Texas oil and gas activity is about to eclipse the peak index achieved in 2008, according to economist Karr Ingham, the creator of the Texas Petro Index. Ingham spoke at a recent Texas Alliance of Energy Producers luncheon.

Levels have increased during the first half of 2013 and are just 1.2% from matching the peak achieved five years ago. He estimated that within the next month or so the peak level will be regained.

This rebound, he said, is based on the stability that the Texas oil and gas economy is experiencing given the high level of activity.

“We’ve had increases in aggregate activity levels in the oil patch in Texas, primarily in terms of production, employment, well completions, well production and value of that production,” he said.

Since mid-2012, crude oil production estimates have showed a net decline. Compared to the first six months of 2012, crude production in Texas is up about 15% midway through 2013 and up by 35% compared to the same period in 2011.

Overall, crude production continues to increase. Statewide production is now at the highest level since 1988, Ingham said.

Estimated gas production has been revised upward. Ingham said this is surprising because of low wellhead prices and the decline in the number of gas wells. He said the rise is due to casinghead gas, or condensate, which is produced as a byproduct of oil wells. Casinghead gas is up by about 20% or more as of mid-year 2013 compared to June 2012.

“It is the production of casing-head gas that is actually helping to propel natural gas production,” he said.

Overall, statewide gas production has declined by 7% to 8% through the first six months of the year.

Commodity prices have not recovered to the levels of 2008. Ingham doesn’t think that many people want to see them back at that level, though.

“When prices get as high as they did then, the industry tends to become a target,” he said.

The count of active drilling rigs in Texas ended first-half 2013 with about 90 fewer rigs working than at the end of June 2012. This still is more than 100 rigs behind the index peak in September of last year of 946 active rigs.

Ingham said the rig count was down by 110 rigs or so on average in June vs. the end of 2012, but some of those are now getting back to work.

The Texas economy is the second-fastest-growing economy in terms of increase in gross state product from 2011 to 2012, at 4.8 %. Only North Dakota achieved a higher rate of growth—13.4% from 2011 to 2012. Ingham attributed these numbers to the huge role the oil and gas industry plays in both states. “Texas is not just a leading edge; it’s essentially half of the activity,” he said. A composite index based on a comprehensive group of upstream economic indicators, the Texas Petro Index in June increased to 284.2, up 3.4% from the same month in 2012. The index reached an all-time high of 287.6 in September and October 2008, then declined to 188.5 in December 2009 before starting its current growth cycle. The index in June represents the peak in that cycle.

Highlights of the index:

• Crude oil production in Texas totaled an estimated 64.6 million barrels, about 8.97 million barrels or 16.1% more than June 2012. Crude oil wellhead prices averaged $92.08 per barrel, about 16.4% more than in June 2012. Production gains and higher wellhead prices combined to boost the value of Texas-based crude oil by about 35.2%, to nearly $5.95 billion.

• Estimated Texas natural gas output was about 603 billion cubic feet, a year-over-year monthly decline of 6.8%. Natural gas prices averaged $4.14 per thousand cubic feet, about 64.6% more than in June 2012. Higher wellhead prices more than offset the production decline to boost the value of Texas-produced gas to nearly $2.5 billion, 53.5% more than in June 2012.

• The Baker Hughes count of active drilling rigs in Texas averaged 841, 9.8% fewer than in June 2012, when 932 rigs on average were operating. Drilling activity in Texas peaked in September 2008 at a monthly average of 946 rigs before falling to 329 in June 2009.

• The number of Texans estimated to be on oil and gas industry payrolls reached a record 274,300, according to Texas Workforce Commission estimates revised in March. Industry employment in Texas dropped to a low of 179,200 in October 2009 after reaching a high of 223,000 in November 2008 during the previous growth cycle.