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PTEN, BRNC, HERO, UDRL, AAV, SDRL, Oil and Gas - Drilling Stocks Overvalued

^{Published on 2011-04-18 05:21:41 - WOPRAI}
 

April 18, 2011/ M2 PRESSWIRE / BUYINS.NET / http://www.squeezetrigger.com is monitoring the Oil and Gas - Drilling sector and these stocks are the most undervalued as of today. PATTERSON-UTI ENERGY INC (NASDAQ:PTEN), BRONCO DRILLING CO INC (NASDAQ:BRNC), HERCULES OFFSHORE INC (NASDAQ:HERO), UNION DRILLING INC (NASDAQ:UDRL), ADVANTAGE OIL & GAS LTD (NYSE:AAV), SEADRILL LTD (NYSE:SDRL) are all expected to go Down as they are Overvalued according to industry standard valuation metrics. The valuation model employs a three-factor approach to stock valuation using fundamental variables--the company's trailing 12-month Earnings-Per-Share (EPS), the analyst consensus estimate of the company's forecasted 12-month EPS, and the 30-year Treasury yield--to create a highly accurate reflection of a company's fair value.

The chart below displays the projected Fair Value and Valuation discount/premium of the most undervalued stocks in the highlighted industry group:

     Symbol     Company Name                        Last Close     Fair Value     Valuation                   Industry               
     PTEN       PATTERSON-UTI ENERGY INC            $29.83         $21.07         41.60% Overvalued           Oil and Gas - Drilling 
     BRNC       BRONCO DRILLING CO INC              $11.00         $8.41          30.80% Overvalued           Oil and Gas - Drilling 
     HERO       HERCULES OFFSHORE INC               $5.75          $3.55          62.00% Overvalued           Oil and Gas - Drilling 
     UDRL       UNION DRILLING INC                  $11.94         $8.67          37.70% Overvalued           Oil and Gas - Drilling 
     AAV        ADVANTAGE OIL & GAS LTD             $8.55          $6.15          39.00% Overvalued           Oil and Gas - Drilling 
     SDRL       SEADRILL LTD                        $34.49         $31.63         9.00% Overvalued            Oil and Gas - Drilling 

Here are some of the variables that are utilized when calculating the Fair Market Valuation of a stock: Long-run EPS growth rate, Duration of Business-growth-cycle, Volatility of EPS growth rate, Systematic or beta risk of the firm, Correlation between the firm's EPS and the interest rate environment, EPS growth volatility, Dividend payout ratio, Buffer earnings, Interest rate related criteria: Interest rate (30 year yield) long-run level, Duration of interest rate cycle, Interest rate volatility. The Fair Market Valuation uses 12-month historic and forecasted EPS values and the current 30-year treasury yield as primary determinants. When calculating risk/return values such as the Sharpe ratio, the historic periods used are five years.

Some expected results of the Valuation Model are: the valuation of a stock increases in a declining interest rate environment. Increasing current and/or projected EPS will produce a higher Valuation. While long-term EPS growth would produce a corresponding long-term Valuation increase, concomitant long-term interest rate increases would offset EPS growth and depress the Valuation. The shorter a company's own business cycle, the higher its stock Valuation will be.

PATTERSON-UTI ENERGY INC (NASDAQ:PTEN) - Patterson-UTI Energy, Inc. provides onshore contract drilling services to independent oil and natural gas operators in North America. It offers pressure pumping services, including well stimulation and cementing for completion of new wells, and remedial work on existing wells to oil and natural gas operators primarily in the Appalachian Basin. The company provides contract drilling services principally in Texas, New Mexico, Oklahoma, Arkansas, Louisiana, Mississippi, Colorado, Utah, Wyoming, Montana, North Dakota, Pennsylvania, and West Virginia, as well as western Canada. It also owns and invests in oil and natural gas assets located primarily in Texas and New Mexico. As of February 11, 2010, the company had approximately 350 marketable land-based drilling rigs. Patterson-UTI Energy, Inc. was founded in 1978 and is headquartered in Houston, Texas.

BRONCO DRILLING CO INC (NASDAQ:BRNC) - Bronco Drilling Company, Inc. provides contract land drilling and workover services to the oil and natural gas exploration and production companies in the United States. It also provides well services, including maintenance, new well completion, and plugging and abandonment services, as well as engages in the installation and removal of downhole equipment and elimination of obstructions in the well bore to facilitate the flow of oil and gas. The company operates drilling rigs in Oklahoma, Texas, Pennsylvania, West Virginia, North Dakota, Utah, and Louisiana. As of February 28, 2010, it owned a fleet of 37 marketed land drilling rigs and 61 work over rigs, as well as 60 trucks used to transport its rigs. The company markets its drilling and workover rigs through employee marketing representatives. Bronco Drilling Company, Inc. was founded in 2001 and is headquartered in Edmond, Oklahoma.

HERCULES OFFSHORE INC (NASDAQ:HERO) - Hercules Offshore, Inc., together with its subsidiaries, provides shallow-water drilling and marine services to the oil and natural gas exploration and production industry in the U.S. Gulf of Mexico and internationally. The company serves integrated energy companies, independent oil and natural gas operators, and national oil companies. As of February 24, 2010, it owned a fleet of 30 jackup rigs, 17 barge rigs, 3 submersible rigs, 1 platform rig, a fleet of marine support vessels, and 60 liftboat vessels, as well as owned 4 retired jackup rigs and 10 retired inland barges located in the U.S. Gulf of Mexico. The company was founded in 2004 and is based in Houston, Texas.

UNION DRILLING INC (NASDAQ:UDRL) - Union Drilling, Inc. provides contract land drilling services and equipment primarily to independent natural gas producers in the United States. The company offers drilling rigs, as well as the drilling crews and ancillary equipment to operate its drilling rigs. The company provides drilling services to customers primarily engaged in developing unconventional natural gas formations. It has principal operations in the Appalachian Basin; the Arkoma Basin in eastern Oklahoma and Arkansas; and the Fort Worth Basin in northern Texas. As of December 31, 2009, it owned and operated a fleet of 71 land drilling rigs. The company was founded in 1997 and is based in Fort Worth, Texas.

ADVANTAGE OIL & GAS LTD (NYSE:AAV) - Advantage Oil & Gas Ltd. engages in the business of oil and gas exploitation, development, acquisition, and production in the provinces of Alberta and Saskatchewan, Canada. The companys principal properties include the Glacier property, the Westerose property, the Lookout Butte property, the Brazeau-Ferrier area, the Sunset/Valleyview area, and the Nevis property located in Alberta; three shallow gas properties located at Medicine Hat, Bantry, and Shouldice; a host of individual properties within the Williston Sedimentary Basin in the southeast corner of Saskatchewan; and the Wapella property. It also has interests in heavy oil properties, including the Lashburn, West Hazel, and Eyehill properties located in the heart of the Lloydminster heavy oil producing area. As of December 31, 2009, Advantage Oil & Gas proved plus probable reserves were 232.3 million barrels of oil equivalent. The company was founded in 2001 and is headquartered in Calgary, Canada.

SEADRILL LTD (NYSE:SDRL) - Seadrill Limited, an offshore drilling contractor, provides drilling and well services to the oil and gas industries worldwide. The company also offers platform drilling, well intervention, and engineering services. It owns and operates a fleet of 41 offshore drilling units, including 6 jack-up rigs, 9 semi-submersible rigs, 3 drillships, and 16 tender rigs; and 7 units under construction. The company was founded in 1972 and is based in Hamilton, Bermuda.

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