On Sep 15, 2014, we issued an updated research report on Patterson-UTI Energy Inc. (PTEN). The company is the second-largest North American land drilling contractor and has a premium quality land rig fleet. Moreover, over the last few years, Patterson-UTI has been spending significant capital on upgrading the old rigs to the latest standard. The positive views are reflected in the company’s current Zacks Rank #1 (Strong Buy), implying that the stock is expected to significantly outperform the broader U.S. market in the next one to three months.
We believe that Patterson-UTI’s technologically advanced ‘Apex’ rigs are the key to its success. The company’s proprietary design makes these rigs move faster than conventional ones, drill quicker and more efficiently, and allows for a safer operating environment. As such, these rigs are better suited for the new requirements of the exploration business and, command higher dayrates and utilization than rigs from other land drillers.
During the last few years, Patterson-UTI spent more than $1 billion to build new land drilling rigs, as well as to modify, upgrade and maintain its drilling fleet. Hence, the new rigs and efficient equipment should give Patterson-UTI Energy an edge over competitors and help it to weather the current volatile environment relatively better.
Additionally, Patterson-UTI reported strong second-quarter results. The company’s earnings per share came in at 37 cents, which surpassed both the Zacks Consensus Estimate of 32 cents and year-ago profit of 28 cents.
Other Stocks That Warrant a Look
Apart from Patterson-UTI, one can also consider players in the same industry like Pioneer Energy Services Corp. (PES), Nabors Industries Ltd. (NBR) and North Atlantic Drilling Limited (NADL). Pioneer Energy sports a Zacks Rank #1 (Strong Buy), while Nabors and North Atlantic Drilling carry a Zacks Rank #2 (Buy).
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