HOUSTON, Dec 17 (Reuters) - Oil and gas activity in the key producing states of Texas, Louisiana and New Mexico edged lower in the fourth quarter, as executives there expressed concern about weak oil prices that are making some wells noneconomic and ongoing geopolitical uncertainty, according to a survey released by the Federal Reserve Bank of Dallas on Wednesday.
Oil and gas production was little changed over the period, and costs increased at a slower pace compared to the prior quarter. Oilfield services firms reported modest deterioration across indicators including equipment utilization and operating margin.
"While oil prices have not been low enough this quarter to force a substantial cutback in activity, they were not high enough to support any growth either," Dallas Fed Assistant Vice President Michael Plante said in a statement.
Responses for planned capital spending next year varied, with "remain close to 2025 levels" being the most-selected response from large E&P firms. Executives at smaller companies showed a tendency for slightly increased spending.
More than half of respondents expect employment levels at their companies to remain the same over the next year.
Data for the survey was collected December 3 to December 11. Of the respondents, 90 were exploration and production firms and 41 were oilfield services firms.
LARGE E&P FIRMS ANTICIPATE MODEST AI GAINS
"Most executives at large E&P companies expect AI to help lower break-even prices for new wells over the next five years, although the expected benefits are often modest in size,” Plante said, adding that smaller firms were much less optimistic about the impact of the emerging technology.
Companies expect a West Texas Intermediate oil price of $62 per barrel and a Henry Hub natural gas price of $4.19 per million British thermal units at year-end 2026, the survey said.
WTI averaged $59.00 per barrel over the survey collection period, with Henry Hub averaging $4.84 per MMBtu, according to the Dallas Fed.
"If the administration succeeds in ending the Ukraine conflict and Russian sanctions are lifted, oil markets will likely be oversupplied in 2026. However, if Russian sanctions continue, along with reduced oil volumes from Iran and Venezuela, markets may approach a balanced position," one oilfield executive said in the anonymous comments section of the survey.
Several executives said they expect the U.S. administration to try and keep oil prices low through midterm elections next year in November.
Reporting by Nathan Crooks in Houston; Editing by Liz Hampton and Andrea Ricci
