Dallas Fed Energy Survey: Uncertainty spikes in the oil patch

DALLAS — Oil and gas activity edged up slightly in first quarter 2025, according to oil and gas executives responding to the Federal Reserve Bank of Dallas Energy Survey.

The business activity index—the survey’s broadest measure of conditions facing Eleventh District energy firms—came in at 3.8, suggesting slight growth since the last survey.

“Business activity showed little growth this quarter while respondents noted a heightened level of uncertainty due to geopolitical risk, trade policy and other factors,” said Michael Plante, an assistant vice president at the Dallas Fed.

Key takeaways:

The company outlook index fell to -4.9 this quarter, a decline of 12, indicating slight pessimism about the outlook.

The uncertainty index jumped 21 points to reach 43.1 this quarter, pointing to increased uncertainty about the outlook.

Oil and natural gas production both grew slightly this quarter. The oil production index was 5.6 vs. 1.1 last quarter while the natural gas production index was 4.8, an increase of 8.

Employment and employee hours both remained close to last quarter’s level. The employment index was 0, down slightly from 2.2 in the fourth quarter of 2024. Employee hours was 0.7, suggesting little change from last quarter.

Costs rose at a faster pace. The lease operating expenses index increased to 38.7 from 25.6, the finding and development costs index rose 6 points to reach 17.1, and the input costs index for oilfield support service firms was 30.9 vs. 23.9.

Breakeven Prices Up Slightly; Smaller Firms See Higher Breakevens Compared to Larger Firms

“Average breakeven prices to profitably drill a new well increased just a little bit this year. Across all responses, the average was $65 per barrel, up $1 from last year’s average. Larger firms had an average breakeven of $61 per barrel compared to $66 for smaller companies,” Plante said.

Additional takeaways from the special questions:

The average price needed to cover operating expenses for existing wells was $41 per barrel, up $2 from last year’s survey.

Executives from E&P firms reported on the cost of regulatory compliance for their firm this survey. The most selected response was $0 to $1.99 on a per-barrel basis, chosen by 49 percent of respondents. 28 percent selected $2 to $3.99 per barrel, 15 percent selected $4 to $5.99 per barrel and the remainder chose greater than or equal to $6 per barrel.

60 percent of executives reported that administrative and legal costs were the main cost component of their firm’s regulatory costs. Monitoring costs were the next most selected response, chosen by 21 percent of executives. Eleven percent chose abatement costs while 8 percent selected other costs.

Opinions are mixed on how the cost of regulatory compliance will change in 2025 vs 2024. The most selected response was “remain close to 2024 levels,” chosen by 40 percent of executives. Another 21 percent chose “increase slightly” while 13 percent chose “increase significantly.” And 20 percent expect a slight decrease while 6 percent expect a significant decrease.

55 percent of oilfield support service executives expect steel import tariffs to slightly decrease customer demand. The next most selected response was “no change,” picked by 28 percent of respondents. Another 8 percent expect a significant decrease, 8 percent a slight increase and 3 percent a significant increase.

Many executives expect the number of employees to remain the same when comparing December 2025 to December 2024. 57 percent of respondents selected “remain the same.” 21 percent selected “increase slightly” while 14 percent selected “decrease slightly.” Only a small percentage selected “increase significantly” or “decrease significantly.”

37 percent of executives expect total merger and acquisition deal value for the U.S. upstream oil and gas sector to increase slightly this year. Another 22 percent of executives expect the deal value to decrease slightly in 2025, and an additional 18 percent each selected “remain close to 2024 levels” and “decrease significantly.”

The survey samples oil and gas companies headquartered in the Eleventh Federal Reserve District, which includes Texas, southern New Mexico and northern Louisiana. Many have national and global operations.

Data were collected March 12–20, 2025, and 130 energy firms responded. Of the respondents, 88 were exploration and production firms, and 42 were oilfield services firms.

For more information, visit dallasfed.org.