Texas Petro Index

Texas Petro Index: Texas Upstream Activity Declines in 2023, Even as State Sets New Production Records

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The year-end Texas Petro Index (TPI), released by the Texas Alliance of Energy Producers, shows steady declines in nearly every oil and gas indicator in 2023. At the same time, however, Texas set records for both crude oil and natural gas production last year, despite lower prices for both, falling rig counts, and fewer drilling permits issued than in 2022. 
The year-end Texas Petro Index, released by the Texas Alliance of Energy Producers, shows steady declines in nearly every oil and gas indicator in 2023. At the same time, however, Texas set records for both crude oil and natural gas production last year, despite lower prices for both, falling rig counts, and fewer drilling permits issued than in 2022.

AUSTIN, Texas – Feb. 5, 2024 – The year-end Texas Petro Index (TPI), released by the Texas Alliance of Energy Producers, shows steady declines in nearly every exploration and production indicator in 2023. At the same time, however, Texas set records for both crude oil and natural gas production last year, despite lower prices for both, falling rig counts, and fewer drilling permits issued than in 2022. 

After reaching its post-COVID peak in January 2023, the Texas Petro Index subsequently declined for the rest of the year.  The December 2023 Texas Petro Index fell for the 11th straight month to 154.4, down from 156.2 in November, and down 13.4% from the December 2022 TPI of 178.3.

“Rising crude oil and natural gas production and still-growing industry employment were unable to offset lower prices, fewer rigs at work, and lower values of statewide production, pushing the TPI downward in 2023 after the January peak,” said Karr Ingham, Petroleum Economist for the Texas Alliance of Energy Producers, and the creator of the TPI analysis.  “But Texas oil and gas producers, with extraordinary efficiency and productivity gains on full display, still managed to grow production significantly, setting new records for statewide output along the way.

Statewide crude oil production in Texas surpassed two billion barrels for the first time ever in 2023, and reached a record 5.62 million barrels per day in December 2023. Daily production, which peaked pre-COVID at 5.45 million barrels in March 2020, finally reached and exceeded that level fully three years later in March 2023. Texas annual crude oil production in 2023 outpaced the 2022 annual total by a stout 8.5%, and comprised 42.6% of U.S. annual production.

Texas natural gas production exceeded 12 trillion cubic feet (TCF) for the first time at an estimated 12.5 TCF in 2023, an increase of 7.4% over the 2022 annual total.  

Surprisingly, however, these milestones were accomplished with a significant and sustained decline in the statewide rig count and fewer drilling permits issued over the course of the year.  The Texas rig count climbed to its post-COVID high of 379 in January 2023, and then fell by 76 rigs to 303 in November, before adding four rigs in December. At year-end 2023 the rig count was down by nearly 18% compared to the December 2022 monthly average.

At the same time the number of drilling permits declined by 16.5% in 2023.

Direct upstream (exploration and production) employment was revised downward by about 9,000 in late 2023, but continued to improve through year-end from the lower benchmark levels, surpassing 200,000 jobs in December for the first time since March 2020. According to the latest and best data*, oil and gas E&P employment increased by 4.1% at year-end compared to the December 2022 monthly estimate, reflecting the addition of about 8,000 jobs over the year.

“It’s an unusual set of circumstances,” said Ingham.  “Steadily climbing volumes of crude oil and natural gas production with steadily falling rig counts and drilling permits, and an industry employment base that is a third smaller than it was less than 10 years ago.”  

“Texas is increasingly leading the way in terms of supply growth domestically and globally, helping to meet the ever-growing demand for abundant, affordable, and reliable energy at home and around the world,” said Ingham. “For this, oil and gas operators in Texas of all shapes and sizes are worthy of thanks, not scorn, and their accomplishments in powering our economy, improving our everyday lives, and enhancing America’s energy security should be widely celebrated.”

Findings of the December/Year-end 2023 Texas Petro Index include:

– Crude oil prices (WTI posted) averaged $68.24 in December, a decline of 6.1% from the December 2022 average of $72.64.  For the year, crude oil averaged $73.51, a decline of 18.7% compared to the 2022 annual average.  In real (inflation-adjusted) terms, crude oil prices were 22% lower on average in 2023 compared to 2022.

– December natural gas prices (Henry Hub, Houston Ship Channel, and Waha Hub) averaged $2.02/mmbtu, a decline of 38% compared to December 2022.  The annual average price of $2.05 was off by a sharp 64% compared to the 2022 annual average.  In real terms, the 2023 annual average natural gas price was down by more than 66% year-over-year.

– The statewide rig count averaged 307 in December 2023, a decline of 17.5% compared to the December 2022 statewide total.

– The 9,225 original drilling permits issued in 2023 was down by 16.5% compared to the 2022 annual total.

– Statewide crude oil production in Texas totaled an estimated 2.01 billion barrels, a record by far, and an increase of 8.5% over 2022.  The real value of that production was down by over 15% year-over-year in 2023.  By year’s end, Texas daily crude oil production was estimated at a record 5.62 million barrels.

– Statewide natural gas production was an estimated 12.5 trillion cubic feet, an increase of 7.4% over the 2022 total.  The real value of that production, however, was down by 63% in 2023.

– Direct upstream oil and gas employment reached 202,850 in December, an increase of 4.1% year-over-year.  Texas upstream oil and gas employment reached its all-time peak of over 307,000 in December 2014.

*Operating and producing companies, service companies, and drilling companies; two-step seasonally adjusted and early benchmarked 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, well completions, volume and value of Texas crude oil and natural gas production, and industry E&P employment. Karr Ingham, Petroleum Economist and Interim President of the Texas Alliance of Energy Producers, created the TPI in January 1995 (based at 100.0) and releases it monthly. For more information, visit https://texasalliance.org/texas-petro-index/.

About the Texas Alliance of Energy Producers 

The Texas Alliance of Energy Producers is the largest and most effective statewide oil and gas association for independents in the nation. Serving nearly 3,000 members, the Alliance provides a voice for sound U.S. energy policy. These individuals and organizations – from small players to publicly traded companies – are the driving force behind the U.S. energy renaissance. Founded in 1930, the Alliance has offices in Wichita Falls and Austin, Texas. For more information, visit https://www.texasalliance.org/.