Onshore contract driller Patterson-UTI Energy Inc. (PTEN) reported weak second-quarter 2013 results owing to seasonal depression in Canadian operations as well as declining utilization of conventional rigs.
Patterson-UTI’s earnings per share (EPS) – excluding a one-time gain – came in at 16 cents, failing to beat the Zacks Consensus Estimate of 29 cents. The figure also decreased 67.4% in comparison with the year-ago adjusted profit of 49 cents.
Revenues of $659.3 million were above our projection of $642.0 million primarily due to greater contribution from pressure pumping unit. However, comparing year over year, revenues dropped 3.2%.
Rig Count Statistics
The number of operational rigs of Patterson-UTI during the reported quarter averaged 185 (183 located in the U.S. and 2 in Canada) compared with 224 in the second quarter of 2012.
Contract Drilling: This segment’s revenues totaled $390.0 million (59.2% of the total revenue), down 15.3% year over year. Average revenues per operating day was $23,120, up 2.4% year over year, while average direct costs per operating day increased 7.6% year over year to $14,390. The segment’s operating profit decreased to $47.1 million from $90.5 million in the year-ago quarter owing to significant increase in selling, general and administrative expenses.
Pressure Pumping: Revenues of $254.6 million were up 23.5% year over year. However, the segment’s operating profit decreased to $30.3 million from $36.9 million in the prior-year quarter owing to adverse market conditions.
Oil & Natural Gas: Revenues were $14.7 million, up marginally by 0.2% from the year-ago quarter. However, operating income of $5.5 million was down from $7.2 million in the prior-year quarter due to substantial hike in direct operating costs.
Capital Expenditure & Balance Sheet
During the quarter, Patterson-UTI spent approximately $158.4 million on capital programs (against $248.7 million in the second quarter of 2012). As of Jun 30, 2013, the company had $148.9 million in cash and $696.3 million in long-term debt (including current portion).
Patterson-UTI currently carries a Zacks Rank #3 (Hold), which implies that it is expected to perform in line with the broader U.S. equity market over the next one to three months.
Patterson-UTI, the second-largest North American land drilling contractor after Nabors Industries Ltd. (NBR), has a large, high-quality fleet of drilling rigs. The company’s technologically-advanced ‘Apex’ rigs are the key to its success.
Patterson-UTI’s proprietary design makes the rigs move faster, drill quicker and provide a safer operating environment in comparison to other conventional rigs. Moreover, these rigs are better suited for the new demands of the exploration business and, therefore, command higher dayrates and utilization than rigs from other land drillers.
On the flip side, Patterson-UTI’s high natural gas exposure raises its sensitivity to gas price fluctuations. The company remains particularly exposed to this situation since its business is heavily biased to gas drilling.
Meanwhile, one can look at oil and gas drilling firms that are expected to perform well over the short term. These include Atwood Oceanics Inc. (ATW) and Ocean Rig UDW Inc. (ORIG). Both the firms sport a Zacks Rank #2 (Buy).
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