The O&G view from Dallas

Programming Note: I am headed off with the family on our summer vacation next week therefore there will be no posts. I will return on July 21st. Hope everyone is enjoying their summer.

The Gist: (1) F&D costs, key to oil’s price floor, are rising in the Permian, signaling tighter economics. (2) LOEs keep increasing, E&Ps are cutting back on wages and hours, leading to softer labor markets. (3) More E&Ps are reporting production declines and service providers are feeling the pressure.

Long-time readers will recognize the chart below—it tracks oil prices (line) against finding & development (F&D) costs (bars).

The logic goes like this: Finding & Development (F&D) costs represent the price to replace reserves—essentially, oil’s marginal cost. As such, they help set the long-term floor for oil prices.

Over the past decade, the Permian Basin has played a pivotal role in anchoring these marginal costs, thanks to having the lowest PD F&Ds in the non-OPEC world.

But even here, the story has shifted. In recent years, PD F&Ds in the Permian have been rising, as the chart below illustrates.

We only get this data once a year—through reserve disclosures in 10-Ks and 20-F filings—so it's always backward-looking and comes with a lag.

However, the Dallas Fed’s quarterly Energy Survey offers a helpful real-time pulse on F&D cost trends. And remember: the Dallas Fed covers the all-important Permian Basin, making it particularly relevant.

In the most recent Q2 2025 survey, more E&P respondents continue to report rising F&D costs rather than falling ones, as shown in the chart below.