July 15, 2016 / 5:06 PM / 2 years ago

CORRECTED-U.S. oil drillers add rigs for third week in a row -Baker Hughes

(Adds latest increase in total oil and gas rig count in
paragraph 11)
    July 15 (Reuters) - U.S. drillers this week added oil rigs
for a third week in a row, according to a closely followed
report Friday, as some producers boost spending and increase
activity to capture higher prices in the future despite a recent
slump in crude prices.
    Drillers added six oil rigs in the week to July 15, bringing
the total rig count up to 357, compared with 638 a year ago,
energy services firm Baker Hughes Inc said.
    Since early June, after crude prices topped the key $50 a
barrel level, drillers have added a net 32 oil rigs. That was
the biggest increase during a nine-week period since July-August
2015 when drillers added net 35 rigs. 
    The increase in July-August last year occurred after oil
rallied to $60 a barrel in May-June 2015. That rally is referred
to by some traders as the "false dawn" as it presaged another
selloff in the market. 
    The rig count declined after hitting a peak of 1,609 in
October 2014 amid the steepest price rout in a generation. But a
analysts and producers have said $50-a-barrel oil would trigger
a return to the well pad.  
    U.S. crude futures on Friday were around $46 a
barrel, up 1 percent on the week after volatile trade that had
pushed prices to two-month lows amid renewed glut worries. 
    Futures for the balance of the year were trading
over $47, while calendar 2017 was above $50.
    U.S. financial services firm Cowen & Co this week forecast
spending by the U.S. exploration and production companies it
tracks would rise to $72 billion in 2017 from $52 billion in
2016, assuming crude prices of $50 in 2017. In 2015, the
companies Cowen tracks spent about $96 billion.
    In 2018, Cowen forecast spending would rise to $81 billion,
assuming $55 crude, noting a $5 increase in prices implies about
a $10 billion increase in capital expenditures or about 85 rigs.
    Cowen forecast total U.S. oil and natural gas rigs would
rise from an average 449 in 2016 to 592 in 2017 and 728 in 2018.
    The total oil and gas rig count bottomed at 404 in mid May,
the lowest level since at least 1940, and increased by seven to
447 in the week ended July 15, according to Baker Hughes data.
In 2015, the total rig count averaged 978.
    Cowen, which has its own rig count forecast, projected the
U.S. land rig count increased by 19 to 439 following a two-rig
increase last week. That puts land rigs up 73 since the count
hit bottom on May 5.
    "We expect weekly changes in the rig count will be choppy in
coming months and could stall or even decline as seasonal
drilling activity declines," Cowen said.

 (Reporting by Scott DiSavino; Editing by Marguerita Choy)
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