Upstream oil and gas activity slows as executives fret – bank survey

Oil and gas business activity in Texas, northern Louisiana and southern New Mexico declined slightly in the first quarter of 2025 despite a small increase in production, according to the Federal Reserve Bank of Dallas' quarterly energy survey.

The bank's business activity index, a broad measure of business conditions, was 3.8 in the first quarter, a slowdown from the preceding quarter's 6.0 amid concern in the oil patch about the new administration's energy and trade policies.

Executives expressed anxiety about the impact of tariffs on the steel needed to drill new wells, as well as dissatisfaction with President Donald Trump's push to drill more in order to lower energy prices. The survey, released March 26, polled more than 100 oil and gas executives in the bank's 11th Federal Reserve District between March 12 and March 20.

"I have never felt more uncertainty about our business in my entire 40-plus-year career," one executive told the bank.

"Planning for new development is extremely difficult right now due to the uncertainty around steel-based products," another executive said. "Oil prices feel incredibly unstable, and it's hard to gauge whether prices will be in the $50s per barrel or $70s per barrel. Combined, our ability to plan operations for any meaningful amount of time in the future has been severely diminished."

The executives wanted Trump's calls for the industry to increase oil and gas production over the current record levels to end. "The administration's chaos is a disaster for the commodity markets," an executive said. "'Drill, baby, drill' is nothing short of a myth and populist rallying cry. Tariff policy is impossible for us to predict and doesn't have a clear goal. We want more stability."

Even after an active mergers and acquisition market in 2024, oil and gas executives think there is more value left in the production patch, according to the survey.

The largest group of the polled executives, 37%, forecast that the value of M&A deals in the upstream oil and natural gas sector will likely increase slightly in 2025, according to the survey. The second-largest group, 22%, expected values to decline slightly.

A positive outlook for natural gas commodity prices over the next two years supported the low-grade bullishness among executives. They expect gas prices on average at $4.30/MMBtu two years from now. The average price would likely be $3.71/MMBtu in the next six months, the executives said.

The average Henry Hub price of gas during the polling period was $4.10/MMBtu.