HP, PTEN et al

[setliff]

8:59 AM Helmerich & Payne (HP) and Pioneer Energy Services (PES) are downgraded to Hold from Buy at Jefferies, which also cuts estimates on other land drillers in anticipation of ongoing higher capex and lower earnings growth. The firm cuts its price target on HP to $71 from $74, on PES to $8 from $9 and on Patterson-UTI (PTEN) to $20 from $23, but raises its target on Nabors (NBR) to $15 from $14.

[dan_s]

Until we see Ngas move firmly over $4.50/mcf the active onshore rig count will probably stay in the 1,750 range. Good news for HP and PTEN is that the shale plays are moving to more pad drilling. The high end rigs will stay on location much longer, drilling 4-8 wells from each pad. This means longer term contracts for the drilling companies and more visible earnings.

I do think there is a darn good chance that Ngas moves over $5.00 this winter. Not a lot of analysts agree with me. U.S. Ngas demand will move over 27 TCF in 2014. There are not enough rigs drilling for gas to meet increasing demand and sooner or later the supply/demand will get very tight.