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Patterson-UTI: 181 Rigs at Work

Zacks Equity Research

Onshore contract driller, Patterson-UTI Energy Inc. (PTEN) declared that its Jun 2013 drill rig count averaged 181, down from 185 in the previous month. In June, the company operated 179 rigs in the U.S. and 2 in Canada, compared with 184 rigs in the U.S. and 1 in Canada during May this year.

Patterson-UTI’s activity levels in the U.S. peaked in early Oct 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 due to decreased demand, largely caused by lower prices for natural gas and tighter credit access.

However, with natural gas prices looking up amid signs of economic stabilization, Patterson-UTI’s monthly rig count has recovered sharply. In fact, its current rig count is up 3 times from a low of 60 in May 2009.   

Houston, Texas-based Patterson-UTI is an onshore contract driller in the U.S. with approximately 330 land-based rigs that operate primarily in the oil and natural gas producing regions of North America. The company operates primarily in three segments: Contract Drilling, Pressure Pumping, and Oil and Natural Gas Production and Exploration.

With a strong competitive market, there is an over availability of land drilling rigs as well as pressure pumping equipment. Hence, Patterson-UTI has lost a portion of its market share to competitors who offer better products and services at a cheaper rate.

Patterson-UTI currently retains a Zacks Rank #4 (Sell). This implies that it is expected to underperform the broader U.S. equity market over the next one to three months.

However, firms in the oil and gas drilling sector with a favorable Zacks Rank are Ocean Rig UDW Inc. (ORIG), Pacific Drilling SA (PACD) and Atwood Oceanics Inc. (ATW). Ocean Rig retains a Zacks Rank #1 (Strong Buy) while Pacific Drilling and Atwood carry a Zacks Rank #2 (Buy).

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