PTEN Upgrades

[dan_s]

I'm expecting several firms to upgrade Patterson-UTI.

Here is what Citi Smith Barney had to say (and why I am so bullish on PTEN and all the onshore drillers):
> Note that the rig count I'm using in my forecast model / Fair Value calculation is below 259.

 Four Reasons Why the Rig Count Will Surprise the Street — We are assuming that PTEN increases its active rig count by another 52 rigs to 259 rigs by 4Q11 (from 207 rigs in 1Q11). We believe these increases are more than many on the Street are forecasting. There are four factors driving this forecast.
> First, PTEN has a 2011 rig program of 25 newbuilds, all of which have received customer commitments and 18 of which have already been contracted.
> Second, PTEN has approximately 30 rigs in the 1,000 hp range that are capable of going back to work, and half of them could be reactivated with no additional capital.
> Third, PTEN has at least another 15 rigs in the 750-900 hp range that are also ready to be put in the field with little or no capital, and the market for such conventional rigs is seeing a significant uptick in demand.
> Fourth, PTEN may stretch the throughput of its newbuild program to more than the current pace of two per month and 25 per year. We believe the company could churn out closer to four rigs per month and 50 per year if desired.
In summary, there is a small chance that larger companies such as PTEN may exhibit some discipline in refraining from adding rigs on the margin, but even given that possibility, we think 52 incremental rigs is very likely by 4Q11.
 Raising Estimates and Price Target — We have raised our EPS estimates in 2011 and 2012 (see table below). We believe consensus estimates are far too low given the likely continuation of the current rig count trends. We are raising our price target to $42 from $35 on the upwards earnings revision. We reiterate our Buy (1S) rating.

[setliff]

COVERAGE REITERATED: Patterson-UTI (PTEN) reiterated by UBS. Reiterated rating Neutral. 04/29 10:50 AM

UPGRADE: Patterson-UTI (PTEN) upgraded by Howard Weil from Market Perform to Market Outperform. 04/29 08:10 AM