Raymond James "Stat of the Week"

[dan_s]

This is from the RJ May 9 "Energy Stat of the Week".

We came away from this year's Offshore Technology Conference (OTC), the single biggest yearly exhibition of oilfield companies, with our bullish views on the energy industry intact. While offshore permitting activity in the Gulf of Mexico inches forward after last year's Macondo incident, commentary from the offshore drillers indicates that tendering activity has ramped up internationally, particularly on higher-end equipment. The primary takeaway from the conference had nothing to do with the offshore market, but rather provided an update on the red hot pressure pumping market. Simply put, manufacturers are churning out frac equipment at a blistering pace with further plans to increase capacity. That said, we think that pressure pumping margins will hold up higher and longer than many of our counterparts. Considering surging demand for pressure pumping capacity and the fact that the wear and tear of 24/7 drilling in unconventional shales has pushed equipment attrition rates well above historical peak levels, the true net capacity additions become much easier to swallow. All in, we remain bullish on companies leveraged to this market, with the caveat of increased psychological trading volatility moving forward.

This highlights why I'm so bullish on PTEN. They have a rapidly growing pressure pumping business and not getting much credit for it yet in the market. - Dan