Patterson-UTI Energy versus peers and industry
Patterson-UTI Energy (PTEN) owns and operates land-based drilling rigs and pressure pumping equipment in the United States. It is also one of the leading contract drillers. On June 22, PTEN was trading at $21.12, ~39% higher than its price at the beginning of 2016.
The VanEck Vectors Oil Services ETF (OIH), an ETF tracking 25 OFS (oilfield service) companies, has increased 11% since January 1. Precision Drilling (PDS), PTEN’s smaller market cap peer, has increased 32% during the same period. PTEN makes up 2.9% of OIH.
What does Patterson-UTI Energy’s share price movement tell us?
Patterson-UTI Energy’s share price trended downwards from June 2015 to January 2016. PTEN’s quarterly revenues and net income in the past four quarters were persistently weak. The WTI (West Texas Intermediate) crude oil price has risen 34% since the beginning of this year. Crude oil’s price recovery in 2016 partly explains the rise in PTEN’s share price this year. The entire OFS industry has been negatively affected by the energy price crash since June 2014.
Patterson-UTI Energy’s moving averages
On June 22, Patterson-UTI Energy’s share price was at a ~12% premium to its 50-day moving average (or DMA). Also, it is trading 31.5% above its 200-day moving average.
Moving averages exhibit a smoother trend following the stock’s price movement. A 50 DMA is a short-term MA, while a 200 DMA shows a long-term trend. PTEN’s short-term MA crossed over its long-term MA in the second week of April. PTEN’s share price was above it short-term MA in May, and has been trading above its long-term MA since the beginning of March. This suggests that PTEN’s share price has gathered momentum.
In this series, we’ll analyze Patterson-UTI Energy’s top-line and bottom-line growth, free cash flow, balance sheet, dividend, and valuation multiples. We’ll start by looking at comments from the company’s management in the next part of this series.