2024-05-22 07:00:00 ET
Summary
- Patterson-UTI Energy has been struggling due to low commodity prices, but improvements in the natural gas market could reverse the trend.
- The company offers a range of services in the drilling and fracking sectors, and its cash conversion rates are among the top in the industry.
- The potential decline in shale production and increasing demand for gas in electricity generation and industrial usage could benefit PTEN.
- We rate PTEN as a buy at current levels.
Introduction
Patterson-UTI Energy ( PTEN ) has been treading water for most of this year as rig counts have suffered and frac spreads have gone to the house. The problem, of course, has been the slow withering of commodity prices, particularly on the natural gas side. Things are changing that will reverse the trend, and some of this equipment - not all, mind you - will go back to work as we move into the third quarter. Why? As the title of this article suggests, the worm has turned for gas , which is an oilfield expression meaning generally that things are getting better. The fundamentals for gas are improving. We have seen a more than ~50% rally in gas prices over the last month, and that has sent a price signal to buy the gas focused E&P companies. EQT Corp, ( EQT ), and Comstock Resources, ( CRK ) have seen strong rallies over the past month in comparison to more oil focused E&P's....
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Patterson-UTI: The Worm Has Turned In Gas