Onshore contract driller Patterson-UTI Inc. (PTEN) reported a better-than-expected first-quarter profit of 3 cents per share, reflecting improvement in rig count on the back of rebounding commodity prices. The
Zacks Consensus Estimate for the quarter was pegged at break-even per share.

Year over Year Comparisons Down

In the year-ago period, Patterson earned 11 cents per share. The negative comparison compared to the year-ago period can be attributed to weak natural gas prices. The number of rigs operating during the quarter averaged 142 (130 rigs located in the U.S. and12 in Canada), compared to 127 average rigs operating in the first quarter of 2009. The rig count was also up from 103 rigs operating in the December quarter.

However, revenue of $271.6 million was up 1.3% from the first quarter 2009 level.

Segmental Performance

Contract Drilling: Contract Drilling revenue totaled $210.7 million (78% of total revenue), down approximately 6.6% year over year. Average revenue per operating day was $16,440, down 16.4%, while average direct costs per operating day decreased 4.3% to $10,540. As a result, the segments operating profit slumped to $8.7 million, a 76.8% year-over-year fall. This was partially offset by the increase in the average number of rigs operating, compared to the year-ago period (142 as against 127).

Pressure Pumping: The company’s Pressure Pumping business recorded revenues of $53.8 million, a rise of 41.1% year over year. In anticipation of increased activity associated with Marcellus Shale, the company has added both equipment and workforce during recent years, which continued to experience ramped-up customer demand. Consequently, the Pressure Pumping business’ operating profit of $4.5 million was a significant improvement over the prior-year’s loss of $875,000

Oil & Natural Gas: Revenue generated from the Oil & Natural Gas business was $7.1 million, up 61.4% from the year-ago quarter. This segment posted an operating income of $2.8 million, as against an operating loss of $3.6 million in the first quarter of 2009, benefiting from improved oil drilling activity.

Capital Expenditure & Balance Sheet

During the quarter, Patterson-UTI spent approximately $108.9 million on capital programs (as against $89.8 million in the first quarter of 2009), of which approximately 84% went to the Contract Drilling segment. As of Mar 31, 2010, the company had $63.9 million in cash and no long-term debt.


Management indicated that drilling activity is picking up, reflected by the sequential improvement in rig count. Spot market dayrates increased during the quarter, but essentially remain below dayrates on rigs
operating under term contracts. Importantly, Patterson’s long-established pressure pumping operations in the Marcellus shale continued to experience increased demand for services, leading to increases in revenues and profitability during the quarter.

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