The Dallas Federal Reserve Bank’s survey of economic activity in the oil patch released on Tuesday illustrates how dire things have become for the industry, Reuters reported. “We will likely shut down drilling next month, pay an early termination penalty to our rig contractor, and liquidate excess hedges to pay down debt. We are in survival mode now,” wrote one of the survey respondents, who was from an exploration and production firm. The Dallas Fed’s survey fell from minus-4.2 in the fourth quarter (not great, not awful), to minus-50.9 in the first quarter (worst ever). The survey apparently arrived as the price war between Saudi Arabia and Russia erupted and the coronavirus pandemic worsened, so it caught producers and service companies at a notable moment of panic. The United States produces nearly 13 million barrels of oil per day, about half from the Dallas Fed’s coverage region, which includes all of Texas, northern Louisiana and southern New Mexico. Estimates for the crash in demand have gone from bad to worse, with some firms now saying that consumption will fall as much as 20 percent in the next quarter. “I am shutting in everything I can and cutting general and administrative expenses to minimal levels to try and ride out the storm. Those who are in debt will not survive,” another respondent said.
