Patterson-UTI (PTEN) Posts Narrower-Than-Expected Q1 Loss

Onshore contract driller Patterson-UTI Energy Inc. (NASDAQ:PTEN) reported first-quarter 2017 loss per share of 42 cents, narrower than the Zacks Consensus Estimate which was pegged at a loss of 44 cents. Further, the bottom line improved from the year-ago period loss of 48 cents per share. Stronger rig demand and higher revenues from Pressure Pumping segment improved results.

Quarterly revenues – at $305 million – was above the Zacks Consensus Estimate of $294 million. Moreover, revenues in the quarter were 13.3% higher than the prior-year figure of $269 million.

Segmental Performance

Contract Drilling: This segment’s revenues totaled $158.7 million (52% of total revenue), down 5.9% year over year.

Average revenues per operating day decreased to $21,200 from $25,340 recorded in first-quarter 2016, while average direct costs per operating day was $14,450, up from the $12,150 recorded figure in the year-ago quarter. The rise in costs was a increase in rig reactivation expenses as rig count accelerated. Consequently, the segment recorded operating loss of $61.7 million – wider than the loss of $35.1 million incurred in the year-earlier quarter.

Operating days increased to 7,487 from 6,657 in the year-ago quarter. Further, the number of operational rigs increased from 73 in the prior-year quarter to 83 in the reported quarter.

Pressure Pumping: Revenues of $141.2 million were higher by 46.6% year over year. Consequently the segment reported a narrower operating loss of $22.9 million when compared to the prior-year quarter loss of $44 million. Pressure pumping gross margin as a percentage of revenues increased to 15.7% for the first quarter from 5.3% in the fourth quarter due to higher pricing and greater fixed cost coverage due to increased activity from reactivated spreads.

Other Operations: Revenues came in at $5.3 million, 33% higher than the year-ago quarter. The operating loss also decreased by 40% to $1.9 million in the reported quarter.

Costs & Expenses

Total costs and expenses increased by 9.2% to $397.8 million in the reported quarter. The increase was mainly driven by higher direct operating costs which were up 35% from the prior-year quarter.

Capital Spending and Balance Sheet

During the quarter, Patterson-UTI which counts Nabors Industries Ltd (NYSE:NBR) , Helmerich & Payne Inc. (NYSE:HP) and Precision Drilling Corp. (NYSE:PDS) as its peers – spent approximately $68.4 million on capital programs (as against $21.3 million in first-quarter 2016).

As of Mar 31, 2017, the company had $466.6 million in cash and $598.5 million in long-term debt.

Dividend and Share Issue

Patterson-UTI declared a quarterly dividend on common stock of 2 cents per share, to be paid on Jun 22, to holders of record as of Jun 8.

With the recent merger with Seventy Seven Energy Inc., Patterson-UTI has issued approximately 47.5 million shares of common stock.

Outlook

Taking into account the post-merger contribution from Seventy Seven, the company expects Pressure Pumping revenues to increase to $275 million in the second quarter.

The Seventy Seven rig fleet which is complementary to Patterson’s-UTI rigs is expected to strengthen the position of the latter and meet the rising demand for super-spec rigs. Including the post-merger contribution, the company expects robust growth in the rig count with 143 rigs in the United States for the second quarter.

Average rig revenue per day is expected to be $19,900 during the second quarter and average margin per day is expected to be $6,000.

Patterson-UTI Energy, Inc. Price, Consensus and EPS Surprise

Zacks Rank

Patterson-UTI is one of the leading providers of domestic land drilling services to major and independent oil & natural gas companies. The Company focuses its operations in Texas & southeast New Mexico. The company under Zacks Oil and Gas Drilling industry currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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