We're updating our models and fair value estimates for land drillers.
The changes come chiefly from revised U.S. land drilling forecasts. Essentially, we are increasing our U.S. land rig count forecasts for Helmerich & Payne (by about 11 rigs, or 5%) at the expense of its competitors. The company is preparing to upgrade many of its rigs to "super spec" status in coming quarters, which we think will prove successful in garnering higher utilization for those rigs. In the long run, we also think Helmerich & Payne's heightened competition will slightly degrade competitors' margins compared to our prior expectations. However, we have slightly increased our expectations for Nabors' U.S. land margins (in terms of gross margins per rig-day), owing to the company's strong performance in recent quarters.
Additionally, part of the lowering in our Nabors fair value comes from slightly more conservative international drilling forecasts. Also, about half of the reduction in our Patterson fair value comes from lower forecasts for its pressure pumping segment, which has posted disappointing results in recent quarters.
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