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Shares of Patterson-UTI Energy Inc. (PTEN - Free Report) hit a 52-week high of $24.64 on Feb 19. In fact, the Houston-based onshore contract dealer has seen its stock price climb more than 20% since the beginning of the year.

Despite this price appreciation, we remain optimistic on the firm’s near-term prospects, supported by consistency in its earnings/cash flows, attractive fundamentals and a positive outlook. These factors are reflected in Patterson-UTI’s Zacks Rank #2 (Buy), implying that it is expected to outperform the broader U.S. equity market over the next one to three months.

Why the Bullishness?

Our bullish investment theme stems from strong demand for Patterson-UTI’s services in the unconventional oil and liquids-rich plays. In particular, the company’s technologically-advanced ‘Apex’ rigs are the key to its success.

Patterson-UTI’s proprietary design makes the rigs move faster than conventional rigs, drill quicker and more efficiently than conventional rigs, and allows for a safer operating environment. As such, these rigs are better suited for the new demands of the exploration business and, therefore, command higher dayrates and utilization than rigs from other land drillers.

The second-largest North American land drilling contractor after Nabors Industries Ltd. (NBR - Free Report) is also benefiting from the 2010 acquisition of certain assets of Key Energy Services, an onshore well service rig provider. Through this transaction, Patterson-UTI has not only expanded its shale drilling ability, it also stands to benefit by coming out of their historical stronghold in the Appalachian Basin into the pressure pumping markets of the Barnett, Eagle Ford and Permian Basin.

We also like Patterson-UTI Energy’s recent decision to retire 36 rigs from its fleet. We expect the retirement to act as a positive step towards balancing the market, given the extreme overcapacity caused by depressed natural gas prices.

Based on solid expected performance from the company, thirteen out of 20 estimates for 2013 have moved higher in the past 30 days, pushing the Zacks Consensus Estimate up by 26 cents (or 23.4%) to $1.37. For 2014, seven out of 17 estimates moved north in the past 30 days, helping the Zacks Consensus Estimate advance by 11 cents (or 6.8%) to $1.72.

Other Stocks to Consider

In addition to Patterson-UTI, there are certain other energy equipment suppliers like Helmerich & Payne Inc. (HP - Free Report) and McDermott International Inc. (MDR - Free Report) that offer value and are worth buying now. Both these company’s sport a Zacks Rank #2 (Buy).

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