PDS is oversold and a Strong Buy up to $7.50
Posted: Mon Sep 20, 2010 5:36 pm
From Raymond James “Energy Stat Of The Week,” as published 09/20/10.
PDS should have much stronger 3rd quarter results than the market is expecting.
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U.S. Rig Count Beating Expectations With Further Upside Likely Our outdated April rig count forecast underestimated both the growth in oil-related activity and the resiliency of natural gas activity in a $4.00/Mcf gas world. As a result, our total rig count forecast from six months ago is already over 150 rigs higher than we had predicted (almost all oil). Going forward, we believe E&P companies will continue to focus their drilling efforts in oily and liquids rich basins (the latter of which technically falls in the gas rig count, i.e., Eagle Ford and Granite Wash). We expect the shift towards horizontal drilling will also continue, as high rates of return continue to improve. We believe these liquids rich basins could see as many as 300 incremental rigs by the end of 2011. This trend should more than offset a steady but modest decline in the dry gas rig count, which we believe will total no more than 100 rigs in 2011. All in, we are increasing our 2011 rig count forecast from 1,495 rigs to 1,750 rigs, or over 250 rigs above our prior forecast. Our oil rig count forecast is up ~150 rigs to 809, while our natural gas rig count forecast is up ~100 rigs to 930, as compared to our prior forecasts. This new forecast implies 2011 U.S. activity will be up 13% on a year-over-year basis, and up 61% from 2009.
PDS should have much stronger 3rd quarter results than the market is expecting.
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U.S. Rig Count Beating Expectations With Further Upside Likely Our outdated April rig count forecast underestimated both the growth in oil-related activity and the resiliency of natural gas activity in a $4.00/Mcf gas world. As a result, our total rig count forecast from six months ago is already over 150 rigs higher than we had predicted (almost all oil). Going forward, we believe E&P companies will continue to focus their drilling efforts in oily and liquids rich basins (the latter of which technically falls in the gas rig count, i.e., Eagle Ford and Granite Wash). We expect the shift towards horizontal drilling will also continue, as high rates of return continue to improve. We believe these liquids rich basins could see as many as 300 incremental rigs by the end of 2011. This trend should more than offset a steady but modest decline in the dry gas rig count, which we believe will total no more than 100 rigs in 2011. All in, we are increasing our 2011 rig count forecast from 1,495 rigs to 1,750 rigs, or over 250 rigs above our prior forecast. Our oil rig count forecast is up ~150 rigs to 809, while our natural gas rig count forecast is up ~100 rigs to 930, as compared to our prior forecasts. This new forecast implies 2011 U.S. activity will be up 13% on a year-over-year basis, and up 61% from 2009.