PTEN Profit Falls on Weak Demand

Patterson-UTI Energy, Inc. ( PTEN - Analyst Report ) , one of the largest onshore contract drillers in the U.S., reported weak third quarter 2012 results. The underperformance was largely due to reduced drilling operations.

While adjusted earnings per share of 39 cents came ahead of the Zacks Consensus Estimate by a penny, revenues of $643.6 million were below the Zacks Consensus Estimate of $646.0 million.

Comparing year over year, Patterson-UTI’s adjusted earnings per share decreased by 29.1% (from 55 cents to 39 cents) and revenue by 4.5%. The year-over-year profit decline reflects lower demand for U.S rigs and sluggish seasonal improvement in Canada.

Rig Count Statistics

The number of operational rigs during the quarter averaged 216 (211 located in the U.S. and 5 in Canada) compared with 221 average rigs operational in the third quarter of 2011 and 224 rigs in the second quarter of 2012.

Segmental Performance

Contract Drilling: Segment revenue totaled $446.7 million (69.4% of the total revenue), up 2.3% year over year. Average revenue per operating day was $22,450, up 4.7% year over year, while average direct costs per operating day increased 2.8% year over year to $13,340. Segment operating profit decreased to $78.0 million from $85.7 million in the year-ago quarter.

Pressure Pumping: Revenue of $182.0 million was down 19.2% year over year. Segment operating profit plummeted to $15.0 million from $50.4 million in the prior-year quarter due to challenging market conditions.

Oil & Natural Gas: Revenue stood at $14.9 million, up 26.2% from the year-ago quarter. Operating income of $5.4 million was slightly up from $4.8 million earned in the prior-year quarter.

Capital Expenditure & Balance Sheet

During the quarter, Patterson-UTI spent approximately $232.3 million on capital programs (as against $283.8 million in the third quarter of 2011). As of September 30, 2012, the company had $83.5 million in cash and $600.0 million in long-term debt.

The company repurchased approximately 2.4 million shares for $39 million during the quarter.

Conclusion

Patterson-UTI Energy, Inc. is one of the largest onshore contract drillers in the U.S. with approximately 300 land-based rigs that operate primarily in the oil and natural gas producing regions of North America. The company was formed 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.