US Oil & Gas Equipment and Services: Land Drillers At a Crossroads; Model Updates

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US Oil & Gas Equipment and Services: Land Drillers At a Crossroads; Model Updates

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29 Jun 2026 06:00:00 ET │ 15 pages

US Oil & Gas Equipment and Services

Land Drillers At a Crossroads; Model Updates

CITI'S TAKE

Scott Gruber AC

Similar to the last few upcycles, the increase in private drilling activity as +1-212-816-8919

well as spot rates for land rigs have been rising faster than many initially scott.gruber@citi.com

anticipated. For PTEN, the same is true for their completion business this

cycle. We expect the momentum to sustain into 3q, however, improvement Johan Monge

beyond 3q is now at risk with the 2027 WTI strip recently falling toward +1-212-816-2803

~$66. This is still an improvement from the $55-60 WTI price that many johan.monge@citi.com

E&Ps were likely budgeting at upon entering 2026 suggesting that current

activity could sustain (albeit no more growth). Yet Citi Commodities see the

potential for a low-$60s WTI price on average next year. Such an outcome

would likely drive a contraction in U.S. activity. Several moving pieces

remain influential (ultimately the outlook for Mid. East oil exports is key) but

we envision lower multiples until clarity arises.

PTEN Update — We update our PTEN model to reflect recent guidance for 2q EBITDA

of $220mm, an increase from $205mm as per their last conference call, largely given

stronger frac activity and pricing. We lift 3q EBITDA to $250mm and 4q to $232mm,

resulting in our 2026 EBITDA rising to $902mm (FactSet consensus at $872mm). At

present, we forecast U.S. drilling activity to rise by ~40 rigs in 2027 which drives our

2027 EBITDA to $1.04B (consensus at $1.0B). We roll our target price on PTEN to

2027 but trim our target price to $10.50 utilizing a reduced ~4.5x multiple given the

risk to crude prices.