Patterson-UTI Slides on Weak Q1 Earnings - Analyst Blog

Onshore contract driller Patterson-UTI Energy Inc. PTEN reported weak first-quarter 2014 earnings, primarily due to disappointing performances across all business segments along with increased direct operating costs. The unfavorable results led to a 3.1% price fall on Apr 24, 2014 at NYSE.

Patterson-UTI's earnings per share EPS came in at 24 cents, missing the Zacks Consensus Estimate by a penny. The figure also decreased 36.8% from the year-ago profits of 38 cents.  

Revenues of $678.2 million surpassed the Zacks Consensus Estimate of $674.0 million and were 1.7% higher than $667.0 million recorded in the year-ago quarter. Higher rig activities aided the results.

Rig Count Statistics

The number of operational rigs of Patterson-UTI during the reported quarter averaged 202 (193 located in the U.S. and 10 in Canada) compared with 199 in the first quarter of 2013.

Segmental Performance

Contract Drilling: This segment's revenues totaled $425.9 million (62.8% of the total revenue), up 1.6% year over year. Average revenues per operating day were $23,380 against $23,410 in the year -ago period. Average direct costs per operating day came in at $13,780, down from $13,800 in the year-earlier quarter. Gross margin for the segment stood at 41.1%, in line with the year-ago quarter.

The segment's operating profit decreased to $67.1 million from $72.6 million in the year-ago quarter, owing to rise in depreciation, amortization and impairment costs.

Pressure Pumping: Revenues of $240.3 million were up 3.9% year over year. However, the segment's operating profits witnessed a substantial decline to $1.5 million from $28.5 million in the prior-year quarter. The deterioration was led by considerable hike in the segment's direct operating expenses.

Oil & Natural Gas: Revenues stood at $12.0 million, down 28.5% from the year-ago quarter. Moreover, operating income of $2.7 million indicated a 56.7% fall from first-quarter 2013, owing to increased direct operating costs of the unit.      

Direct operating costs

The company reported direct operating expenses of $454.1 million, highlighting an 8.6% hike from $418.2 million reported in the year-ago quarter.

Dividend

Patterson-UTI has declared a quarterly dividend of 10 cents per share, in line with the previous quarter. The dividend will be payable on Jun 26, 2014 to the shareholders of record as of Jun 12, 2014.

Capital Expenditure & Balance Sheet

During the quarter, Patterson-UTI spent approximately $170.4 million on capital programs (against $174.2 million in the first quarter of 2013). As of Mar 31, 2014, the company had $257.8 million in cash and $690.0 million in long-term debt (including current portion).

Zacks Ranks

Patterson-UTI currently retains a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.   

Meanwhile, one can look at better-ranked players in the oil and gas drilling sector like Helmerich & Payne Inc. HP, Pioneer Energy Services Corp. PES and Seadrill Partners LLC SDLP. Helmerich & Payne along with Pioneer Energy Services sport a Zacks Rank #1 (Strong Buy), while Seadrill Partners carries a Zacks Rank #2 (Buy).