Tue, Sep. 15, 12:18 PM
- Citi analyst Scott Gruber reiterates his cautious view on the oil services sector (NYSEARCA:OIH) as it “digests the likelihood of domestic E&P spending declining 15%-20% next year, driving activity lower and maintaining pressure on rates.”
- Gruber now sees a better than 30% drop In the average cost of a U.S. shale well in 2015 and another 5%-10% drop in 2016 compared to the forecast he made in March of a 20%-25% drop in 2015 and another 2%-3% decline next year.
- The analyst sees a need for “material negative revisions” across the universe of mid- and small-cap oil services stocks he covers, including Superior Energy (NYSE:SPN), RPC (NYSE:RES), Patterson-UTI (NASDAQ:PTEN), Nabors Industries (NYSE:NBR), C&J Energy (NYSE:CJES) and Aspen Aerogels (NYSE:ASPN).
- Gruber recommends taking advantage of negative sentiment to buy “premiere franchises” Schulmberger (NYSE:SLB) and Halliburton (NYSE:HAL).
Tue, Sep. 1, 6:57 PM
- Diamond Offshore (NYSE:DO) is upgraded to Market Perform from Underperform along with the overall offshore drilling segment at Wells Fargo to reflect valuations below net asset value and the potential for an underappreciated demand profile in a recovery scenario in 2017-18.
- But it is hardly a ringing endorsement, as the firm also cut its offshore drilling earnings estimates by 10%-40% for 2016 and 20%-60% for 2017 to primarily reflect likely 5%-15% reductions in floater dayrates and 10%-20% reductions in jack-up dayrates as well as updated idling/stacking assumptions across each fleet.
- For DO, the firm believes the downside risk for the company’s fleet is largely priced in, and that DO’s free cash flow and strong balance sheet relative to the industry suggests more of a neutral outlook than meaningful downside risk.
- Wells' move hardly helped today's stock results in the sector, which were sharply lower: DO -4.2%, RIG -3.5%, SDRL -6.3%, ESV -5.5%, NE -2.4%, ATW -4.5%, RDC -2.1%, ORIG -6.3%.
- At the same time, Wells downgraded land drillers Pioneer Energy (NYSE:PES), RPC Inc. (NYSE:RES) and Patterson-UTI (NASDAQ:PTEN) to Market Perform from Outperform.
Mon, Jul. 27, 12:57 PM
- Patterson-UTI (PTEN -2.7%) is downgraded to Accumulate from Buy with an $18 price target, cut from $27, at Global Hunter, which calls into question the timing and trajectory of a North American onshore recovery due to the more uncertain E&P spending outlook.
- Hunter says it still believes onshore service activity is bottoming, and favors PTEN's positioning relative to peers, but it expects investors will focus on 2016, and the firm's EPS estimate for 2016 is 18% below consensus.
- While the firm believes activity levels likely have stabilized, it assumes a more moderate slope to the recovery in both contract drilling and pressure pumping.
Thu, Jul. 23, 6:05 AM
Fri, Jul. 17, 11:32 AM
- Offshore drillers are significantly underperforming the broader market following cautious commentary from Schlumberger (SLB -0.1%) despite its Q2 earnings beat, a contract termination and an analyst downgrade.
- On its earnings call this morning, SLB said it expects little improvement in pricing levels in the near future and declines in activity for offshore drillers, while land rigs provide a more attractive opportunity and better margins.
- For its Q3, SLB foresees a further 5%-6% decline in Q/Q revenue as well as lower EPS, and says the $0.77 consensus is a realistic number.
- Yesterday, ConocoPhillips (COP -1.8%) said it plans to cut future deepwater exploration spending, particularly in its operated Gulf of Mexico program; in light of the decision, COP is terminating a contract for an Ensco (ESV -4.9%) deepwater drill ship.
- Also, UBS today downgraded National Oilwell Varco (NOV -1.5%) to Sell from Neutral.
- SDRL -6.4%, RIG -4.7%, RDC -6%, DO -3.3%, ATW -4.2%, HP -1.2%, PTEN -1.2%, PACD -5.7%.
Thu, Jul. 9, 3:26 PM
- The tide is finally starting to turn for global oil services stocks (NYSEARCA:OIH), Morgan Stanley says, now seeing a very favorable risk/reward balance for investors and up to 60% upside in the space over the next 6-9 months with only ~10% downside risk.
- The firm says it begins to see signs that global oil production is getting under control, as U.S. rig counts appear to have stabilized well below the level necessary to sustain production and Brazil production was recently revised well below consensus expectations.
- Stanley's top pick in the group is Schlumberger (SLB +1.1%), and it also likes Core Labs (CLB +2.2%), Frank's International (FI +1.5%), Patterson-UTI (PTEN +2.7%), Nabors Industries (NBR +4%) and Helmerich & Payne (HP +1.9%).
Fri, Jun. 19, 4:58 PM
- Patterson-UTI Energy (NASDAQ:PTEN), Precision Drilling (NYSE:PDS) and Nabors Industries (NYSE:NBR) are the best bets among oilfield services stocks, RBC analysts say.
- The firm says its initial 2017 EPS estimates for North American land drillers are generally higher than consensus, and believes the Street underestimates the magnitude of the North American recovery and that valuations are reasonable "when looking through the near term noise."
- RBC says land drillers consistently have been among the top performers in every oil cycle rebound dating back to 1997-98, driven primarily by U.S. E&P spending, which has the highest velocity once oil starts to recover; NBR, PTEN and PDS have averaged among the top five performing sector stocks coming off crude oil troughs, the firm says.
Tue, May 26, 3:58 PM
- Land drillers Patterson-UTI Energy (PTEN -6.1%), Nabors Industries (NBR -6.1%) and Weatherford (WFT -2.7%) are downgraded to Underperform from Outperform at CLSA, based on its belief that oil prices remain vulnerable.
- CLSA describes the advancement of unconventional drilling and completion as one of the most disruptive technologies in oilfield history, an achievement that likely will derail the normalization of a cycle and trigger a number of structural consequences; the firm says it favors maintstays such as Halliburton (HAL -1.1%) and Schlumberger (SLB -1.4%) "that have and will continue to facilitate the change, not those that will be impaired by the change."
Mon, May 11, 11:49 AM
- It's time to "take profits and... a summer vacation" in onshore oil services stocks such as National Oilwell Varco (NOV -2.8%), Weatherford International (WFT -2.7%), Patterson-UTI Energy (PTEN -3.7%) and RPC (RES -4%), Citigroup's Scott Gruber says.
- The onshore service stocks are discounting at least 400 horizontal rigs returning to service, yet quick-to-market tight oil means supply concerns likely will manifest as soon as the rig count begins to rally, the firm says.
- Citi downgrades NOV to Sell from Neutral given risk of backlog cancellations, continued EPS compression and valuation, and believes a recovery multiple is not warranted for the stock until backlog growth resumes; the firm also cuts RPC to Sell, reiterates its Sell rating on Helmerich & Payne (HP -2%), and lowers WFT and PTEN to Neutral from Buy.
Thu, May 7, 11:59 AM
- UBS says it's time to buy the big three names in land drilling - Helmerich & Payne (HP -2.6%), Nabors Industries (NBR -4.2%) and Patterson-UTI Energy (PTEN -2.6%) - as they take market share from the weaker companies while lower oil prices wash out the weaker hands.
- The firm also notes the group is not taking the public relations beating that some of the fracking giants are from the likes of David Einhorn.
- The three companies are taking it on the chin today, but they recently reported better than expected Q1 results on improved rig revenues, even as revenues typically fell due to reduced rig activity.
Mon, Apr. 27, 5:30 PM
- Land drilling activity cuts that began late last year are nearing an end with the bottom likely this quarter, Goldman Sachs says as it upgrades land drillers Patterson-UTI Energy (NASDAQ:PTEN), Nabors Industries (NYSE:NBR) and Helmerich & Payne (NYSE:HP) to Buy from Neutral.
- Goldman believes the sharp reduction in rig activity - with rig declines reaching 900-plus rigs on average in Q2 2015 v- has started the self-correcting mechanism in oil supply, and that oil production should flatten in Q2 and is unlikely to grow Y/Y by Q4; the firm now expects the U.S. land rig count to increase by ~430 rigs by year-end 2016, with the horizontal rig count increasing by nearly 300 rigs.
- Earlier: Helmerich & Payne upgraded to Buy from Neutral at Goldman
Thu, Apr. 23, 6:07 AM
Tue, Apr. 21, 7:30 PM
- There’s not much value to be found in the stock market by traditional metrics, but the equity strategists at Jefferies think they’ve found five companies that are still bargains.
- The firm cites HollyFrontier (NYSE:HFC), Reliance Steel (NYSE:RS) and Universal (NYSE:UVV) as three value picks whose assets are at least double their liabilities, their long-term debt is less than their working capital, each has enjoyed positive earnings growth the past five years and made consecutive dividend payouts over the past decade, and their P-E ratio is less than 15x over the past 10 years, among other criteria.
- Patterson-UTI Energy (NASDAQ:PTEN) and Tidewater (NYSE:TDW) are seen as more aggressive value picks, meaning their current ratio of assets to liabilities is higher than 1.5x, long-term debt is less than 110% of working capital, and current price-to-book ratio is 1.2x.
- “Investors ought to be mindful that the market is no longer inexpensive,” the Jefferies strategists sum up.
Tue, Apr. 21, 9:54 AM
- Patterson-UTI Energy (NASDAQ:PTEN) says it agrees to pay $14.5M to settle U.S. Equal Employment Opportunity Commission claims that it tolerated racial and ethnic discrimination and harassment on its drilling rigs and punished individuals who complained.
- The EEOC claimed that since at least 2006, PTEN assigned minorities to the lowest level jobs, failed to train and promote minorities, and disciplined and demoted minority employees disproportionately.
- The agency estimates that at least 1,000 people were affected.
Thu, Apr. 9, 5:48 PM
- Sell-rated Helmerich & Payne (NYSE:HP) has the greatest risk for negative revisions among its oilfield services peers, Citi analyst Scott Gruber writes, since earnings compression is happening faster at peers; 2016 estimates are above consensus for Patterson-UTI Energy (NASDAQ:PTEN), RPC (NYSE:RES) and Superior Energy (NYSE:SPN), partly reflecting improvement in pressure pumping margins given a lack of contract roll.
- Gruber also thinks consensus estimates are too optimistic, pricing in a full recovery in one year; the Street expects HP’s land business to generate $400M in sales in FY 2016, which Gruber estimates would require a spot dayrate of more than $30K/day or a rig count of ~270, which would be within 5% of the prior peak.
- HP currently trades at 1.7x 2016 consensus price to book value vs. 1.1x for PTEN, 1.1x for Precision Drilling (NYSE:PDS) and 0.9x for Nabors Industries (NYSE:NBR); Gruber says history suggests downside risk to 1x as HP's return on equity likely will fall to 3% in 2016.
Wed, Feb. 18, 3:15 PM
- RBC analysts think it's time to position for an oil recovery by buying oilfield services stocks such as Schlumberger (SLB -1.2%), Patterson-UTI (PTEN -0.4%), Nabors Industries (NBR +2.5%) and Precision Drilling (PDS +0.4%).
- The firm believes oil prices will bottom in H1 2015, improves during H2 and averages at least $75/bbl in 2016, and sees U.S. land drillers and intensive service companies providing the best returns in the early phases of cycle recovery.
- RBC notes that three of the top five performing stocks in the sector off the lows since 1997 have been PTEN, PDS and NBR; the firm considers SLB and NBR as best ideas, while PTEN is a small-cap best idea.
PTEN vs. ETF Alternatives
Patterson-UTI Energy Inc is a provider of contract services to the oil and natural gas industry. It operates in three segments namely contract drilling services, pressure pumping services, and oil and natural gas exploration and production.
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