DALLAS FED ENERGY SURVEY: ACTIVITY DECLINES SLIGHTLY, UNCERTAINTY REMAINS ELEVATED

The following information was released by the Federal Reserve Bank of Dallas:

Oil and gas activity decreased slightly in third quarter 2025, according to oil and gas executives responding to the Federal Reserve Bank of Dallas Energy Survey.

The business activity indexthe surveys broadest measure of conditions facing Eleventh District energy firmscame in at -6.5, suggesting a small decline in activity since last survey.

It was another lackluster quarter for the industry according to our survey respondents, as activity and oil production fell slightly while many costs continued to increase, said Michael Plante, an assistant vice president at the Dallas Fed.

Key takeaways:

Both employment and employee hours were relatively unchanged this quarter. The employment index was -1.5 vs. -6.6 in the second quarter of 2025. The employee hours index was -3.7 vs. -5.1 last quarter.

Oil and natural gas production decreased slightly this quarter. The oil production index was -8.6 while the natural gas production index was -3.2.

Lease operating expenses and finding and development costs rose at a faster pace this quarter. The lease operating expense index was 36.9 vs. 28.1 last quarter while the finding and development costs index rose to 22.0 from 11.4.

Input costs rose again for oilfield support service firms but at a slightly slower pace. The input cost index was 34.8 this quarter relative to 40.0 last quarter.

The uncertainty index remained elevated at 44.6.

Most firms report delaying investment decisions due to uncertainty

Seventy-eight percent of executives from exploration and development firms report their company has delayed investment decisions in response to heightened uncertainty surrounding oil prices and the cost of producing oil, Plante said.

Additional takeaways from the special questions:

About three-quarters of respondents believe shale oil drilling will become commercially viable in international locations outside the U.S., Canada and Argentina in the next 10 years.

57 percent of executives estimate that regulatory changes since January 2025 have reduced their firms break-even cost for new wells by less than $1 per barrel. Another 25 percent estimate a reduction between $1 to $1.99.

The One Big Beautiful Bill Act lowers federal royalty rates and increases federal leasing offerings. When asked whether these changes would increase crude oil production, the most selected response was a slight increase, chosen by 58 percent. Another 36 percent reported no change, while only 6 percent expect a significant increase. Similar results were obtained for natural gas production.

Executives at EandP firms were asked about whether their operations have been impacted by theft in the oil field. 59 percent reported they had not been impacted by oilfield theft, while 41 percent reported being impacted. Among those affected, most (about three-quarters) report a low impact while 15 percent reported medium impacts and 9 percent reported high impacts.

73 percent of oilfield support service firms estimate that some fraction of their equipment is sourced directly or indirectly from China. The most selected response was 1 to 25 percent of their equipment (chosen by 49 percent of respondents). A large majority of executives79 percentexpect there would be a slight impact to their costs if they had to switch from Chinese suppliers to other countries. 14 percent report there would be a significant impact while 7 percent expect no impact.

Close to two-thirds of executives from oilfield support service firms expect artificial intelligence to help meaningfully increase the average lifespan of their firms equipment. 49 percent believe there will be a slight increase, while 12 percent expect a significant increase. 39 percent report they do not expect an increase in the average lifespan of their firms equipment.

A majority of EandP firms68 percentreport they will hedge about the same in 2025 and 2026 as they did in 2024. Another 15 percent reported a slight increase, while 6 percent selected a significant increase. Six percent report they decreased hedging significantly while 5 percent reported a slight decrease.

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 September 1018, 2025, and 139 energy firms responded. Of the respondents, 93 were exploration and production firms, and 46 were oilfield services firms.