For the first time this year, there were more oil and gas companies who say they are hiring than who say they are laying off workers, according to a survey released Thursday by the Federal Reserve Bank of Dallas.
The quarterly energy survey asks companies in Texas, southern New Mexico and northern Louisiana a series of questions about business conditions. This quarter’s survey had 141 respondents, of whom 67 were exploration & production firms and 80 oilfield services firms.
While most companies said their headcounts had remained unchanged during the quarter, 18 .4 percent reported net hiring and 15 percent reported net layoffs, turning the employment index positive for the first time this year.
The oil services sector appeared to have the largest boost in hiring, with 22.5 percent of firms saying they had added jobs. In exploration and production, hiring was slower, with 13.4 percent of firms saying they had added positions in the quarter, according to the Dallas Fed.
The outlook in the services sector improved dramatically in the fourth quarter, said Michael Plante, senior research economist at the Dallas Fed.
In the survey, a whopping 59.5 percent reported an improved outlook for this quarter.
“We’ve seen an increase in drilling activity basically over the entire second half of 2016, particularly in West Texas in the Permian Basin. Finally, it’s starting to spill over to the services sector,” Plante said.
However, employment still appeared to lag from levels a year ago, with 23 percent of firms saying they had increased hiring compared to the fourth quarter of last year and 29 percent saying they had fewer jobs than in the year ago quarter.
And Plante said it could take a while for some companies to decide to add more workers, but many are giving the workers they have extra hours, the survey showed.
This quarter’s survey also asked companies about the deal among OPEC countries to cut production. And not surprisingly, most didn’t expect the deal to hold. Of the respondents, 58 percent said they didn’t expect the production agreements to be enforced. Still, most said they expected prices to rise and that the oil markets would come into balance by the third quarter of 2017.
Plante says the survey shows the companies’ mixed expectations when it comes to the effect OPEC cuts will have.
“Industry participants have some skepticism about the agreements particularly when it came to indicators related to actual business plans. … They were pretty cautious about revising those up based on the production cuts,” he said.
The executives were also asked about the soaring prices for leases in the Permian Basin, where drilling is hot.
Some of the respondents, whose names were not included in the Dallas Fed report, likened the Permian prices to a “bubble” or a “Ponzi scheme.”
But others said the prices were justified given improving technology that has the potential to make production in the Permian very profitable as oil prices rise.
“My take is, based on the comments, there are probably some people who have really good acreage and it’s going to work out well for them and some people who are just making a bet.” Plante said.
