Oil fuels Union Drilling, Bronco outlook; shares jump

BANGALORE (Reuters) - Onshore drillers Bronco Drilling Co BRNC.O and Union Drilling (UDRL.O) expect higher oil prices to drive dayrates up this year as exploration and production companies look to increasingly spend on search for liquid-rich properties.

Shares of Union Drilling skyrocketed 37 percent, while those of Bronco jumped 16 percent as strong drilling activity boosted results at both the companies. The broader S&P Oil & Gas Drilling Sub-Industry Index .GSPOILD was down half a percent.

Oil prices, which rose 12 percent in the fourth quarter, have pushed exploration companies to hunt further for oil on land.

A closely watched survey of energy companies from Barclays Capital in December showed global exploration and production expenditures are expected to rise 11 percent this year, with much of that earmarked for emerging markets.

"The trend toward more horizontal wells continues as does more rigs in search of oil as opposed to natural gas ... the trend toward more oil drilling will likely continue," an executive at Bronco said on a conference call with analysts.

In the fourth quarter, Union Drilling's rig utilization rose to 58.5 percent -- its highest in two years -- from 37 percent last year. It said dayrates "dramatically" firmed over the past year, and that the company's rigs were signed at higher rates in 2011.

"My outlook on the company is very positive right now, even with a flat to slightly down gas rig count, the momentum in oil and especially horizontal oil is providing healthy demand...," Union Drilling Chief Executive Christopher Strong said on a conference call.

Global Hunter Securities analyst Brian Uhlmer said higher utilization will give pricing power to both Bronco and Union Drilling this year.

"They will not only increase day rates but also add new rigs to their fleet that will help their earnings and profitability," he added.

Union Drilling reported an adjusted loss of 6 cents a share, compared with analysts' estimates of a loss of 11 cents a share according to Thomson Reuters I/B/E/S.

Bronco posted a surprise profit of 6 cents, compared with analysts' expectations of a loss of 1 cent.

(Reporting by Swetha Gopinath, Vaishnavi Bala and Mayuresh Tungare in Bangalore; Editing by Maju Samuel)