Oil and gas producers across Texas and the broader Eleventh Federal Reserve District finally caught a break in early 2026, as activity ticked back into growth territory, according to a survey released Wednesday by the Dallas Fed. The mood on the ground, though, is hardly euphoric, with firms flagging higher costs and a foggier near-term outlook.
Survey Shows Activity Popping, Nerves Still Frayed
The survey’s broad business activity index jumped 27 points to 21 in the first quarter, which moved the sector back into expansion after months of contraction. The company outlook index also swung into positive territory, climbing from -15.2 to 32.2, a gain of more than 47 points, even as the outlook uncertainty index headed higher, according to the Federal Reserve Bank of Dallas.
Jobs Flat While Crews Work Longer And Earn More
Despite the uptick in activity, hiring still looks tentative. The survey’s employment index hovered near zero, suggesting headcounts are holding steady. At the same time, aggregate employee hours rose and firms reported notable increases in wages and benefits. “Activity rose for the first time in almost a year,” Michael Plante, an assistant vice president at the Dallas Fed, said in remarks reported by NBC 5 Dallas-Fort Worth.
Big Players Hunker Down While Smaller Firms Push Ahead
The survey results point to a clear divide in strategy. Nearly 70 percent of large exploration and production firms said they have not changed their 2026 drilling plans. In contrast, almost 60 percent of smaller E&P firms reported they plan to increase drilling this year. Those responses came from special questions the Dallas Fed posed in mid-March to about 135 energy firms, according to the Federal Reserve Bank of Dallas.
Cost Squeeze, Barrel Break-Evens And The Permian’s Next Move
Rising costs remain a stubborn problem. Oilfield services firms reported higher input costs, while lease operating expenses stayed elevated and finding and development expenses moved higher. Executives told surveyors they need roughly $43 per barrel just to cover operating costs on existing wells and about $66 per barrel to profitably drill new wells, and most respondents expect production growth to come from the Permian Basin, NBC 5 Dallas-Fort Worth reported.
For oilfield towns, service yards and the contractors who keep rigs running, the next few months will reveal whether this rebound has legs or is just a brief rally. Drilling schedules, equipment lead times and still-climbing input costs will decide whether the pickup in activity turns into steady hiring and broader investment across the region.
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