Energy Industry Soldiers On

By Eric Fox | June 18, 2009 AAA

Keeping up during earnings season can be a daunting task for anyone as dozens of Energy companies report results in a compressed time frame. Now that earnings season is over, it's a good time to review other news that has been released. (For a primer on the oil industry, refer to our Oil and Gas Industry Primer)

IN PICTURES: Eight Ways To Survive A Market Downturn

Land Drillers
Patterson-UTI Energy (Nasdaq:PTEN) releases a monthly report on its land drilling fleet. Its report for May, 2009 indicated that Patterson had an average of 60 drilling rigs operating in the month. Investors should note that this is an average, and doesn't explain anything about the trend in drilling activity during the month, or what the rig count was at the beginning and end of the month. The April report showed 69 rigs drilling, so a downtrend is still evident.

Bronco Drilling (NYSE:BRNC) also came out with an abysmal fleet report. Bronco Drilling reported that utilization for its fleet was 31% in May, down from 34% in April 2009, and 58% for the entire first quarter of 2009. Utilization for the workover fleet was even worse at 14%.

Although the market has bid up these two land drillers, and competitors Nabors (NYSE:NBR) and Helmerich & Payne (NYSE:HP) tremendously since the March lows, fundamentals have not followed yet. It will take a boost in natural gas prices to put these fleets back to work, as much of the drilling in North America is oriented toward developing natural gas basins.

Capital Anyone?
The industry to raise capital, taking advantage of the rally in stock prices and the slow thawing of the credit markets. Stone Energy (NYSE:SGY) sold seven million shares at $8, raising $52.6 million after fees.

Anadarko Petroleum (NYSE:APC) was next, raising $900 million by selling debt in three different issues out five, 10 and 30 years. The company said that part of the proceeds will be used to pay off a floating rate issue that was redeemed ay the end of June 2009.

The most recent report on natural gas inventories still shows an oversupply of inventory, with natural gas in storage at 2.44 Tcf as of June 6, 2009. This was 22% above the five-year average of storage levels, and 30% above last year. It seems that we are destined to test the theoretical limits on storage in the U.S. come this November, a topic that is the subject of much speculation in the industry.

The Bottom Line
Recent news from the Energy sector shows a mixed picture for the industry, as fundamentals for the land drillers continue to deteriorate. Investors don't seem to care, however, and have bid up the stocks, anticipating a turn in business sometime in late 2009 or 2010. (Read our related article What Are Fundamentals?, and learn what this term the investing world loves to talk about really means.)

comments powered by Disqus
Related Analysis
  1. Unconventional Drilling Still Has Room To Boom
    Stock Analysis

    Unconventional Drilling Still Has Room To Boom

  2. What's Keeping Oil Prices Below $100 a Barrel? - Industry Outlook
    Stock Analysis

    What's Keeping Oil Prices Below $100 a Barrel? - Industry Outlook

  3. Finding An Alternative With Currency ETFs
    Stock Analysis

    Finding An Alternative With Currency ETFs

  4. Commodities: Has Their Time Come Again?
    Stock Analysis

    Commodities: Has Their Time Come Again?

  5. Why 'Bricks And Mortar' Retail Remains A Solid Bet
    Stock Analysis

    Why 'Bricks And Mortar' Retail Remains A Solid Bet

Trading Center