Patterson-UTI Energy, Inc. PTEN soared past expectations, reporting an adjusted net profit of 19 cents per share for the fourth quarter of 2023. This impressive performance exceeded the Zacks Consensus Estimate of 18 cents, largely fueled by outstanding results in the Completion Services and Drilling Services segments. However, the bottom line saw a decline from the preceding year, stemming from a meager contribution from the Other Operations segment.
While the adjusted net profit fell short compared to the year-ago quarter’s 46 cents, the total revenues of $1.6 billion exceeded the Zacks Consensus Estimate of $1.5 billion. This not only displayed an extraordinary improvement of 100.9% on a year-over-year basis but was also attributed to PTEN’s enhanced revenue contribution from the Completion Services segment during the same period.
Patterson-UTI’s Strong Revenue Segments
Drilling Services: Revenues in this segment totaled $463.6 million, exhibiting a 0.4% increase from the prior year’s figure. Marvellously, this figure surpassed expectations, underscoring the segment’s robust performance. Operating profit amounted to $92.7 million, demonstrating an upward trajectory from $81.2 million in the fourth quarter of 2022. However, the figure slightly missed our projected estimate.
Completion Services: This segment’s revenues of $1 billion witnessed a monumental spike of approximately 230.6% from the year prior, owing to improved pricing. Remarkably, this figure also surpassed our forecast of $949.6 million. Operating profit totaled $70.3 million, showcasing a notable rise from $58.6 million in the preceding year. Despite the increase, the figure was slightly lower than our estimate of $81.9 million.
Drilling Products: PTEN’s revenues totaled $88.1 million, yet, with an operating loss of $261,000. The fourth quarter marked the company’s first complete reporting period following its acquisition of Ulterra Drilling Technologies.
Other Services: Revenues amounted to $18.3 million, 9.4% lower than the year-ago quarter’s figure of $20.2 million, with operating profit amounting to $1 million compared with $3.5 million in the fourth quarter of 2022.
Capital Expenditure & Outlook
In the reported quarter, PTEN expended $205.3 million on capital programs compared with $119.2 million in the previous year. As of Dec 31, 2023, the company had cash and cash equivalents worth $192.7 million and long-term debt of $1.2 billion.
Looking ahead, Patterson-UTI foresees steady oil basin activity throughout 2024, with potential impacts on natural gas basins from prevailing low prices. It also anticipates maintaining an average of 120 U.S. rigs in operation for the first quarter of 2024, with expectations of relatively flat drilling services adjusted gross profit quarter over quarter.
For the Completion Services segment, revenues are projected to range between $940-$950 million, with approximately $750 million in direct operating costs and an anticipated adjusted gross profit of $190-$200 million. Demand in the Drilling Products segment is expected to remain stable through the first quarter, with projected revenues of approximately $90 million, $50 million in direct operating costs, and an expected adjusted gross profit of $40 million. The Other segment foresees flat sequential revenues and adjusted gross profit. Additionally, PTEN expects to incur selling, general, and administrative expenses of approximately $65 million and depreciation, depletion, amortization, and impairment expenses of approximately $280 million for the first quarter.
Looking further into 2024, PTEN foresees an effective tax rate of 24%, with anticipated annual cash taxes ranging from $35-$45 million. The company also estimates capital expenditures of approximately $740 million, including $285 million for Drilling Services, $360 million for Completion Services, $55 million for Drilling Products, and $40 million for Other and Corporate purposes.
Zacks Rank and Key Picks
With a Zacks Rank #4 (Sell) currently, PTEN presents an interesting perspective to a multitude of investors delving into the energy sector. For those intrigued by the sector, stocks like Subsea 7 S.A. SUBCY and Energy Transfer LP ET, both carrying a Zacks Rank #1 (Strong Buy), and Murphy USA Inc. MUSA, holding a Zacks Rank #2 (Buy) currently, might serve as better options. Subsea 7 is valued at $3.96 billion and pays an annual dividend of 38 cents per share, equating to 2.93%. The company specializes in offering offshore project services for the energy industry. Energy Transfer, valued at $43.91 billion, pays a dividend of $1.26 per share annually, or 9.03%. The company is an independent energy entity, primarily engaged in crude oil and natural gas acquisition, exploration, development, and production. Murphy USA, with a valuation of about $8.34 billion, has seen a remarkable 47% surge in its shares over the past year. The company is involved in the retail marketing of motor fuel products and convenience merchandise, operating retail stores under the brands Murphy USA, Murphy Express, and QuickChek.
