UPDATE 2-Patterson-UTI posts Q4 loss, but sees optimism in mkt

* Q4 loss $0.06/shr vs est $0.08

* Revenue falls 60 percent

* Avg operating rigs up 41 pct sequentially

* Sees increase in drilling activity continuing in 2010

* Sees renewal of optimism among customers (Adds conference call details, analysts' comments, share movement)

By Thyagaraju Adinarayan

BANGALORE, Feb 11 (Reuters) - Drilling contractor Patterson-UTI Energy Inc (PTEN.O) posted a narrower-than-expected quarterly loss, helped by an increase in drilling activity that it said carried on to 2010.

"With the upward direction in the U.S. rig count, there appears to be a definite renewal of optimism among our customers in the drilling and pressure pumping industries," Chairman Mark Siegel said in a conference call with analysts.

"Drilling activity has continued to climb at a steep rate so far in 2010," Siegel said in a statement.

The rig count has taken off from the bottom back in summer last year and is continuing to move higher, Raymond James analyst Marshall Adkins said by phone.

The onshore drilling services provider said it saw continued growth in rig count in the first six weeks of 2010.

The company had an average of 103 rigs operating in the fourth quarter and currently has an 145 rigs operating.

However, gas production is going to enter a market that does not need additional gas supply and that may pressurise gas prices and stall the rise in rig count, Barclays Capital analyst James West said.

"We might even see a decline in rig count later this year," West added.

The company, which also provides drilling and completion fluid services, said it expects tax refunds of about $114 million in 2010.

Patterson said it expects capital expenditures to be about $500 million for the year.

COMMODITY PRICE IMPACT

Long-term trends in the commodity markets favored the company, and the land-drilling industry has been a major beneficiary of those positive trends in terms of greater numbers of wells being drilled, Patterson said in a recent Credit Suisse energy conference.

Siegel said the ramp-up in activity in the Appalachians, particularly in the Marcellus shale was very encouraging, and believes 2010 will see rapid expansion in this market.

Raymond James' Adkins said he sees good improvement in oil activity and even natural gas prices are trading better than 2009, which shows potential for increase in rig count.

The increase in oil prices is showing a trend towards a shift in investment in oil plays from the traditional gas plays, Barclays Capital's West said.

One key measure of sentiment for the oil services industry is U.S. crude oil prices CLc1, which have doubled in less than a year. The change is palpable for firms that sell energy companies the tools they need to extract oil and gas.

NARROWER-THAN-EXPECTED Q4 LOSS

For the fourth quarter, the company posted a net loss of $18.2 million, or 12 cents a share, compared with net income of $79.5 million, or 52 cents a share, a year earlier.

Excluding items, the company posted a loss of 6 cents a share, 2 cents lower than analysts expectations, according to Thomson Reuters I/B/E/S.

Revenue fell 60 percent to $214 million. Analysts on average were expecting revenue of $216.42 million.

Average revenue per operating day fell 17 percent.

Shares of the Houston-based company were up 1 percent at $16.67 in midday trade Thursday on Nasdaq. They have risen about 70 percent in the last 52-weeks. (Additional reporting by Krishna N. Das in Bangalore; Editing by Savio D'Souza and Unnikrishnan Nair)