DALLAS—Oil and gas executives’ responses to the third-quarter Energy Survey from the Federal Reserve Bank of Dallas show that activity is growing.

“The business activity index, the survey's broadest measure of the conditions energy firms face in the Eleventh District, remained positive but declined slightly from 46.1 in the second quarter to 38.8 in the third. This suggests the pace of expansion slowed slightly but remained solid,” the Fed reports.

The survey draws on responses from 83 exploration and production firms and 42 oil field service firms located in the Eleventh District, which includes Texas, southern New Mexico and northern Louisiana. Data collection took place between Sept. 16-24.

The indexes are calculated by subtracting the percentage of respondents reporting a decrease from the percentage reporting an increase. “When the share of firms reporting an increase exceeds the share reporting a decrease, the index will be greater than zero, suggesting the indicator has increased over the previous quarter. If the share of firms reporting a decrease exceeds the share reporting an increase, the index will be below zero, suggesting the indicator has decreased over the previous quarter,” the Fed notes.

Cost pressures continue to affect both E&Ps and service firms. “Among oil field services firms, the input cost index stayed elevated but edged down from 64.4 to 60.4. Among E&P firms, the finding and development costs index and the lease operating expenses index were relatively unchanged at 41.5 and 43.9, respectively,” the Fed details. “All cost indexes were above their series averages, suggesting costs are growing at a faster-than-average pace.”

Even so, oil field service firms reported improvement in most indicators. “The equipment utilization index increased from 31.9 in the second quarter to 41.9 in the third,” the Fed relates. “The operating margin index remained positive but decreased from 52.2 to 37.2, suggesting margins expanded at a slightly slower pace. The prices received for services index also remained positive but declined slightly from 24.5 to 16.3.”

Price Forecasts

Respondents’ predictions for where West Texas Intermediate would be at the end of the year ranged from $70 to $126, with the average at $88. They anticipate a price around $79 two years from now and $82 five years from now, the Fed reports.

“The WTI crude oil price will be in the range of $75 to $100 per barrel. It is totally dependent on the war with Iran and the continued turmoil in the Middle East,” one respondent commented.

As part of the survey, the Fed asked how long it will take for oil exports from the Persian Gulf to return to normal levels. “The most frequently selected time frame was by second quarter 2027 (28% of participants). That was followed by 2028 or later (21% of respondents) and first quarter 2027 (19% of respondents),” the bank shares.

“I am unsure if crude exports from the Persian Gulf will ever return to normal levels, and I anticipate a new, lower baseline for normal when the conflict ends,” one comment reads.

When asked what they anticipated the Henry Hub price to be by the end of the year, survey participants put it at $3.29 per MMBtu. They see that price rising over time, reaching $3.82 two years from now and $4.28 five years from now.

“For reference, WTI spot prices averaged $98.70 per barrel during the survey collection period, and Henry Hub spot prices averaged $2.97 per MMBtu,” the bank notes.

Extra Cash Flow

Thanks to higher commodity prices, many producers have more free cash flow this year than they did in the first three quarters of 2025.

“We are living through wild times, but it is not the first crisis energy companies have had to weather,” one participant reflected. “A lot of companies have been focused on free cash flow since the pandemic and even before then, so they are now reaping the fruits of cash management via significant enhancements to free cash flow yield on producing assets.”

When the Fed asked where respondents expected their firms to allocate the additional cash flow, the answers varied by company size. The Fed classifies a company as small if it produces less than 10,000 bbl/d and large if it produces that amount or more. While small firms outnumber large ones in the United States, the Fed says the latter account for more than 80% of domestic production.

“Among large E&P firms, the majority of executives—50%—expect their firm to allocate additional cash flow (largely accumulated earlier in 2026) as capital return to shareholders and/or owners. Capital expenditures ranked second, selected by 21% of executives,” the bank reports. “By comparison, for small E&P firms, the top choice was capital expenditures, selected by 31% of executives, followed by debt reduction, cited by 23% of executives.”

One E&P executive remarked that it would be easier to invest if the United States had more stable policies. “When administrations’ priorities shift sharply every two to four years, companies face a dilemma: Invest in initiatives the current administration favors or avoid them due to reversal risk under the next administration. This creates decision paralysis as executives defer capital deployment rather than risk stranded investments. The economic consequence is slower productivity growth and capital inefficiency.”

The full survey includes more details on respondents’ price forecasts, comments from both E&Ps and service companies, and statistics for questions about oil field theft and how long it will take the spread between diesel and crude oil prices to return to normal levels. You can find it on the Dallas Fed’s website.