UPDATE 2-Patterson-UTI posts narrower-than-expected Q3 loss

* Q3 loss $0.12/shr vs est loss $0.16/shr

* Q3 revenue $176.2 mln

* Sees signs of increased drilling activity, rig demand

* Sees Q4 U.S rig count at 90

* Shares rise 13 percent (Adds conference call details, analyst comment)

By Arup Roychoudhury

BANGALORE, Oct 29 (Reuters) - Drilling contractor Patterson-UTI Inc (PTEN.O) posted a narrower-than-expected third-quarter loss, helped by a sequential increase in dayrates and rig count, sending its shares up as much as 13 percent.

The company said it was experiencing an increase in rig demand as customers prepared for increased drilling activities in 2010 and that spot market dayrates stabilized during the third quarter, with recent signs of an increase.

"It looked like they are putting rigs back to work. It was a combination of lower quality rigs, which got in lower dayrates, and some of the newer rigs," UBS analyst Andrew Coleman said.

Patterson said although it did not experience a meaningful improvement in the fourth quarter for its drilling fluids segment and exploration and production segment, there were signs of sequential increase in daily revenue, with margins expected to remain flat.

"We now expect to see additional rigs go back to work between now and year-end," Patterson CEO Douglas Wall said in a conference call with analysts.

"For the fourth quarter, we expect our average U.S. rig count to be approximately 90 rigs, and the Canadian count to average approximately four," he added.

Wall expects an average of about 34 rigs in 2010 and 21 rigs in 2011 under existing long-term contracts.

While huge changes in average revenue per day were not expected, he said he is seeing stable prices in all markets and an improvement in certain regions.

Analyst Coleman said, "I think the positives are that rig activity is getting better, and as rig activity improves and utilization goes up, we are going to see (higher) dayrates, we will see pricing power."

For the quarter, the company's loss was $18.6 million, or 12 cents a share, compared with net income of $108.7 million, or 69 cents a share, a year earlier.

Revenue more than halved to $176.2 million.

Analysts on average were expecting Patterson-UTI to post a loss of 16 cents a share, on revenue of $162.6 million, according to Thomson Reuters I/B/E/S.

Average numbers of rigs operating increased by 10 sequentially, to 73 rigs, while average revenue per operating day was $16,800, compared with $17,780 a quarter earlier, the company said.

Shares of Patterson-UTI touched a high of $17.62 Thursday morning, before paring gains to trade 9.5 percent up at $17.11 during the afternoon session on Nasdaq.

For the alerts, please double click [ID:nWNAB6476] (Editing by Vinu Pilakkott and Aradhana Aravindan)