In this part, we’ll discuss Helmerich & Payne (HP) and Patterson-UTI Energy’s (PTEN) indebtedness. On September 30, Patterson-UTI Energy’s net debt was $576 million. It was ~22% lower compared to its net debt on December 31, 2015. The net debt is the aggregate of short and long-term debt, less cash and marketable securities.
The net debt-to-trailing 12-month adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) for Patterson-UTI Energy was ~2.3x on September 30. It was considerably higher than at the beginning of 2016. Despite lower debt, the leverage increased as a result of lower EBITDA. The net debt-to-EBITDA measures a company’s debt repayment ability. When the crude oil price is volatile, a high net debt-to-EBITDA is a concern for an OFS (oilfield equipment and services) company.
Helmerich & Payne’s indebtedness
On September 30, Helmerich & Payne’s net debt was -$457 million. Its cash and marketable securities exceeded its total debt. The company’s net debt was also negative on December 31, 2015. So, Helmerich & Payne’s net debt-to-EBITDA ratio was negative on September 30. Helmerich & Payne accounts for 1.5% of the iShares Select Dividend ETF (DVY).
So, between Patterson-UTI Energy and Helmerich & Payne, the latter is in a superior position to service its debt due to its higher cash balance relative to its debt level. However, investors should note that Patterson-UTI Energy doesn’t have any term debt maturities until October 2020. It might not require sizeable funds before that related to debt repayment.
To learn more about the oilfield services industry, read The Oilfield Equipment and Services Industry: A Primer.