A cross-section of E&Ps seem resigned to a natural gas market stuck with low prices and an overall industry that isn’t getting the capital it needs, according to the Federal Reserve Bank of Kansas City’s latest quarterly survey released on Jan. 12.

“World demand is rising; investment hasn’t kept pace” one respondent told the survey. Another: “Worldwide capital expenditures remain relatively low.”

The survey, conducted between Dec. 15 and Jan. 3, includes responses from 31 firms from Oklahoma, Colorado, Wyoming, the northern half of New Mexico and western Missouri.

Another participant reported that a “lack of infrastructure will prohibit being able to develop and connect supplies to growing markets.”

And there is a concern about filling additional LNG export trains. “LNG send-out capacity is currently driving domestic gas supplies. Current gas prices are insufficient to add new dry gas production,” a respondent wrote.

But, reported another operator, “Any meaningful rise in gas price will be met with dry gas drilling.”

Fourth-quarter oil and gas activity in the district declined for a fourth consecutive quarter, “but is expected to pick up modestly in the next six months” based on the survey results, reported Chad Wilkerson, Kansas City Fed senior vice president.

Also, “firms reported that oil prices needed to be on average $64/bbl for drilling to be profitable and $84/bbl for a substantial increase in drilling to occur,” he added.

Kansas City FED Survey Graphic
Drilling/Business Activity Indexes. (Source: Federal Reserve Bank of Kansas City)

On the natural gas front, “prices needed to be $3.12 per MMBtu for drilling to be profitable on average and $4.04 for drilling to increase substantially.”

Along with profit, the Fed survey found that drilling and business activity index decreased from -13 to -33 in the fourth quarter. “Only the employment-related indexes had positive readings in the quarter—namely the number of employees, employee hours and wages and benefits indexes,” Wilkerson reported.

As for going forward, “expectations for future activity remained expansionary despite the downturn.”

Supplier delivery time has been a sore spot, though. “All expectations indexes stayed positive, except for supplier delivery time, access to credit and the expected natural gas prices.”

Kansas City FED Survey
District Operators’ Expectations in 2024 vs. 2023. (Source: Federal Reserve Bank of Kansas City)