Onshore contract driller
Patterson-UTI Energy Inc.
) declared that its July 2012 drill rig count averaged 224, up
marginally from 222 in the previous month. The company operated 219
rigs in the U.S. and 5 in Canada in July, compared with 221 rigs in
the U.S. and one in Canada during June this year.
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PATTERSON-UTI (PTEN): Free Stock Analysis
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Patterson-UTI's activity levels in the U.S. peaked in early October
2008 with a rig count of 275. From then 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 and tighter access to credit.
However, during the last few quarters, there have been signs that
companies were beginning to bring rigs back on line amid signs of
economic stabilization pushed by energy demand. This is reflected
in Patterson-UTI's monthly rig count numbers, which recovered
substantially from a low of 60 in May 2009 to reach around 240 few
Patterson-UTI has approximately 330 land-based rigs that operate
mainly in the oil and natural gas producing regions of North
America. The company operates primarily in Texas, New Mexico,
Oklahoma, Arkansas, Louisiana, Mississippi, Colorado, Utah,
Wyoming, Montana, North Dakota, Pennsylvania, West Virginia and
Additionally, Patterson-UTI is engaged in the exploration and
production business and provides pressure pumping services (an
umbrella term used to describe a number of vital services performed
on new and existing wells).
We continue to appreciate the company for its growing premium land
rig fleet, un-levered balance sheet and cost containment efforts.
Despite these positives, Patterson-UTI - the second-largest North
American land drilling contractor after
Nabors Industries Ltd.
) - currently retains a Zacks #5 Rank, which translates into a
short-term Strong Sell rating.
This can be mainly attributed to pricing and utilization challenges
in the pressure pumping market that are likely to push margins
lower during the second half of the year. Moreover, with natural
gas fundamentals remaining uncertain, we see no price upside for
Patterson-UTI stock in the near-to-medium term.