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Patterson-UTI Drops More North American Onshore Rigs

Patterson-UTI Energy Inc. (PTEN), one of North America's largest onshore contract drilling and pressure pumping operators, said Tuesday it had, on average, 82 U.S. rigs and one Canadian rig working during December, compared with a year ago when 208 domestic and nine Canadian rigs were in operation.

The Houston-based operator's drilling rig count has fallen steadily -- and sharply -- over the past year. The average rig count represents the average number of rigs that were operating under drilling contracts.

Between October and December, PTEN was averaging 88 drilling rigs in the United States with three in Canada, versus the 3Q2014 average of 210 domestic and nine Canadian rigs.

According to PTEN's website, as of Tuesday only 80 total rigs were working in North America, with the United States losing three from December. CEO Andy Hendricks had said in October pressure pumping pricing had deteriorated to an "unsustainable level," and he said the company was expecting further decline in the U.S. rig count into 2016 (see Shale DailyOct. 22, 2015).

In a note Monday, Raymond James & Associates Inc. analysts said U.S. exploration and production (E&P) cash flows and spending likely would fall "well below market expectations" this year because of the continuing oil and natural gas supply glut (see Daily GPIJan. 4). Lower E&P spend translates to lower spend for the oilfield services (OFS) sector.

"We continue to believe early 2016 will be very difficult for industry fundamentals -- activity, rig count and earnings -- as consensus earnings estimates remain way too high," wrote J. Marshall Adkins and his colleagues.

Consensus has begun to firm around U.S. OFS activity bottoming this month as E&P budgets are revamped, but Raymond James analysts aren’t buying it.

"We, however, believe skinny E&P cash flows and a nonexistent debt market will drive U.S. oilfield activity lower well into the second quarter of 2016 reaching an absolute bottom at 550 rigs, ahead of a robust second half recovery," Adkins wrote. "Bottom line: Look for a roller coaster ride in early 2016 for oilfield services, followed by outsized gains in the second half."

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