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Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: Dennis Roth who wrote (178105)	4/24/2013 8:29:26 PM
From: Bearcatbob	Read Replies (1) \| Respond to of 206176

Dennis, If you follow Robry and his natural gas predictions he is saying a price spike is coming and that the number of gas directed rigs will have to jump - and jump soon. If he is correct - then the land drillers will be obvious beneficiaries. My local friend in the biz claims there are a large number of wells in the Marcellus that are not yet connected. If we had a good definition of that number - me thinks we could get a real good sense of any price rise to come this year. Bob

To: Dennis Roth who wrote (178105)	4/30/2013 9:51:51 AM
From: Dennis Roth	2 Recommendations Respond to of 206176

Oilfield Services Landslide We remain Underweight on the Land Drilling sector. We are raising estimates of HP and PTEN and lowering estimates for NBR and PDS. We are increasing the target price for PTEN. Earnings Overview. The four largest publically traded land drillers posted beats compared to our estimates, for different reasons. HP saw a 7% decrease in its US onshore utilization but was helped by an early termination payment. NBR beat on investment income and tax rate. PTEN was also helped by an early termination payment. PDS had higher dayrates than the 10% year-over-year decline in activity would indicate, aided by momentum from a stronger than expected Q4. Rig efficiency was embraced by all participants; the focus has shifted aggressively to pad-capable rigs and older rigs are getting swept aside in the conversation. Challenging. Despite the apparent earnings optimism, management of the four companies unanimously gave cautious guidance and described “challenging” outlooks for the industry in the near term, which is largely due to tumbling leading edge dayrates. This led to land driller share prices falling between 1%-7% once the numbers were digested. We think guidance is optimistic given current market dynamics that include a high focus on utilization, an aggressive willingness to accept lower rates, and new entrants putting spec rigs to work. We are modeling a greater decline in forward dayrates than the -2% to -3% decrease suggested on the calls. Growth and Outlook. Year-over-year growth for the land drillers will be difficult in 2013 as appetite for newbuilds remains low and increased competition continues to pressure prices. However, most of the companies said that activity would remain relatively stable if oil prices stay above $85. The drillers will benefit from some level of uptick in seasonal activity in 2H13. All of the contractors are very positive on the outlook for their respective new-builds but the total rig count increase might result in cannibalization of existing work. It’s Not All Bad. The upside potential in 2Q13 will come from sustained high natural gas prices and the Marcellus will be the first region to benefit. We estimate that PTEN and PDS have the top two market shares in the basin. Year to date the Marcellus rig count has been flat which means PTEN and PDS have been replacing competitor rigs. The Eagle Ford and Permian Basins are other likely hot spots in 2013. Analogy. Replacing older Yellow cabs with brand new Mercedes without raising rates is clearly positive for the passengers but not the cab owner. The fleets look nice and impressive but the underlying difference in costs and depreciation matter and weigh on economic benefit. We remain Underweight on the Land Drilling sector. 30 April 2013 Download link at the bottom of This Page