Onshore contract driller Patterson-UTI Energy Inc. (PTEN) reported healthy first quarter 2011 results, reflecting increased drilling activities in the fertile oil and liquids plays in the U.S. along with a higher pricing for services.
Earnings per share came in at 46 cents, ahead of the Zacks Consensus Estimate of 43 cents. The quarter’s result also jumped significantly from the year-ago quarter’s profit of just 3 cents.
Quarterly revenue of $567.4 million shot up 108.9% from the year-earlier level of $271.6 million. The revenue also surpassed our projection of $541 million.
Rig Fleet Analysis
The number of rigs operating during the quarter averaged 192 in the U.S. and 15 in Canada, netting 207, up 6.7% year over year.
During the quarter, the company completed three new Apex(TM) rigs and operated 86 rigs under long-term contracts. Patterson-UTI targets to complete 25 new Apex(TM) rigs in 2011 and has already entered into long-term contracts for 18 such rigs. Additionally, management aims at operating an average of approximately 102 rigs under long-term contracts during the balance of 2011.
Segmental Performance
Contract Drilling: Contract Drilling revenue leaped 79.1% year over year to $377.4 million in the first quarter. Average revenue per operating day was $20,240 (up 23.1%), while average direct costs per operating day increased (by 11.3%) to $11,730. The segment recorded an operating profit of $80.5 million as against $8.7 million in the year-ago quarter.
Pressure Pumping: The segment reported revenue of $179.7 million, much higher than $53.8 million generated in the prior-year period. The improvement was buoyed by increased operations in the Permian Basin including a greater number of wells being drilled. Consequently, the segment posted an operating profit of $41.4 million, which increased considerably over $4.5 million in the prior-year quarter.
Oil & Natural Gas: Revenue generated from the Oil & Natural Gas business climbed 46.5% year over year to $10.4 million and segment operating income of $4.8 million increased from $2.8 million earned in the prior-year quarter, on improved oil drilling activity.
Capital Expenditure & Balance Sheet
During the first quarter of 2011, Patterson-UTI incurred a capital expenditure of $182.6 million, with approximately 74% targeted toward the Contract Drilling segment. As of March 31, 2011, the company had $37.7 million in cash.
Outlook
We believe that in the near term, Patterson-UTI stands to benefit from the current boom in pressure pumping services given its growing premium land rig fleet and stellar financial position (free cash flow positive and a debt-free balance sheet).
However, with natural gas fundamentals remaining weak, we see no significant price upside for the company stock in the near-to-medium term and maintain our Neutral rating. Patterson-UTI competes with other U.S. onshore drilling companies, such as Helmerich & Payne Inc. (HP) and Nabors Industries Ltd. (NBR).
HELMERICH&PAYNE (HP): Free Stock Analysis Report
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