Oil- and gas-sector activity in Texas, northern Louisiana and southern New Mexico contracted for the first time this year, the Federal Reserve Bank of Dallas said in its second-quarter Energy Survey. The business-activity index slipped to –8.1 from 3.8 in the previous quarter, while the oil-production index dropped to –8.9 and the natural-gas index to –4.5, indicating slight declines in output. Respondents also reported rising uncertainty, with the survey’s uncertainty gauge climbing to 47.1. Companies remain cautious about the outlook. Nearly half of exploration-and-production executives said they now expect to drill fewer wells in 2025 than they had planned at the start of the year, including 26 percent who anticipate a significant reduction. A majority—61 percent—would cut output if West Texas Intermediate crude were to hold around $60 a barrel, and 46 percent foresee a sharp fall were prices to average $50. Cost pressures are intensifying. The input-cost index for oil-field-services firms rose to 40.0, its highest level in a year, and 26 percent of producers estimate that doubling the U.S. steel import tariff to 50 percent has added 4–6 percent to the expense of drilling and completing a well. Twenty-seven percent expect the higher tariff to lead to slightly fewer wells in the second half of 2025. Despite the pullback, executives on average project West Texas Intermediate to end 2025 at $68 a barrel and Henry Hub natural gas at $3.66 per million British thermal units, roughly in line with current spot levels. The Dallas Fed surveyed 136 firms between 18 and 26 June.