Onshore contract driller, Patterson-UTI Energy Inc. (PTEN) declared that its Dec 2014 drill rig count has decreased by three from the previous month to reach an average of 216. The company operated 208 rigs in the U.S. and 8 in Canada.
Patterson-UTI added that for the three months ending Dec 31, its rig count averaged 210 in the U.S. and 9 in Canada.
Patterson-UTI is a major onshore contract driller in the U.S. with over 275 land-based rigs that operate primarily in the oil and natural gas producing regions of North America.
The emergence of major shale plays yielding impressive results over the last few years, resulted in an overwhelming requirement for increasingly complex drilling. With its technologically advanced ‘Apex’ rigs – that command higher dayrates and utilization – constituting around 65% of its total fleet, Patterson-UTI is well poised for further expansion in the shale-drilling market.
However, with oil prices falling to multi-year lows, several upstream companies are cutting their capital budget as maintaining profitability has become a challenge. This could hamper financials of the likes of Patterson-UTI that depend on contracts from these upstream companies for revenue generation.
Moreover, Patterson-UTI Energy’s operating cost increased significantly over the last four quarters. This could be challenging in retaining profits in this weakly priced market. Also, increased labor costs for contract drilling may lead to slower margin growth.
Houston, TX based Patterson-UTI currently carries a Zacks Rank #5 (Strong Sell).
Despite the current weakness in the energy sector, there are better-ranked stocks like Seadrill Partners LLC (SDLP), QEP Midstream Partners, LP (QEPM) and Cheniere Energy Partners LP. (CQP). All these stocks sport a Zacks Rank #1 (Strong Buy).
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