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Why Patterson-UTI Energy Stock Is So Bearish

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Patterson-UTI Energy versus industry ETF and crude oil

Patterson-UTI Energy (PTEN) is a land-based drilling rigs and pressure pumping operator and also one of the leading contract drillers in the United States. On June 2, 2017, PTEN was trading at $21.19. That was ~24.0% below its price at the beginning of 2017. The Dow Jones Industrial Average (DJIA-INDEX) has risen 6.0% year-to-date. The energy sector makes up 6.0% of the DJIA-INDEX.

The VanEck Vectors Oil Services ETF (OIH), an ETF-tracking index of 25 OFS (oilfield services and equipment) companies, has fallen 25.0% year-to-date. PTEN makes up 4.6% of OIH. The price of WTI (West Texas Intermediate) crude oil has fallen 9.0% since the start of the year. You can read more on crude oil in Market Realist’s Are Energy Commodities Entering a Bearish Zone?

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PTEN’s stock movement

In June 2016, Patterson-UTI Energy stock started trending upward, but in February 2017, that trend subsided. PTEN’s revenues in the past three quarters have risene, although its net earnings have remained weak. Its free cash flow turned negative in 1Q17. We’ll be looking at its value drivers in detail in the rest of this series. It’s worth noting that the weakness in the price of crude oil partially explains the fall in the price of stocks for OFS companies such as Schlumberger (SLB) and Halliburton (HAL) in 2017.

PTEN’s moving averages

On June 2, 2017, Patterson-UTI Energy stock was at a ~6.0% discount to its 50-day moving average (or DMA). It’s trading 12.0% below its 200-DMA.

PTEN’s short-run MA (moving average) crossed over its long-run MA in the second week of May 2017 after running steadily over the long-run MA for nearly a year. PTEN stock also moved below its long-run MA in April 2017 and has been running below its short-run MA since March 2017. That indicates that PTEN could face a short-term headwind while its stock is facing resistance over the longer period. A 50-DMA is a short-term MA, while a 200-DMA shows a long-term trend.

Series highlights

In this series, we’ll analyze Patterson-UTI Energy’s revenue and earnings, free cash flow, balance sheet, dividend yield, and industry drivers that are affecting it. Let’s start with management’s comments.

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