On Oct 5, onshore contract driller, Patterson-UTI Energy Inc. (PTEN - Analyst Report) declared that its Sep 2016 drill rig count averaged at 62 rigs in the U.S. and two in Canada. The company further added that for the three months ending Sep 30, its rig count averaged 60 in the U.S. and two in Canada.
The latest fleet status indicates a substantial decrease in rig count from the year-ago level. The company had recorded an average rig count of 99 in the U.S. and four in Canada. Also, the rig count for the three months ending Sep 30, declined from the prior-year level of 105 rigs in the U.S. and four rigs in Canada.
The weak crude pricing environment has forced most drillers to cut back on the number of rigs. Also, fewer new contracts and declining dayrates have made maintaining profitability a challenge. Retiring rigs, therefore, is an effective way to curb operating expenses. Hence, Patterson-UTI, like its peers Nabors Industries Ltd. (NBR - Analyst Report) , SeaDrill Limited (SDRL - Analyst Report) and Atwood Oceanics, Inc. (ATW - Snapshot Report) , has substantially reduced the number of rigs to be used for current operations.
For third-quarter 2016, Patterson-UTI projects an average of 45 rigs to be operational. The company also anticipates an average of 42 rigs to be under term contract for the second half of this year.
Patterson-UTI is a major onshore contract driller in the U.S. with over 221 land-based rigs that operate primarily in the oil and natural gas producing regions of North America.
On the earnings front, the company reported better-than-expected numbers in the second quarter, mainly due to reduction in costs and good execution. The company has a large, high-quality fleet of drilling rigs, which include the technologically advanced ‘Apex’ rigs – the key to its success.
However, with the company’s rig count declining, earnings and cash flows are likely to be affected in the upcoming quarters. Negative earnings estimate revisions for the current quarter as well as the current year suggest further bearishness ahead.
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