(WO) — U.S. oil and gas activity continued to expand in the third quarter of 2026, with exploration and production companies reporting higher oil and natural gas output despite elevated costs and longer supplier delivery times, according to the Federal Reserve Bank of Dallas Energy Survey.
The survey’s business activity index remained firmly positive at 38.8, down from 46.1 in the second quarter, indicating that activity continued to grow but at a slightly slower pace.
E&P firms reported stronger production during the quarter. The oil production index increased from 15.0 to 20.7, while the natural gas production index climbed from 3.7 to 14.8. E&P companies also reported a significantly stronger outlook than oilfield services firms, with respective outlook indexes of 50.0 and 4.6.
Cost pressures remained elevated. The finding and development costs index stood at 41.5, while the lease operating expenses index was 43.9. Among oilfield services companies, the input cost index declined from 64.4 to 60.4 but remained well above its historical average.
Oilfield services activity nevertheless improved during the quarter. The equipment utilization index climbed from 31.9 to 41.9, while the operating margin index remained positive at 37.2. Employment and employee hours also increased across the sector.
Supply-chain pressures persisted, with the overall supplier delivery time index increasing from 31.7 to 36.2. The measure remained particularly elevated among E&P firms at 43.9.
Looking ahead, survey respondents expect West Texas Intermediate crude to average $88/bbl at year-end 2026, compared with an average WTI spot price of $98.70/bbl during the survey collection period. Respondents forecast WTI at $79/bbl two years from now and $82/bbl five years from now.
Executives expect Henry Hub natural gas to reach $3.29/MMBtu at year-end, compared with an average $2.97/MMBtu during the survey period. Longer term, respondents forecast Henry Hub at $3.82/MMBtu in two years and $4.28/MMBtu in five years.
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