I believe that very few analysts have noticed PTEN's rapidly growing share of the pressure pumping business. When they do, this one has a lot more upside. Read our full report on PTEN under the Sweet 16 tab. - Dan
Zacks Equity Research, On Friday July 8, 2011, 5:30 pm EDT
Onshore contract driller Patterson-UTI Energy Inc. (NasdaqGS: PTEN - News) declared that its June 2011 drill rig count averaged 205, up from 201 in the previous month. The company operated 201 rigs in the U.S. and 4 in Canada in June, compared with 200 rigs in the U.S. and 1 rig in Canada during May this year.
Patterson-UTI’s activity levels in the U.S. peaked in early October 2008 with a rig count of 275. Since then through the second quarter of 2009, the company witnessed a steep and rapid decline in rig count on the back of decreased demand, largely caused by lower commodity prices for natural gas and tighter access to credit.
However, during the last few quarters, there have been signs that companies were beginning to bring rigs back on line amid signs of economic stabilization pushed by energy demand. This is reflected in Patterson-UTI’s monthly rig count numbers, which recovered substantially from a low of 60 in May 2009 to the current level of more than 200.
Management indicated that U.S. drilling activity continues to be strong, reflected by the improvement in rig count. Additionally, there is considerable tightness in the market for shale-suitable rigs, and dayrates across the rig fleet have been going up.
Buoyed by these favorable trends, Patterson-UTI – the second-largest North American land drilling contractor after Nabors Industries Ltd. (NYSE: NBR - News) – currently retains a Zacks #2 Rank (short-term Buy rating) in the short run.
The company, which had a heavy spot market exposure, was hit badly by the financial crisis with operators tending to release land rigs to preserve cash.
However, Patterson-UTI Energy has recovered almost all its lost market share, benefiting from its growing premium land rig fleet and the current boom in pressure pumping services (an umbrella term used to describe a number of vital services performed on new and existing wells).
Additionally, the company’s stellar financial health (free cash flow positive and a debt-free balance sheet) stands it in good stead. As such, we believe Patterson-UTI Energy is well positioned going forward and view it as an attractive investment.
Houston-based Patterson-UTI is one of the largest onshore contract drillers in the U.S. with approximately 350 land-based rigs operating primarily in the oil and natural gas producing regions of North America. Additionally, the company is engaged in the exploration and production business and provides pressure pumping services.