Patterson-UTI: 204 Rigs at Work - Analyst Blog

Onshore contract driller Patterson-UTI Energy Inc. PTEN announced that its Mar 2014 drill rig count decreased by one from Feb 2014 to average 204. The company operated 196 rigs in the U.S. and 8 in Canada last month.

Patterson-UTI revealed that for the three months ending Mar 31, the rig count of the company averaged 193 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, through the second quarter of 2009, the company witnessed a sharp and rapid decline in rig count owing to decreased demand, largely caused by lower natural gas prices.

However, more recently, the statistics are improving on a rise in rig demand. Also, as several companies shift focus to drilling horizontal wells, Patterson-UTI is set to benefit from its portfolio of high-specification rigs and a dominant market position. In the past few quarters, natural gas prices have also improved amid signs of economic stabilization and prolonged cold weather conditions. The inherent volatility of the commodity, however, makes us cautious.

Patterson-UTI Energy is one of the largest onshore contract drillers in the U.S. with approximately 330 land-based rigs that operate primarily in the oil and natural gas producing regions of North America. New and well-maintained rigs, along with efficient equipment should give Patterson-UTI Energy an edge over its competitors and help it weather the current volatile environment relatively better.

Patterson-UTI currently sports a Zacks Rank #1 (Strong Buy), implying that it is expected to significantly outperform the broader U.S. equity market over the next one to three months.

Other players worth considering in the oil and gas drilling sector include Helmerich & Payne Inc. HP, Nabors Industries Ltd. NBR and Precision Drilling Corporation PDS. While Helmerich & Payne sports a Zacks Rank #1, Nabors and Precision Drilling hold a Zacks Rank #2 (Buy).