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Patterson-UTI Energy: Management’s Views after 2Q17

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What does management think?

Patterson-UTI Energy’s (PTEN) management thinks that the company has transformed into a multiservices company from primarily a land drilling company after acquiring Seventy Seven Energy. Mark Steven Siegel, Patterson-UTI Energy’s chairman, spoke in the 3Q17 earnings conference call. He said, “With the acquisition of Seventy Seven Energy, our third quarter percentages were 53% of total revenues for pressure pumping and 44% for drilling. The land drilling tag does not seem to fit any longer, yet given our considerable land drilling exposure, the pressure pumping tag does not appear appropriate either. Now that we have added directional drilling, I believe that the description that fits best is that of a multiservices company.”

On April 20, 2017, Patterson-UTI Energy completed the acquisition of Seventy Seven Energy. To learn more, read Oilfield Services Deal: PTEN Will Acquire Seventy Seven Energy. Since September 29, Patterson-UTI Energy’s stock price has fallen 2%—compared to a 2% rise in the iShares Core S&P Mid-Cap ETF (IJH). Patterson-UTI Energy accounts for 0.216% of IJH.

Rig count and margin estimates

William Andrew Hendricks, Patterson-UTI Energy’s CEO, spoke in the 3Q17 earnings conference call. He said, “For the month of October, we expect our rig count will average 158 rigs and for the fourth quarter, 160 rigs. We expect slight improvement in our rig count through the end of the year due to the delivery of incremental upgraded super-spec rigs. Average rig revenue per day is expected to be relatively flat in the fourth quarter at $20,300. Average rig operating cost per day is expected to be approximately $13,000 for the fourth quarter. Accordingly, average rig margin per day for the fourth quarter is expected to be approximately $7,300.” Patterson-UTI Energy’s average rig count was 161 in 3Q17, while its average rig margin per day was $7,730 in 3Q17.

Pressure pumping outlook

Hendricks spoke about pressure pumping in the 3Q17 earnings conference call. He said, “We plan to reactivate one spread late in the fourth quarter, ending the year with 23 active spreads, comprising approximately 1.25 million horsepower. Increased activity as a result of a higher spread count in the fourth quarter is expected to be somewhat offset by the seasonal impact of the holidays. Nonetheless, higher activity combined with better pricing is expected to result in an increase in pressure pumping revenues during the fourth quarter to approximately $390 million and gross profit as a percentage of pressure pumping revenues of approximately 22.5%.”

In the next part, we’ll discuss Patterson-UTI Energy’s revenue and earnings.

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