Patterson-UTI Energy’s net debt
In January 2017, PTEN issued shares concurrent to its Seventy Seven Energy acquisition, which led to a higher cash balance. PTEN also repaid Seventy Seven Energy’s debt. Net debt, in effect, fell 80.0% from 1Q16 to 1Q17. Net debt is the aggregate long-term and short-term debt less cash and marketable securities.
Net debt compared to peers
PTEN’s net debt in 1Q17 was $132.0 million. In comparison, Superior Energy Services’ (SPN) net debt was ~$1.1 billion in the same quarter. National Oilwell Varco’s (NOV) net debt was ~$1.7 billion, while Baker Hughes’s (BHI) net debt was negative on March 31, 2017. BHI’s cash and marketable securities exceeded its total debt in 1Q17. PTEN makes up 2.8% of the iShares US Oil Equipment & Services (IEZ). IEZ has fallen 11.0% since June 3, 2016. PTEN stock rose 16.0% during that same period.
Patterson-UTI Energy’s indebtedness
Patterson-UTI Energy’s net debt to TTM (trailing 12-month) adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) has been rising from 1Q16 through 1Q17. Despite the fall in net debt, increasingly lower EBITDA resulted in a higher net debt-to-EBITDA ratio during that period. In 1Q17, PTEN’s net debt-to-EBITDA ratio was ~2.7x, or 106.0% higher than a year ago. A net debt-to-EBITDA ratio reflects a company’s ability to repay its debt from operational earnings and available cash.
How much of Seventy Seven Energy’s debt did PTEN repay?
In 1Q17, after PTEN acquired Seventy Seven Energy, PTEN repaid all of its outstanding debt with Seventy Seven Energy. Earlier, on January 24, 2017, PTEN priced the issuance of 15.8 million shares at $26.45 per share, with an additional purchase up to ~2.4 million shares by the underwriters. PTEN used the proceeds from the equity offerings to repay Seventy Seven Energy’s debt. Read more on the acquisition in Market Realist’s Oilfield Services Deal: PTEN Will Acquire Seventy Seven Energy.
What’s PTEN’s available credit facility?
PTEN has recently increased its revolving credit facility to $632.0 million through September 2017, and to $490.0 million through March 2019.
Next, let’s take a look at Patterson-UTI Energy’s free cash flow.