- The rig count in US has just started to slump and the implications are negative for onshore drillers like Patterson-UTI Energy.
- Of 208 operating rigs as of December 2014, only 93 have term-contracts in 2015. The implication is idle time, low utilization and lower revenue.
- EBITDA compression started in the third quarter of 2014 and is likely to continue over the next 2-3 quarters.
- Goldman Sachs is forecasting $40 per barrel oil and there can be more bearish times ahead for the sector.
- At a 5.1x multiple of 2014E EBITDA, Patterson-UTI shares may appear attractively priced, given the significant unsatisfied demand for new-generation equipment.
- However, the current pace of newbuilding may signal the approach of the next cyclical trough.
- The market has tended to under-price Land Drilling stocks in the past going into cyclical downturns.
Patterson-UTI Energy, Inc.: Technologically Advanced And Environmentally FriendlyPatrick Rooney • Mar. 28, 2014
- More advanced technology as compared to its peers, giving it increased profit margins.
- Earnings growth continuing to beat analysts' consensus.
- Consistent supporter of environmental-friendliness, as well as health & safety awareness.
PTEN: A Cheap Company Due To Benefit From The Energy Renaissance
Patterson-UTI Energy: Well Prepared for Lean Days AheadCabeza Howe • Apr. 26, 2007
Wed, Jan. 7, 3:23 PM
- Oil driller Helmerich & Payne (HP -6.5%) is the day's biggest S&P 500 loser after saying rates for its high-tech rigs have tumbled 10% Q/Q and warns of more softness ahead because of falling crude oil prices.
- "Drilling activity and spot dayrate pricing are now expected to significantly decline in the U.S.," HP says in a presentation which indicates deteriorating utilization and dayrates among land drillers is spreading farther and faster than expected.
- HP says the idle and available number of its FlexRigs has risen to 26 from 15 since Dec. 11, and sees expects to see another 40-50 FlexRigs become idle in the next 30 days from its current total of 287 but does not foresee further idling beyond that point.
- SunTrust analysts think HP’s rig count will wind up lower by the mid-30s in percentage Q/Q, cutting their 2015 EPS estimates on HP to $2.60, well below the consensus of $5.56, and slashing their price target to $56 from $70.
- Credit Suisse's James Wicklund, who offered little optimism for the oil service sector today, also slashed his estimates on land drillers HP, Nabors Industries (NBR -3.6%), Precision Drilling (PDS -2.1%) and Patterson-UTI (PTEN -3.6%) - "the result is ugly."
Dec. 23, 2014, 6:19 PM
- Although the energy sector led today's stock advance, a raft of companies downgraded by Global Hunter mostly took it on the chin - none more so than Key Energy (NYSE:KEG), which plunged 15% after shares were cut to Reduce from Neutral with a $1.50 price target that was reduced from $2.50.
- Also downgraded to Reduce were HERO -6.1%, NBR -3.2%, DO +1.3%.
- Lowered to Neutral were HAL +0.5%, GEOS -8.9%, HP -2.9%, BAS -2.5%, PKD -2.5%, BHI +0.6%, BBEP -0.2%, MEP +0.1%.
- Downgraded to Accumulate: PES -3.5%, PTEN -1.1%, NGLS +2.9%.
- The firm upgraded five stocks - ATW, NOV, OII, RES and SPN - all of which gained in today's trading.
Dec. 18, 2014, 5:54 PM
- Analysts say big U.S. land drillers that operate new, faster rigs are best placed to weather the downturn brought by weaker crude oil prices and could gain market share from smaller drillers with high debt levels and outdated equipment.
- Companies with considerable debt such as Nabors Industries (NYSE:NBR) and small private firms with less efficient rigs will scramble to keep them in operation; those with new rigs, such as Helmerich & Payne (NYSE:HP) at Patteron-UTI (NASDAQ:PTEN), will have more leeway to negotiate lower rates with producers and keep or even expand their business.
- The top 3-4 players had 65%-70% of the most modern rigs and the oil slump gives them a chance to win market share from small firms that make up about half of the U.S. land drilling sector, RBC Capital analyst Kurt Hallead says.
- HP has a debt-to-EBITDA ratio of less than 1, PTEN's is 2.3x while NBR is 7.4x.
Dec. 18, 2014, 9:59 AM
- RBC recommends increasing weightings and exposure to oil service stocks (OIH +2.5%) heading into 2015, as it says oil prices will start to improve in H2 of next year and that oil service stocks typically discount this move by 6-9 months.
- Down cycles such as 2000-02 and 2008-09 suggest North American land drillers and service companies provide the best returns off business cycle lows, RBC says as it expects a similar dynamic this time.
- RBC upgrades Key Energy (KEG +24.6%) and Superior Energy (SPN +7.5%) to Outperform, and downgrades FMC Tech (FTI +1.8%), Franks (FI +4.9%), Oceaneering (OII +0.2%) and Oil States (OIS +2.3%) to Sector Perform; the firm also says since 1985 three of the top five performing stocks off lows have been Patterson-UTI (PTEN +6.6%), Precision Drilling (PDS +4%) and Nabors (NBR +7.2%).
Oct. 27, 2014, 8:55 AM
- Goldman Sachs lowers its ratings on the oil services sector (NYSEARCA:OIH) to Cautious from Attractive and downgrades several specific stocks as it cuts its 2015 oil price forecast.
- U.S. land activity will suffer the biggest impact of the lower price deck, Goldman says, with customer capital spending expected to decline 6% next year vs. its prior outlook for a 9% increase; as a result, the firm now forecasts the horizontal U.S. rig count to fall 7%, or ~200 rigs, over the next 12 months.
- Goldman downgrades Parsley Energy (PE -3.8% premarket), Diamond Offshore (DO -1.5%), Laredo Petroleum (LPI -9%) and Basic Energy Services (BAS -6.2%) to Sell with sharply lower price targets; Patterson-UTI (NASDAQ:PTEN), Pioneer Energy (NYSE:PES) and Emerge Energy (NYSE:EMES) are cut to Neutral.
- The firm adds Oceaneering (OII -0.3%) to its Conviction Buy list; it also removes Halliburton (HAL -1.5%) from the list but maintains its Buy rating on the stock.
Oct. 23, 2014, 6:17 AM| Comment!
Oct. 17, 2014, 3:17 PM
- UBS is upgrading the U.S. land drillers, believing that the selloff in the sector has been overdone, even assuming a more cautious North America environment.
- The firm stresses that buying the land drillers is partially a play on oil prices - it sees upside risk of 40%-80% if oil prices return to $90/bbl for WTI but downside risk of 25% if oil prices slide to $75 for a sustained period of time - but it says underlying industry fundamentals also are positive and the demand for pad-capable rigs will grow.
- Helmerich & Payne (HP -2.1%), Nabors Industries (NBR +1.1%) and Patterson-UTI Energy (PTEN +0.2%) are all upgraded to Buy from Neutral.
Oct. 15, 2014, 3:59 PM
- Oil services companies are rising after Citigroup issued positive comments on a number of stocks in the sector.
- Baker Hughes earns a Buy rating, seen as having a strong chance of meeting EPS estimates before tomorrow's open given recent contract wins in Norway and Brazil, and the stock's valuation is "compelling."
- Among small- and mid-caps, Citi starts Patterson-UTI (PTEN +5.7%) and RPC (RES +2.3%) with Buy ratings, seeing each as likely to outperform if, as the firm forecasts, crude prices rebound and E&P companies' capital expenditures are higher than expected.
- Citi tags Schlumberger (SLB +0.5%), Halliburton (HAL +2.1%), Weatherford (WFT +1%), Superior Energy (SPN +2%) and Helmerich & Payne (HP +5.1%) with Neutral ratings.
Oct. 9, 2014, 3:43 PM
- Offshore drillers have company now that falling oil prices are hitting the shares of land drillers such as Helmerich & Payne (HP -3.7%), Patterson-UTI (PTEN -6.8%), Nabors Industries (NBR -4.7%) and Seventy Seven Energy (SSE -5%) - with good reason, Susquehanna analysts say.
- The firm views land drillers at considerable risk to estimate revisions, given high current dayrates and significant newbuild construction activity, which could be problematic if lower crude prices persist or a weaker outlook on U.S. E&P spending comes out of earnings season.
- Nevertheless, the firm finds valuations much better in land drilling for now, and it prefers PTEN and NBR at a respective 3.7x and 4.5x 2015 EBITDA.
Sep. 19, 2014, 6:25 PM
- Patterson-UTI Energy (NASDAQ:PTEN) today announced the purchase of a fleet of pressure pumping assets from an unnamed privately held company in a move praised by analysts.
- The acquisition includes 143,250 horsepower of fracking equipment and provides PTEN with two additional bases of operations and employees to support customer activity in the Eagle Ford and Haynesville shale plays.
- The seller is believed to be Clearlake Capital's Platinum Energy, with an estimated $143M price.
Jul. 24, 2014, 6:12 AM| Comment!
Jun. 11, 2014, 5:59 PM
- It's time to lock in profits in Patterson-UTI Energy (PTEN), Barron's David Englander writes, after shares have surged 123% since July 2012.
- While drilling demand shows signs of strengthening, Englander thinks PTEN shares likely reflect much of the good prospects, trading for an enterprise value of 4.8x next year's EBITDA and above their average 4.4x multiple since 2006.
- Cowen analyst James Crandell warns to expect little improvement in dayrates from this point thanks to the aggressive adding of rigs by several contract drillers.
Jun. 6, 2014, 2:24 PM
- Patterson-UTI (PTEN +2%) is higher on news of a deal with an unidentified privately-held company to acquire pressure pumping operations in east Texas, including 31.5K horsepower of hydraulic fracturing equipment.
- PTEN says the purchase provides it with a new base of operations to support drilling programs, supplementing its existing operations in the Permian Basin as well as the Eagle Ford and Barnett shale formations; PTEN also has a significant presence in the Marcellus and Utica shale plays in the eastern U.S.
Apr. 24, 2014, 6:11 AM| Comment!
Apr. 22, 2014, 5:15 PM
- Some S&P energy stocks set new 52-week highs today, including Hess (HES), EQT and Baker Hughes (BHI), as the sector begins to catch up to the hype about the U.S. energy renaissance.
- Analysts say oil and gas drillers are just starting to reap the benefits of an ancillary boom in energy-related technology and innovation; RBC Capital sees bullish prospects for rig companies, adding that drillers such as Helmerich & Payne (HP), Patterson-UTI (PTEN) and Nabors Industries (NBR) are best positioned to capitalize on the boom.
- BofA/Merrill's Stephen Suttmeier offers a technical set-up, seeing energy poised for a breakout similar to Oct. 2010, when the sector moved above its 13-, 26- and 40-week relative moving averages and outperformed for another six months.
- ETFs: XLE, ERX, OIH, VDE, ERY, FCG, XOP, DIG, DUG, GASL, FRAK, XES, IYE, IEO, IEZ, GASX, PXE, PXJ, PXI, PSCE, FENY, RYE, FXN, DDG
Apr. 17, 2014, 11:29 AM
- Deutsche Bank analysts raise their price targets on top oil service stocks (OIH), seeing increasing strength in a North American cyclical recovery with current forward earnings estimates perhaps proving to be conservative.
- Basic Energy Services (BAS) gets a big price boost to $43 from $18, citing a recent activity update that indicated utilization levels had increased across all the company’s business segments.
- Other top stocks rated Buy at the firm, including those whose price objectives have been raised: BHI, EXH, HAL, PTEN, PES, SLB.
PTEN vs. ETF Alternatives
Patterson-UTI Energy, Inc. is a provider of contract services to the oil and natural gas industry. It operates in three segments namely contract drilling services, pressure pumping services and oil and natural gas exploration and production.
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