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Patterson-UTI (PTEN) Reports Narrower Q2 Loss, Revenues Beat

Zacks Equity Research

Patterson-UTI Energy, Inc. PTEN reported adjusted net loss per share of 17 cents, narrower than the Zacks Consensus Estimate of 21 cents. The better-than-expected numbers reflect strong performance by its Contract Drilling segment.

However, the bottom line worsened from the year-ago loss of 5 cents on lower completion activity that impacted the Pressure Pumping unit.

Revenues of $675.8 million came ahead of the Zacks Consensus Estimate of $670 million but declined 20.9% from the year-ago quarter.

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

Segmental Performance

Contract Drilling: This segment’s revenues totaled $348.1 million, essentially flat year over year. Meanwhile, operating income of $16.5 million reflected a turnaround from the loss of $251,000 in the year-earlier quarter.

Average rig revenues per operating day increased to $24,200 from $21,870 in the second quarter of 2018, partly offset by a 3.1% rise in average daily rig operating costs. Consequently, average rig margin per day improved 23% year over year to $10,170.

While the unit was plagued by fall in both the operating days (from 15,998 to 14,385) and the number of rigs operational (from 176 to 158), it benefited from the inclusion of early termination revenues.

Pressure Pumping: Revenues of $251 million dropped 41% from the year-ago sales of $425.3 million. Moreover, the segment reported a loss of $14.4 million against income of $20.6 million in the prior-year quarter. Reduced completion activity and pricing pressure led to the deterioration.

Directional Drilling: The unit’s revenues totaled $50.2 million, down 4.7% year over year. However, the segment’s operating loss of $5.3 million narrowed from the year-ago loss of $7.7 million as continued stress on margins and efficiency more than offset lower activity.

Other Operations: Revenues came in at $26.4 million – unchanged from the year-ago quarter. However, the unit incurred a wider quarterly loss of $7.3 million, as against the loss of $4.8 million recorded in year-ago quarter. The deterioration was mainly on account of rise in SG&A costs – from $4.8 million to $7.3 million.

Capital Expenditure & Financial Position

During the quarter, Patterson-UTI spent approximately $96.9 million on capital programs (as against $194.9 million in the second quarter of 2018). As of Jun 30, 2019, Patterson-UTI had $255.5 million in cash and cash equivalents and $1.1 billion in long-term debt. The company also informed that it repurchased 6.3 million shares during the quarter for $75 million and shelled out more than $8 million as dividends.

Guidance & Outlook

Patterson-UTI management said that drilling and completion activities are expected to remain weak with upstream energy companies choosing to remain conservative with their investment budgets.

Patterson-UTI sees an average rig count of around 142 in the third quarter, declining from the second quarter’s 158. The onshore driller expects an average of 92 rigs to be operational under term contracts during the third quarter and 58 for the 12 months ending Jun 30, 2020.

In pressure pumping, Patterson-UTI expects a slowdown in third quarter completions activity on continued drilling weakness. Directional Drilling revenues are expected to be roughly $49 million with gross margins at second quarter levels.

Finally, the company forecasts full-year capital expenditure to come in approximately $400 million, 14% below original guidance of $465 million.

Zacks Rank & Stock Picks

Patterson-UTI holds a Zacks Rank #3 (Hold).

Some better-ranked players in the energy space are TC Energy Corporation TRP, TechnipFMC plc FTI and Cheniere Energy, Inc. LNG. All the companies carry a Zacks Rank #2 (Buy).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Canada-based TC Energy has an excellent track of outperforming estimates over the last four quarters at an average rate of 14.8%.

The 2019 Zacks Consensus Estimate for London-based TechnipFMC is $1.26, representing some 53.7% earnings per share growth over 2018. Next year’s average forecast is $1.57 pointing to another 24.8% growth.

Cheniere Energy’s expected EPS growth rate for three to five years currently stands at 31.1%, comparing favorably with the industry’s growth rate of 14.3%.

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