Global Hunter Lowers Price Target On Union Drilling

According to Global Hunter Securities, Union Drilling UDRL price target is lowered. Global Hunter said that UDRL's Q1 miss exceeded our expectations and the Street's. “This, along with an insipid conference call and a repugnant energy tape led the stock chart to resemble the trajectory of the belly-flop in the classic 80's hit "Spring Break." However, backing out non-recurring items, which drove the substantial increase in costs, the quarter, while still a miss, was no where near as negative as the -17c headline. More importantly, nothing coming out of the quarter changed our thesis that UDRL's margins will expand as new rigs commence contracts and 18 existing rigs re-price over the next three quarters, the majority of which at much higher rates. Additionally, management reaffirmed its intentions of utilizing a portion of the nearly $80MM of availability on its credit facility to add newbuilds, just as it did in Q1. With our thesis intact, we reiterate our Buy rating. However, assuming higher costs than originally anticipated, we are lowering estimates, which when applying the same 4.5x 2012 EBITDA multiple brings our price target to $15, down from $16.50.” Union Drilling closed yesterday at $9.75.