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The expanding opportunities that are becoming available in the United States in gas and oil shale will eventually lead to expanding opportunities in the oil services industry. One company that should benefit greatly is Patterson – UTI Energy (NASDAQ:PTEN).

“Patterson-UTI Energy, Inc., through it subsidiaries, provides onshore contract drilling services to oil and natural gas operators. The company offers pressure pumping services that consist of well stimulation and cementing for completion of new wells and remedial work on existing wells in Texas and the Appalachian Basin; and contract drilling services primarily in Texas, New Mexico, Oklahoma, Arkansas, Louisiana, Mississippi, Colorado, Utah, Wyoming, Montana, North Dakota, Pennsylvania, West Virginia, and western Canada”. (Business Description from Yahoo Finance)

8 reasons PTEN is a good value at $18 a share

  1. PTEN is selling in the bottom half of its five-year valuation range based on P/E, P/B and P/CF.
  2. The company has beat earnings estimates each of the last six quarters. The average beat over consensus over the previous four quarters has been 10%
  3. It has the largest fleet is the fast growing Permian Basin.
  4. PTEN has rapidly increasing earnings. It earned 72 cents in 2010, is expected to earn $2.23 a share in 2011 and $2.86 in 2012.
  5. Revenue is expected to increase 75% in 2011 and 25% in 2012.
  6. Earnings estimates for 2011 and 2012 have increased over the past three months
  7. Its forward PE is 6.4, which is a 70% discount to its five-year average.
  8. The stock price is way under analysts’ price targets. S&P has a $30 price target on PTEN, Credit Suisse is at $42 and the median analysts’ target is $34.
Source: Patterson - UTI Energy: A Vastly Undervalued Energy Services Firm