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Patterson-UTI (PTEN) Up 11.8% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Patterson-UTI (PTEN). Shares have added about 11.8% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Patterson-UTI due for a pullback? Before we dive into how investors and analysts have reacted as 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.

Patterson-UTI Incurs Narrower-Than-Expected Loss in Q1

Patterson-UTI reported a first-quarter 2022 adjusted net loss of 13 cents per share, narrower than the Zacks Consensus Estimate of a loss of 21 cents. This outperformance can be attributed to better-than-expected results in the Contract Drilling and Other Operations segments.

Moreover, the loss was narrower than the year-ago quarter's loss of 57 cents per share on accelerated rig activity and much higher energy prices.

The company’s total quarterly revenues of $509 million marginally outperformed the Zacks Consensus Estimate of $508 million. Moreover, the top line improved by an impressive 111.4 % on a year-over-year basis.

Patterson-UTI will pay out its quarterly dividend of 4 cents per share (or 16 cents per share annualized) on Jun 16, 2022 to shareholders of record as of Jun 2, 2022. A dividend of 4 cents marks 100% year-over-year growth from the last year’s first-quarter payout of 2 cents per share.

Segmental Performances

Contract Drilling: Revenues totaled $256.6 million, up by 92.2% from the last year’s fourth-quarter figure of $133.5 million, due to further increased activity and pricing strength. Despite revenues, the unit lost about $3.2 million in the first quarter, narrower than the year-ago loss of $48.6 million, due to the increasing day rates and lower operating costs on a per day basis.

Pressure Pumping: Revenues of $189.6 million rose about 150% from the year-ago figure of $75.8 million due to better pricing. Moreover, the segment posted an operating profit of $6.4 million compared to a loss of $39.7 million in the first quarter of 2021. The profit is attributable to better pricing and the full-quarter impact of the spread reactivated in the fourth quarter.

Directional Drilling: Revenues summed at $43.3 million, up 120% year over year from the last year’s figure of $19.7 million, due to higher activity and more favorable pricing. Moreover, the segment posted an operating profit of $1.8 million against a loss of $4.9 million reported in the corresponding quarter of 2021 due to higher activity and more favorable pricing.

Other Operations: Revenues were $19.8 million, 66.2% more than the year-ago quarter’s $11.9 million, as activity levels improved. The unit also posted a quarterly profit of $741 thousand compared to a loss of $4.6 million recorded in the year-ago quarter.

Capital Expenditure & Financial Position

In the first quarter of 2022, PTEN spent $94.8 million on capital programs (compared with $18.5 million in the first quarter of 2021). As of Mar 31, 2022, the company had $48.3 million of cash and cash equivalents and $852.5 million as long-term debt.

Outlook

Patterson-UTI believes that the increasing demand and the tight supply of rigs should drive better pricing, longer-term contracts and increase the contract backlog in contract drilling moving forward.

Based on contracts currently in place, Patterson-UTI expects its second-quarter 2022 rig count to average 57 rigs under term contracts. As the onshore driller foresees a ramp-up in drilling activity, the company expects the second-quarter rig count to be 122 rigs, on average.
 
For 2022, PTEN expects adjusted EBITDA to be more than $500 million. The company maintains its Capex forecast of approximately $350 million.

 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision.

The consensus estimate has shifted 58.33% due to these changes.

VGM Scores

Currently, Patterson-UTI has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

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

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Patterson-UTI has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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