Onshore contract driller Patterson-UTI Energy Inc. (PTEN) reported higher-than-expected first-quarter 2012 results, owing to higher U.S. rig activity levels.
Earnings per share came in at 62 cents, well ahead of the Zacks Consensus Estimate of 57 cents. Revenues at $745.9 million were above our projection of $732.0 million.
Compared with the year-ago period, Patterson-UTI’s adjusted earnings per share improved by a handsome 34.8% (from 47 cents to 62 cents), while revenues surged 31.6%, reflecting major growth from contract drilling activities, where day rates kept improving and activity levels got benefited from the addition of 5 new Apex rigs.
Rig Count Statistics
The number of operational rigs during the quarter averaged 237 (224 rigs located in the U.S. and 13 in Canada), compared with 207 average rigs operating in the first quarter of 2011 and 232 rigs operating in the December quarter.
Segmental Performance
Contract Drilling: Revenue totaled $489.5 million (65.6% of the total revenue), up approximately 29.7% year over year. Average revenue per operating day was $22,650, up 11.9% year over year, while average direct costs per operating day increased 11.5% year over year to $13,080. Additionally, the average number of rigs operating jumped from 207 in the year-ago quarter to 237, driving the segment operating profit to $111.8 million (as against $80.5 million in the year-ago quarter).
Pressure Pumping: Recorded revenues of $241.7 million, a rise of 34.6% year over year, mainly reflecting continued ramp in customer demand in the Southwest region that more than made up for the softness in the Northeast. Consequently, the segment’s operating profit of $46.8 million improved over the prior-year’s income of $41.4 million.
Oil & Natural Gas: Revenue generated was $14.7 million, up 41.7% from the year-ago quarter. This segment posted an operating income of $7.5 million, up from $4.8 million earned in the prior-year quarter, benefiting from improved oil and liquids rich drilling activity.
Capital Expenditure & Balance Sheet
During the quarter, Patterson-UTI spent approximately $263.4 million on capital programs (as against $182.6 million in the first quarter of 2011), of which approximately 76.2% was allocated toward the Contract Drilling segment. As of December 31, 2011, the company had $17.8 million in cash and $390.0 million in long-term debt.
Recommendation & Outlook
Patterson-UTI kept improving as they managed to shift people and equipment to match their rig fleet and keep pace with the changing trends in capital spending plans of customers. In the near term, the company continues to forecast strength from U.S. drilling business, despite the market moving from natural gas to oil and liquid rich drilling.
However, for the second-quarter, Patterson-UTI projected weakness in its drilling business due to seasonal slowdown in the Canadian region. Apart from this, its pressure pumping business will face occasional challenges owing to decrease demand in natural gas markets, plus soaring supply of additional frac equipment.
Patterson-UTI, the second-largest North American land drilling contractor after Nabors Industries Ltd. (NBR), currently retains a Zacks #4 Rank, which translates into a short-term Sell rating.
We are maintaining our long-term Neutral recommendation on the stock.
NABORS IND (NBR): Free Stock Analysis Report
PATTERSON-UTI (PTEN): Free Stock Analysis Report
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