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Patterson-UTI Energy’s ‘Buy’ Ratings Are Increasing

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Analysts’ ratings for Patterson-UTI Energy

Patterson-UTI Energy (PTEN) is fourth in terms of the highest “buy” ratings assigned by sell-side analysts in the OFS (oilfield equipment and services) industry. Approximately 78% of the Wall Street analysts tracking Patterson-UTI Energy recommended a “buy” or some equivalent as of June 19. Approximately 19% of the analysts recommended a “hold,” while 3% recommended a “sell” or some equivalent. Analysts’ consensus target price for Patterson-UTI Energy was ~$25.7 as of June 19. Currently, Patterson-UTI Energy is trading near $17.9, which implies 43% returns over the next 12 months at the current price.

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How Patterson-UTI’s rating has changed

On March 19–June 19, the percentage of analysts recommending a “buy” or some equivalent for Patterson-UTI Energy increased from 76% to 78%. Analysts’ “hold” recommendations decreased during the same period. A year ago, ~59% of the sell-side analysts recommended a “buy” for Patterson-UTI Energy.

Factors that impacted Patterson-UTI Energy’s performance

  • Patterson-UTI Energy had higher average operating rigs working.
  • There was higher average revenue per operating day and a higher average margin per operating day.
  • As of March 31, Patterson-UTI Energy had term contracts for drilling rigs providing for ~$600 million of future day rate drilling revenue—an increase from $540 million as of December 31, 2017.
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Why analysts are bullish 

In the second quarter, Patterson-UTI Energy’s management expects its rig count to increase by seven to 176. Management also expects the company’s average rig margin per day to increase by ~$400 with the average revenue per day increasing by $250 and the average rig cost per day decreasing by $150 compared to the first quarter. Patterson-UTI Energy has undertaken initiatives to upgrade its existing rig fleet to add the capabilities of a new build, super-spec rig, which effectively requires lower capital investment. Modern rigs with increased efficiencies should help improve Patterson-UTI Energy’s operating margin.

Analysts’ ratings for Patterson-UTI Energy’s peers

Approximately 70% of the sell-side analysts recommended a “buy” for Nabors Industry (NBR)—Patterson-UTI Energy’s OFS industry peer. Approximately 70% of the analysts assigned a “buy” for Weatherford International (WFT), while 38% of the analysts rated Core Laboratories (CLB) as a “buy.”

Next, we’ll discuss analysts’ ratings for Schlumberger (SLB).

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