Before you wig out about today's pullback in natural gas, consider Grey Wolf's (AMEX: GW) statement today that its E&P clients see attractive returns at two-thirds of current levels. With advances in rig technology and shale exploitation expertise, producers like Devon Energy (NYSE: DVN) are simply lighting it up in the U.S. onshore market. The flurry of activity is driving dayrates higher and bringing stacked rigs out of retirement.

In the first quarter, Grey Wolf's fleet saw a dayrate decline, because some higher-priced contracts rolled over at today's lower rates. Yes, I know I said rates were headed higher. They're still well below levels seen some two years ago, though. Rig margins were quite strong at 44%, and bottom-line earnings came in at around $31 million.

If you're uncomfortable with Grey Wolf's lopsided exposure to natural gas drilling, there are two developments worth mentioning. First is the proposed merger with Basic Energy Services (NYSE: BAS), about which I have some mixed feelings. Another way that Grey Wolf can get oilier is by besieging the Bakken, a northerly oil formation currently being feasted upon by EOG Resources (NYSE: EOG), Continental Resources (NYSE: CLR), and others. The firm has moved its first rig into the play, and expects more demand in the future.

Grey Wolf is often placed on the defensive by having its older rigs compared unfavorably to Helmerich & Payne's (NYSE: HP) flashy FlexRigs, but the firm is rolling out some new, highly mobile units called PaDSRigs. And even when it comes to the refurbished fleet, Grey Wolf's CEO defuses any angst by noting simply that the company is signing term contracts left and right. In short, this guy's not sheepish about Grey Wolf, and shareholders have no reason to be, either.