How will the oil and gas industry do in 2017?

Aerial view of a fracking wellhead powered by a series of Halliburton pumping units at a fracking site managed by Octane Energy on Friday, Sept. 23, 2016 near Stanton. James Durbin/Reporter-Telegram
Aerial view of a fracking wellhead powered by a series of Halliburton pumping units at a fracking site managed by Octane Energy on Friday, Sept. 23, 2016 near Stanton. James Durbin/Reporter-Telegram

U.S. independent oil and gas drillers will lead the industry out of survival mode in 2017, according to a new report from an energy research firm.

Oil and gas companies that survived the 2-year-old oil price crash have cut their operating expenses in half, paid off debt and increased cash flow, the energy research firm Wood Mackenzie said on Monday. Most will make money in 2017 for the first time since the downturn, according to the report — but only if oil prices hold above $55 a barrel.

U.S. independent exploration and production companies will respond first to rising prices. Operators in the lower 48 states have three competitive advantages, the report said: access to capital, low-cost oil and gas acreage, and the ability to scale back spending if prices dip.

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They could increase investment by over 25 percent if oil prices average above $50 a barrel, the report said. Sixty corporations will grow production by an average of 2 percent next year, “which is impressive,” the firms says, since development spending was slashed by over 40 percent between 2014 and 2016.

The rebound still won’t be quick, said Tom Ellacott, WoodMac’s senior vice president of corporate analysis. He called it a “cautious, U-shaped recovery.”

Companies are going to focus on boosting savings, reducing debt, cutting expenses and modestly increasing production. Spending by the major oil companies — Exxon, Chevron, Shell, etc. — will fall by 8 percent as big capital projects wind down.

Still, all of that means some companies — now leaner and more productive — will be more attractive for corporate mergers and acquisitions.

“Overall 2017 will be a year of stability and opportunity for oil and gas companies in positions of financial strength,” Ellacott said. “More players will look at opportunities to adapt and grow their portfolios.”

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