* Gas-directed rig count falls to new 10-year low
* Horizontal rig count climbs to record high
* Oil drilling rigs jump 17 to new 25-year high
By Joe Silha
NEW YORK, May 11 (Reuters) - The number of rigs drilling for natural gas in the United States fell this week to the lowest level in 10 years as still-low gas prices encouraged producers to further slow dry gas operations.
The gas-directed rig count notched its fifth drop in the last six weeks, sliding by eight this week to 598, the lowest since April 2002 when there were 591 rigs operating, data from Houston-based oil services firm Baker Hughes showed on Friday.
If in coming weeks the count drops to 590 or lower, gas-directed drilling would be at its lowest in 12-1/2 years, or since October 1999.
One of the mildest winters on record sharply cut gas demand and left a huge surplus in inventory that helped pressure gas prices this year.
Front-month gas futures hit a 10-year low of $1.90 per mmBtu three weeks ago, a level that makes most dry gas drilling uneconomic, but have since rebounded to about $2.50.
While cheap gas has helped homeowners and businesses and attracted more demand from utilities and industry, it has been bad news for some dry gas producers that have been forced to sell gas at below cost.
The nearly steady drop in dry gas drilling over the last seven months -- the gas rig count is down 36 percent since peaking at 936 in October -- has raised expectations that producers were finally getting serious about stemming the flood of record gas supplies.
But rising output from shale has kept production growing.
Horizontal rigs, the type most often used to extract oil or gas from shale, jumped 29 to an all-time high of 1,187, eclipsing the previous record of 1,185 hit in late January.
It was the third gain in the horizontal count in four weeks.
The share of horizontal rigs drilling for dry gas is down to about 35 percent from 78 percent just two years ago, but the associated gas produced by horizontals labeled as oil has held dry gas output up this year.
The oil-focused rig count climbed this week to a new 25-year high, up 17 to 1,372 rigs, Baker Hughes data showed.
There were 45 percent more rigs drilling for oil in the United States this week, compared to a year earlier, when only 947 oil rigs were operational.
Energy companies have shifted spending away from dry gas to more lucrative hydrocarbons like oil and liquids-rich gas.
Front-month natural gas futures on the New York Mercantile Exchange, which were up 1.3 cents at $2.50 per mmBtu just before the Baker Hughes data was released at 1 p.m. EDT (1700 GMT), edged up slightly to the $2.50 area after the report.
Talk of more supply cuts by producers and strong coal-to-gas switching by utilities have helped firm gas prices recently. But so far any reductions in output have not been reflected in pipeline flows, which are still hovering near record levels.
U.S. Energy Information Administration data last week showed gross gas production in February fell 420 million cubic feet per day, or 0.6 percent, from January’s record high.
The decline, only the second in the last 12 months, stirred talk that domestic production might finally have peaked and was poised to slow.
Despite the decline in dry gas drilling, analysts say any decline in output could take a lot more time as producers seek out more profitable shale oil and shale gas liquids prospects.
Many traders remained skeptical of any upside in prices with inventories and production still at or near all-time highs and milder spring weather likely to slow demand.
The U.S. Energy Information Administration on Tuesday slightly trimmed its estimate for marketed gas production growth in 2012 but still sees output at a record high 69.14 bcf per day, which would be the second straight yearly record.
Most analysts do not expect any major slowdown in gas output until later this year.