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Patterson-UTI: 194 Rigs at Work

Zacks Equity Research

Onshore contract driller Patterson-UTI Energy Inc. (PTEN) declared that its Nov 2013 drill rig count increased by seven from Oct 2013 to average 194. The company operated 184 rigs in the U.S. and 10 in Canada in November.

Patterson-UTI reveals that for the two months ending Nov 30, the rig count of the company averaged 181 in the U.S. and 10 in Canada.

Patterson-UTI’s activity levels in the U.S. peaked in early Oct 2008, with a rig count of 275. Since then, and 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.

However, natural gas prices have recovered significantly from their multi-year lows amid signs of economic stabilization. Moreover, according to U.S Energy Information Administration (EIA), the winters of 2013 and 2014 are expected to be colder, compared to a relatively warm 2012 winter. Hence natural gas demand is expected to increase, which would help set an increasing price trend.   

Houston, Texas-based Patterson-UTI Energy is one of the largest onshore contract drillers in the U.S. with more than 300 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 contract drilling being the most significant contributor to operating income.  

However, with a strong competitive market, there is excess availability of land drilling rigs as well as pressure pumping equipment. Hence, the company has lost some of its market share to competitors who offer better products and services at a cheaper rate.

Patterson-UTI currently retains a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.

Meanwhile one can look at better-ranked players in the oil and gas drilling sector like Tesco Corporation (TESO), Helmerich & Payne Inc. (HP) and Pacific Drilling SA (PACD). Tesco sports a Zacks Rank #1 (Strong Buy) while Helmerich & Payne and Pacific Drilling hold a Zacks Rank #2 (Buy). 

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Read the Full Research Report on PACD

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