US oil and gas producers are seeing slowing activity, rising costs, and have issued a negative outlook on production, according to the Federal Reserve Bank of Dallas’ quarterly energy survey.
Released 24 September, the survey provides insights on business activity and sentiment across the Federal Reserve’s 11th District, which includes Permian Basin developers in Texas and New Mexico as well as many of the shale gas producers in northern Louisiana.
Heightened uncertainty over prices and costs has prompted some respondents to hold off on new investments, with 42% of executives saying they had slightly delayed decisions and 36% reported significant delays. Those representing smaller oil and gas companies, considered by the survey to be producers of less than 10,000 B/D, were somewhat more likely than their larger peers to report no delays.
The executives put the median oil price at $63/bbl in 6 months and $64/bbl in 1 year, with the outlook rising to $69/bbl in 2 years and $77/bbl over 5 years. The average oil price during the survey period from 10 to 18 September was $63.80/bbl.
The survey includes the responses of 139 energy executives representing 93 exploration and production firms and 46 oilfield services firms.
Impact of Regulatory Shifts
The survey also asked about the new US omnibus law, called the One Big Beautiful Bill Act, which rolled back federal royalty rates and expands oil and gas leasing on US federal lands. A slight increase in output was the most common expectation, with 58% of executives seeing higher crude production from federal lands and 55% anticipating higher gas supplies. Larger oil and gas companies mostly predicted no change, while smaller operators leaned toward modest gains.
When asked about the impact of regulatory changes, 57% said changes since January 2025 have reduced break-even costs for new wells by less than $1.00/bbl, while another 25% saw reductions between $1.00 and $1.99/bbl.
In a question on technology, nearly half of support service firms expect artificial intelligence (AI) to slightly extend equipment lifespans and 12% see a meaningful increase, though 39% said they do not expect AI to make a difference.
Higher Oil Prices Needed
Looking beyond the numbers, the Dallas Fed invited executives to weigh in on the top issues facing their firms through open comments. Many addressed recent policy moves under US President Donald Trump’s administration, with views ranging from starkly negative to cautiously upbeat.
Several warned that the US shale sector’s best days may be behind it. One operator wrote, “We have begun the twilight of shale. Several multibillion-dollar firms that have previously been US-onshore-only are making investments in foreign countries and riskier (waterborne) geologies.” Another said, “It’s going to be a bleak 3-plus years for the oilpatch,” while predicting investors will turn away from the US upstream sector in favor of the fast-rising AI business.
The comments also reemphasized that the outlook for oil and gas prices is a top concern and that unless prices rise, the ability to drive profits and drill new wells will be constrained. One respondent noted, “Given the US Energy Information Administration's forecast for 2026 oil prices averaging $47/bbl, we are suspending drilling indefinitely after we drill our last well starting this month.” The respondent added that, following the sweeping US tariffs announced in April, the firm cut its drilling plan from 15 wells to 10.
Others echoed frustration that the mantra of “drill, baby, drill” has lost its appeal after prior boom-and-bust cycles. “From now on, economic decisions will have to be prudent and well-founded in logic, not hyperbole,” one executive said.
Not all executives were downbeat. Some pointed to geopolitics and policy as potential tailwinds.
“I view oil as having far more upside potential than downside,” one commenter said, citing the US Strategic Petroleum Reserve being at its lowest level since 1984 and ongoing global tensions as potential drivers for activity. “If this shakes out, we could see a massive capital flow into energy as European countries mitigate supply shocks by increasing on-hand inventory.”
Another added, “Lowering interest rates will spur the economy and drive oil and gas consumption higher. [Liquified natural gas] exports will also help our industry.”
However, even some of the more optimistic executives tempered their expectations. As one put it, “Overall, we feel good about the future of the industry but expect some short-term pain for the next year or so.”
Service providers also emphasized the strain they are feeling from tariffs and geopolitics. One respondent from the service side of the business said, “We are suffering from a combination of increased cost due to tariffs and downward pricing pressure from end users. Global geopolitical issues and US foreign policy uncertainty are creating increased financial challenges for both our US and international business.”
