Onshore contract driller Patterson-UTI Energy Inc. (PTEN) has reported stellar second quarter 2011 results, reflecting enhanced drilling activities in the fertile oil and liquids plays across the country along with higher pricing for services.
Earnings per share of 52 cents came in fairly ahead of the Zacks Consensus Estimate of 48 cents. The quarter’s results also jumped significantly from the year-ago profit of 19 cents.
Quarterly revenue of $600.1 million shot up 95.5% from the year-earlier level of $307.0 million. The revenue also surpassed our projection of $589 million.
Rig Fleet Analysis
The number of rigs operating during the quarter averaged 199 in the U.S. and 3 in Canada, netting 202, up 29.5% year over year.
During the quarter, the company completed 8 new Apex rigs and operated 107 rigs under long-term contracts. Patterson-UTI targets to complete 25 new Apex(TM) rigs in 2011, of which it has already entered into long-term contracts for 10. Additionally, management aims at operating an average of approximately 122 rigs under long-term contracts during the second half of 2011.
Segmental Performance
Contract Drilling: Contract Drilling revenue leaped 65.2% year over year to $386.5 million in the second quarter. Average revenue per operating day was $21,000 (up 24.3%) while average direct costs per operating day were $11,880 (up 12.9%). The segment recorded an operating profit of $85.1 million as against $22.1 million in the year-ago quarter.
Pressure Pumping: The segment reported revenue of $200.1 million, much higher than $59.4 million generated in the prior-year period. The improvement was buoyed by increased operations in U.S. oil fields coupled with high demand for services. Consequently, the segment posted an operating profit of $50.3 million, which increased considerably over $6.7 million in the prior-year quarter.
Oil & Natural Gas: Revenue generated from the Oil & Natural Gas business climbed 74.0% year over year to $13.4 million. The segment operating income of $7.1 million increased from $2.9 million earned in the prior-year quarter, on improved oil drilling activity.
Capital Expenditure & Balance Sheet
During the second quarter, Patterson-UTI incurred a capital expenditure of $245.1 million, with approximately 80% targeted toward the Contract Drilling segment. As of June 30, 2011, the company had $64.6 million in cash.
Outlook
We believe that in the near term, Patterson-UTI stands to benefit from the current boom in pressure pumping services given its growing premium land rig fleet and robust financial position (positive free cash flow and a debt-free balance sheet).
Buoyed by these favorable trends, Patterson-UTI – the second-largest North American land drilling contractor after Nabors Industries Ltd. (NBR) – currently retains a Zacks #1 Rank (short-term Strong Buy rating) in the short run.
