Will Merger Agreement Restrict Patterson-UTI Energy’s Dividend?

Patterson-UTI Energy’s dividend

On February 9, 2017, Patterson-UTI Energy (PTEN) declared a dividend per share (or DPS) of $0.02 to be paid on March 22, 2017. Earlier, in June 2016, PTEN management elected to slash its quarterly DPS by 80.0%, prompted by a steep fall in earnings. The company aimed to improve its liquidity through dividend reduction while the crude oil market continued to stay pressured. PTEN’s industry peer Superior Energy Services (SPN), which last declared a dividend in January 2016, paid a DPS of $0.08.

Will Merger Agreement Restrict Patterson-UTI Energy’s Dividend?

Patterson-UTI Energy’s dividend yield

Dividend yield, expressed as dividend per share relative to share price, was steady from 2Q15 through 2Q16 before it crashed in 3Q16. From September 30, 2016, to December 30, 2016, PTEN stock rose 20.0%, while its DPS remained unchanged. In effect, its dividend yield fell to 0.36% on December 30, 2016.

PTEN makes up 0.25% of the SPDR S&P MidCap 400 ETF (MDY).

Effect of Seventy Seven Energy merger on dividends

According to PTEN’s proposed merger transaction with Seventy Seven Energy (SVNT), PTEN can’t pay more than $0.02 per share until the merger becomes effective or is terminated.