Patterson-UTI: OPEC Production Increases Create A Blurry Future (Rating Downgrade)

Ronald Ferrie
3.28K Followers
(8min)

Summary

  • Patterson-UTI faces margin pressure as declining domestic drilling activity persists amid lower oil prices.
  • PTEN’s ability to structure performance-based contracts across multiple service platforms gives the company a leading edge on peers.
  • At the current share price, PTEN generates an attractive free cash flow yield despite the challenging market.
  • Near term risks of OPEC+ actions could severely impact PTEN’s profitability. This is central to my thesis for downgrading the company to a Hold.

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Thesis

Patterson-UTI Energy (NASDAQ:PTEN) is an oil and gas service provider that operates mainly in the United States. The recent decline in crude oil prices has caused several producers to slightly trim drilling activity.

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This article was written by

3.28K Followers
I am a Licensed Professional Engineer who works in the Nuclear Power industry. I use my professional working knowledge of the power/energy industries to aid in evaluating potential equities worthy of long-term investment. I invest in income producing equities and rental real estate properties for cash flow and long-term appreciation. My articles are to serve as a platform for presenting the underlying fundamentals and long-term potential of each equity/business.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of PTEN either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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