Energy Prospectus

Our updated Net Income and Cash Flow Forecast model for HP has been posted under the Sweet 16 Tab. EPG members can log on and click on the HP logo under the Sweet 16 Tab to see it.

My Fair Value estimate will be "officially" raised on Monday. You can see it at the bottom of the forecast.

HP is a "Keeper".

Updated company profiles for both HP and PTEN will be sent out to EPG Members on Monday.

PTEN closed Friday at less than 3X my CFPS forecast for 2012. HP is trading at more than 7X CFPS. No doubt that HP has a higher quality rig fleet, but PTEN under 3X CFPS looks ridiculous to me. They may loose a few rigs due to a decline in drilling for natural gas but any decline should be offset by higher demand in the liquids rich areas of the shale plays. Plus, PTEN will have more than 20 new APEX rigs going out on long-term contracts this year.

My Take;
> You want to own HP as "The Best of Breed"
> PTEN is the top value in the seven onshore drillers we are tracking.

> UTRL is a small-cap driller that looks interesting.

My updated forecast models for HP and PTEN are now available under the Sweet 16 Tab. Just click on the company logos.

TPH Comments on HP:

HP Dec-Q follow-up ($61.71 – A) – Driver of DecQ beat won’t repeat
(opex normalizes going forward) but reducing our assumed dayrate erosion through
the year in accordance with current visibility (prior assumed spot dayrates
-$500/qtr, now assuming -$200 with later start) bumps earnings up. 2012 +47c to
$4.95 (Street $4.97).; 2013 +7c to $5.21 (Street $5.77). Stock pricier than
peer group (~12x 2013 vs. peer median 8.3x) but higher confidence in estimates
warrants premium, maintain Accumulate with $78 price target (uses 10 year median
FY2 P/E of 15x; represents ~27% upside).