Houston — Although Texas upstream oil and gas and oilfield services companies saw their operations negatively impacted in the immediate aftermath of Hurricane Harvey, which struck the Texas Gulf Coast August 25, the negative effects were largely short-lived, an analyst with the Federal Reserve Bank of Dallas said Wednesday.
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The Dallas Fed included several questions about the impacts that Harvey had on exploration and production and service companies in its quarterly Dallas Fed Energy Survey, which gauges the attitudes of executives of these businesses, Kunal Patel, a senior research analyst with the bank, said.
"Respondents reported widespread but generally limited impact on their operations due to Hurricane Harvey and most believe these effects will be gone six months from now," Patel said.
The survey received 142 responses from energy company executives in Texas and parts of Louisiana and New Mexico, split about 50:50 between E&P and service companies, he said.
Asked whether the hurricane had an impact on their business, 53% of respondents said it had "a slight negative impact on their business, 18% were moderately impacted and 28% were not impacted at all," Patel said.
In response to a question as to whether the executives expected a continued impact from the storm within six months, the majority of respondents, 62%, said they expect that their business will not be affected six months from now. Meanwhile, 30% expected it to have a slight negative impact, 7% foresaw an impact that was moderately negative, and only 1% of respondents foresaw an impact that was severely negative.
Respondents were also asked whether they thought the broader energy sector -- including the midstream and downstream segments -- would be negatively affected six months from now by Hurricane Harvey.
Fifty-five percent of respondents said they expected that the broader energy sector would be affected slightly, 24% said moderately, and 18% said they saw no severe effect at all, while only 2% of respondents said they thought the entire energy complex would still be affected severely by the storm six months out.
Patel said the survey results largely bore out the reality that analysts were seeing on the ground -- that the impacts from the storm to oil and gas production were temporary. "Production has come back" less than six weeks after Harvey made landfall, he said.
The same results are reflected in data from Platts Analytics. Although sample production in the Eagle Ford Basin took a significant hit in the immediate aftermath of Hurricane Harvey, it recovered rapidly. Production had been averaging 1.3 Bcf/d in the beginning of August.
When Harvey made landfall August 25, sample production volumes in the Eagle Ford fell by more than half, 773 MMcf/d, remaining low at an average 639 MMcf/d until the August 30, when volumes began to return.
Sample production has mostly recovered and has averaged 1.2 Bcf/d since the hurricane, Platts Analytics said.
Karr Ingham, a Texas-based energy economist, said the biggest production impacts from Harvey were seen in crude oil markets, while natural gas production and prices saw little to no impact from the storm.
"Just in advance of Harvey rolling ashore, and after it did, posted benchmark WTI crude oil prices went down a two or three bucks a barrel," he said.
This drop in crude prices was felt by oil producers in the Permian Basin after Harvey hit the Texas coast, bringing with it flooding that caused the temporary shutdown of a number of coastal refineries.
"Those prices were discounted further because the pipelines weren't accepting that crude oil and it didn't have a place to land on the other end," Ingham said.
On the other hand, "I saw virtually no impact to natural gas" from the storm, he said.
The midpoint for cash prices at the Henry Hub on August 24, the day before Harvey made landfall in Texas, was $2.920/MMBtu, according to Gas Daily data. The following Monday, the August 28, Henry Hub cash prices had risen by only 1 cent, to $2.930/MMBtu.
More than a month after the storm, on October 4, Henry Hub cash prices had fallen 20.4 cents from the August 28 price to $2.726/MMBtu.
The failure of the hurricane to have a significant impact on gas prices presents a marked difference to what happened in 2005 when the Gulf Coast region was slammed by two massive hurricanes, Katrina and Rita, causing the prices of both crude oil and gas to soar.
"Crude oil prices spiked up during Katrina and natural gas prices certainly did, and that lasted two or three months," Ingram said.
"None of those effects were seen in 2017 and the clear difference between those two periods is the explosion of onshore crude oil and natural gas production" over the last several years, he said.
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