Economic Indicators

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06/28/2011 — admin

 

INGHAM ECONOMIC REPORTING
Karr Ingham
P.O. Box 7531                                                                                                     Phone: (806) 373-4814
Amarillo, TX 79114                         e-mail: InghamEcon@aol.com                            Fax: (806) 373-5370
 
 
 
January 31, 2011
 
The Midland Development Corporation
 

 Presents

 
The Midland-Odessa Regional Economic Index
and the
Texas Permian Basin Petroleum Index
December/4th Quarter/Annual 2011
 
The year 2011 was clearly a year of economic growth and expansion in the general economy of the combined Midland-Odessa metropolitan area, and of continued recovery from the deep recession of 2009. It also was a year of dramatic expansion in the regional oil & gas economy as oil & gas E&P companies continued to push the envelope, raising activity levels in the Permian Basin to impressive new levels.
 
The general economy of the Midland-Odessa combined metro area is measured by the Midland-Odessa Regional Economic Index, which finished the year at 172.3 for December, up from 170.7 in November, and up 13.5% from the December 2010 MOREI of 151.8. December 2011 represents the 22nd straight month of expansion in the index, and again, November 2011 marked the month in which the index surpassed its previous peak prior to the onset of recession, which was achieved in December of 2008. Each new month of increase in the MOREI represents the establishment of a new record level of aggregate activity in the Midland-Odessa general economy.
 
The regional oil & gas economy is measured by the Texas Permian Basin Petroleum Index, which rose in December for the 25th straight month increasing to 281.7 up from 279.9 in November, and up 12.6% from the December 2010 index of 250.2 (which in turn was up over 35% compared to the December 2009 TPBPI). As it turns out, the petroleum index also surpassed its pre-downturn high in November 2011, which had been achieved in September of 2008.
 
As December marks the end of a quarter, the table of economic indicators for the Midland-Odessa Regional Economic Index contains largely fourth quarter totals/averages, along with the annual totals/averages, with the exception of the employment data which reflects the December monthly estimates along with the annual averages.
 
And a caveat with regard to the employment data; payroll employment estimates and the labor force/unemployment rate estimates will be revised over the next couple of months beginning with the first release of revised data in early March. As a part of that process, employment estimates in these categories will be revised for 2011, and possibly 2010, and new benchmarks will be established for the monthly estimates going forward in 2012.
 
The table of economic indicators for the general economy of Midland-Odessa is impressive, with no year-over-year negatives except for the one category in a growing economy that should be lower this year compared to last, and that is the unemployment rate. The economy as represented by these various indicators grew impressively in 2011, and the numbers reflect extraordinary increases in many cases.
 
General real spending is at the top of that list. A critical local economic indicator, inflation-adjusted taxable spending by households and businesses is a virtually failsafe measure of cyclical expansion and contraction in the local economy.  In the fourth quarter alone, spending was up by over 25% compared to the fourth quarter of 2010, and is easily the highest fourth quarter total ever recorded. And again, the number is adjusted for inflation, so the increase represents real growth in the Midland-Odessa economy. For the year, real spending was up by 26% compared to 2010. The 2011 annual total is also some 12% higher than the annual total for 2008, the year spending peaked prior to the onset of recession in 2009.
 
Real auto spending also moved beyond its pre-recession high point in 2011, and was nearly 40% higher for the year compared to the 2010 annual total. Again, the number represents inflation-adjusted spending on new and used automobiles per motor vehicle sales tax receipts in Midland and Ector counties, so the increases reflected are real increases and represent a true picture over time. Fourth quarter auto spending is also a record, and was over 38% higher compared to the fourth quarter of 2010 (which in turn was up over 40% compared to Q4 of 2009).
 
Hotel/motel activity in 2011 was up sharply with hotel/motel tax receipts up by over 50% compared to 2010. The expansion in hotel/motel activity is, of course, a function of a growing economy as well as the direct use of local lodging facilities by oil & gas companies.
 
Construction activity was up sharply as well, with the value of building permits issued by the two cities up by over 40% compared to 2010. The $472 million in permit valuations was the highest on record save for 2001 when a new power plant permit was issued by the city of Odessa for $415 million. The $124 million in permits issued in the fourth quarter was more than double the Q4 2010 total, and is easily the highest fourth quarter total ever recorded.
 
Home building in Midland-Odessa was an unusually positive story in 2011. In most metro areas, housing construction peaked a number of years ago and has been on a steady decline since then. In Midland-Odessa, however, more new single-family residence permits were issued in 2011 than in any year dating back to at least 1995 (the year we began data collection for the analysis), and likely long before that. The 857 permits issued in 2011 was up by nearly 28% compared to 2010, and the fourth quarter total was up by nearly 50% (year-over-year), and is also the highest fourth quarter total on record.
 
The number of existing homes sold looks a bit more normal relative to other metro areas and the general trends around the state as a whole. Home sales were up by over 10% in 2011, but were lower compared to 2001, and each year 2003-2008. Closed sales totaled 2,719 in 2011, compared to the peak sales total of 3,440 in 2005. 
 
Pricing of those homes is a different matter, of course. Housing prices continued to increase in 2011, with the annual average up by 6.8% compared to 2010. Even in the recession year of 2009, prices merely flattened (the annual average was down by .3% compared to 2008, a year in which the average price was over 14% higher than the 2007 average). The fourth quarter 2011 average sale price was up by 3% compared to a year ago; both the fourth quarter and annual averages represent nominal (not adjusted for inflation) record price levels.
 
Employment gains are actually quite modest given the strong totals in other sectors of the economy, namely the oil & gas business, and the strong performance in the spending sector (employment growth and spending growth typically go hand-in-hand). According to the current estimates, total payroll employment in Midland-Odessa is up by some 2.6% at year-end 2011 (an increase of about 3,400 jobs) compared to year-end 2010. For the year as a whole, employment growth was up by 3.6% on average compared to the 2010 annual average. And again, at least according to the current estimates, total payroll employment continues to lag slightly behind peak employment levels established in 2008. 
 
The upcoming employment data revisions may well rectify these discrepancies – these revisions have a history of unpredictability and some odd surprises here and there, but it seems at least fairly likely that employment data estimates for 2010 will be raised when the revised data is released, which would potentially move employment in 2011 beyond any prior period and into record territory where it seems it should be.
 
The regional rig count in 2011 is of truly historic significance. The current rig count for the three RRC districts that make up the Texas portion of the Permian Basin is high not just relative to 2010, or even 2008, when the rig count peaked as a part of the previous expansion, but also to the benchmark E&P period in the Permian of the early-mid-1980s. Again, the December 1984 rig count (the year of the apparent peak rig count in that period) was 320 for the same geographical region. The rig count for that region surpassed 400 in November, and stands at 404 (the monthly average) for December 2011.
 
Over 2,500 more original drilling permits were issued in 2011 than in 2008, the prior peak in the number of permits issued, and was up by nearly 30% compared to the 2010 annual total, which in turn was up by over 90% compared to 2009.
 
Astoundingly, the crude oil production curve has turned around in a big way. The long-term trend has clearly been one of decline. Between 1995 and 2005, crude oil production declined by about 25%. Since then, however, crude oil production has grown by about 12%, including production volume growth of an estimated 5.5% in 2011. In fact, estimated crude oil production in the Texas Permian Basin (RRC districts 7C, 8 and 8A) in 2011 is the highest since 1999
 
The estimated value of that production – about $26 billion – is also a nominal record, surpassing even 2008 when crude oil prices peaked at a much higher level. The record value in 2011 is a function of higher production in 2011 compared to 2008, and the fact that prices were steadily higher in 2011 compared to 2008 when prices rose rapidly, peaked at over $130/bbl (monthly average) and then dropped rapidly in the latter half of the year.
 
2011 was simply a great year for the Midland-Odessa economy, and for the regional economy of the Permian Basin. The expansion in the economy and in the business cycle was dramatic; business was better, jobs were added, and the economic pie got much bigger. Again, the final results are not quite in yet due to the employment data revisions yet to come. When the new numbers are released, the various index calculations will be revised accordingly. At that time, we will close out 2011 and offer a general forecast for the balance of 2012.

Midland, Texas Economic Indicators
        % Change   % Change
    2010 2011 2010-2011 2012 2011-2012
             
City of Midland January  $       2,421,849  $       3,296,154 36.1%  $       3,897,179 18.2%
Sales Tax Rebate February  $       3,709,728  $       4,654,346 25.5%    
  March  $       2,339,418  $       3,081,011 31.7%    
  April  $       2,557,462  $       2,922,199 14.3%    
  May  $       3,423,685  $       5,173,110 51.1%    
  June  $       2,657,740  $       3,618,325 36.1%    
  July  $       2,739,523  $       3,775,860 37.8%    
  August  $       3,560,718  $       4,337,808 21.8%    
  September  $       2,745,810  $       3,499,784 27.5%    
  October  $       3,145,630  $       3,758,205 19.5%    
  November  $       3,580,321  $       4,222,797 17.9%    
  December  $       3,082,857  $       4,004,386 29.9%    
  Year-To-Date Total  $     35,964,741  $     46,343,985 28.9%    
             
             
Midland County January  $       1,424,499  $       2,088,360 46.6%    
Motor Vehicle Sales Tax February  $       1,353,104  $       1,727,965 27.7%    
  March  $       1,879,209  $       2,499,678 33.0%    
  April  $       1,744,647  $       2,245,929 28.7%    
  May  $       1,153,354  $       1,618,965 40.4%    
  June  $       1,830,646  $       2,542,287 38.9%    
  July  $       1,668,369  $       2,422,370 45.2%    
  August  $       1,719,533  $       3,056,617 77.8%    
  September  $       1,848,934  $       3,048,963 64.9%    
  October  $       1,782,481  $       2,385,677 33.8%    
  November  $       1,915,477  $       2,505,587 30.8%    
  December  $       1,663,760  $       2,503,658 50.5%    
  YTD Total  $     19,984,013  $     28,646,056 43.3%    
             
             
City of Midland January  $          493,161  $          706,666 43.3%    
Hotel/Motel Tax Receipts April  $          537,846  $          746,792 38.8%    
Collected January, April, July and October July  $          604,101  $          879,753 45.6%    
for previous quarters ending October  $          650,628  $       1,027,524 57.9%    
December, March, June and September YTD Total  $       2,285,736  $       3,360,735 47.0%    
             
             
Midland International Airport  January                29,764                32,787 10.2%    
Passenger Enplanements February                28,511                32,360 13.5%    
  March                35,173                39,575 12.5%    
  April                34,837                37,117 6.5%    
  May                36,685                39,499 7.7%    
  June                40,979                42,963 4.8%    
  July                41,504                41,904 1.0%    
  August                37,637                38,482 2.2%    
  September                37,785                39,519 4.6%    
  October                41,601                40,503 -2.6%    
  November                37,802                40,096 6.1%    
  December                40,265                41,548 3.2%    
  YTD Total               442,543               466,353 5.4%    
             
             
City of Midland January  $     10,192,393  $     13,142,694 28.9%    
Building Permit Valuation Total February  $     21,744,765  $     21,818,980 0.3%    
  March  $     29,658,712  $     13,711,987 -53.8%    
  April  $     15,776,395  $     15,799,624 0.1%    
  May  $     11,820,028  $     26,630,509 125.3%    
  June  $       8,372,741  $     29,141,321 248.0%    
  July  $       7,378,269  $     26,068,980 253.3%    
  August  $     20,581,182  $     50,136,328 143.6%    
  September  $       5,754,195  $     23,672,313 311.4%    
  October  $       9,039,844  $     17,532,340 93.9%    
  November  $     13,474,515  $     21,028,979 56.1%    
  December  $     15,797,451  $     19,729,164 24.9%    
  YTD Total  $   169,590,490  $   278,413,219 64.2%    
             
             
City of Midland January                       30                       42 40.0%    
New Single-Family Residence Permits February                       32                       37 15.6%    
  March                       51                       50 -2.0%    
  April                       38                       64 68.4%    
  May                       37                       54 45.9%    
  June                       28                       76 171.4%    
  July                       21                       47 123.8%    
  August                       83                       40 -51.8%    
  September                         7                       44 528.6%    
  October                       17                       42 147.1%    
  November                       34                       45 32.4%    
  December                       26                       25 -3.8%    
  YTD Total                     404                     566 40.1%    
             
             
Midland  January                       78                       91 16.7%    
Existing Home Sales February                     100                     118 18.0%    
  March                     151                     148 -2.0%    
  April                     157                     167 6.4%    
  May                     158                     177 12.0%    
  June                     173                     154 -11.0%    
  July                     131                     153 16.8%    
  August                     132                     202 53.0%    
  September                     117                     156 33.3%    
  October                     106                     125 17.9%    
  November                     108                     118 9.3%    
  December                     115                     135 17.4%    
  YTD Total                  1,526                  1,744 14.3%    
             
             
Midland January  $          190,383  $          201,101 5.6%    
Average Home Sale Price February  $          198,800  $          215,685 8.5%    
  March  $          197,300  $          212,533 7.7%    
  April  $          186,772  $          162,706 -12.9%    
  May  $          193,296  $          224,854 16.3%    
  June  $          202,906  $          219,245 8.1%    
  July  $          217,524  $          222,313 2.2%    
  August  $          187,021  $          213,660 14.2%    
  September  $          209,247  $          217,861 4.1%    
  October  $          194,183  $          211,487 8.9%    
  November  $          205,427  $          216,873 5.6%    
  December  $          210,752  $          207,191 -1.7%    
  YTD Average  $          199,318  $          210,492 5.6%    
             
             
Midland January  $     14,849,835  $     18,300,222 23.2%    
Home Sales Total Dollar Volume February  $     19,880,017  $     25,450,885 28.0%    
  March  $     29,792,288  $     31,454,870 5.6%    
  April  $     29,323,246  $     27,171,896 -7.3%    
  May  $     30,540,797  $     39,799,139 30.3%    
  June  $     35,102,719  $     33,763,761 -3.8%    
  July  $      28,495,612  $      34,013,830 19.4%    
  August  $      24,686,787  $      43,159,405 74.8%    
  September  $      24,481,907  $      33,986,365 38.8%    
  October  $      20,583,435  $      26,435,872 28.4%    
  November  $      22,186,144  $      25,590,986 15.3%    
  December  $      24,236,433  $      27,970,850 15.4%    
  YTD Total  $    304,159,220  $    367,098,081 20.7%    
             
             
Midland January                65,000                68,500 5.4%    
Payroll Employment February                66,200                69,100 4.4%    
  March                66,700                70,200 5.2%    
  April                67,500                70,100 3.9%    
  May                68,200                69,600 2.1%    
  June                68,500                70,100 2.3%    
  July                68,600                70,000 2.0%    
  August                68,800                70,800 2.9%    
  September                69,100                70,800 2.5%    
  October                69,200                71,300 3.0%    
  November                69,400                70,800 2.0%    
  December                69,700                71,800 3.0%    
  YTD Average                68,075                70,258 3.2%    
             
             
Midland  January                13,900                15,900 14.4%    
Mining & Construction Employment February                14,200                16,000 12.7%    
(Oil & Gas Employment) March                14,400                16,200 12.5%    
  April                14,900                16,200 8.7%    
  May                15,100                16,300 7.9%    
  June                15,500                16,600 7.1%    
  July                15,700                16,700 6.4%    
  August                15,800                16,800 6.3%    
  September                15,800                16,800 6.3%    
  October                15,900                16,800 5.7%    
  November                16,000                16,800 5.0%    
  December                16,100                16,700 3.7%    
  YTD Average                15,275                16,483 7.9%    
             
             
Midland January                      6.0                      5.0 -16.7%    
Unemployment Rate February                      5.7                      4.8 -15.8%    
  March                      5.6                      4.6 -17.9%    
  April                      5.3                      4.4 -17.0%    
  May                      5.2                      4.6 -11.5%    
  June                      5.6                      5.3 -5.4%    
  July                      5.4                      5.1 -5.6%    
  August                      5.3                      4.8 -9.4%    
  September                      5.0                      4.9 -2.0%    
  October                      4.9                      4.5 -8.2%    
  November                      5.0                      4.1 -18.0%    
  December                      4.7                      3.9 -17.0%    
  YTD Average                      5.3                      4.7 -12.1%    

 

                            Texas Permian Basin Petroleum Index
OIL AND GAS INDICATORS BASE YEAR LAST YEAR THIS YEAR % Change
  December 1996 December 2010 December 2011 12/10 - 12/11
         
         
Oil Price/bbl (Mo. Avg WTI Crude)  $                  23.37  $                 85.76  $                  95.05 10.8%
Oil Price/bbl (YTD Avg)  $                  20.43  $                 75.96  $                   91.45 20.4%
Gas Price (Waha Hub Mo Avg) *  $                    3.59  $                   4.16  $                     3.34 -19.7%
Gas Price (YTD Avg)  $                    2.07  $                   4.26  $                     3.96 -7.0%
Rig Count (Month)                            89                        286                          404 41.3%
Rig Count (YTD Avg)                            83                        237                          355 49.8%
Drilling Permits (Month                          372                        764                          764 0.0%
Drilling Permits YTD                       4,437                     8,074                     10,424 29.1%
Oil Completions (Month)                          128                        206                          410 99.0%
Oil Completions YTD                       2,401                     3,556                       3,516 -1.1%
Gas Completions (Month)                            49                          24                            16 -33.3%
Gas Completions YTD                          730                        524                          171 -67.4%
Oil Production Volume (000's bbls/month)                     26,860                   22,738                     23,525 3.5%
Oil Production Volume YTD                   329,608                 267,918                   282,548 5.5%
Oil Production Value (000's Month)  $              627,718  $          1,949,984  $            2,236,051 14.7%
Oil Production Value YTD  $            6,729,629  $         20,371,405  $          25,834,989 26.8%
Gas Production Volume (000's MCF/month)                   122,914                   101,576                     95,635 -5.8%
Gas Production Volume YTD                1,504,801                1,259,756                1,184,371 -6.0%
Gas Production Value (000's Month)  $               441,261  $               422,555  $               319,422 -24.4%
Gas Production Value YTD  $            3,104,540  $            5,380,893  $            4,683,301 -13.0%
Oil and Gas Employment (Month)                     17,900                     28,400                     29,400 3.5%
Oil and Gas Employment (Avg YTD)                     17,500                     26,833                     29,033 8.2%
Oil and Gas Regional Stock Index**                       194.5                    1,790.7                    1,720.0 -3.9%
         
INDEX (Base = 100 January 1996)                  111.9                  250.2                  281.7 12.6%
* Courtesy Robert K. Anderson Co. and wellreports.com
** Market Cap. Index based on outstanding shares and END OF MONTH stock prices for:
  Clayton Williams Energy, Inc.
   Dawson Geophysical
   Parallel Petroleum
   Patterson Energy