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Patterson-UTI Energy (PTEN) Up 4.2% Since Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Patterson-UTI Energy, Inc. (PTEN - Free Report) . Shares have added about 4.2% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is PTEN due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

First-Quarter 2018 Results

Patterson-UTI Energy's first-quarter adjusted net loss per share of 16 cents was wider than the Zacks Consensus Estimate of a loss of 9 cents, primarily due to a surge in direct operating costs.

However, Patterson-UTI’s performance improved from the year-ago loss of 40 cents per share, as shale drilling picked up amid rebounding oil prices.

Revenues of $809 million increased from $305 million in the year-ago quarter due to improvement in revenues in the Contract Drilling and Pressure Pumping segments, also beating the Zacks Consensus Estimate of $792 million.

Segmental Performance

Contract Drilling: This segment’s revenues totaled $327.8 million, soaring 106.5% year over year.

Average revenues per operating day increased to $21,540 from $21,200 in the first quarter of 2017. Moreover, average direct costs per operating day came in at $13,970, down from $14,450 in the year-ago quarter. The segment was also boosted by a jump in both the operating days (from 7,487 to 15,218) and number of rigs operational (from 83 to 169), on the back of resilience in Patterson-UTI’s operations amid an improving market.

Consequently, the segment recorded operating loss of $17.1 million, significantly narrower than the loss of $61.7 million incurred in the year-earlier quarter.

Pressure Pumping: Revenues of $406.8 million increased from the year-ago sales of $141.2 million. Moreover, the segment reported a profit of $25.4 million, turning around from a loss of $22.9 million in the prior-year quarter. Pricing gains and higher activity, along with supply chain organization by the company led to the improvement. It was partially offset by adverse weather conditions.

Directional Drilling: Directional Drilling — Patterson-UTI’s newest unit following the acquisition of MS Directional — lost $4.9 million on revenues of $48.6 million.

Other Operations: Revenues came in at $26 million compared with $5.3 million in the year-ago quarter. However, the increase in direct operating cost from $3.3 million in the year-ago period to $17.7 million led to a wider quarterly loss of $4.1 million compared with a loss of $2 million recorded in year-ago quarter.

Direct Operating Costs

The company incurred direct operating expenses of $589 million, reflecting a 155.5% jump from $230.5 million reported in the year-ago quarter.

Share Repurchase

924,800 shares have been bought back by the company at an average price of $18.28. At present, the company has $170 million in its share repurchase program.

In addition, the company decided to double its quarterly dividend from 2 cents to 4 cents (16 cents on an annualized basis), which will be paid on Jun 21, 2018 to shareholders of record as of Jun 7, 2018.

Capital Expenditure & Balance Sheet

During the quarter, Patterson-UTI spent approximately $122.9 million on capital programs (versus $68.4 million in the first quarter of 2017).

As of Mar 31, 2018, the company had $304.3 million in cash and $598.8 million in long-term debt.

Guidance & Outlook

Patterson-UTI management remains upbeat over its business following the recovery in land rig count and recent bullishness in activity and pricing. In fact, the company sees 2018 as an exciting year for super-spec rigs. The company expects around 110 rigs, on an average, to be operational in the second quarter under term contracts, and 75 within the next four quarters.

Patterson-UTI expects an average rig count of 176 in the second quarter along with a seasonal slowdown in drilling activities in Canada. In the beginning of the second quarter, the company created its 24th frac spread, which is now operating in the Permian Basin assets. By the end of the second quarter, the company plans to activate its 25th frac spread.

As stated earlier by Patterson-UTI, the company’s capex budget of around $675 million will remain unstirred.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There have been two revisions higher for the current quarter compared to six lower.

VGM Scores

At this time, PTEN has a strong Growth Score of A, though it is lagging a lot on the momentum front with an F. The stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, stocks has an aggregte VGM score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for growth investors than value investors.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Notably, PTEN has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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