Fourth Quarter | December 17, 2025
Lingering pessimism, uncertainty further weigh on oil and gas activity
What’s New This Quarter
Special questions focus on capital spending in 2026, the oil price firms use for budgeting, employee headcount, the expected impact of artificial intelligence (AI) on well breakevens, lightweight proppant use in well completions, whether oil and gas support services firms are entering the power services market, and whether exploration and production firms plan to target wells with higher natural gas content.
Activity in the oil and gas sector edged lower in fourth quarter 2025, according to oil and gas executives responding to the Dallas Fed Energy Survey. The business activity index, the survey’s broadest measure of the conditions energy firms face in the Eleventh District, remained negative, though relatively unchanged at -6.2 in the fourth quarter.
The company outlook index, while also still negative, improved slightly from -17.6 in the third quarter to -15.2, suggesting continuing pessimism among firms. Meanwhile, the outlook uncertainty index remained elevated and was relatively unchanged at 43.4.
Oil and gas production was little changed in the fourth quarter, according to executives at exploration and production firms. The oil production index remained negative, though it advanced from -8.6 in the third quarter to -3.4. The natural gas production index increased slightly from -3.2 to 0.
Costs increased at a slower pace when compared with the prior quarter. The input cost index for oilfield services firms declined from 34.8 to 24.4. Among exploration and production firms, the finding and development costs index remained positive but fell from 22.0 to 5.7. Also, the lease operating expenses index decreased slightly from 36.9 to 28.4.
Oilfield services firms reported modest deterioration in nearly all indicators. The equipment utilization index for oilfield services firms was relatively unchanged at -12.2. The operating margin index also remained negative and was relatively unchanged at -31.7, indicating margins compressed at a similar rate. Meanwhile, the prices received for services index declined slightly from -26.1 to -30.0.
Overall, demand for employees fell, and those on the job tended to work fewer hours. The aggregate employment index declined from -1.5 in the third quarter to -10.8 in the fourth quarter. Additionally, the aggregate employee hours index declined from -3.7 to -9.3. Meanwhile, the aggregate wages and benefits index remained positive but declined slightly from 11.5 to 6.2.
On average, respondents expect a West Texas Intermediate (WTI) oil price of $62 per barrel at year-end 2026; responses ranged from $50 to $82 per barrel. When asked about longer-term expectations, respondents on average said they expect a WTI oil price of $69 per barrel two years from now and $75 per barrel five years from now. Survey participants foresee a Henry Hub natural gas price of $4.19 per million British thermal units (MMBtu) at year-end 2026. When asked about longer-term expectations, respondents on average said they anticipate a Henry Hub gas price of $4.57 per MMBtu two years from now and $5.00 per MMBtu five years from now. For reference, WTI spot prices averaged $59.00 per barrel during the survey collection period, and Henry Hub spot prices averaged $4.84 per MMBtu.
Next release: March 25, 2026
Data were collected Dec. 3–11, and 131 energy firms responded. Of the respondents, 90 were exploration and production firms and 41 were oilfield services firms.
The Dallas Fed conducts the Dallas Fed Energy Survey quarterly to obtain a timely assessment of energy activity among oil and gas firms located or headquartered in the Eleventh District. The Eleventh District encompasses Texas, northern Louisiana and southern New Mexico. Firms are asked whether business activity, employment, capital expenditures and other indicators increased, decreased or remained unchanged compared with the prior quarter and with the same quarter a year ago. Survey responses are used to calculate an index for each indicator. Each index is calculated by subtracting the percentage of respondents reporting a decrease from the percentage reporting an increase. When the share of firms reporting an increase exceeds the share reporting a decrease, the index will be greater than zero, suggesting the indicator has increased over the previous quarter. If the share of firms reporting a decrease exceeds the share reporting an increase, the index will be below zero, suggesting the indicator has decreased over the previous quarter.
