(CN) – Business activity in large swaths of the U.S. oil industry continued a downward trend in the fourth quarter even as the amount of fossil fuels pulled from the ground grew for the 13th quarter in a row, according to a new survey of energy executives released Friday by the Federal Reserve Bank of Dallas.
The survey’s overall “business activity index” – a measure of the mood among energy firms operating or based in Texas and some surrounding states – moved from minus 7.4 in the third quarter to minus 4.2 in the fourth, a sign of some improvement within the industry. Still, the survey showed companies continuing to cut jobs and work hours.
“We’ve had an employment index for the last three straight quarters that’s been negative,” Dallas Fed Economist Kunal Patel said in an interview. “It’s getting a little bit more negative each quarter. The trend is, I would call it, a trimming of head count.”
Some subsets of the industry expressed more optimism than others. While exploration and production companies have been encouraged by the recent uptick in oil prices, the oilfield service firms that handle the nitty-gritty of the drilling process have been harder hit amid a drop in the number of drilling rigs being deployed.
“There’s just a big divergence in responses between the E&P firms and oilfield service firms,” Patel said. “E&P firms see the mood improving, oilfield services see it worsening.”
The U.S. rig count dropped to 805 this week, down from 1,083 this time last year, according to global service company Baker Hughes. Most of the active rigs were operating in the sprawling Permian Basin of west Texas and southeast New Mexico, by far the nation’s largest oilfield.
Houston-based services giant Halliburton made headlines earlier this month with its decision to lay off more than 800 workers in Oklahoma. Friday’s survey, citing “flat input prices and lower selling prices” for the kind of work companies like Halliburton perform, calculated an “operating margins index” for such firms falling from minus 24 last quarter to minus 39.7 this quarter.
“It seems that the oilfield services [sector] is a bit overextended in terms of adding too much equipment,” Patel said. “And these crews are getting more efficient.”
While the industry as a whole applauds the recent progress on a U.S.-China trade deal, other challenges remain. Friday’s survey pointed to broader concerns about capital, with 41% of executives telling the Dallas Fed they planned to slightly or significantly decrease capital spending in the new year.
Government forecasts also point to a more modest year ahead for the industry. The Energy Information Administration expects U.S. oil production to grow by 0.9 million barrels per day in 2020, a slowdown from the 1.3 million barrels per day increase that was forecasted for 2019.