Patterson-UTI Energy (PTEN) Tops Q1 EPS by 7c, Revenues Beat

Patterson-UTI Energy (NASDAQ: PTEN) reported Q1 EPS of ($0.14), $0.07 better than the analyst estimate of ($0.21). Revenue for the quarter came in at $704 million versus the consensus estimate of $694.06 million.

Andy Hendricks, Patterson-UTI's Chief Executive Officer, stated, "Drilling and completion activity slowed during the first quarter as E&P companies reacted to the sharp drop in oil prices at the end of 2018. In contract drilling, our rig count averaged 175 rigs during the first quarter, compared to an average of 183 during the fourth quarter. While oil prices strengthened and operator cash flow expectations have improved, operators have remained fiscally conservative and demand levels remain subdued. For the second quarter, we expect our rig count to average approximately 160 rigs."

Mr. Hendricks added, "During the first quarter, average rig revenue per day increased $620 to $23,590, more than offsetting a $310 increase in average rig operating costs per day to $13,880. Accordingly, the average rig margin per day increased $310 to $9,700.

"As of March 31, 2019, we had term contracts for drilling rigs providing for approximately $650 million of future dayrate drilling revenue. Based on contracts currently in place, we expect an average of 104 rigs operating under term contracts during the second quarter, and an average of 59 rigs operating under term contracts during the 12 months ending March 31, 2020.

"In pressure pumping, as expected, completion activity slowed in the first quarter. We ended the first quarter with 16 active spreads compared to 20 at the end of the fourth quarter. As we remain focused on reducing costs and improving cash flow, we took the proactive step of removing spreads from the market until we can redeploy them at attractive economics. With the sequential decrease in activity, pressure pumping revenues for the first quarter declined to $248 million. Gross margin of $44.9 million for the first quarter exceeded our expectation, as we were able to improve internal efficiencies during the quarter. While we have reduced our spread count, we expect our second quarter activity to be similar to the first quarter.

"In directional drilling, gross margin improved to $7.4 million in the first quarter from $6.7 million in the fourth quarter, as we reduced expenses for repairs and maintenance and third-party rentals. Revenues for the first quarter were $53.0 million compared to $56.4 million for the fourth quarter."

Mark S. Siegel, Chairman of Patterson-UTI, stated, "The industry backdrop improved during the first quarter as oil prices began to recover from the sharp drop in the fourth quarter. Oil prices in the mid-$60s have historically been sufficient to support increasing activity levels. While drilling and completion activity is currently subdued, we expect the strength in commodity prices will eventually lead to higher activity levels. Nonetheless, we remain resolute in our focus on efficient and high-quality services, our operational flexibility, a strong balance sheet, and prudent capital allocation."

Mr. Siegel continued, "As our free cash flow improved during the first quarter, we opportunistically accelerated share repurchases and bought back $75 million of our stock at a valuation we believe significantly undervalues the cash flow generating power of the underlying assets. Even after $75 million of share repurchases and $8.5 million of dividends paid in the first quarter, our cash balance improved to $249 million," he concluded.

For earnings history and earnings-related data on Patterson-UTI Energy (PTEN) click here.

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