It has been about a month since the last earnings report for Patterson-UTI (PTEN - Free Report) . Shares have lost about 24.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Patterson-UTI due for a breakout? 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.
Patterson-UTI’s Q2 Loss Narrower Than Expected
Patterson-UTI Energy reported adjusted net loss per share of 17 cents, narrower than the Zacks Consensus Estimate of 21 cents. The better-than-expected numbers reflect strong performance by its Contract Drilling segment.
However, the bottom line worsened from the year-ago loss of 5 cents on lower completion activity that impacted the Pressure Pumping unit.
Revenues of $675.8 million came ahead of the Zacks Consensus Estimate of $670 million but declined 20.9% from the year-ago quarter.
Contract Drilling: This segment’s revenues totaled $348.1 million, essentially flat year over year. Meanwhile, operating income of $16.5 million reflected a turnaround from the loss of $251,000 in the year-earlier quarter.
Average rig revenues per operating day increased to $24,200 from $21,870 in the second quarter of 2018, partly offset by a 3.1% rise in average daily rig operating costs. Consequently, average rig margin per day improved 23% year over year to $10,170.
While the unit was plagued by fall in both the operating days (from 15,998 to 14,385) and the number of rigs operational (from 176 to 158), it benefited from the inclusion of early termination revenues.
Pressure Pumping: Revenues of $251 million dropped 41% from the year-ago sales of $425.3 million. Moreover, the segment reported a loss of $14.4 million against income of $20.6 million in the prior-year quarter. Reduced completion activity and pricing pressure led to the deterioration.
Directional Drilling: The unit’s revenues totaled $50.2 million, down 4.7% year over year. However, the segment’s operating loss of $5.3 million narrowed from the year-ago loss of $7.7 million as continued stress on margins and efficiency more than offset lower activity.
Other Operations: Revenues came in at $26.4 million – unchanged from the year-ago quarter. However, the unit incurred a wider quarterly loss of $7.3 million, as against the loss of $4.8 million recorded in year-ago quarter. The deterioration was mainly on account of rise in SG&A costs – from $4.8 million to $7.3 million.
Capital Expenditure & Financial Position
During the quarter, Patterson-UTI spent approximately $96.9 million on capital programs (as against $194.9 million in the second quarter of 2018). As of Jun 30, 2019, Patterson-UTI had $255.5 million in cash and cash equivalents and $1.1 billion in long-term debt. The company also informed that it repurchased 6.3 million shares during the quarter for $75 million and shelled out more than $8 million as dividends.
Guidance & Outlook
Patterson-UTI management said that drilling and completion activities are expected to remain weak with upstream energy companies choosing to remain conservative with their investment budgets.
Patterson-UTI sees an average rig count of around 142 in the third quarter, declining from the second quarter’s 158. The onshore driller expects an average of 92 rigs to be operational under term contracts during the third quarter and 58 for the 12 months ending Jun 30, 2020.
In pressure pumping, Patterson-UTI expects a slowdown in third quarter completions activity on continued drilling weakness. Directional Drilling revenues are expected to be roughly $49 million with gross margins at second quarter levels.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -28.86% due to these changes.
Currently, Patterson-UTI has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Patterson-UTI has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.