Energy Prospectus

Susquehanna raised Baker Hughes (NYSE:BHI), Halliburton (NYSE:HAL), and Patterson-UTI Energy (NasdaqGS:PTEN) estimates based on pressure pumping checks that indicate demand is likely to be greater than already high expectations.

I've updated my forecast model for PTEN and sent it to Kim for posting to the website under the Sweet 16 tab. Just click on the PTEN logo.

IMO the general market has yet to realize that PTEN is becoming a major player in the pressure pumping business that has very high margins. During the 1st quarter, pressure pumping was 31.6% of PTEN's revenues. That percentage will be going up.

PTEN is currently trading at just 6X the current First Call estimated CFPS and I think the company is going to crush that forecast. Per my model, CFPS will easily top $7.00 in 2012.

PTEN's average dayrates and revenues from its pressure pumping subsidiary are going up. The general market has yet to notice that PTEN is becoming a significant pressure pumping company. Demand for pressure pumping in the Eagle Ford is going way up this summer.

Morgan Stanley U.S. and Canadian active rig count forecast (average for each year)
US Land
2010A = 1,509
2011E = 1,764
2012E = 2,001
2013E = 2,243

Canada
2010A = 348
2011E = 414
2012E = 435
2013E = 458

Patterson-UTI (PTEN) is well positioned in all major North American markets.

Here are Morgan Stanley's price targets for three of the six onshore drillers on our Watch List
PTEN = $35 [My Fair Value estimate is $40. I believe the market is underestimating the growth coming from PTEN's pressure pumping business.]
NBR = $45
HP = $75
UNT is not on their list but it looks very good to me. UNT has a significant E&P division that is heavily weighted to natural gas.