Patterson-UTI Energy Reports Financial Results for Three and Twelve Months Ended December 31, 2018

HOUSTON, Feb. 7, 2019 /PRNewswire/ -- PATTERSON-UTI ENERGY, INC. PTEN today reported financial results for the three and twelve months ended December 31, 2018.  The Company reported a net loss of $201 million, or $0.93 per share, for the fourth quarter of 2018, compared to a net profit of $195.4 million, or $0.88 per share, for the quarter ended December 31, 2017, which included the positive impact of the 2017 tax law change.  The Company recorded a non-cash goodwill impairment charge in the fourth quarter of 2018 of $211 million ($192 million after-tax or $0.89 per share).  Excluding the goodwill impairment charge, the net loss for the fourth quarter of 2018 would have been $9.0 million, or $0.04 per share.  Revenues for the fourth quarter of 2018 were $796 million, compared to $787 million for the fourth quarter of 2017. 

For the year ended December 31, 2018, the Company reported a net loss of $321 million, or $1.47 per share, compared to a net profit of $5.9 million, or $0.03 per share, for the year ended December 31, 2017.  Excluding non-cash impairment charges incurred during the third and fourth quarters of 2018, the net loss for 2018 would have been $74.7 million, or $0.34 per share.  Revenues for the year ended December 31, 2018 were $3.3 billion, compared to $2.4 billion for the same period in 2017.

During the fourth quarter, the Company repurchased approximately 3.8 million of its outstanding shares for $50.0 million.  During the year ended December 31, 2018, the Company repurchased 9.3 million shares on the open market, or 4.2% of its outstanding shares at the beginning of the year, for approximately $150 million.  At December 31, 2018, the remaining amount under the Company's share repurchase authorization was approximately $150 million, and the Company's Board has authorized an increase to bring the current authorization up to $250 million.

Andy Hendricks, Patterson-UTI's Chief Executive Officer, stated, "In contract drilling, our rig count averaged 183 rigs during the fourth quarter, an increase of five rigs from the third quarter.  The sharp drop in oil prices in December resulted in some of our customers notifying us of their intent to release rigs.  Recently, with the sharp rebound in oil prices above $50, we have seen an improvement in operator sentiment.  We expect our rig count will average 174 rigs during the first quarter of 2019."

Mr. Hendricks added, "We achieved an increase in average rig margin per day of $920 to $9,390.  Dayrates for super-spec rigs were strong during the fourth quarter, leading to an increase in average rig revenue per day of $690 to $22,970.  Average rig operating costs per day for the fourth quarter decreased $230 to $13,580.  Average rig revenue, costs and margin on a per day basis were all better than expected during the fourth quarter.      

"We completed 14 major upgrades throughout 2018 and one additional major upgrade in January 2019.  We currently have only one additional major rig upgrade contracted for delivery in 2019.  Given the significant capital investment for major upgrades, we require term contracts for a major upgrade.  We have not delivered any major drilling rig upgrades without a term contract, nor do we intend to do so.

"As of December 31, 2018, we had term contracts for drilling rigs providing for approximately $770 million of future dayrate drilling revenue.  Based on contracts currently in place, we expect an average of 122 rigs operating under term contracts during the first quarter, and an average of 78 rigs operating under term contracts during 2019.   

"In pressure pumping, we generated a better than expected gross profit for the fourth quarter of $62.2 million on revenues of $320 million compared to gross profit of $79.1 million on revenues of $422 million for the third quarter.  The sequential decrease in both revenues and gross profit was a function of lower activity levels, primarily as a result of year-end E&P budget exhaustion.  We continue to make progress in improving our pressure pumping performance, where the fourth quarter showed increasing internal efficiencies with reduced non-productive time and an increase in average number of stages per pumping day.  With the weakness in commodity prices late in the fourth quarter, operators have been delaying starting new completion projects in the first quarter, and pricing remains extremely competitive.  As such, we have made the decision to idle spreads rather than work at unreasonably low prices.  We ended the fourth quarter with 20 active spreads and idled three spreads early in the first quarter of 2019.     

"In directional drilling, revenues for the fourth quarter increased to $56.4 million from $51.6 million in the third quarter due to higher activity levels, as well as progress made to improve pricing and reduce equipment rental expense.  Adjusted EBITDA improved to $4.1 million from $3.3 million in the third quarter." 

Mark S. Siegel, Chairman of Patterson-UTI, stated, "The magnitude and speed of the oil price decline during the fourth quarter was surprising, even for those who have witnessed many major fluctuations in oil prices.  The timing of the sharp decline no doubt impacted plans for first quarter 2019 drilling and completion programs. 

"With oil prices in the mid-$50's, operator sentiment has improved.  However, we suspect some of our E&P customers will wait to see if these prices, or possibly even higher prices, remain in effect before solidifying their drilling and completion plans.  If oil prices do move higher, we expect activity levels will improve.  With this market backdrop, and based on near-term activity levels, we expect 2019 capital expenditures of $465 million, a 27% decrease from the $641 million spent in 2018."

Mr. Siegel continued, "We will continue to focus on the things that have made us a leader in our markets and served us well in prior periods of uncertainty: efficient and high-quality services, our operational flexibility, the strength of our balance sheet, and prudent capital allocation.  In 2018 we used our cash flow to repurchase $150 million of our stock, or more than 4% of the stock that was outstanding at the beginning of the year.  We will continue to evaluate opportunities to repurchase our shares, particularly when we feel our stock is significantly undervalued," he concluded.

The Company declared a quarterly dividend on its common stock of $0.04 per share, to be paid on March 21, 2019, to holders of record as of March 7, 2019.

Financial results for the fourth quarter include pre-tax, non-cash impairment charges totaling $211 million ($192 million after-tax or $0.89 per share) related to the impairment of all of the goodwill associated with the Company's pressure pumping and directional drilling businesses.  For the year ended December 31, 2018, financial results also include pre-tax, non-cash impairment charges totaling $65.9 million related to the impairment of certain legacy drilling rigs and sand handling equipment during the third quarter of 2018.  For the year ended December 31, 2017, financial results include a benefit of $219 million related to a non-cash revaluation of deferred tax items and $83.8 million of net pre-tax costs that include merger and integration expenses, non-cash impairment charges, and gains on the sale of certain real estate and oil and gas interests. Excluding these items, the net loss for 2017 would have been $158 million or $0.80 per share.   

All references to "per share" in this press release are diluted earnings per common share as defined within Accounting Standards Codification Topic 260.

The Company's quarterly conference call to discuss the operating results for the quarter ended December 31, 2018, is scheduled for today, February 7, 2019, at 9:00 a.m. Central Time. The dial-in information for participants is (844) 704-2496 (Domestic) and (647) 253-8661 (International).  The conference ID for both numbers is 3519209.  The call is also being webcast and can be accessed through the Investor Relations section of the Company's website at http://investor.patenergy.com.  A replay of the conference call will be on the Company's website for two weeks. 

About Patterson-UTI

Patterson-UTI is a provider of oilfield services and products to oil and natural gas exploration and production companies in North America, including market leading positions in contract drilling, pressure pumping and directional drilling services.  For more information, visit www.patenergy.com.  

Cautionary Statement Regarding Forward-Looking Statements

This press release contains forward-looking statements which are protected as forward-looking statements under the Private Securities Litigation Reform Act of 1995 that are not limited to historical facts, but reflect Patterson-UTI's current beliefs, expectations or intentions regarding future events.  Words such as "anticipate," "believe," "budgeted," "continue," "could," "estimate," "expect," "intend," "may," "plan," "predict," "potential," "project," "pursue," "should," "strategy," "target," or "will," and similar expressions are intended to identify such forward-looking statements.  The statements in this press release that are not historical statements, including statements regarding Patterson-UTI's future expectations, beliefs, plans, objectives, financial conditions, assumptions or future events or performance that are not historical facts, are forward-looking statements within the meaning of the federal securities laws.  These statements are subject to numerous risks and uncertainties, many of which are beyond Patterson-UTI's control, which could cause actual results to differ materially from the results expressed or implied by the statements.  These risks and uncertainties include, but are not limited to: volatility in customer spending and in oil and natural gas prices, which could adversely affect demand for Patterson-UTI's services and their associated effect on rates, utilization, margins and planned capital expenditures; global economic conditions; excess availability of land drilling rigs and pressure pumping equipment, including as a result of low commodity prices, reactivation, improvement or construction; liabilities from operations; weather; decline in, and ability to realize, backlog; equipment specialization and new technologies; shortages, delays in delivery and interruptions of supply of equipment and materials; ability to hire and retain personnel; loss of, or reduction in business with, key customers; cybersecurity risk; difficulty with growth and in integrating acquisitions and new technology; governmental regulation; product liability; legal proceedings, including technology disputes, and actions by governmental or other regulatory agencies; political, economic and social instability risk; ability to effectively identify and enter new markets; dependence on our subsidiaries to meet our long-term debt obligations; variable rate indebtedness risk; ability to maintain credit rating and service debt; and anti-takeover measures in our charter documents; contingent tax liabilities; and ability to use net operating losses.

Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained from time to time in Patterson-UTI's SEC filings.  Patterson-UTI's filings may be obtained by contacting Patterson-UTI or the SEC or through Patterson-UTI's website at http://www.patenergy.com or through the SEC's Electronic Data Gathering and Analysis Retrieval System (EDGAR) at http://www.sec.gov.  Patterson-UTI undertakes no obligation to publicly update or revise any forward-looking statement.