Patterson-UTI Energy (PTEN) downgraded to Market Perform from Outperform at Wells Fargo.
All of the onshore drillers will have a bit of a dark cloud over them until it becomes clear how much natural gas directed drilling falls due to the recent drop in NG prices. Q4 results for all of the drillers on our Watch List will be solid.
Check out our new profile on PDS (under the Watch List Tab). We should post a profile on NBR today. I do think NBR has the most exposure to lower NG prices. I think PDS, HP and PTEN will be fine. Demand for their high end rigs in the liquids prone areas of the large resource plays (Bakken, Eagle Ford, Utica, Marcellus, Niobrara) remains very strong.
PTEN
Re: PTEN
Union Drilling has rigs working in the Permian Basin (West Texas), Appalachia and the Arkoma Basin (Oklahoma & Texas) and just getting started in the Utica Shale. It has the most exposure to a prolonged dip in natural gas price in Appalachia.
UDRL is much better positioned since it sold its low HP rigs in December.
UDRL is much better positioned since it sold its low HP rigs in December.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: PTEN
Let me add that in this market that already lacks confidence, a black cloud may hang over the onshore drillers for awhile. They should all report strong 4th quarter results but the market may not care if investors believe the drilling for gas will drop off the cliff. It might, but my take is that E&P companies will shift to drilling more wells in the liquid prone areas.
At $100 oil the Bakken, Eagle Ford and Permian look very good.
Check out our profile on PDS. They seem to have the least exposure to a drop of in gas drilling.
At $100 oil the Bakken, Eagle Ford and Permian look very good.
Check out our profile on PDS. They seem to have the least exposure to a drop of in gas drilling.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: PTEN
below article may apply to pten, also. last qtr report they complained of higher costs.
Drillers hitting bumps in N. American oil boom
Profit challenges loom on low natural gas prices, logistical costs 01/25 01:18 PM
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NEW YORK (MarketWatch) -- While energy companies continue to scale up their domestic oil and natural gas liquids production, the trend didn't necessarily translate to wider profit margins for oil service firms in the latest quarter.
Higher costs for shifting resources from dry gas to shale oil fields, along with pricier bills for materials used to extract crude created some bumps in the oil boom for big oil service firms as 2011 drew to a close.
These wrinkles caught Wall Street by surprise, with analysts scaling back some profit expectations for the coming year after quarterly updates from Baker Hughes (BHI:$48.15,00$0.71,001.50%) , Halliburton Co. (HAL:$35.975,0$-0.385,0-1.06%) and Schlumberger Ltd. (SLB:$75.91,00$1.32,001.77%) -- the three largest oil service players.
Among energy producers, Apache Corp. (APA:$98.07,00$0.36,000.37%) and Chesapeake Energy Corp. (CHK:$23.149,0$0.659,02.93%) have both signaled a greater emphasis on oil production in separate moves earlier this week.
Halliburton (HAL:$35.975,0$-0.385,0-1.06%) CEO cites higher costs
Halliburton (HAL:$35.975,0$-0.385,0-1.06%) Chief Executive David Lesar said the company faced more challenging costs tied to producing shale oil, with some products in tight supply.
"The shift to the oil basins requires more expensive materials," Lesar told analysts on Monday.
Canaccord Genuity analyst Scott Burk noted this week that Halliburton (HAL:$35.975,0$-0.385,0-1.06%) broke a two-year trend by beating earnings expectations based on better international results, instead of improved North American margins.
Halliburton's (HAL:$35.975,0$-0.385,0-1.06%) North American profit margins in the fourth quarter totaled 27%, about 2% lower than his target in the face of merger and acquisition costs, equipment moves and logistical issues, Burk said.
The company is in the midst of moving eight hydraulic fracturing crews to more oily basins in the first quarter, but after that, it should see margin improvement, he added.
Burk cut his 2012 earnings target for Halliburton (HAL:$35.975,0$-0.385,0-1.06%) to $3.91 a share from $4.01, based partly on costs tied to the continued shift out of gas basins to liquids regions and cost inflation.
He also pared back his price target for Halliburton (HAL:$35.975,0$-0.385,0-1.06%) to $43 a share from $46 a share, but reiterated his buy target because the company "remains significantly cheaper that historical averages."
Natural gas rig count falls in the U.S.
Baker Hughes (BHI:$48.15,00$0.71,001.50%) , the maker of drill bits and other oilfield gear that compiles industry data, reported average gas rigs in operation the U.S. declined by 20 in the fourth quarter from the third quarter, while average oil rigs increased by 87 rigs verses the prior quarter.
The company warned that profit margins in its pressure pumping services used to extract oil and other fossil fuels were squeezed in the fourth quarter.
"We had what I would consider to be unusual challenges relative to the market associated with handling this ramping demand and some of the inefficiencies associated with that," Baker Hughes (BHI:$48.15,00$0.71,001.50%) CEO Martin Craigshead told analysts.
As the company works through those logistical issues, it expects a partial recovery in the first quarter in its pressure pumping business, as well as improvements in North American margins in the later half of the year
Raymond James analyst J. Marshall Adkins on Wednesday said earnings from Baker Hughes (BHI:$48.15,00$0.71,001.50%) were "disappointing." He reiterated his outperform rating on Baker Hughes (BHI:$48.15,00$0.71,001.50%) and cut his price target on the stock to $60 a share from $68.
"Despite our less optimistic North American margin view, the company's international prospects continue to strengthen," Adkins said in a note to clients.
Susquehanna Financial Group analyst Charles Minervino cut his rating on Baker Hughes (BHI:$48.15,00$0.71,001.50%) to neutral from positive and trimmed his target price to $54 a share from $68.
"Logistics inefficiencies and cost inflation in North America pressure pumping will likely compound the negative effects of a sharply slowing drilling environment in the first half of 2012 due to low natural gas prices," Minervino said in a note to clients.
Schlumberger cautious on North America
As for Schlumberger, Johnson & Rice analyst Daniel Burke said the largest oil service firm by market capitalization remains "cautious" on its North American business.
While the company's drilling and wireline business -- data collection for oil reservoirs -- both showed upward momentum, its pressure pumping business, "had experienced downward price pressure and relatively flat pricing," Burke said in a note to clients.
Burke reiterated an equal weight rating on the stock and lowered his 2012 earnings estimate for Schlumberger to $4.75 a share from $4.90 and said it'll be "at least a few more quarters" before the company's international business reaches an inflection point.
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Drillers hitting bumps in N. American oil boom
Profit challenges loom on low natural gas prices, logistical costs 01/25 01:18 PM
--------------------------------------------------------------------------------
NEW YORK (MarketWatch) -- While energy companies continue to scale up their domestic oil and natural gas liquids production, the trend didn't necessarily translate to wider profit margins for oil service firms in the latest quarter.
Higher costs for shifting resources from dry gas to shale oil fields, along with pricier bills for materials used to extract crude created some bumps in the oil boom for big oil service firms as 2011 drew to a close.
These wrinkles caught Wall Street by surprise, with analysts scaling back some profit expectations for the coming year after quarterly updates from Baker Hughes (BHI:$48.15,00$0.71,001.50%) , Halliburton Co. (HAL:$35.975,0$-0.385,0-1.06%) and Schlumberger Ltd. (SLB:$75.91,00$1.32,001.77%) -- the three largest oil service players.
Among energy producers, Apache Corp. (APA:$98.07,00$0.36,000.37%) and Chesapeake Energy Corp. (CHK:$23.149,0$0.659,02.93%) have both signaled a greater emphasis on oil production in separate moves earlier this week.
Halliburton (HAL:$35.975,0$-0.385,0-1.06%) CEO cites higher costs
Halliburton (HAL:$35.975,0$-0.385,0-1.06%) Chief Executive David Lesar said the company faced more challenging costs tied to producing shale oil, with some products in tight supply.
"The shift to the oil basins requires more expensive materials," Lesar told analysts on Monday.
Canaccord Genuity analyst Scott Burk noted this week that Halliburton (HAL:$35.975,0$-0.385,0-1.06%) broke a two-year trend by beating earnings expectations based on better international results, instead of improved North American margins.
Halliburton's (HAL:$35.975,0$-0.385,0-1.06%) North American profit margins in the fourth quarter totaled 27%, about 2% lower than his target in the face of merger and acquisition costs, equipment moves and logistical issues, Burk said.
The company is in the midst of moving eight hydraulic fracturing crews to more oily basins in the first quarter, but after that, it should see margin improvement, he added.
Burk cut his 2012 earnings target for Halliburton (HAL:$35.975,0$-0.385,0-1.06%) to $3.91 a share from $4.01, based partly on costs tied to the continued shift out of gas basins to liquids regions and cost inflation.
He also pared back his price target for Halliburton (HAL:$35.975,0$-0.385,0-1.06%) to $43 a share from $46 a share, but reiterated his buy target because the company "remains significantly cheaper that historical averages."
Natural gas rig count falls in the U.S.
Baker Hughes (BHI:$48.15,00$0.71,001.50%) , the maker of drill bits and other oilfield gear that compiles industry data, reported average gas rigs in operation the U.S. declined by 20 in the fourth quarter from the third quarter, while average oil rigs increased by 87 rigs verses the prior quarter.
The company warned that profit margins in its pressure pumping services used to extract oil and other fossil fuels were squeezed in the fourth quarter.
"We had what I would consider to be unusual challenges relative to the market associated with handling this ramping demand and some of the inefficiencies associated with that," Baker Hughes (BHI:$48.15,00$0.71,001.50%) CEO Martin Craigshead told analysts.
As the company works through those logistical issues, it expects a partial recovery in the first quarter in its pressure pumping business, as well as improvements in North American margins in the later half of the year
Raymond James analyst J. Marshall Adkins on Wednesday said earnings from Baker Hughes (BHI:$48.15,00$0.71,001.50%) were "disappointing." He reiterated his outperform rating on Baker Hughes (BHI:$48.15,00$0.71,001.50%) and cut his price target on the stock to $60 a share from $68.
"Despite our less optimistic North American margin view, the company's international prospects continue to strengthen," Adkins said in a note to clients.
Susquehanna Financial Group analyst Charles Minervino cut his rating on Baker Hughes (BHI:$48.15,00$0.71,001.50%) to neutral from positive and trimmed his target price to $54 a share from $68.
"Logistics inefficiencies and cost inflation in North America pressure pumping will likely compound the negative effects of a sharply slowing drilling environment in the first half of 2012 due to low natural gas prices," Minervino said in a note to clients.
Schlumberger cautious on North America
As for Schlumberger, Johnson & Rice analyst Daniel Burke said the largest oil service firm by market capitalization remains "cautious" on its North American business.
While the company's drilling and wireline business -- data collection for oil reservoirs -- both showed upward momentum, its pressure pumping business, "had experienced downward price pressure and relatively flat pricing," Burke said in a note to clients.
Burke reiterated an equal weight rating on the stock and lowered his 2012 earnings estimate for Schlumberger to $4.75 a share from $4.90 and said it'll be "at least a few more quarters" before the company's international business reaches an inflection point.
--------------------------------------------------------------------------------
Get more news on:SYMBOLS: HAL, BHI, SLB, APA, CHK NEWS TYPE: Top News, Top Stories: General, Top Stories: Investing, Commodities SECTORS