American Oil and Gas Reporter - January 2015 - 25

Texas Index Reaches
New High In October
HOUSTON-Texas oil and gas
producers defied falling crude oil prices
in October, setting well-permitting and
employment records, and pushing the
Texas Petro Index (TPI) to another
record high at 312.9, the Texas Alliance
of Energy Producers reports.
However, the Alliance notes,
wellhead prices continued to decline
dramatically in November-dropping to
a posted price of $62.50 a barrel for
West Texas Intermediate crude on the
Plains Pipeline system after the
Organization of Petroleum Exporting
Countries opted to maintain its current
production quotas-leaving little doubt
that a contraction of the Texas upstream
oil and gas economy was in the offing
after nearly five years of spectacular
expansion.
"At this point, a contraction is
unavoidable," allows Amarillo, Tx.,
economist Karr Ingham, who created
the TPI and maintains it monthly. "But,
other than the direct impact on the value
of Texas crude oil production, lower
wellhead prices in October did not
appear to affect other upstream oil and
gas indicators."
Ingham says he expected upstream
oil and gas activity in Texas as reflected
by the TPI to peak late last year or very
early in 2015, and then enter into a state
of decline for some time, depending on
what happened to crude oil prices.
"Regardless of the depth or duration
of an economic decline, producers in
Texas may be better positioned to
weather that storm than most think, as a
result of declining tight-oil production
costs," Ingham suggests.
He says, "Production costs can be
expected to moderate as lower oil prices
undermine demand for many well site
supplies and services, and service
companies and suppliers compete for
dwindling business opportunities by
lowering fees and prices."
Leading Indicators
The Texas Petro Index in October
was 312.9, 5.8 percent higher than in
October 2013. Before the current
economic expansion, the TPI's
previous all-time high of 287.6
occurred in September and October
2008, after which the TPI declined to
188.5 in December 2009 before
embarking on its current growth cycle.
Among leading TPI indicators
during October, the Texas Alliance
reports:
* Crude oil production in Texas

totaled an estimated 98.2 million
barrels, 22.1 percent more than in
October 2013. With crude oil prices in
October averaging $80.94 a barrel, the
value of Texas-produced crude oil
totaled nearly $7.95 billion, 1.7 percent
less than in October 2013.
* Estimated Texas natural gas
output was more than 702.1 billion
cubic feet, a meager year-over-year
monthly increase of 0.3 percent. With
natural gas prices in October averaging
$3.87an Mcf, the value of Texasproduced gas increased 12.7 percent to
more than $2.7 billion.
* The Baker Hughes count of active
drilling rigs in Texas averaged 899,
increasing 9.6 percent from 820 active
rigs in October 2013. Drilling activity in
Texas peaked in September 2008 at a
monthly average of 946 rigs before
falling to a trough of 329 in June 2009.
During this last economic expansion,
the statewide average monthly rig count
peaked at 932 in May and June 2012.
* The number of Texans on oil and
gas industry payrolls averaged a record
312,200, according to statistical
methods based on Texas Workforce
Commission estimates, about 10.3
percent more than in October 2013.
Upstream oil and gas industry
employment in Texas has increased
steadily since falling to a nadir of
179,200 in October 2009. During the
previous growth cycle, industry
employment peaked at 223,200 in
November 2008.
Ì

Spectra Energy Expands
Pipelines Into Wyoming
WASHINGTON-Spectra Energy and
Spectra Energy Partners have proposed
a pipeline network expansion, with
service from Guernsey, Wy., to Patoka,
Il.
According to the companies, there is
strong market demand to move light,
sweet crude from the Bakken, the
Denver-Julesburg Basin and the Powder
River Basin, to Patoka-where shippers
will be able to access Midwest and Gulf
Coast markets. Spectra Energy says the
expansion may enable access to Eastern
U.S. refiners as the company continues
to explore opportunities to serve those
markets as well.
Spectra states the expansion will be
in service in 2017 with 400,000 barrels
a day initial capacity, and will provide
unprecedented access for shippers and
the flexibility to meet Gulf Coast
refiners' demand for light crude. Ì
JANUARY 2015 25



American Oil and Gas Reporter - January 2015

Table of Contents for the Digital Edition of American Oil and Gas Reporter - January 2015

Contents
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