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Patterson-UTI (PTEN) Q2 Earnings Lag Estimates, Improve Y/Y

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Patterson-UTI Energy, Inc. PTEN recently reported second-quarter adjusted net loss per share of 5 cents, wider than the Zacks Consensus Estimate of a loss of 4 cents primarily due to a surge in direct operating costs.

However, Patterson-UTI’s performance improved from the year-ago loss of 46 cents per share, as shale drilling picked up amid rebounding oil prices.

Revenues of $854.4 million rose from $579.2 million in the year-ago quarter on higher revenues from the Contract Drilling and Pressure Pumping segments. However, the figure missed the Zacks Consensus Estimate of $866 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 $349.9 million, up 29.5% year over year.

Overall average revenues per operating day increased to $21,870 from $20,270 in the second quarter of 2017. Moreover, average margin per operating day came in at $8,270, up from $6,710 in the year-ago quarter. The segment also gained from a rise in both operating days (from 13,323 to 15,998) and number of rigs operational (from 146 to 176) owing to resilient operations of the company amid an improving market.

Consequently, the segment recorded operating loss of $0.3 million, significantly narrower than the loss of $73.4 million incurred in the year-earlier quarter.

Pressure Pumping: Revenues of $425.3 million increased from the year-ago sales of $290 million. Moreover, the segment reported a profit of $20.6 million, higher than $4.6 million in the prior-year quarter. Pricing gains and higher activity by the company led to the improvement. It was partially offset by operational delays.

Directional Drilling: Directional Drilling — Patterson-UTI’s newest unit following the acquisition of MS Directional — recorded second-quarter 2018 revenues of $52.7 million. The segment reported operating loss of $7.7 million.

Other Operations: Revenues came in at $26.5 million compared with $19 million in the year-ago quarter. However, the increase in direct operating cost from $12.7 million in the year-ago period to $17.5 million led to a wider quarterly loss of $4.8 million compared with a loss of $4.6 million in year-ago quarter.

Direct Operating Costs

The company incurred direct operating expenses of $621.8 million, reflecting a 45.5% jump from $427.2 million in the year-ago quarter.

Share Repurchase

During the second quarter, the company bought back 1.7 million shares for $33.6 million. At present, the company has $250 million under its share repurchase program.

In addition, the company has decided to pay a regular quarterly dividend of 4 cents (16 cents on an annualized basis), on Sep 20, 2018, to shareholders of record as of Sep 6, 2018.

Capital Expenditure & Balance Sheet

During the quarter, Patterson-UTI spent approximately $194.9 million on capital programs (versus $118.4 million in the second quarter of 2017).

As of Jun 30, 2018, the company had $241.9 million in cash and $1,118.9 million in long-term debt.

Guidance & Outlook

Patterson-UTI management is upbeat about 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. However, for the short run, the pressure pumping business is expected to face weak industry conditions due to oversupply. The company expects an average rig count of 180 in the third quarter.

Patterson-UTI expects around 119 rigs, on average, to be operational in the third quarter under term contracts, and 81 within the next four quarters.

As stated earlier by Patterson-UTI, the company’s capital expenditure budget of around $675 million remains unchanged.

Zacks Rank & Key Picks

Currently, Houston, TX-based Patterson-UTIhas a Zacks Rank #3 (Hold). Investors interested in the Energy sector can opt for some better-ranked stocks like Canadian Natural Resources Limited CNQ, ConocoPhillips COP and Cheniere Energy, Inc. LNG. While Canadian Natural Resources sports a Zacks Rank #1 (Strong Buy), ConocoPhillips and Cheniere Energy carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Calgary, Canada-based Canadian Natural Resources is an upstream energy company. The company’s top line for 2018 is anticipated to improve 35.3% year over year, while its bottom line is expected to increase more than 170%.

Houston, TX-based ConocoPhillips is an integrated energy company. The company’s top line for 2018 is likely to improve 18.4% year over year. In the last four reported quarters, the company delivered an average positive earnings surprise of 27.6%.

Houston, TX-based Cheniere Energy mainly focuses on liquefied natural gas-related businesses. The company’s top line for 2018 is anticipated to improve 25.9% year over year, while its bottom line is expected to increase more than 225%.

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