The Baker Hughes rig count ended 2016 at 658 working rigs, which was only 40 fewer rigs than at year-end 2015. Texas was by far the leader in regaining ground lost in the downturn. At year-end 2016 there were 324 rigs turning to the right, nearly double the 173 rigs operating at year-end 2015.

The Permian Basin was outstripping every other play in the U.S., well ahead of 2015. With 264 rigs running, the basin had 81.5% of the total number of rigs in Texas. And Texas had three more rigs at work at year-end 2016 than it did at year-end 2015. These are all good signs for continued strengthening of the U.S. oil and gas industry.

Of course, this depends on the price of oil. If OPEC maintains its pledge to lower production and certain OPEC members don’t cheat, oil prices could continue to rise to the $60 level. And the U.S. industry will tell itself it will maintain the production discipline to keep prices at that level. That remains to be seen.

Trading ended at $52.33 on Jan. 3, 2017, which is double the low of $26.21 on Feb. 11, 2016. The industry is being cautious. However, the large number of drilled but uncompleted wells could quickly boost production levels.

On Dec. 19, 2016, Wood Mackenzie issued its global corporate outlook for 2017, predicting the oil and gas industry will turn cash flow positive for the first time since the downturn if oil prices are above $55.

Its corporate outlook listed five themes for the majors, independents and national oil companies for 2017: strengthening finances will be a top priority; U.S. independents will lead the sector into a new investment cycle; portfolios will adapt down the cost curve and into new energy; modest growth in production will occur despite past capex cuts; and the industry will see an improved value proposition for exploration, mergers and acquisitions.

“Overall, 2017 will be a year of stability and opportunity for oil and gas companies in positions of financial strength. More players will look at opportunities to adapt and grow their portfolios,” said Tom Ellacott, senior vice president of corporate analysis research at Wood Mackenzie.

But 2016 will prove to be the low point in the investment cycle, with confidence boosted by OPEC’s decision to cut production, according to the company.

According to the analysis, U.S. independents could increase investment by more than 25% if oil prices average above $50/bbl. But spend for the bigger players will continue to trend down—total investment by the majors will fall by about 8% as recent capital-intensive projects wind down.

“The hot oil plays are U.S. tight oil, with the Permian Basin to the fore and Brazilian presalt,” Ellacott said. Without a doubt—well, without too many doubts—the new year is starting off in the right direction.

Contact the author at slweeden@hartenergy.com.