Patterson-UTI (PTEN) Reports Narrower Q1 Loss, Revenues Beat

Patterson-UTI Energy, Inc. PTEN reported net loss per share of 14 cents, narrower than the Zacks Consensus Estimate and the year-ago losses of 21 cents and 16 cents, respectively. The better-than-expected bottom line reflects strong performance from its Contract Drilling segment.

Revenues of $704.2 million beat the Zacks Consensus Estimate of $697 million but fell 13% from the year-ago quarter on lower completion activity that impacted the Pressure Pumping unit.

Segmental Performance

Contract Drilling: This segment’s revenues totaled $372.4 million, up 13.6% year over year. Average rig revenues per operating day increased to $23,590 from $21,540 in the first quarter of 2018, while average daily rig operating edged down slightly. As a result, average rig margin per day improved 28.1% from year over year to $9,700 – the highest since early 2016.

The segment was also boosted by rise in both the operating days (from 15,218 to 15,787) and the number of rigs operational (from 169 to 175). Consequently, the segment recorded operating income of $21.2 million – turning around from the loss of $17.1 million in the year-earlier quarter.

Pressure Pumping: Revenues of $247.6 million dropped 39.1% from the year-ago sales of $406.8 million. Moreover, the segment reported a loss of $18.8 million against income of $25.4 million in the prior-year quarter. Reduced completion activity and pricing pressure led to the deterioration.

Directional Drilling: The unit’s revenues totaled $53 million, up 8.9% year over year. However, the segment recorded operating loss of $5.7 million, wider than the year-ago loss of $4.9 million on decreasing activity.

Other Operations: Revenues came in at $31.2 million compared to $26 million in the year-ago quarter. However, the unit incurred a wider quarterly loss of $5.2 million, as against the loss of $4.1 million recorded in year-ago quarter. The deterioration was mainly on account of rise in direct operating costs – from $17.7 million to $21.8 million.

Capital Expenditure & Financial Position

During the quarter, Patterson-UTI spent approximately $118.3 million on capital programs (as against $122.9 million in the first quarter of 2018). As of Mar 31, 2019, Patterson-UTI had $248.9 million in cash and cash equivalents and $1.1 billion in long-term debt. The company also informed that it repurchased 5.4 million shares during the quarter for $75 million and shelled out $8.5 million as dividends.

Guidance & Outlook

Patterson-UTI management said that drilling and completion activities are yet to recover from the effects of the low year-end crude prices that prompted the upstream companies to be conservative with their investment budgets. As a result, demand has failed to take off despite the significant rebound in commodity prices.

Patterson-UTI sees an average rig count of around 160 in the second quarter. The onshore driller expects an average of 104 rigs to be operational under term contracts during the second quarter and 59 for the 12 months ending Mar 31, 2020.

In pressure pumping, Patterson-UTI expects second quarter activity to be in line with the first quarter. Directional Drilling revenues are expected to be roughly $51 million with gross margins at first quarter levels.

The company remains upbeat over its business following the rebound in oil prices. Management believes that mid-60 crude prices to ultimately lead to increasing activity levels. In response to the changing market dynamics, Patterson-UTI is looking to continue its disciplined approach to capital spending while focus on efficiency and service quality.

Zacks Rank & Key Picks

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

Meanwhile, investors interested in the the energy space could look at some better options like ProPetro Holding Corp. PUMP, Parsley Energy PE and TransCanada Corporation TRP that carry a Zacks Rank #2 (Buy).

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

The 2019 Zacks Consensus Estimate for Midland, TX-based ProPetro is $2.42, representing some 21% earnings per share growth over 2018. Next year’s average forecast is $2.70 pointing to another 11.5% growth.

TransCanada has a 100% track of outperforming estimates over the last four quarters at an average rate of 19%.

The 2019 Zacks Consensus Estimate for Austin, TX-based Parsley is $1,53, representing some 8.5% earnings per share growth over 2018. Next year’s average forecast is $2.47 pointing to another 61.8% growth.

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