Energy sector components are aligning to spawn recovery in Texas, the No. 1 oil producer, but it's still early in the expansion, an industry economist said.

As the top oil state in the country, the energy sector in Texas generated about $9.4 billion in taxes and revenue last year, according to the Texas Oil & Gas Association. Even during last year's market downturn, the trade group said that worked out to be about $26 million per day in state and local revenue.

Crude oil prices have been steady around $55 per barrel for most of the year in response to a decision from the Organization of Petroleum Exporting Countries to put a lid on output in an effort to correct an over-supplied market. That's made it more economic for companies to return to work in the shale oil and gas deposits in Texas that were sidelined by last year's market slump.

Karr Ingham, an economist at the Texas Alliance of Energy Producers, said the basic components of market recovery are evident, but the sector is still transitioning out of contraction. The market price for oil and gas has improved, exploration and production activity is gaining, but other measures like total production and employment are still lower than they were a year ago.

"The expansion is in its infancy and 2017 will very likely be a year of growth and recovery in the Texas upstream oil and gas economy," he said in a statement. "But at some point, absent another surge in the price of crude oil, price levels and oilfield service costs will conspire to put a bit of a lid on activity growth."

Ingham's group estimates Texas oil production totaled 99.5 million barrels in January, about 4.5 percent less than last year. Responding to higher crude oil prices, however, the value of Texas-produced oil was 63.5 percent higher year-on-year. The situation is the same for natural gas, with year-on-year production down 10 percent and value up 29.7 percent.

A January survey from the Federal Reserve Bank of Dallas said state-wide job growth was close to zero in December, though energy executives responding to its surveys said their outlook was improving along with crude oil prices. Nevertheless, quarterly data show payrolls are still lower than the peak in December 2014.

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