Patterson-UTI Energy Inc.
) hit a 52-week high of $24.64 on Feb 19. In fact, the
Houston-based onshore contract dealer has seen its stock price
climb more than 20% since the beginning of the year.
Despite this price appreciation, we remain optimistic on the
firm's near-term prospects, supported by consistency in its
earnings/cash flows, attractive fundamentals and a positive
outlook. These factors are reflected in Patterson-UTI's Zacks
Rank #2 (Buy), implying that it is expected to outperform the
broader U.S. equity market over the next one to three months.
Why the Bullishness?
Our bullish investment theme stems from strong demand for
Patterson-UTI's services in the unconventional oil and
liquids-rich plays. In particular, the company's
technologically-advanced 'Apex' rigs are the key to its
Patterson-UTI's proprietary design makes the rigs move faster
than conventional rigs, drill quicker and more efficiently than
conventional rigs, and allows for a safer operating environment.
As such, these rigs are better suited for the new demands of the
exploration business and, therefore, command higher dayrates and
utilization than rigs from other land drillers.
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The second-largest North American land drilling contractor after
Nabors Industries Ltd.
) is also benefiting from the 2010 acquisition of certain assets
of Key Energy Services, an onshore well service rig provider.
Through this transaction, Patterson-UTI has not only expanded its
shale drilling ability, it also stands to benefit by coming out
of their historical stronghold in the Appalachian Basin into the
pressure pumping markets of the Barnett, Eagle Ford and Permian
We also like Patterson-UTI Energy's recent decision to retire 36
rigs from its fleet. We expect the retirement to act as a
positive step towards balancing the market, given the extreme
overcapacity caused by depressed natural gas prices.
Based on solid expected performance from the company, thirteen
out of 20 estimates for 2013 have moved higher in the past 30
days, pushing the Zacks Consensus Estimate up by 26 cents (or
23.4%) to $1.37. For 2014, seven out of 17 estimates moved north
in the past 30 days, helping the Zacks Consensus Estimate advance
by 11 cents (or 6.8%) to $1.72.
Other Stocks to Consider
In addition to Patterson-UTI, there are certain other energy
equipment suppliers like
Helmerich & Payne Inc.
McDermott International Inc.
) that offer value and are worth buying now. Both these company's
sport a Zacks Rank #2 (Buy).