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Patterson-UTI's Potential Acquisition Could Add Significant Assets To Its Core Business

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Patterson-UTI's Potential Acquisition Could Add Significant Assets To Its Core Business

Patterson-UTI Energy, Inc. (NASDAQ: PTEN) has announced its intention to acquire Seventy Seven Energy Inc (OTC: SSEIQ), primarily using equity for the deal that will add meaningful exposure to the drilling and pumping segments of the combined entity.

Wunderlich’s Jason A. Wangler maintains a Hold rating on the company, while raising the price target from $24 to $27.

Adding Assets

“With an upturn expected in 2017, high-spec rigs a major focus and pressure pumping looking to rebound (in terms of utilization and price), the timing of the deal makes sense, in our view,” Wangler mentioned.

The analyst believes Seventy Seven Energy’s assets will be important to the deal, although the ability to add mid-continent exposure, workforce talent and diversification in the customer base would offer Patterson-UTI Energy material upside, along with its recovery.

Expansion

Wangler believes that with expansion in mind, Patterson-UTI Energy “has shifted to the acquisition market to increase its high-spec fleet from 161 to 201 and also acquired Warrior recently to improve its top-drive technology. This could also help support PTEN in its plans to upgrade more rigs to the ultra high-spec type in demand.”

In addition, “SVNT has a large infrastructure footprint that should allow PTEN to not only add horsepower, but also the capability to deploy the horsepower effectively,” the analyst noted, while adding, “With the deal closing late in 1Q17, we assume that PTEN will use equity around that time to keep its balance sheet strong, and opportunistic, as it looks to expand in the recovery.”

At last check, shares of Patterson-UTI were up 0.37 percent at $26.80.

Latest Ratings for PTEN

DateFirmActionFromTo
Apr 2019MaintainsBuyBuy
Mar 2019Initiates Coverage OnNeutral
Jan 2019DowngradesOverweightNeutral

View More Analyst Ratings for PTEN
View the Latest Analyst Ratings

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