Energy firms upbeat about future prospects: KC Fed

Expectations for future activity remained upbeat in a fourth-quarter survey of energy companies by the Federal Reserve Bank of Kansas City.

Firms in US Central Great Plains states reported that oil prices need to be on average $73/bl to trigger a substantial increase in drilling, the survey showed. WTI crude futures closed today at $78.90/bl in New York.

The drilling and business activity index fell to 31 from 39, with positive levels indicating expansion. The total revenues index remained high, while the wages and benefits index reached a record.

"Drilling and business activity continued to grow through the end of 2021," said Chad Wilkerson, Oklahoma City branch executive and economist at the bank. "Revenues have risen along with higher wages and benefits for workers."

The future drilling and business activity index eased from 46 in the third quarter to 44 but was above the second-quarter reading of 41.

Almost a fifth of companies expected capital spending to increase significantly this year compared with 2021, while about half expected slight increases.

"Expect prices to remain steady due to supply constraints resulting from underinvestment coupled with disproportionate demand increase," said one respondent.

The poll was carried out between 15 December-3 January and included responses from companies across the Fed's 10th district, including Colorado, Kansas, Nebraska, Oklahoma, Wyoming, northern New Mexico and western Missouri.

By Stephen Cunningham