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Patterson-UTI (PTEN) Q1 Loss Wider Than Expected, Sales Top

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Patterson-UTI Energy, Inc.’s PTEN first-quarter adjusted net loss per share of 16 cents was wider than the Zacks Consensus Estimate of a loss of 9 cents, primarily due to a surge in direct operating costs.

However, Patterson-UTI’s performance improved from the year-ago loss of 40 cents per share, as shale drilling picked up amid rebounding oil prices.

Revenues of $809 million increased from $305 million in the year-ago quarter due to improvement in revenues in the Contract Drilling and Pressure Pumping segments, also beating the Zacks Consensus Estimate of $792 million.

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

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

Segmental Performance

Contract Drilling: This segment’s revenues totaled $327.8 million, soaring 106.5% year over year.

Average revenues per operating day increased to $21,540 from $21,200 in the first quarter of 2017. Moreover, average direct costs per operating day came in at $13,970, down from $14,450 in the year-ago quarter. The segment was also boosted by a jump in both the operating days (from 7,487 to 15,218) and number of rigs operational (from 83 to 169), on the back of resilience in Patterson-UTI’s operations amid an improving market.

Consequently, the segment recorded operating loss of $17.1 million, significantly narrower than the loss of $61.7 million incurred in the year-earlier quarter.

Pressure Pumping: Revenues of $406.8 million increased from the year-ago sales of $141.2 million. Moreover, the segment reported a profit of $25.4 million, turning around from a loss of $22.9 million in the prior-year quarter. Pricing gains and higher activity, along with supply chain organization by the company led to the improvement. It was partially offset by adverse weather conditions.

Directional Drilling: Directional Drilling — Patterson-UTI’s newest unit following the acquisition of MS Directional — lost $4.9 million on revenues of $48.6 million.

Other Operations: Revenues came in at $26 million compared with $5.3 million in the year-ago quarter. However, the increase in direct operating cost from $3.3 million in the year-ago period to $17.7 million led to a wider quarterly loss of $4.1 million compared with a loss of $2 million recorded in year-ago quarter.

Direct Operating Costs

The company incurred direct operating expenses of $589 million, reflecting a 155.5% jump from $230.5 million reported in the year-ago quarter.

Share Repurchase

924,800 shares have been bought back by the company at an average price of $18.28. At present, the company has $170 million in its share repurchase program.

In addition, the company decided to double its quarterly dividend from 2 cents to 4 cents (16 cents on an annualized basis), which will be paid on Jun 21, 2018 to shareholders of record as of Jun 7, 2018.

Capital Expenditure & Balance Sheet

During the quarter, Patterson-UTI spent approximately $122.9 million on capital programs (versus $68.4 million in the first quarter of 2017).

As of Mar 31, 2018, the company had $304.3 million in cash and $598.8 million in long-term debt.

Guidance & Outlook

Patterson-UTI management remains upbeat over its business following the recovery in land rig count and recent bullishness in activity and pricing. In fact, the company sees 2018 as an exciting year for super-spec rigs. The company expects around 110 rigs, on an average, to be operational in the second quarter under term contracts, and 75 within the next four quarters.

Patterson-UTI expects an average rig count of 176 in the second quarter along with a seasonal slowdown in drilling activities in Canada. In the beginning of the second quarter, the company created its 24th frac spread, which is now operating in the Permian Basin assets. By the end of the second quarter, the company plans to activate its 25th frac spread.

As stated earlier by Patterson-UTI, the company’s capex budget of around $675 million will remain unstirred.

Zacks Rank and Stocks to Consider

Houston, TX-based Patterson-UTI currently carries a Zacks Rank #3 (Hold).

Investors interested in the Energy sector can opt for some better-ranked stocks in the same space like Nine Energy Service, Inc. NINE, Oasis Midstream Partners LP OMP and CNOOC Ltd. CEO. While Nine Energy Service sports a Zacks Rank #1 (Strong Buy), Oasis Midstream and CNOOC carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Houston, TX-based Nine Energy Service is an onshore service provider. For 2018, the bottom line is likely to be up 33.4%. In the last reported quarter, the company delivered a positive earnings surprise of 6.3%.

Houston, TX-based Oasis Midstream is an integrated energy partnership. The company’s revenues for 2018 are anticipated to improve 29.3% from the prior-year quarter, while its earnings are expected to increase 337.2%.

Hong Kong-based CNOOC is an integrated energy company. The company’s top line for 2018 is anticipated to improve 49% year over year, while its bottom line is expected to increase 82.8%.

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