NEW YORK (The Deal) -- Lots of energy folks are in a better mood these days, with oil prices back up to around $58 per barrel after their dramatic slide from over $100 last summer to around $44 in March. Rig counts appear to be leveling off a bit after falling to 885 recently, half of what they were and their lowest level in almost three years. As a result, stocks of U.S. companies that drill wells on land for oil and gas explorers are up 30% to 50% vs. their Jan. 15 lows.
That is pretty typical. So-called land drillers and other land-centric service companies have provided the best return in every three-month period and the entire two-year cycle after oil bottomed, "no exceptions," RBC Capital Markets analyst Kurt Hallead declared in a recent report. And while offshore fundamentals remain weak for the foreseeable future, he's starting to hear more and more talk of a bottom for North American land activity, possibly late in the second quarter or in the third quarter. "This cycle progression is playing out like every cycle dating back to 1995," he said.
Even though U.S. land drillers have already performed well, they are believed to be headed higher over the next 12 months as the cycle recovery unfolds, with U.S. exploration and production companies "selectively planning to put some rigs back to work," Tudor, Pickering, Holt & Co. Securities wrote recently. Pioneer Natural Resources (PXD), for example, said recently it would likely add two rigs per month starting in July if the outlook for oil prices remains positive.