were revised downward a bit as production struggles to reach the peak of 5.45 million barrels per day in March 2020.  As of April, crude oil production stands at just over 5.3 million barrels per day, leaving production short of that peak by about 136,000 barrels per day.

Natural gas production continues to climb ever deeper into record territory. Again, that is largely due to the phenomenon of associated gas, which remains at more than 40% of total statewide production.

The industry continues to add jobs, though at a snail’s pace over the last three months. The upstream oil and gas industry* has added more than 20,000 jobs over the last 12 months, but only a net of about 115 jobs have been added over the last three months.

“A sustained decline in the Texas Petro Index means a contraction in the upstream oil and gas industry in Texas,” said Karr Ingham, Alliance Petroleum Economist and the creator of the TPI analysis. “Declining prices, followed by a decline in drilling permits, suggests that the rig count will weaken in the coming months, absent price recovery that would turn things around. At some point, employment will follow suit. We can hope that the economy shrugs off a recession and that growing domestic and global demand will begin to stabilize prices and return some optimism to the oil patch in 2023.”

*Early benchmarked and two-step seasonally adjusted by the Federal Reserve Bank of Dallas, with additional adjustments by TAEP

About the Texas Petro Index
The Texas Petro Index (TPI) is a monthly measure of growth rates and cycles in the Texas upstream oil and gas economy. The TPI is calculated based on a comprehensive group of exploration and production (E&P) indicators, which include crude oil and natural gas wellhead prices, rig count, drilling permits, oil and gas well completions, volume and value of Texas crude oil and natural gas production, and industry E&P employment. Karr Ingham, Petroleum Economist and Executive Vice President of the Texas Alliance of Energy Producers, created the TPI in 2003 with a base of 100.0 in January 1995 and releases its monthly.
In March 2022, Ingham made the first major methodological revision to the TPI since its inception. He fully adjusted the TPI for inflation, for the purpose of making more accurate comparisons over a long period of time. For more information, visit https://texasalliance.org/texas-petro-index/.

About Texas Alliance of Energy Producers
The Texas Alliance of Energy Producers is the most knowledgeable and effective statewide oil and gas association in the nation. Serving more than 3,000 members, the Alliance provides a voice for sound U.S. energy policy. These individuals and organizations – from small independents to publicly traded companies – are the driving force behind the U.S. energy renaissance. Founded in 1930, the Alliance celebrates its 91st anniversary this year. For more information, visit https://www.texasalliance.org/ and @TexasAllianceEP.