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Patterson-UTI (PTEN) Q3 Earnings Beat, Revenues Miss Mark

Zacks Equity Research

Patterson-UTI Energy, Inc. PTEN reported adjusted net loss per share of 27 cents in third-quarter 2019, narrower than the Zacks Consensus Estimate of a loss of 29 cents. The better-than-expected numbers reflect lower capital costs.

However, the bottom line worsened almost 170% from the year-ago loss of 10 cents due to lower completion activity that impacted the Pressure Pumping unit.

Revenues of $598 million also missed the Zacks Consensus Estimate of $607 million and declined 31.02% from the year-ago quarter of $867 million as well.

Segmental Performance

Contract Drilling: Revenues of $317 million essentially dropped 13.2% year over year and fell below the Zacks Consensus Estimate of $340 million. Meanwhile, the segment incurred an operating loss of $169 million, wider than the loss of $42 million in the year-earlier quarter.

Average rig revenues per operating day increased to $24,240 from $22,280 in the third quarter of 2018, partly offset by an 8.8% rise in average daily rig operating costs. Consequently, average rig margin per day improved 15.6% year over year to $9790.

Although the unit was plagued by a fall in both the operating days (from 16,394 to 13,081) and the number of rigs operational (from 178 to 142), it benefited from the inclusion of early termination revenues.

Pressure Pumping: Revenues of $209 million plunged 50.5% from the year-ago sales of $422 million and also missed the Zacks Consensus Estimate of $257 million. Moreover, the segment incurred an operating loss of $42 million, wider than the loss of $1.4 million in the prior-year quarter. Reduced completion activity and pricing pressure caused this deterioration.

Directional Drilling: Revenues of $47 million were down 8.9% year over year and also lagged the Zacks Consensus Estimate of $50 million. Moreover, the segment’s operating loss of $32 million deteriorated from the year-ago loss of $8.9 million as operating costs increased.
Other Operations: Revenues came in at $25.7 million, down 11.3% from the year-ago quarter of $29 million. Further, the unit’s quarterly loss of $39.2 million was higher than the $4.8 million loss in the year-ago quarter. This downside was mainly on account of higher SG&A costs of 2.2 million.

Capital Expenditure & Financial Position

During the quarter, Patterson-UTI spent approximately $68 million on capital programs (compared with $96.9 million in the second quarter). As of Sep 30, 2019, Patterson-UTI had $164.8 million in cash and cash equivalents and $970 million in long-term debt. The company also informed that it repurchased shares worth $75 million and shelled out more than $7.8 million as dividends in the period.

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

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

Patterson-UTI Energy, Inc. price-consensus-eps-surprise-chart | Patterson-UTI Energy, Inc. Quote

Guidance & Outlook

Driven by the current market conditions, management stated that drilling and completion activities are expected to be persistently weak with upstream energy companies choosing to be conservative with their investment budgets.

Patterson-UTI sees an average rig count of around 126 in the fourth quarter. The contract drilling unit anticipates average rig revenue per day to decrease due to lower early termination revenues.

In pressure pumping, Patterson-UTI expects a slowdown in fourth-quarter completion activity, thanks to continued drilling weakness. Directional Drilling revenues are expected to be roughly $39 million with gross profit margin of $8 million.

Finally, the company forecasts full-year capital expenditure to be approximately $350 million, indicating a 12.5% decline from its second-quarter projection of $400 million and a 24.7% fall from the original annual budget of $465 million.

Zacks Rank & Stocks to Consider

Patterson-UTI has a Zacks Rank #3 (Hold). Some better-ranked players in the energy space are Subsea 7 SA, Inc.SUBCY, Phillips 66 PSX and Sunoco LP SUN that sport a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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