OIL & GAS MARKETS • DEPARTMENTS
Texas Petro Index: Strong crude prices drive recovery of state’s E&P economy
BY STEPHEN WHITFIELD, ASSOCIATE
EDITOR After nearly two years of contraction,
Texas’ E&P economy finally saw a year of
recovery in 2021, driven primarily by the
upward trend in crude oil prices, according
to the Texas Alliance of Energy Producers’
Texas Petro Index (TPI).
“We’ve begun to recover with the oil
price as demand has begun to recover and
as we’ve taken a considerable amount of
supply offline, certainly in Texas,” Karr
Ingham, Petroleum Economist at the Texas
Alliance of Energy Producers, said on 26
January. “We find ourselves in recent
months with prices averaging in excess
of $70, and now we’re seeing prices going
over $80. We’ve had quite an uptick in
price this year.”
The TPI, a monthly measure of growth
rates and cycles in the Texas upstream
oil and gas economy, has seen continu-
ous growth since March 2021. From 138.3
that month, the index had risen to 172.6
by December, a nearly 25% increase. The
December 2021 index, the most recent fig-
ure available as of February 2022, also
represented a nearly 29% improvement
over December 2020 levels. However,
the December TPI still remains around
19% lower than the most recent cyclical
peak (post-2015, pre-COVID) of 213.6 set in
February 2019.
The TPI is calculated by assigning val-
ues to a group of E&P indicators, including
crude oil and natural gas wellhead prices,
rig count, drilling permits, well comple-
tions, Texas crude oil and natural gas pro-
duction and employment figures.
As a main driver of the TPI, average WTI
prices rose by nearly 40% in 2021: up from
$35 in 2020 to nearly $50/bbl last year.
Monthly average WTI peaked at $77.12 in
October 2021, although average prices have
since risen even higher .
Natural gas prices – which represents
a combination of Waha and HSC prices –
averaged $5.79/MMBtu in 2021, the high-
est annual average since 2008 and a 251%
increase over the $1.65 average in 2020.
Winter Storm Uri was an obvious factor
in 2021, with both Waha and HSC seeing
significant spikes that February. In fact,
TPI scor
sc or
oree 250.00
250. 200.00
200. 213.1
193.1 185.7
172.6 150.00
150. 134.0
100.00 100.
50.00 50.
0.0.0.00 December 2017
December 2018
December 2019
December 2020
202 0
D ecember 2021
December 202 1
Texas’ E&P economy continues to trend upward, with December 2021’s score nearly
29% higher than a year ago, although it is still notably below pre-COVID levels.
Waha averaged $24.28 that month while
HSC averaged $36.93. If the February num-
bers are removed from the calculation,
then natural gas prices averaged $3.53/
MMBtu in 2021. Even without Uri, how-
ever, Mr Ingham said Texas was expecting
an increase in gas demand as the state
recovered from the COVID-19 pandemic.
Average natural gas price in December
2021 was $3.53/MMBtu, a 42% increase
over the December 2020 monthly average
of $2.49/MMBtu.
Rig counts in Texas also improved last
year, although not at the same pace as oil
and gas prices. The statewide rig count
averaged 216 rigs in 2021, an approximate-
ly 4% increase over the 207 rigs in 2020.
The improvement is more striking when
looking at average monthly rig counts,
which increased from a low point of 170 in
January to a high of 275 in December. That
275 is the highest the average rig count has
been since April 2020, when it was 283,
although it’s still well below the 533 rigs
averaged during the last cyclical peak in
October and November 2018.
Total oil well completions dropped by
33.8% from 2020 to 2021, while gas well
completions declined by 24.8%. This drop
was expected after 2020 saw operators
restart a high number of drilled-but-
uncompleted (DUC) wells in 2020.
“The 2020 spike in DUCs happened
because production fell off a whole lot
more rapidly than we expected post-COV-
ID,” Mr Ingham said. “That’s certainly why
we were able to maintain production in
2020 without adding too much to the rig
count. But I think that’s played out now.
We’re adding production, and we’re adding
more rigs, so we don’t need to draw down
DUC inventory.”
Production in Texas is also trending
upwards. For the first time since April
2020, crude oil production exceeded 5 mil-
lion bbl/day in December 2021, according
to preliminary estimates from the Texas
Railroad Commission. Assuming contin-
ued upside price support, then by the sec-
ond half of this year, production is on
target to exceed the previous record of
5.4 million bbl/day, set in March 2020.
Meanwhile, natural gas production con-
tinues to build on the records set in 2020,
moving up from 10.51 million cu ft/day in
2020 to 10.68 million cu ft/day in 2021.
Further, Texas added nearly 16,500 jobs
in the upstream oil and gas sector last
year, according to data from the Texas
Workforce Commission. As of December
2021, an estimated 175,925 people were
employed in the upstream sector, up from
the post-COVID low of 157,330 in September
2020 . DC
D R I L L I N G C O N T R AC T O R • M A R C H/A P R I L 202 2
13