Move Into Pioneer (PDC) (UDRL), Out of Bronco (BRNC) Says Global

Global Hunter Securities downgraded Bronco Drilling (NYSE:BRNC) from "Accumulate" to "Neutral" after receiving a takeover bid from Chesapeake Energy (NYSE:CHK).

Global says, "Last Friday, BRNC announced Chesapeake Energy (NYSE: CHK) is acquiring it for $315 million, or $11 per share. The valuation metrics work out to 1.02x BV, 6.9x and 5.1x our 2011 and 2012 EBITDA estimates, respectively, and -$14.3 million per rig, which implies zero value for Bronco MX or Challenger Ltd. CHK is currently BRNC’s second largest customer, operating three rigs. CHK intends to integrate the 22 rigs into its subsidiary, Nomac Drilling, for which CHK operates 90 of its 95 rigs. We believe that many of these rigs will likely be working for CHK in the Powder River and DJ Basins, after completing their current term contracts, where the company recently inked a joint venture with CNOOC (NYSE:CEO) and in the Mississippian horizontal oil play in the northern Anadarko Basin."

"We do not expect a third party to come in with a higher bid for BRNC. We believe that Helmerich & Payne (NYSE:HP) has no interest in running a rig outside of a FlexRig, and Nabors (NYSE:NBR) and Patterson-UTI (Nasdaq:PTEN) are more likely to spend the incremental $4-5 million to build a rig rather than pay the implied $14.3 million per unit CHK is spending for BRNC. We feel the same way for the smaller-cap drillers and do not believe any other operators have an interest in spending over $300 million to guarantee they have rigs to meet anticipated drilling programs and hedge against rate increases."

"Rotate into Pioneer (NYSE:PDC) and Union (Nasdaq:UDRL). Up nearly 70% and 64% YTD, we think these stocks still have plenty of room to run."

Global Hunter Securities lowered its price target on Bronco from $13.50 to $11.

Nabors (NBR) (HP) (PTEN) (COP) As Oil Prices Break $111

The soaring price of oil, which topped $111 a barrel today, is pushing up the share price of Nabors Industries (NYSE:NBR), Helmerich & Payne (NYSE:HP), Patterson-UTI Energy (NASDAQ:PTEN) and ConocoPhillips (NYSE:COP).

Crude futures for West Texas Intermediate crude (CLK11) jumped to break $111 a barrel, up about $5 over the past week.

“U.S. land drilling contractors should be a major beneficiary of the forecast increase in horizontal drilling,” Macquarie analysts said in a note to clients, which raised its outlook on Nabors Industries (NYSE:NBR), Helmerich & Payne (NYSE:HP) and Patterson-UTI Energy (NASDAQ:PTEN).

The NYSE Arca Oil Index (XOI) rose by 0.7% to 1,394. That’s the index’s highest level since the record run of oil prices fueled an all-time record of 1,570 almost three years ago.

Nabors Industries was trading at $31.82, gaining $1.32, or 4.33 percent, as of 2:00 PM EDT. Helmerich & Payne was trading at $69.54, gaining $2.04, or 3.02 percent. Patterson-UTI Energy was at $29.30, up $1.27, or 4.55 percent. ConocoPhillips was trading at $81.02, rising $0.62, or 0.77 percent.

Halliburton (HAL) Boosting Activity at Saudi Project

Halliburton Co. (NYSE:HAL) announced it is going to boost its activity at its Saudi Manifa project, generating speculation as to the reasons for the move.

Some suggest it points to limited supplies of the oil reserves in the country, and others that it is seeking to increase the amount of spare capacity in order to push back against rising oil prices around the world.

Other companies that could benefit from the increased production in Saudi Arabia, if that is in fact what is going on, will be Nabors Industries (NYSE:NBR), Weatherford International Ltd. (NYSE:WFT), Schlumberger Ltd. (NYSE:SLB) and Baker Hughes (NYSE:BHI).

For Halliburton, they are now operating one rig at Manifa, but it has had a goal from the beginning to operate up to 10 rigs in the project.

Others that could benefit from a increase in drilling in Saudi Arabia would be those who are specialists in drilling in shallow waters.

Halliburton closed Tuesday at $49.00, gaining $1.10, or 2.30 percent.