Federal Reserve Bank of Kansas City releases Fourth Quarter Energy Survey
by Federal Reserve Bank of Kansas City
January 12, 2026
KANSAS CITY, MISSOURI –The Federal Reserve Bank of Kansas City released the fourth quarter Energy Survey today. According to Cortney Cowley, assistant vice president and Oklahoma City Branch executive at the Federal Reserve Bank of Kansas City, Tenth District energy activity fell sharply, with further contraction expected in the next six months.
"Tenth District drilling and business activity decreased to its lowest level since 2020," said Cowley. "One reason for these declines was that WTI oil prices fell below District firms’ average profitable price of $61 per barrel in Q4 2025. Moving forward, the outlook for investment in 2026 is mixed, with similar shares of firms planning to increase investment, decrease investment, or leave it unchanged."
The Kansas City Fed’s quarterly Tenth District Energy Survey provides information on current and expected activity among energy firms in the Tenth District. The survey monitors oil and gas-related firms located and/or headquartered in the Tenth District, with results based on total firm activity. Survey results reveal changes in several indicators of energy activity, including drilling, capital spending, and employment. Firms also indicate projections for oil and gas prices. All results are diffusion indexes – the percentage of firms indicating increases minus the percentage of firms indicating decreases.
A summary of the survey is attached. Results from past surveys and release dates for future surveys can be found at https://www.kansascityfed.org/surveys/energy-survey.
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. As part of the nation’s central bank, the Bank participates in setting national monetary policy, supervising and regulating numerous commercial banks and bank holding companies, and providing financial services to depository institutions.
More information is available online at www.kansascityfed.org.
The views expressed are those of the authors and do not necessarily reflect the positions of the Federal Reserve Bank of Kansas City or the Federal Reserve System.
TENTH DISTRICT ENERGY SUMMARY
FEDERAL RESERVE BANK OF KANSAS CITY
Fourth quarter energy survey results showed that Tenth District energy activity fell sharply, with further contraction expected in the next six months. Firms reported that oil prices needed to be on average $61 per barrel for drilling to be profitable, and $75 per barrel for a substantial increase in drilling to occur. Natural gas prices needed to be $3.80 per million Btu for drilling to be profitable on average, and $4.89 per million Btu for drilling to increase substantially.
Summary of Quarterly Indicators
Tenth District energy activity fell sharply in the fourth quarter of 2025, as indicated by firms contacted between Dec. 15, 2025, and Dec. 31, 2025 (Tables 1 & 2). The quarter-over-quarter drilling and business activity index was -39 in Q4, down from -16 in Q3 and from -17 in Q2 (Chart 1). Revenues and profits fell further from their lowest levels in two years, now at -33 and -42 respectively. However, employment levels only contracted modestly at -3.
Drilling activity also decreased from this time last year, with the year-over-year drilling/business activity index falling from -24 to -50 in Q4. Revenues and profits fell further, and accordingly, capital expenditures fell from -18 to -39. Employment levels stayed steady from last year, but the employee hours index remained in negative territory at -14.
Firms anticipated further declines in drilling activity, revenues, profits, employment, and capital expenditures in the next six months. The expected drilling activity index fell from 0 to -19 and expected revenues decreased from 3 to -22, the lowest readings in over two years.
Summary of Special Questions
Firms were asked what oil and natural gas prices were needed on average for drilling to be profitable across the fields in which they are active. The average oil price needed was $61 per barrel (Chart 2), while the average natural gas price needed was $3.80 per million Btu (Chart 3). Firms were also asked what prices were needed for a substantial increase in drilling to occur across the fields in which they are active. The average oil price needed was $75 per barrel (Chart 2), and the average natural gas price needed was $4.89 per million Btu (Chart 3).
Firms reported what they expected oil and natural gas prices to be in six months, one year, two years, and five years. The average expected WTI prices were $57, $62, $69, and $73 per barrel, respectively. The average expected Henry Hub natural gas prices were $3.69, $4.05, $4.35, and $4.93 per million Btu, respectively.
Firms were asked their expectations for capital spending and employment levels for 2026 compared to 2025. Expectations for capital expenditures were mixed, with 9% expecting a significant increase, 29% a slight increase, 34% expecting similar levels to 2025, 17% expecting a slight decrease, and 11% expecting a significant decrease. A majority of firms (60%) expect employment to remain close to 2025 levels, while 3% expect a significant increase, 9% expect a slight increase, 25% expect a slight decrease, and another 3% expect a significant decrease.
Contacts were also asked how they expect rising U.S. power demand to affect natural gas demand, prices, and drilling activity relevant to their firm over the next five years. A majority of firms (62%) expect it will modestly increase demand and support somewhat higher prices and drilling activity, and another 29% expect it will materially increase demand and support substantially higher prices and drilling activity. Only 9% expect little effect on demand, prices, or drilling activity.
Selected Energy Survey Comments
FEDERAL RESERVE BANK OF KANSAS CITY
"Our company is not making money at current oil prices. We do not see that current reserve development is warranted."
"We need help in prices."
"Lots of uncertainty but better long-term prospects."
"High OPEC production pushing down global oil price."
"I am hopeful if oil prices fall below $55, that Permian producers will cut back and that will lower supply and we can see a rebound late 2026."
"It looks like demand should build slowly."
"Low capital investment will eventually lead to tighter supply. Inflation drivers will push prices up."
"The sweet spot for oil prices where companies make acceptable profits, but it's not too high to impact economic activity is $70-$80/barrel."
"AI energy requirements will create more demand for natural gas."
"Adequate supply to meet forecasted demand."
"The shoulder months with lower demand have weak pricing, and I think we keep seeing that until data center and LNG demand is large enough to compete with injections."
"A lot of new demand with LNG and electric generation, but gas is plentiful and fairly quick to bring online. Infrastructure seems to be catching up."
|
