Patterson-UTI Ahead of Estimates

Patterson-UTI Energy, Inc. ( PTEN - Analyst Report ) , one of the largest onshore contract drillers in the U.S., reported better-than-expected second quarter 2012 results. The outperformance was driven by robust drilling operations.

Earnings per share (excluding gain on sale of assets) came in at 49 cents, ahead of the Zacks Consensus Estimate of 44 cents. Revenues of $681.1 million were also above our projection of $664.0 million.

Comparing year over year, Patterson-UTI’s adjusted earnings per share decreased by 5.8% (from 52 cents to 49 cents), though revenue was up 13.5%. The profit decline from the prior-year results reflects difficult market conditions.

Rig Count Statistics

The number of operational rigs during the quarter averaged 224 (all located in the U.S.) compared with 202 average rigs operational in the second quarter of 2011 and 237 rigs in the first quarter of 2012.

Segmental Performance

Contract Drilling: Revenue totaled $460.2 million (67.6% of the total), up approximately 19.1% year over year. Average revenue per operating day was $22,570, up 7.5% year over year, while average direct costs per operating day increased 12.5% year over year to $13,370. Additionally, the average number of rigs operating jumped from 202 in the year-ago quarter to 224, driving the segment operating profit to $90.5 million from $85.1 million in the year-ago quarter.

Pressure Pumping: Revenue of $206.2 million was up 3.0% year over year. However, with market conditions remaining challenging, the segment’s operating profit of $36.8 million decreased from $50.3 million in the prior-year quarter.

Oil & Natural Gas: Revenue stood at $14.7 million, up 9.2% from the year-ago quarter. Operating income of $7.2 million was slightly up from $7.1 million earned in the prior-year quarter.

Capital Expenditure & Balance Sheet

During the quarter, Patterson-UTI spent approximately $248.7 million on capital programs (as against $245.1 million in the second quarter of 2011), of which approximately 73.1% was allocated toward the Contract Drilling segment. As of June 30, 2012, the company had $75.3 million in cash and $600.0 million in long-term debt.

The company repurchased more than 3% of its outstanding shares (approximately 4.7 million shares) for $70 million during the quarter.

Conclusion

Patterson-UTI Energy, Inc. is one of the largest onshore contract drillers in the U.S. with approximately 330 land-based rigs that operate primarily in the oil and natural gas producing regions of North America. The company was incepted following a merger between Patterson Energy, Inc. and UTI Energy Corporation.

Patterson-UTI, the second-largest North American land drilling contractor after Nabors Industries Ltd. ( NBR - Analyst Report ) , currently carries a Zacks #3 Rank, which implies a short-term Hold rating on the stock.