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Is Patterson-UTI Energy Meeting Its Fund Obligations Internally?

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PTEN’s sources and requirements of funds

Patterson-UTI Energy’s (PTEN) internal cash generation has not been adequate to cover its external obligations. In fiscal 2015, PTEN’s internal source of funds as a percentage of the external fund requirement was 30%. The internal source of funds is expressed as free cash flow plus cash and marketable securities. The external fund requirement is defined as the contractual obligation plus dividend payment. PTEN’s dividend payment in fiscal 1Q16 was unchanged from the year prior. In comparison, Forum Energy Technologies’ (FET) internal source of funds as a percentage of the external requirement was 37% in fiscal 2015.

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Fund obligations versus internal sources

In fiscal 1Q16, Patterson-UTI Energy reduced its long-term debt by 3% from the prior quarter. By the end of fiscal 2015, PTEN’s contractual obligation, or debt repayment obligation, was $1.2 billion. Between fiscals 2014 and 2015, PTEN’s internal sources of fund improved significantly as a result of its free cash flow turning positive in fiscal 2015. PTEN’s external fund requirement decreased 35% during the same period, and the ratio improved in fiscal 2015. PTEN makes up 0.04% of the Vanguard High Dividend Yield ETF (VYM). In the next part of this series, we’ll discuss Patterson-UTI Energy’s dividends and dividend yields.

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