Those Texans are a stubborn bunch. According to a recent report by the Texas Alliance of Energy Producers, dropping commodity prices in September did nothing to dim their enthusiasm for drilling. In fact, drilling and production activity in the state was so high that it propelled the Texas Petro Index to a new high for the 20th consecutive month. “Independent oil and gas producers continue to drive activity levels upward, despite the fact that both crude oil and natural gas wellhead prices were lower in September than in either July or August,” petroleum economist Karr Ingham is quoted as saying (Ingham created the Petro Index in 2003). “Other measures of upstream activity – drilling permits, well completions, the rig count, employment – remained very favorable compared to year-ago levels. However, these indicators should be watched closely in the coming months, especially if prices fall closers to producers’ finding and production costs.” A composite index based on a comprehensive group of upstream economic indicators, the Petro Index reached 282.3 in September, up from 279.6 in August and nearly 50 points higher than the index in September 2007. Among the indicators was the Baker Hughes rig count, up 13% from a year ago; 63.3% more drilling permits issued by the Texas Railroad Commission; and an 8.7% increase in employment. I will be curious to see how long this enthusiasm remains strong. It brings to mind a paper airplane that reaches the apex of its trajectory before plummeting back to earth. Are the reserves in the Barnett Shale or the Wilcox trend still economic at US $60/barrel oil? We’ll find out.
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