OKLAHOMA CITY – The pace of decline in Oklahoma’s energy production sector is “accelerating into the deepest contraction in the last 20 years,” Jerry Bohnen wrote in OK Energy Today, a daily report of which he is the managing editor.
The Energy Index contracted sharply in April, Bohnen reported. Oil and natural gas activity fell by 14.3% to an index reading of 102.8 – just above the baseline of 100 indexed to the base year of 2000.
Total energy activity in the state is now down 44% from a year ago, Bohnen reported.
All index components were down again in April.
Rig activity fell by 43%, with April’s weekly rig counts averaging only 25. Rig activity continued to fall into May with new drilling all but halted in the state. Eleven oil/gas rigs were operating in Oklahoma on June 5, compared to 101 a year earlier, according to Baker Hughes.
Oil prices fell precipitously in April before outright collapsing in May to headlines of negative prices. “Many of the headlines were driven by expiring futures contracts and an unwillingness to accept physical delivery of the commodity, but the underlying weakness in energy demand is real,” Bohnen wrote.
Energy sector job losses mounted in April with primary exploration and production employment down 7.6% and support employment down 6.1%. Job losses will continue in the months ahead as drilling budgets continue to be slashed and producers shift into a production holding pattern.
“There remains a legitimate concern that markets are overplaying the economic recovery as we move into summer,” said Dr. Russell Evans, executive director of the Steven C. Agee Economic Research and Policy Institute at Oklahoma City University. “A relaxing of the most severe restrictions on social gathering is certainly allowing an economic recovery to materialize, but economic activity will quickly stabilize well below 2019 levels.”
David Deardeuff, senior vice president at INSURICA, agreed. “2020 has been a very challenging year for companies of every size, especially service companies, which have been impacted not only by the price war but also by their challenge of connecting with customers and prospecta in a COVID-19 world. We are all eager to put the past 90 days behind us as we move forward toward our new normal,” Deardeuff said.
According to Brook A. Simmons, president of The Petroleum Alliance of Oklahoma, the world economy may face a “slow and policy-fueled crawl back to full economic health.”
“We are in the midst of the storm,” Simmons said. “There are dark clouds, destruction, and obstacles in our way. There is little optimism global energy demand will quickly rebound to resume the track of growth necessary to return Oklahoma’s energy sector to pre-coronavirus levels of activity immediately, but storms pass and we will rebuild,” he concluded.