Oil and gas business activity across Texas, northern Louisiana, and southern New Mexico declined in the second quarter of 2025, as uncertainty rose and commodity prices weakened.
The Dallas Fed Energy Survey’s Business Activity Index (for the Fed’s 11th District) fell to -8.1 from 3.8 in Q1, signaling a modest contraction. Outlook sentiment also dipped, with the company outlook index at -6.4, while uncertainty rose sharply to 47.1.
The survey was conducted from June 18 to June 26, 2025, with responses from 136 energy firms, including 91 E&P companies and 45 oilfield services providers.
Production and Cost Trends
E&P firms reported a decline in both oil and natural gas production, with the oil production index falling to -8.9 from 5.6 and the natural gas index slipping to -4.5. (These indices reflect the net share of firms reporting increases versus decreases, so negative values indicate that more firms saw declines than gains.) Cost inflation was mixed across segments:
Price Expectations
Spot prices during the survey period averaged $69.81 for WTI and $3.30 for Henry Hub. Executives nonetheless forecast modest price increases in the medium to long term:
Most firms expect WTI to stay between $65–$75/Bbl at year-end 2025, while natural gas prices are forecast to stay between $3.50–$4.49/MMBtu.
Drilling and Investment Outlook
Drilling plans have been tempered:
Price Sensitivity and Risk
Low oil prices threaten upstream viability:
Service firms also showed vulnerability. If oil averages $50/Bbl, 58% expect significant price cuts for their primary service offerings.
Long-Term Structural Constraints
Produced water management is emerging as a long-term constraint in the Permian Basin:
Conclusion
The outlook for the U.S. oil and gas sector remains fragile. According to those surveyed, near-term prices are expected to remain in a tight range, and investment is retreating as cost pressures mount. Persistent structural issues, from tariffs to water management, are shaping a cautious tone across both operators and service providers.