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Houston economic outlook
January 2016
Presented by:
Patrick Jankowski
Senior Vice President, Research
Greater Houston Partnership
The basics
Gross Domestic Product- 2014
Rank Metro Area $ Billions
1 New York 1,558.5
2 Los Angeles 866.7
3 Chicago 610.6
4 Houston 525.4
5 Dallas-Fort Worth 504.4
6 Washington D.C. 471.6
7 San Francisco 412.0
8 Philadelphia 391.1
9 Boston 382.5
10 Atlanta 324.9
Source: U.S. Bureau of Economic Analysis
The nation’s fourth largest economy
240.9 238.4 254.5286.2
316.5352
391.9414.8
373.5400.1
441.7475
515.2 525.4
'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14Source: U.S. Bureau of Economic Analysis
Metro Houston GDP – $ Billions (Nominal)
A long history of growth
24.5
106.1
164.5
345.2
399.4
428.1
553.4
664.6
750.7
774.0
Chicago
Philadelphia
Boston
Atlanta
Miami
Los Angeles
Washington D.C.
Dallas-Fort Worth
Houston
New York
Source: U.S. Bureau of Labor StatisticsSeasonally adjusted
Jobs (000s)
Jobs created since Jan ’00
Population
Most Populous U.S. Metros - 2014
Rank Metro Area Population
1 New York 20,092,883
2 Los Angeles 13,262,220
3 Chicago 9,554,598
4 Dallas-Ft Worth 6,954,330
5 Houston 6,490,180
6 Philadelphia 6,051,170
7 Washington D.C. 6,033,737
8 Miami 5,929,819
9 Atlanta 5,614,323
10 Boston 4,732,161
Fifth Most Populous Metro
569.7 528.1 526.4
433.3 397.3
363.5 327.6
179.7
93.1 85.8
Houston Dallas-FtWorth
New York Los Angeles Washington Miami Atlanta Boston Chicago Philadelphia
Source: U.S. Census Bureau
10 Largest U.S. Metros (000s)
Population Growth 4/10 – 7/14
Other12,720 0.2%
Mixed Race180,434
2.9%Asian
418,2376.7%
Black1,037,595
16.5%
Hispanic2,228,634
35.5%
White2,406,315
38.3%
Race and Ethnicity
Source: U.S. Census Bureau
A Diverse Population
30.6%
35.5%
42.6%
38.3%
13.2%
16.5%
13.6%
6.7%
U.S. 2060 Projected
Houston MSA
Race/Ethnicity: Houston Now and the U.S. in 2060% Distribution of populations
Hispanic White Black Asian & Other
Source: U.S. Census Bureau
Houston is the nation’s future
The Current
Environment
No sugar coating
30
35
40
45
50
55
60
65
70
'05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16
Source: Institute for Supply Management-Houston
Houston Purchasing Managers Index
(50 = Neutral)
Co
ntr
acti
on
E
xp
ansi
on
PMI signaling contraction
85.6
107.8 115.2 116.4
120.2
102.0
2010 2011 2012 2013 2014 2015
Source: WISERTrade
Exports, Houston-Galveston Customs District November YTD, $ Billions
Exports of last year’s pace
20
40
60
80
100
120
$ P
er B
arre
l
Source: U.S. Energy Information Administration
Spot Price, West Texas Intermediate
Crude has fallen $80 from its peak
When will prices recover?
• That depends on . . .
• China growth
• Saudi output
• Global demand
• Iranian sanctions
• U.S. Production
• OECD Inventories
• U.S. Inventories
• Market sentiment
When will prices recover?
When will prices recover?
This time last year, EIA forecasted WTI to average $55 in ’15 and $71 in ’16.
30
32
34
36
38
40
42
44
Feb16
Apr16
16-Jun
Aug16
Oct16
Dec16
Feb17
Apr17
Jun17
Aug17
Oct17
Dec17
Feb18
$ P
er B
arre
l
Source: Yahoo Finance
Futures Chain, Crude Oil, NYMEX
When will prices recover?
This time last year
When will prices recover?
Wells Fargo Oil Price Forecast
Q1 Q2 Q3 Q4
Brent Crude $40 $42 $50 $58
When will prices recover?
Wells Fargo Oil Price Forecast
Q1 Q2 Q3 Q4
Brent Crude $40 $42 $50 $58
When will prices recover?
Wells Fargo Oil Price Forecast
Q1 Q2 Q3 Q4
Brent Crude $40 $42 $50 $58
When will prices recover?
Wells Fargo Oil Price Forecast
Q1 Q2 Q3 Q4
Brent Crude $40 $42 $50 $58
When will prices recover?
When will prices recover?
• That depends on . . .
• China growth
• Saudi output
• Global demand
• Iranian sanctions
• U.S. Production
• OECD Inventories
• U.S. Inventories
• Market sentiment
When will prices recover?
• That depends on . . .
• China growth
• Saudi output
• Global demand
• Iranian sanctions
• U.S. Production
• OECD Inventories
• U.S. Inventories
• Market sentiment
500
700
900
1100
1300
1500
1700
1900
2100
Source: Baker Hughes
U.S. Rotary Rig Count
Nearly 1,300 rigs have been idled
When will the rig count recover?
• That depends on . . .
• Decline in U.S. production
• Rebound in oil prices
• Internal cash flow
• Access to credit
• Mood on Wall Street
Source: OilPro
When will the rig count recover?
• That depends on . . .
• Decline in U.S. production
• Rebound in oil prices
• Internal cash flow
• Access to credit
• Mood on Wall Street
Share Prices – Selected Exploration Firms
Peak Close 1/12/16
Anadarko $112.80 $37.33
Apache 103.51 35.42
Chevron 135.10 82.15
ConocoPhillips 86.67 40.25
EOG 117.98 62.92
ExxonMobil 104.72 74.95
Hess 101.00 39.60
Marathon 41.69 9.19
Occidental 100.95 60.97
Shell 88.13 39.52
Source: Yahoo Finance
Wall Street’s not happy
Share Prices – Selected Exploration Firms
Peak Close 1/12/16 % Change
Anadarko $112.80 $37.33 66.9
Apache 103.51 35.42 65.8
Chevron 135.10 82.15 39.2
ConocoPhillips 86.67 40.25 53.6
EOG 117.98 62.92 46.7
ExxonMobil 104.72 74.95 28.4
Hess 101.00 39.60 60.8
Marathon 41.69 9.19 78.0
Occidental 100.95 60.97 39.6
Shell 88.13 39.52 55.2
Source: Yahoo Finance
Wall Street’s not happy
When will the rig count recover?
• That depends on . . .
• Decline in U.S. production
• Rebound in oil prices
• Internal cash flow
• Access to credit
• Mood on Wall Street
Change in Cash Flow, Selected U.S. Energy Firms
$ Revenues (billions) Difference
Q3/15 Q3/14 $ %
Anadarko 1.688 5.01 -3.32 -66.3
EOG 2.172 5.119 -2.95 -57.6
Apache 1.496 3.441 -1.95 -56.5
Marathon 1.323 2.971 -1.65 -55.5
ConocoPhillips 7.507 12.917 -5.41 -41.9
Hess 1.689 2.736 -1.05 -38.3
Chevron 34.315 54.679 -20.36 -37.2
ExxonMobil 67.344 107.13 -39.79 -37.1
Shell 69.184 109.825 -40.64 -37.0
Occidental 3.246 4.93 -1.68 -34.2
Group Total $189.964 $308.758 $118.794 -46.2%
Source: various company web sites and Securities
What’s happened to cash flow?
Change in Cash Flow, Selected U.S. Energy Firms
$ Revenues (billions) Difference
Q3/15 Q3/14 $ %
Anadarko 1.688 5.01 -3.32 -66.3
EOG 2.172 5.119 -2.95 -57.6
Apache 1.496 3.441 -1.95 -56.5
Marathon 1.323 2.971 -1.65 -55.5
ConocoPhillips 7.507 12.917 -5.41 -41.9
Hess 1.689 2.736 -1.05 -38.3
Chevron 34.315 54.679 -20.36 -37.2
ExxonMobil 67.344 107.13 -39.79 -37.1
Shell 69.184 109.825 -40.64 -37.0
Occidental 3.246 4.93 -1.68 -34.2
Group Total $189.96 $308.76 $118.80 -46.2%
Source: various company web sites and Securities
What’s happened to cash flow?
When will the rig count recover?
• That depends on . . .
• Decline in U.S. production
• Rebound in oil prices
• Internal cash flow
• Access to credit
• Mood on Wall Street
And if you read the news every day . . .
We’ve been here before
Oil Prices Losses
Recession Peak Trough Rigs Energy Jobs
Mid-1980s $30.75 $12.05 -3,766 (-83.3%) -53,600 (-46.3%)
Early-1990s $35.89 $14.57 -526 (-46.3%) -6,800 (-10.8%)
9-11/Enron $34.55 $19.53 -528 (-41.3%) -4,700 (-7.3%)
Great Recession $136.96 $39.51 -1,119 (-44.4%) -11,900 (-13.6%)
Current $106.31 $30.51 -1,267 (-65.6%) ----
Note: All losses calculated from the monthly average Sources: U.S. Energy Information Administration, Baker Hughes, U.S. Bureau of Labor Statistics
0
20
40
60
80
100
120
140
160
1.5
1.8
2.0
2.3
2.5
2.8
3.0
'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16
WTI
($/bbl)Jobs
(millions)
Source: U.S. Energy Information Administration and Texas Workforce Commission data
Oil Prices and Employment Growth
Employment Monthly Oil Prices
We’ve been here before
0
20
40
60
80
100
120
140
160
1.5
1.8
2.0
2.3
2.5
2.8
3.0
'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16
WTI
($/bbl)
Jobs
(millions)
Source: U.S. Energy Information Administration and Texas Workforce Commission data
Oil Prices and Employment Growth
Employment Monthly Oil Prices
We’ve been here before
We’ve been here before
We’ve been here before
2.2
2.3
2.4
2.5
2.6
2.7
2.8
2.9
3.0
3.1
'04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16
Emp
loym
ent
(M
illio
ns)
Source: Texas Workforce Commission
Total Nonfarm Payroll, Houston Metro Area, '04 - '16
Employment is still growing
Houston won’t disappear in the downturn
Port of Houston 8,000 ships per year
Population Growth 125,000 new residents
Houston Airports 54 million passengers
Texas Medical Center 7.2 million patients
Downstream Energy 25% refining capacity
40% base petrochem
Global Trade Ties 5,700 companies
Resilience Been here before
Houston won’t disappear in the downturn
98.4
-8.1
18.7
44.353.4 54.4 53.0
10.6
92.8
17.8
59.7
1.3
-1.7-11.6
39.3
91.1
107.0
90.7
-110.6
49.7
82.9
118.5
89.9
104.7
23.2 21.9
December to December Job Growth (000s)
Source: Texas Workforce Commission *Partnership 2016 Forecast
What will 2016 look like?
Houston economic outlook
January 2016
Presented by:
Patrick Jankowski
Senior Vice President, Research
Greater Houston Partnership
