Fed: Regional energy firm activity bleak

With the price of oil down, further cuts and layoffs at regional energy firms could be on the horizon, according to a new Federal Reserve Bank of Kansas City survey.

Released Friday, the third quarter energy survey by the Fed’s 10th district showed a “large decline” in firm activity. Drilling and business activity, revenues and employment and employee hours all slipped, according to energy firm feedback from Sept. 14 to Sept. 30.

“As in the spring, firms on average reported needing domestic oil prices to be around $60 per barrel to be profitable,” said Fed spokesman Chad Wilkerson in a release. “They now don’t expect that price until at least 2017 and so many are planning further capital spending cuts and layoffs.”

Overall, firms reported that financing from various sources was less available, though “private equity remained the most accessible,” according to the survey. Firms reported that they expected the price of a barrel of West Texas Intermediate crude to average around $58 in 2016, which would actually be an increase from the expected 2015 average of $48, according to the survey.

Capital spending is expected to be cut significantly with more than a third of the firms surveyed stating that they expect to cut spending by “more than 20 percent” in 2016. Across all firms, employment is expected to be down 7 percent next year when compared to 2015 levels.

The Kansas City Fed’s 10th district includes Kansas, the western third of Missouri, Colorado, Nebraska, Oklahoma, Wyoming and part of New Mexico.

This story was originally published October 9, 2015 at 11:23 AM with the headline "Fed: Regional energy firm activity bleak."