HomeNewsOil Prices Are Skyrocketing, But Here’s Why Texas Isn’t Drilling

Oil Prices Are Skyrocketing, But Here’s Why Texas Isn’t Drilling

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Oil prices are escalating. We’re all flinching at the pump. But it doesn’t appear that drilling for Texas oil is going to save the day for consumers.

We should point out that the number of working Texas oil rigs has increased over the past year. And that’s a good thing for the state, which produces more than 40 percent of the country’s annual total. More Texas oil would mean a bigger supply on the market, which should mean that prices go down. It’s simple supply/demand economics.

But Texas Monthly explained why the state’s oil rig count isn’t going to approach pre-pandemic levels, back when gas was far cheaper. The magazine said that Wall Street is “brow-beating” the Texas oil business.

Drilling for Texas Oil at a Glance

  • Nearly half of the country’s working oil rigs are in Texas, specifically in the Permian Basin.
  • The number is increasing, but it’s no where near pre-pandemic levels.
  • Companies drilling for Texas oil say investors don’t want more production.

Travis F. Thompson, the CEO of Fort Worth’s FireBird Energy, told Texas Monthly the company’s investors don’t want more drilling. His company operates two rigs in the oil-rich Permian Basin in West Texas. It’ll go to three after buying land from Chevron. The investors, which include Ontario Teachers’ Pension in Canada and Dallas’ RedBird Capital Partners, want the company to stick to a disciplined plan. Extra money goes to infrastructure for recycling water and a solar project to decrease its carbon footprint. Then give the extra money back to the investors.

The goals, Thompson said, are focused on “creating cash flow and a sustainable business.”

“As prices continue to rise. there will be increased pressure to ramp up activity,” Thompson told Texas Monthly. “I don’t think you see companies move too far away from their capital disciplined approach.”

The Texas oil rig count stood at 320, Friday. That’s up a dozen rigs since March 4. Here’s some context. On March 13, 2020, right as the country shut down because of Covid-19, the rig count was 408. It bottomed out with 100 working rigs on Aug. 14, 2020. Friday’s count was the highest number since the pandemic started. It’s also an increase of 43 rigs since the start of the year.

Meanwhile, there were 663 working rigs for oil and natural gas in the United States. CNBC said the rig count has increased in nine of the past 10 weeks.

Data compiled by Austin-based Enverus shows that publicly traded Pioneer Natural Resources has the most rigs pumping in the Permian Basin. The next two are Mewbourne Oil of Tyler and Midland’s Endeavor Energy. Both those companies are private. They have far more working Texas oil rigs than giants like Exxon, Chevron and Conoco-Phillips.

Texas Monthly reported that as oil prices rose in late 2021, Pioneer gave back $ 1.1 billion to dividends to investors. Contrast that with what happened four years ago, when Pioneer paid $55 million to investors. That was for the entire year.

Scott Sheffield, Pioneer’s CEO, told Texas Monthly, it will be business as usual, no matter how much prices increase.

“At $100 oil, $150 oil, we’re not going to change our growth rate,” he said.

And again, this is about supply and demand. If Texas increases its production, then owners risk prices plummeting. OPEC also could increase production and suddenly there’s a glut.

Oil prices still are high, trading at roughly $109 to $112 a barrel. But the market saw its biggest one-week decline in prices since November.