Patterson-UTI Energy (PTEN) Tops Q4 EPS by 5c, Revenues Beat

Patterson-UTI Energy (NASDAQ: PTEN) reported Q4 EPS of ($0.57), $0.05 better than the analyst estimate of ($0.62). Revenue for the quarter came in at $220.8 million versus the consensus estimate of $218.12 million.

Andy Hendricks, Patterson-UTI's Chief Executive Officer, stated, "Drilling and completion activity improved during the quarter, marking what we believe to be the beginning of a recovery. Based on our customer engagement, we are confident that activity levels will continue to improve. With increased confidence that a recovery has begun, we took advantage of our strong balance sheet by repurchasing a portion of our senior notes at a discount, and repaying half of our outstanding bank term loan, leaving only $50 million of total debt due before 2028."

Mr. Hendricks continued, "In contract drilling, our average rig count for the fourth quarter improved to 62 rigs from 60 rigs in the third quarter. The proportion of rigs that were idle but contracted decreased to 16% in the fourth quarter from 28% in the third quarter. Our rig count at the end of 2020 was 65 rigs, of which five were idle but contracted. For the first quarter, we expect our rig count will average 69 rigs, of which five are expected to be idle but contracted.

"Average rig margin per day during the fourth quarter was $7,770, which exceeded our expectation. Relative to the third quarter, average rig revenue per day of $20,210 was negatively impacted by lower dayrates and the absence of any lump-sum early termination revenues in the fourth quarter. Average rig operating cost per day increased to $12,440 due to a smaller proportion of rigs that were idle but contracted, relative to the third quarter.

"As of December 31, 2020, we had term contracts for drilling rigs providing for approximately $300 million of future dayrate drilling revenue. Based on contracts currently in place, we expect an average of 42 rigs operating under term contracts during the first quarter, and an average of 34 rigs operating under term contracts during 2021.

"In pressure pumping, revenues increased to $79.5 million during the fourth quarter from $72.0 million during the third quarter, as we averaged seven active spreads in the fourth quarter, compared to five in the third quarter. Gross margin for pressure pumping decreased to $4.1 million in the fourth quarter from $8.3 million in the third quarter. While industry completion activity in the Permian increased in the fourth quarter, in the Northeast, where we have a strong presence, industry completion activity decreased significantly and remained at this lower level as we entered the first quarter. As a result, we are relocating one of our dual-fuel spreads from the Northeast to Texas where it has dedicated work.

"In directional drilling, revenues during the fourth quarter increased 64% sequentially to $16.9 million, outpacing the growth in the underlying horizontal and directional rig count, as our directional drilling business continues to gain market share. The market share increase was aided by the enhanced performance of our new technology, the Mercury™ measurement while drilling system, and new Mpact® directional drilling motor sizes, which were introduced in early-2020. With better fixed cost coverage and the benefits of the cost reduction efforts implemented in 2020, gross margin improved in the fourth quarter to $2.2 million, or 12.8% of revenues, from $0.5 million, or 5.0% of revenues, in the third quarter."

Mr. Hendricks concluded, "The start of a recovery is an encouraging time in the oilfield, as we look forward to increasing activity levels and an improvement in pricing. We believe we are well-positioned both financially and operationally to take advantage of this industry recovery. In addition, we believe we will benefit from our investments in technology and performance, especially in the area of alternative fuel technology, where our natural gas fueled rigs and frac spreads and our EcoCell™ lithium battery hybrid energy management system help to reduce both fuel consumption and emissions.

"With this focus on technology, our capital spending has shifted from capital intensive investments in major upgrades to primarily maintenance capital expenditures with some modest spending on technology and minor equipment upgrades. Based on our current outlook for activity, our capital spending budget for 2021 is $135 million."

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

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