Sitting on some of the most prolific oil and natural gas fields in world, North America’s energy landscape certainly is changing. New technologies have allowed firms to finally tap this wealth of fuel, and as the world’s voracious thirst for oil and gas continues to grow, energy companies continue to drill throughout these shale regions to satiate that demand.

While the shale boom has been good to shareholders of the various E&P firms, those who do the physical drilling have floundered. Despite rising rig counts, contract land drillers have seen their share prices slump in the face of higher natural gas inventories. However, with the long-term picture for global energy demand still rosy, land drilling firms offer one of the real values left in the sector.

Higher Inventories, Smaller Share Prices

The sheer abundance of natural gas and proliferation of drilling activity in U.S. has created a slight problem: higher inventories. Currently, gas inventories remain at elevated levels — about 11.4% higher than a year ago and nearly 15% above five-year averages. This copious supply has caused spot prices at Henry Hub to drop by approximately 40% to their current level of around $3 per MMBtu. Along with the fall in natural gas prices, land drillers have suffered as well.

However, this punishment may be unjustified. According to its weekly rig count report, oil service firm Baker Hughes (NYSE:BHI) showed that the number of drilling rigs nationwide has more than doubled from 2009’s six-year low of 876. What is striking is the composition of those rigs. Horizontal/directional drilling, which encompasses the technology needed to extract gas/oil from shale, has grown dramatically. In 2003, horizontal-style drilling had a roughly 30% market share; today, that number sits well above 60%. The total number of horizontal rigs in action currently sits at 1,376.

With drilling activity ramping up across a variety of “new” shale formations like the Utica, analysts expect the number of drilling rigs needed to surge upward. Already, the sector is facing huge backlogs, with E&P firms seeing delays as long as six months, and analysts predict demand for fracking services might continue to exceed supply well into 2013. According to strategists at UBS (NYSE:UBS), those drillers with modern directional fleets will see higher day rates, increased margins and experience greater demand from E&P firms thanks to this better technology.

Finding the Bargains

Despite the long-term bullishness for shale oil and gas, investors continue to paint the entire sector with one brushstroke. For those wanting to go against the grain, a few land drillers offer a unique value proposition.

One such interesting play is Patterson-UTI Energy (NASDAQ:PTEN). The firm is one of the largest contract drillers in the country and has more than 221 rigs currently in operation. However, the key to firm’s current and future success has been its proprietary Apex rigs. These horizontal-style advanced rigs are designed to achieve gains in drilling efficiencies and rapid deployment. Patterson completed construction on seven new Apex-style rigs in the third quarter of 2011 and estimates it will have 30 of these rigs in 2012. Also, in 2010, Patterson purchased Key Energy Services‘ (NYSE:KEG) pumping business. This allows the company to offer a “bundled fracking service” to customers using its rigs. Shares of Patterson currently can be had for dirt-cheap P/E of 10.

Like many commodities sectors, the trend of consolidation within the drilling world is alive and well. Chesapeake Energy‘s (NYSE:CHK) recent purchase of Bronco Drilling and Precision Drilling‘s (NYSE:PDS) purchase of Grey Wolf highlight this fact. Small-cap Union Drilling (NASDAQ:UDRL) could be exactly what a larger firm is look for. Already partnering with majors like Exxon Mobil (NYSE:XOM) to drill for natural gas in shale formations, Union Drilling’s 71 horizontal rigs could be major asset to an acquiring firm. Shares of UDRL sit about 50% below its 52-week high.

As of this writing, Aaron Levitt did not hold a position in any of the aforementioned stocks.