Patterson-UTI
Energy is an underappreciated oilfield services firm that is poised for
significant growth in the long term due to rise in drilling activity, strong
demand for APEX rigs, improving avg revenue/op day and avg revenue/job numbers,
continuous growth in pressure pumping market, the management’s positive
attitude towards innovation (e.g. bi-fuel rigs) and potential for growth in the
Canadian market.
Patterson-UTI
Energy (PTEN)
is an oilfield services firm which provides drilling and pressure pumping
services to E&P companies operating in North America. Patterson specializes
in using walking rigs for pad drilling applications. The company, and its
subsidiaries, has a large fleet of more than 300 land drilling rigs, including
120 high-quality APEX ® rigs. For the month of August 2013, Patterson had an average of 190 rigs operating in North America of
which 182 were in the United States while 8 were in Canada.
The company has a
strong footprint in all American drilling markets.
The company
has two main operating areas; contract drilling and pressure pumping. It
usually earns ~60% of its operating revenues from contract drilling and more
than 35% of its operating revenues from pressure pumping. The rest, nearly 2%,
comes from some of its E&P activities.
(table 1)
The slump in
natural gas prices had an adverse impact on the drilling and pressure pumping
market as the E&P firms cut back on their expenditure. The recovery of the
industry has been quite slow and as a result, Patterson has suffered with
little top and bottom line growth.
(figure 1)
Contract
Drilling
The
profitability of this segment depends on the average number of rigs operating
and the average revenue per operating day.
Despite the
persistent weakness in the market, the company is now showing signs of improvements
with the uptake in contracting activity. This was also evident in the most recent average rig count (August 2013) which
dropped …. Read full article
