Ahead of the Bell: Land Drillers Upgrade
Monday February 4, 8:29 am ET
Seeing More Drilling and Stable Rates, Jefferies Upgrades 4 Onshore Oil Drillers
NEW YORK (AP) -- A Jefferies & Co. analyst upgraded a group of onshore oil drillers Monday, saying the stocks should rise in the next few months as drilling activity and contract sizes stabilize.
Judson Bailey upgraded the sector, and shares of Grey Wolf Inc., Union Drilling Inc., Pioneer Drilling Co. and Patterson-UTI Energy Inc., to "Buy" from "Hold."
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Contract rates and drilling activity have been declining, but Bailey said the market will take those into account, and stock prices could rise as much as 40 percent above their lows by the time drilling and day rates bottom out.
He thinks drilling and day rates -- the per-day payment a drilling contractor gets from an oil company -- will be steady by the middle of the year.
Shares of Patterson-UTI and Pioneer Drilling reached annual lows on Jan. 22. Bailey said all four stocks are now trading at a discount.
The analyst raised his price target on each stock. His target on Patterson-UTI shares rose to $27 from $23, Union Drilling increased to $20 per share from $15, Pioneer drilling went to $15 from $15, and Grey Wolf increased to $7.50 from $7.
"Although we believe that Nabors Industries Ltd. represents the best long-term opportunity due to its international growth, we believe that Patterson-UTI and Pioneer Drilling represent the best opportunities among the pure play U.S. land drillers," he said
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