Revenues per day increased $940 to a record $19,780, and daily operating margins increased by $800 to $10,980, according to Cloyce Talbot, Patterson-UTI's CEO and president. Patterson-UTI is also continuing its refurbishing of 30 drilling rigs, with 17 completed so far. Patterson-UTI is a land driller that I own along with Bronco Drilling ( BRNC, and I still like them both, despite their recent poor share-price performance. I believe there is a disconnect between value and share price here for both companies. They are seeing an increase in rig utilization and day rates, and pricing pressure remains on their side. Natural gas storage was an issue at the beginning of the summer due to an unusually mild winter and, until recently, a mild summer. However, due to global warming, or the fact that it just got hot, storage for natural gas is being drawn down. This, and tension in the Middle East, all bodes well for the land drillers. The Iranian foreign minister claimed that sanctions on his country would cause oil to go to $200 per barrel. I believe he overstates Iran's importance. It produces about 5% of world supply, and while sanctions would roil the oil markets a bit, it would not produce $200 oil. In fact, myriad factors have contributed to oil and gas being at their current levels. These include the problems in the Middle East, which have created a premium, the ethanol shortage created by our inept politicians abruptly cutting out MTBE instead of graduall phasing it out, and the increase in demand. Remember, historically, oil prices peak before Labor Day. I believe, and hope, that the Middle East tensions will ease. At the very least, I don't think they will worsen, and with the end of driving season coming up, I think demand will ease. Ethanol will start to catch up to demand, as well, which will help gas prices.
All this being said, I don't think now is a time to buy the major oil-integrated companies. I own Exxon Mobil ( XOM - Get Report), Chevron ( CVX - Get Report) and BP ( BP - Get Report). If I had to sell a stock in my portfolio, I would probably sell one of these; however, I plan on holding them for now, but wouldn't recommend adding shares. I believe natural gas is a different story. With natural gas rigs getting better day rates elsewhere in the world and a hot summer still ahead of us -- and most likely a normal winter -- we could see natural gas prices continue to rise. I plan on keeping my natural gas play Anadarko Petroleum ( APC - Get Report). Remember, being poor is bad, staying that way is stupid.