Record Texas Production | Russell T. Rudy Energy LLC
In a recent article in “Rigzone”, economist Karr Ingham, the author of the Texas Petroleum Index, points out the disconnect between the usual indicators and production levels here in Texas. In spite of decreases in oil prices, rig counts, drilling permits, and well completions, June oil production exceeded the 2014 level for the same month by 15.8 million barrels.
Ingham projects total 2015 production to reach 1.284 billion barrels, surpassing the 1972 record of 1.263 billion. Ironically, for the year ended in June 2015, wellhead oil prices dropped by 44.7%, yet production increased by 17.2 %. In fact, even the rate of increase in oil production in Texas is not yet showing signs of slowing.
This disparity is not confined to oil. Natural gas production in the state is also growing as prices decline. While the inverse relationship between the two is less dramatic for gas, it is unmistakable. For the first 6 months of 2015, wellhead gas prices were down 44% as compared to the same period last year. Nevertheless, gas production was up 3%.
It should be noted that much of the natural gas production in Texas is “casinghead”, or oil well gas, and will move roughly in tandem with crude production. That could explain why only 10% of drilling rigs over the last 5 years were looking for gas, but gas production increased nevertheless.
Ingham concludes that with increasing production and a global oil glut, prices will continue to decline. He predicts this will continue until prices get low enough, and stay there long enough for production to decline and surpluses to be reduced. However, he is quick to point out that no one knows how low the price has to be, nor for how long, for prices to recover.
To read the article in its entirety, please go to http://www.rigzone.com/news/article.asp?hpf=1&a_id=139915&utm .
