Oil and gas activity across Texas and the broader region is picking up again, according to a new survey from the Federal Reserve Bank of Dallas. However, industry leaders say uncertainty remains.
The survey says the business activity index, the agency’s broadest measure of energy conditions for firms, rose 27 points to 21 in the first quarter, signaling a return to growth after months of contraction in 2025.
“Activity rose for the first time in almost a year,” said Michael Plante, an assistant vice president at the Dallas Fed, in a statement. “The ongoing conflict in the Middle East, however, has generated substantial uncertainty for firms about the near-term outlook.”
Even as activity increases, hiring has yet to follow. The survey’s employment index remained near zero in the first quarter, suggesting little change in overall staffing levels. At the same time, companies reported a sharp increase in employee hours and a notable rise in wages and benefits, indicating firms may be relying more heavily on existing workers as demand picks up.
Production levels were largely unchanged. The oil production index held at zero, while natural gas production posted only a slight increase.
Costs, meanwhile, continued to climb. Oilfield services firms reported higher input costs, and companies saw increases in finding and development expenses. Lease operating expenses remained elevated.
Industry sentiment about the future improved significantly during the quarter, with the outlook index jumping more than 47 points. But that optimism is tempered by rising uncertainty, which has also increased to one of the highest levels in recent quarters.
The survey points to a growing divide between large and small energy producers.
Nearly 70% of large exploration and production firms said they have not changed their 2026 drilling plans, despite rising oil prices. Smaller firms, however, are more likely to expand, with nearly 60% reporting plans to increase drilling this year.
Overall, about half of all firms said their plans are unchanged, while nearly as many reported increases.
Executives also indicated the price of oil remains a key factor shaping those decisions. On average, firms said they need about $43 per barrel to cover operating costs for existing wells and about $66 per barrel to drill new wells profitably.
That gap may help explain why larger companies are holding steady despite recent price gains.
Looking ahead, most firms expect production growth to come from the Permian Basin, reinforcing its role as the center of U.S. oil output.