HP and PTEN

[dan_s]

I remain bullish on the onshore drillers despite lower natural gas prices. Demand for rigs in the liquids plays remains quite high.

This from Raymond James today:

"As U.S. natural gas prices have crashed and burned over the past month, energy investors have been selling first and asking questions later. Fear has dominated the energy investment mindset even though most understand drilling activity in the U.S. is significantly more levered to oil prices than natural gas prices. In today's Stat of the Week we attempt to make heads or tails of the impact of falling U.S. natural gas prices upon U.S. drilling activity. The obvious things that will change include the following two facts: 1) clearly the remaining "dry" gas rig activity needs to come down, and 2) the cash flows for operators looking to accelerate "oily"/liquids activity are likely coming down with lower natural gas prices. On the other hand, the economics for drilling oil and "wet" gas wells remains very strong, which should continue to counteract the declines in gas rig activity. To fully understand all of the moving parts affecting the U.S. drilling outlook, one must fully understand the basin-by-basin rig count trends as well as the bigger picture movements between dry gas, wet gas, and oil-directed activity. In today's piece, we will detail why we think the average U.S. drilling rig count will still be up about 8% (or nearly 150 rigs) versus 2011 despite lower gas price realizations."