HOUSTON, April 8 (Reuters) - ConocoPhillips, thelargest independent producer of oil and natural gas, plans toadd drilling rigs in 2017 in key U.S. shale acreage based on itsexpectations for a crude price recovery, the company's chiefexecutive said on Wednesday.
Conoco, which slashed its capital spending plan nearly 30percent to $11.5 billion this year, told investors it expects toincrease the number of rigs in its Eagle Ford acreage in SouthTexas to 12 in 2017 from an average of seven this year.
In North Dakota's Bakken, the rig count will double to 10over the same period.
The company's rig forecast is a strong sign that producersfirmly believe in the long-term viability of drilling for shaleoil, which has boomed over the last decade but been scaled backsharply since U.S. oil prices tumbled 50 percent since June toaround $50 a barrel.
"While we've ramped down to adjust to current marketconditions and lower commodity prices, our intention is to rampback up with rig count in both those two plays," Conoco CEO RyanLance told a small group of reporters on a conference call.
Those shale projects have higher margins, a shorter cashcycle and provide higher returns, the executive said.
While a commodity price recovery is likely to be "volatile,"Lance said the proposed $70 billion deal by Royal Dutch Shell to acquire BG Group Plc may signal the markethas bottomed out as U.S. supply and demand return to balance.
"As refineries in the U.S. are coming back on, we'll getsome of the inventories in Cushing worked off. We ought to seesome recovery in price as the supply starts to react to the lowprice as well," he said.
On the cost side, Lance said Conoco expects to save as muchas $1 billion in operating costs through 2016, a figure thatlikely could grow if U.S. onshore drilling costs keep falling.
(Reporting by Anna Driver; Editing by Terry Wade and RichardChang)