Rising State Energy Index Attributed to Exploration, Production Growth, Industry Officials Say

By Paul Monies, The Oklahoman

Oct. 19–Increased exploration and drilling escalated the Oklahoma Energy Index in June, the Oklahoma Independent Petroleum Association said Thursday.

At 223.9, the index was 6 percent higher than in June 2006. Much of the increase was attributed to an average rig count in June of 193, a tie for second-place since the index started in 1995. The state’s highest-ever rig count stood at more than 880 in 1982.

Karr Ingham, an economist who compiles the state energy index, said higher energy prices have allowed more exploration of harder-to-reach oil and gas deposits. Crude oil production in the state is up 2.5 percent in the first half of the year, as compared to 2006. Natural gas production is up 1.8 percent in the same period.

“We’ve just sort of settled into this period of relative price stability that is a happy medium from the consumer standpoint and the producer standpoint,” Ingham said about natural gas prices, which have ranged from $6 to $7.50 per thousand cubic feet in recent months.

Increased exploration and production also has led to higher employment in the oil patch, the index showed. About 45,900 people are employed in energy production in Oklahoma, an increase of almost 14 percent from June 2006.

The positive energy environment is helping Oklahoma companies on Wall Street. OIPA’s energy production stock index rose to 754.1 in June, up from 680.8 in June 2006. The index includes a basket of stocks that are active in Oklahoma drilling, including Chesapeake Energy Corp., Devon Energy Corp. and Unit Corp.

More recently, oil field services company Baker Hughes Inc. said 200 rigs were prospecting in Oklahoma in the week ended Oct. 12. Demand for high-horsepower drilling rigs has led to higher prices for their services.

“Definitely the higher horsepower rigs — diesel, electric — they are bringing a premium, or more money in the market, and the demand goes that way,” Frank Harrison, chief executive officer of Edmond’s Bronco Drilling Co. Inc., told investors in August. “And I think it will continue to go that way for quite some time, and then you just move down ’til you get to your lower horsepower rigs.”

Ingham said a sustained expansion in the energy industry for the last few years has helped go a long way toward solving problems with rig supply and manpower.

“The index has flattened out a little bit, but it’s flattened out at a high level,” Ingham said.

The Oklahoma Energy Index has a baseline of 100 from 1995. It is a joint project of the OIPA and the office of state Energy Secretary David Fleischaker.

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