US rig count up as oil prices lure back drillers

SAN FRANCISCO, June 26 Fri Jun 26, 2009 2:57pm EDT

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SAN FRANCISCO, June 26 (Reuters) - The number of U.S. rigs working rose for a second week as improved crude oil prices lured back drillers even as natural gas activity weakened, according to figures from Baker Hughes Inc (BHI.N) on Friday.

The rise appeared to support predictions made a few months ago by oil services company executives for a bottoming of the closely watched rig count in the second or third quarter.

In the week to Friday, the overall U.S. rig count rose by 18 rigs to 917, having touched a six-year low of 876 two weeks before. But the number of rigs drilling for natural gas fell again, down by five at 687, as gas prices remained subdued by massive production and weak demand. [ID:nN26341943]

On the other hand, U.S. crude oil price futures CLc1 have doubled in the past four months, even if they are still only half their level of a year ago.

Nabors Industries Ltd (NBR.N) Chief Executive Gene Isenberg, speaking to analysts in April after the contract driller reported first-quarter results, said he saw the rig count bottoming in the second quarter. Many others have predicted the bottom would be hit in the third quarter.

Nonetheless, Pritchard analysts expect any recovery in drilling to be modest.

"We expect a period of stabilization in which the rig count only modestly improves, with a material improvement unlikely until mid-2010," the analysts wrote in a note this week.

The U.S. rig count, which is far more volatile than international numbers, peaked above 2,000 last year. (Reporting by Braden Reddall; Editing by Christian Wiessner)

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