Jefferies Says Buy Land Drillers Now in Huge Contrarian Call

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Patterson-UTI Energy

This company remains a top oil services pick across Wall Street. Patterson-UTI Energy Inc. (NASDAQ: PTEN) is the second largest land driller in North America and a large pressure pumping provider. Its operations are particularly focused in the Marcellus and in Texas.

Patterson-UTI and its subsidiaries operate land-based drilling rigs in oil and natural gas producing regions of the continental United States and western Canada. Universal Pressure Pumping, and Universal Well Services provide pressure pumping services primarily in Texas and the Appalachian region.

Patterson-UTI remains the fifth largest pressure pumper, with a 1.5 million HHP frac fleet (currently 83% utilized) with exposure to ancillary rental equipment business through Great Plains Oilfield Rental. Its recent acquisition of MS Energy (directional drilling) complements its contract drilling business and provides attractive growth opportunities for investors.

Jefferies analysts have stayed positive on the company, citing this recently:

We expect the company’s drilling fleet-wide EBITDA to improve over the next 12-24 months as the US rig count continues to move higher and high-end AC rig day rates continue to strengthen (Patterson and the wider industry is currently nearly fully sold out of such high-end “super-spec” AC drilling rigs).

Investors are paid a small 0.89% dividend. The $25 Jefferies price target is essentially in line with the consensus price objective of $25.53. The stock closed most recently at $17.92 a share.

Precision Drilling

Canada’s leading oilfield services firm provides contract drilling, well servicing and strategic support services to its customers. Precision Drilling Corp. (NYSE: PDS) provides customers with access to an extensive fleet of contract drilling rigs, directional drilling services, well service and snubbing rigs, coil tubing services, camps, rental equipment and water treatment units backed by a comprehensive mix of technical support services and skilled, experienced personnel.

Despite the company’s large Canadian exposure, 54% of its U.S. drilling fleet is located in the Permian Basin, which remains the hottest shale area in the United States. This stock may be a top pick for aggressive accounts looking for low-priced stocks to gain more shares.

Jefferies has set its price objective at $4.50. The consensus target price is $4.44, and the stock was last seen trading at $3.15 per share.

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Four plays that range from reasonably conservative to highly speculative. The bottom line is the current issues that are weighing on share prices won’t last forever, so now is the time to buy stock while they are so very out-of-favor.