First quarter indicates challenges for Texas oil and gas industry, rig counts down

As President Donald Trump touts economic and energy policies in Texas, the first quarter indicates ongoing challenges for the oil and gas industry. Rig counts are down and thousands of energy jobs have been eliminated in Texas’ energy capital, Houston.Despite ongoing market challenges and uncertainty, Texas oil and natural gas producers played a pivotal role in energy production last year, accounting for 43% of U.S. crude production, The Center Square reported. This equates to an average of 5.8 million barrels per day (bpd) with monthly peaks reaching 5.9 million bpd.
Texas also broke methane reduction records largely due to increased entrepreneurial and technological advancements and the majority of operations occurring on private land. The support of Gov. Greg Abbott, the Texas legislature and regulatory agencies and a bipartisan congressional delegation also helped, The Center Square reported.
Natural gas markets rebounded in the last quarter, “with Henry Hub prices averaging about $3.52 per million British thermal units for the year, a 56% increase from 2024 lows, driven by seasonal heating demand and proactive supply management that helped meet winter needs effectively. Texas natural gas production reached record levels, estimated at nearly 13.6 trillion cubic feet annually, underscoring the state’s critical supply contributions,” according to an analysis of market trends and industry data by the Texas Independent Producers and Royalty Owners Association (TIPRO).
“In the fourth quarter, the U.S. oil and natural gas sector demonstrated strong operational resilience, achieving record production levels that reinforced America’s position as the world’s leading energy supplier” and also underscores Texas’ “unmatched leadership amid persistent market headwinds,” TIPRO president Ed Longanecker said.
West Texas Intermediate crude oil averaged $59.65 a barrel last quarter, contributing to a full-year average of nearly $65 a barrel. “Domestic operators drove annual crude production to a historic high of 13.6 million bpd, led by continued efficiency gains in the Permian Basin despite a declining rig count,” Longanecker notes. “Prices faced persistent downward pressure from abundant global supply and moderated demand growth.”
Despite Trump’s pledge to drop prices at the pump, lower gas prices correlate to more layoffs and lower rig counts fears expressed – fears expressed by more than 130 energy firms last year. Industry experts argue $65 to $70 a barrel is needed to break even or to profitably drill. Inflation and tariff wars drove up costs and made it difficult for small businesses and investors, The Center Square reported.
There are nearly 50 fewer rigs operating in Texas compared to this time last year despite Trump’s “drill, baby drill” mantra, according to the latest Baker Hughes count. Last year, Houston’s energy giants laid off thousands of employees, the Houston Chronicle reported.
OPEC+ nation output increases also “created a well-supplied global market, while demand growth slowed to around 850,000 bpd due to economic normalization, trade uncertainties and softer consumption in key regions,” Longanecker said. “Seasonal inventory builds added temporary downward pressure on WTI. For natural gas, winter weather preparations and demand surges offered significant relief, though abundant supply growth limited the magnitude and duration of price gains.”
TIPRO notes that early indicators for the first quarter this year “show continued challenges for domestic producers. WTI crude oil hovered around $60 per barrel through much of January amid persistent global surplus conditions.” Geopolitical tensions involving Iran, with an apparent imminent strike by the U.S., are also raising supply disruption concerns.
Texas producers continue to “deliver essential energy reliably even under sustained market pressure,” Longanecker said. “As the cornerstone of U.S. production, Texas continues to lead through innovation, cost discipline and a steadfast focus on operational excellence. The current environment demands careful resource management and realistic expectations. Federal policies that prioritize domestic energy expansion, expedite permitting and eliminate unnecessary regulatory obstacles will be critical to maintaining investment momentum, protecting jobs and ensuring affordable energy for American families and businesses.”
He and others in the industry argue permitting reform for energy infrastructure projects remains a top priority. Bills the U.S. House passed with bipartisan support have gone nowhere in the U.S. Senate despite support from Texas’ senators Ted Cruz and John Cornyn.
The House passed the SPEED Act to amend NEPA, limit judicial challenges and streamline processes for energy and infrastructure projects; the PERMIT Act to reform Clean Water Act permitting processes; and the Improving Interagency Coordination for Pipeline Reviews Act to streamline permitting for pipeline infrastructure.
The industry remains optimistic about Trump administration regulatory and permitting reforms but says statutory changes are needed to ensure reliability and secure long-term investment. It is calling on the Senate to act.

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