Oil Drillers Dig for the Bottom for Rig Counts

NEW YORK, May 6 (Reuters) - For the past year and a half, a chart of the number of U.S. oil rigs in operation has resembled a death-defying ski slope - but soon it may be time to get back on the chair lift.

The U.S. rig count may finally be bottoming out as U.S. oil companies look for oil prices to rally just a bit more, a signal that the time has come to deploy more capital and get production moving again, analysts say.

The number of active oil rigs in the United States has fallen for seven consecutive weeks, as of data released Friday. Some believe the rig count will start to rise, as drillers plan to ramp up production if benchmark U.S. crude reaches the trigger level of $50 a barrel. U.S. crude prices hit a year-to-date high of $46.78 last week.

In the past two weeks, oil producers including Anadarko Petroleum Corp and Pioneer Natural Resources have cited an improving outlook for oil prices, executives said on calls discussing earnings. Dave Lesar, chief executive of oilfield services provider Halliburton Co, said he believes the rig count has hit a bottom and likely will rise this year.

The U.S. rig count generally reacts to prices with a three or four-month lag, so following the nadir for crude in February, it should bottom in the next month, Morgan Stanley's head of energy commodity research Adam Longson said in a report this week.

"The same analysis also suggests a notable increase in rig activity may be ahead - potentially reversing much of the decline over the past several months," he wrote.

Some companies are already resuming drilling on wells that had been put on hold, known as drilled-uncompleted projects, and planning to drill new wells.

"Our estimates are that at $45-$50 WTI some of the light tight oil goes into production," said Mark Routt, Chief economist in the Americas for KBC Advanced Technologies, referring to a technical name for the type of oil in shale formations. "When you have the front of the market lift, as it has done, it makes it that much easier to justify coming back on."

U.S. crude prices, after hitting their year-to-date high on April 29, have gained support from output disruptions in Canada during the past week, indicating that the market is becoming more responsive to fundamental supply concerns that have often failed to elicit a price response during the rout.

Companies are expected to be cautious as they redeploy rigs, so the count will not rapidly accelerate and blunt the impact of the increase in crude prices.

The current count of 332 rigs is unlikely to surge back to the 668 seen a year ago, to say nothing of 2014's peak north of 1,600 rigs.

Exploration and production companies have planned for capital expenditures at about half of last-year's levels. If companies stay consistent with this guidance, the rig count should remain fairly flat, said Bob Brackett, a senior research analyst at Sanford Bernstein in New York.

Brackett cited an analysis of drilling data from Texas showing a six-month lag between the time when rigs are deployed and when the well pad hits peak production. So even as rig counts increase slightly, "we still see a six-month lag with supply response," Brackett said.

Companies also are likely to be highly selective in which rigs they deploy as they increase drilling operations, said Fadel Gheit, senior energy strategist at Oppenheimer & Co. Companies are likely to only drill top wells as they will be wary that prices could decline again, he said.