With their business outlook worsening, about half of oil field service firms plan to cut spending in 2020, the Federal Reserve Bank of Dallas said on Friday in its quarterly energy survey.
The report also asked oil and gas firms about natural gas flaring and venting in the Permian Basin, which reached a new all-time high in the third quarter, averaging more than 750 million cubic feet per day (MMcfd), according to Rystad Energy.
Pipeline takeaway capacity and a lack of gathering and processing plants were cited as the top reasons for flaring, according to the Dallas Fed survey.
Oil and gas activity and employment dipped in the fourth quarter in the Dallas Fed region, which includes the largest U.S. shale field, the Permian Basin in Texas and New Mexico.
U.S. oil prices have hovered below $60 a barrel for most of the year, prompting many energy firms to cut staff and reduce budgets, even as major oil exporting countries have curbed production. About 36% of oil and gas producers plan to cut budgets next year, the survey said.
U.S. oil has rebounded to $61.72, up about 6% from a month ago, but oil producers and their service firms, which provide equipment and oil field crews, are planning their budgets for oil prices between $54 and $55 per barrel in 2020, according to the survey.
“Continued weak oil prices and high costs are squeezing my margins,” one survey respondent said. “It is very difficult to find any projects that make sense economically.”