Activity in the oil and gas sector jumped significantly in the second quarter of 2026, according to the Dallas Fed Energy Survey released June 24. The business activity index, the survey’s broadest measure of conditions facing energy firms in the Eleventh District, increased from 21.0 in the first quarter to 46.1 in the second quarter — the strongest reading since the second quarter of 2022.
The survey was conducted June 9–17, as the United States and Iran negotiated a memorandum of understanding about ending hostilities. A total of 127 energy firms responded, including 82 exploration and production firms and 45 oilfield services firms. The Eleventh District encompasses Texas, northern Louisiana, and southern New Mexico.
Oil production advanced modestly while natural gas production saw minimal gains. The oil production index increased from zero in the first quarter to 15.0, whereas the natural gas production index remained relatively unchanged at 3.7. The company outlook index remained positive but edged down to 29.3, with E&P firms more positive at 48.2 while services firms remained cautious at -4.4.
Costs increased at a faster pace relative to the prior quarter. Among oilfield services firms, the input cost index surged from 34.9 to 64.4, with no respondents reporting a decrease in costs. Among E&P firms, the finding and development costs index increased from 22.3 to 40.0. All cost indexes were above their series averages, suggesting costs are growing at a faster-than-average pace.
Oilfield services firms reported improvement in most indicators. The operating margin index increased markedly from -7.0 to 52.2, the first positive reading in many quarters, suggesting margins expanded. Capital spending strengthened considerably, with the capital expenditures index advancing from 21.2 to 40.9, as 49 percent of firms reported increased spending. However, the index for expected capital expenditures for next year was zero, suggesting cautious long-term planning despite current spending increases.
On average, respondents expect a West Texas Intermediate oil price of $81 per barrel at year-end 2026, with responses ranging from $60 to $150 per barrel. For longer-term expectations, respondents on average anticipate $78 per barrel two years from now and $82 per barrel five years from now. Survey participants foresee a Henry Hub natural gas price of $3.36 per million British thermal units at year-end 2026. The next Dallas Fed Energy Survey is scheduled for release on September 30, 2026.
Special questions in the second-quarter survey focused on projected U.S. production growth in 2027, price expectations if the military conflict in Iran continues through year-end, and the likelihood of Iran permanently restricting crude oil exports from the Persian Gulf. Respondents were also asked about anticipated timing for full resolution of natural gas takeaway constraints in the Permian Basin and key factors limiting drilling activity in the Permian and beyond over the next 12 months. About two-thirds of executives indicated concerns about ongoing geopolitical risks, but the June 17 U.S.-Iran memorandum of understanding has eased the most immediate fears. The survey results underscore the complex balance Texas energy producers face between capitalizing on current price strength and planning for a potentially more stable geopolitical environment in the months ahead.
