Lower oil pricing is leading some oil and gas companies to trim their budgets for the coming year.
“We are hunkering down and weathering the storm.” This anonymous quote from the most recent quarterly energy survey conducted by the Federal Reserve Bank of Kansas City seems to sum up the attitudes of top executives of at least some oil and gas companies operating in Oklahoma, Kansas, Colorado, Nebraska, Wyoming and parts of Missouri and New Mexico. The survey, released Friday, shows energy companies pulled back their activities in the final quarter of the year. It also shows at least some companies have trimmed their capital expenditure plans for 2019, but still presents a mixed picture. Some executives who took part in the surveys said they will continue to execute set drilling plans for the coming year to hold acreage while hedging significant amounts of production to protect themselves from a volatile market. Others said those ebbs and flows in pricing, particularly when it comes to oil, are a “deal killer” for their plans. One said, “uncertainty is driving our plans for the next year,” while another added, “continued low prices will dampen new hires and future spending.” The bank uses the survey results to create indexes that measure energy industry activities, including drilling, capital spending, employment levels and costs. Data from the fourth-quarter survey showed that: • The survey’s drilling and business activity indexes fell for the first time in nearly
• Indexes for total revenues, profits and access to credit also decreased considerably.
• Indexes for most employee-related items also weakened, but showed the industry was still expanding in the quarter, just more slowly.
As for what executives expected in 2019, the survey showed that some predicted their firms would spend less and earn less profit.
It also showed they expected for oil and natural gas prices to continue moderating.
“The recent drop in oil prices led to some pullback” during the fourth quarter, said Chad Wilkerson, the Oklahoma City branch executive and
A number of firms also reduced their 2019 capital spending plans. Firms report needing $63 a barrel on average for oil in order to ‘substantially’ increase drilling.” Chad Wilkerson, Oklahoma City branch executive
economist at the Federal Reserve Bank of Kansas City.
“A number of firms also reduced their 2019 capital spending plans,” he said, adding, “Firms report needing $63 a barrel on average for oil in order to ‘substantially’ increase drilling.
“But they anticipate oil rising to only the mid- to high-$50s this year.”