By Cortney Cowley & Megan Williams Third quarter energy survey results showed that energy activity in the Federal Reserve’s Tenth District continued to decline, with no changes expected in the next six months.
Firms reported that oil prices needed to average $63 per barrel for drilling to be profitable, and $78 per barrel for a substantial increase in drilling to occur. Natural gas prices needed to be $3.56 per million Btu for drilling to be profitable, on average, and $4.64 per million Btu for drilling to increase substantially.
Tenth District energy activity continued to decline in Q3 2025, as indicated by firms contacted between Sept. 15 and Sept. 30. Revenues and profits fell to their lowest levels in two years. The number of employees fell for the second consecutive quarter, and employee hours fell from 10 to -26.
Drilling activity also decreased from this time last year. Employment levels fell from the previous year for the first time since Q1 2021. More firms reported decreasing capital expenditures on net compared to last quarter, with the index declining from -3 to -18.
Firms still do not anticipate a rebound in drilling activity or capital expenditures in the next six months. Further, firms expect only modest increases in revenues and profits while employment is expected to fall further.
Firms contacted by the Federal Reserve were asked if they have delayed investment decisions this year in response to heightened uncertainty. Nearly half (47%) of firms reported slightly delaying investment decisions due to uncertainty, while a quarter reported delaying decisions significantly. An additional 25% of firms have not delayed investment decisions due to uncertainty, and 3% reported no opinion.
Contacts also were asked what share of their oil and gas production is hedged in 2025, and how much they plan to hedge in 2026. The median firm has hedged 45% of oil production in 2025 and plans to hedge 40% in 2026. Additionally, the median firm reported hedging 50% of natural gas production in 2025 and plans to hedge 33% in 2026.
Energy comments “Tremendous uncertainty in the markets currently, which has a negative effect on investment decisions for the industry.”
“The current price of oil is equivalent to approximately $45 oil in 2016-2017. We are going to have to start laying off people soon if the price doesn’t change. We are losing money producing oil. All fixed costs have gone up (materials, pipe, pumps, chemical) and they will not recess. Also, our price of labor has increased significantly to keep up with inflation.”
“There is no funding, no investors, and no capital available for drilling and mining. No new leases available.”
“We believe shale production is maturing and that will place upward pressure on oil prices.”
“Natural gas is a weather bet. We need a cold winter for $4 natural gas prices, and that is a rarity. We can build supply at $3.50 pricing significantly in the U.S. if needed within 6 to 9 mon ths.”
“Current pricing is not enough incentive to keep up with fast growing demand for LNG and then power generation. Gas supply growth is dependent on infrastructure development and oil focused drilling in the Permian.”
The Federal Reserve Bank of Kansas City serves the Tenth Federal Reserve District, encompassing the western third of Missouri; all of Kansas, Colorado, Nebraska, Oklahoma and Wyoming; and the northern half of New Mexico.