Onshore contract driller Patterson-UTI Energy Inc. (PTEN) declared that its January 2011 drill rig count averaged 204, up from 196 in the previous month. The company operated 188 rigs in the U.S. and 16 in Canada in January, compared with 184 rigs in the U.S. and 12 rigs in Canada during December last year.

Patterson-UTI’s activity levels in the U.S. peaked in early October 2008 with a rig count of 275. Since then through the second quarter of 2009, the company witnessed a steep and rapid decline in rig count on the back of decreased demand, largely caused by lower commodity prices for natural gas and tighter access to credit.

However, during the last few quarters, there have been signs that companies were beginning to bring rigs back online amid signs of economic stabilization that could push up the energy demand. This is reflected in Patterson-UTI’s monthly rig count numbers, which recovered substantially from a low of 60 in May 2009 to the current level of 204.

In recent times, U.S. drilling activity has been picking up, reflected by the sequential improvement in rig count. Additionally, there is considerable tightness in the market for shale-suitable rigs, and dayrates across the rig fleet have been going up.

The number of rigs operating during the quarter averaged 194 (182 rigs located in the U.S. and 12 in Canada), compared with 103 average rigs operating in the fourth quarter of 2009. The count was also up from 178 rigs in operation in the September quarter.

Patterson-UTI is one of the largest onshore contract drillers in the U.S. with approximately 350 land-based rigs that operate primarily in the oil and natural gas producing regions of North America. Additionally, the company is engaged in the exploration and production business and provides pressure pumping services.

Patterson-UTI, which competes with other U.S. onshore drilling companies, including Nabors Industries Ltd. (NBR), currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock.

 
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