(Adds this week's rig count in paragraph 2)
By Scott DiSavino
NEW YORK, Sept 30 U.S. oil drilling has seen its
best quarter since crude prices tumbled two years ago mainly due
to small operators returning to the well pad, but analysts say
the continued recovery in the rig count depends on whether
OPEC's output reduction plan can bring the market back to $50 a
Since May, drillers have added 109 oil rigs with the rig
count rising to 425 rigs this week, that included the most
additions in a quarter since the first quarter of 2014,
according to oil service firm Baker Hughes Inc.
The number of rigs had plunged from a record high of 1,609
in October 2014 to a low of 316 in May after crude prices
collapsed in the biggest price rout in a generation, in part due
to U.S. shale producers adding to a global oil glut.
Private or mom-and-pop type drillers, commonly running one
or two rigs, accounted for up to two-thirds of the rig count
increase, analysts said, which came after U.S. crude futures
topped the key $50 mark that spurred producers to return.
Even though U.S. prices have mostly languished in the mid
$40s since June, the rig count continued to climb in the longest
streak without a cut in two years, but the rate of increases has
slowed over the last month.
"Given oil's move from $50 to $45, this likely hit the cash
flows of the private operators who have added a large portion of
the rigs," said James West, senior managing director and partner
at Evercore ISI, a U.S. investment banking advisory.
He said those drillers may "choose to conserve capital,"
forcing them to drop rigs.
The proposed production curbs by the Organization of the
Petroleum Exporting Countries (OPEC) has boosted U.S. crude
prices about 8 percent this week to around $48, with futures for
2017 trading above $51 and 2018 futures at
With the higher prices, analysts said larger drilling
firms, such as Anadarko Petroleum Corp, Southwestern
Energy Co and WPX Energy Inc, will likely follow
through on longer-term plans to put more rigs into operation.
"Mid to larger companies are looking to add rigs," said Trey
Cowan, senior industry analyst at Platts RigData, a forecasting
unit of S&P Global Platts.
"If prices hold around $45, those guys would more than make
up for seasonal declines we usually see in the fourth quarter
and any losses you may see from smaller operators," Cowan told
Reuters before OPEC's announcement on Wednesday.
Platts RigData, which makes rig count projections, expects
U.S. oil and gas land rig counts to rise from an average of 449
in 2016 to 579 in 2017.
(Additional reporting by Barani Krishnan; Editing by Marguerita