U.S. natgas drilling rig count hits 10-year low

* Natural gas-directed rig count at lowest since May 2002 * Oil rigs up again, at 25-year high *

Horizontal rig count up 16 to 1,180. By Selam Gebrekidan and Eileen Houlihan NEW YORK, March 16

(Reuters) - The number of rigs drilling for natural gas in the United States fell to a 10-year low this week as producers cut back on gas-related drilling operations. The gas-directed rig count fell for the 10th straight week, down by seven to 663, its lowest since May 2002, data from Houston-based oil services firm Baker Hughes showed on Friday. The cutbacks in drilling followed a crash in gas prices to a 10-year low, driven by weak winter demand. Gas prices have also been weighed down for the past year by record high output, primarily from shale gas patches. Front-month natural gas futures on the New York Mercantile Exchange showed little reaction to the data, remaining about 3 cents higher on the day at $2.308 per million British thermal units. Several companies such as Chesapeake, the nation's second-largest gas producer, and Encana, Canada's largest gas producer, have announced cuts that total more than 1 billion cubic feet per day, or nearly 2 percent of estimated annual production. Most market participants expect no major slowdown in gas output until late this year, noting it will be difficult to balance the market without serious production cuts. Traders are skeptical since planned reductions so far were not enough to tighten a market over supplied by as much as 3 bcfd, or more than 4 percent. Meanwhile, Horizontal drilling rigs, the kind most often used in shale drilling-- rose by 16 this week to 1,180, just under the all-time high of 1,185 in late January. The share of horizontal rigs drilling for dry gas has fallen sharply over the last two years due to much higher prices for oil and natural gas liquids (NGLs). The oil rig count rose by 21 to a 25-year high of 1,317, Baker Hughes data showed. This is 57 percent higher than last year, when only 839 rigs were drilling for the more-lucrative hydrocarbon. The cutbacks in natural gas production are aiding burgeoning growth in oil production in the nation's shale outposts from North Dakota to Texas.