Patterson-UTI Energy (PTEN) Down 1.9% Since Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Patterson-UTI Energy, Inc. PTEN. Shares have lost about 1.9% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

First-Quarter 2017 Results

Patterson-UTI reported first-quarter 2017 loss per share of $0.42, narrower than the Zacks Consensus Estimate, which was pegged at a loss of $0.44. Further, the bottom line improved from the year-ago period loss of $0.48 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 an 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 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 $0.02 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.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed an upward trend in fresh estimates. There have been three revisions higher for the current quarter compared to one lower. In the past month, the consensus estimate has moved up 13.1% due to these changes.

Patterson-UTI Energy, Inc. Price and Consensus

 

Patterson-UTI Energy, Inc. Price and Consensus | Patterson-UTI Energy, Inc. Quote

VGM Scores

At this time, Patterson-UTI's stock has an average Growth Score of 'C'. However, its Momentum is doing a lot better with an 'A'. However, the stock was allocated a grade of 'D' on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of 'C'. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for momentum investors than growth investors.

Outlook

Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. The stock has a Zacks Rank #3 (Hold). We expect in-line returns from the stock in the next few months.

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