Will Patterson-UTI Energy’s Bull Run Face Headwinds?



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’s also one of the leading contract drillers. On March 16, 2017, PTEN was trading at $26.01, which was ~42.0% higher than a year ago.

The VanEck Vectors Oil Services ETF (OIH), which tracks 25 OFS (oilfield services and equipment) companies, has risen 11.0% since March 17, 2016. PTEN makes up 3.5% of OIH.

WTI (West Texas Intermediate) crude oil has recovered 24.0% during the past year. You can read more on crude oil prices in Market Realist’s Crude Oil Futures: Will the Recovery Be Short-Lived?

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What does Patterson-UTI Energy stock tell us?

In the past year, Patterson-UTI Energy stock has trended upward. PTEN’s revenues in the past two quarters have risen, although its net earnings have stayed weak in the past four quarters. The recovery of crude oil partially explains the rise OFS companies such as Schlumberger (SLB) and Halliburton (HAL) in the past year. Before the recovery, the entire OFS industry had been negatively affected since June 2014 by the energy price crash.

Patterson-UTI Energy’s moving averages

On March 16, 2017, Patterson-UTI Energy stock was at a ~5.5% discount to its 50-day moving average (or DMA). It was trading 11.0% above its 200-DMA.

Moving averages exhibit a smoother trend following the movement in a stock’s price. A 50-DMA is a short-term moving average, while a 200-DMA shows a long-term trend. PTEN’s short-run moving average crossed over its long-run moving average in the second week of April 2016.

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PTEN stock has been trading above its long-run moving average in the past year. However, PTEN stock has been below its short-run moving average since the second week of February 2017. That indicates that Patterson-UTI Energy’s bull run could face short-term headwinds, although it remains strong over a longer period.

Series highlights

In this series, we’ll analyze Patterson-UTI Energy’s top-line and bottom-line growth. We’ll also look at its relationship to industry drivers, its free cash flow, its balance sheet, and its dividend yield. Let’s start by looking at management’s comments.


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