Onshore contract driller Patterson-UTI Energy Inc. (PTEN) reported notable fourth-quarter and full-year 2010 results, benefiting from strong drilling and pressure pumping activities along with an efficient rig fleet.
Earnings per share, excluding transaction-related costs and disposition expense, came in at 37 cents, ahead of the Zacks Consensus Estimate of 32 cents. The quarter’s results also improved significantly from the adjusted net loss of 17 cents per share in the year-ago period.
On a similar note, for full-year 2010, the company earned 72 cents per share, beating our forecast of 67 cents. The results show a marked improvement from a loss of 25 cents per share Patterson-UTI suffered in the prior year.
Quarterly revenue of $505.7 million was up 136.8% from the year-earlier level of $213.6 million. The revenue also surpassed our projection of $476 million. Full-year revenue leaped 87.1% year over year to $1,462.9 million.
Rig Count Analysis
The number of rigs operating during the quarter averaged 182 in U.S. and 12 in Canada, netting 194, significantly up 88.3% year over year. During 2010, the company operated 168 rigs on average (159 rigs in U.S. and 8 rigs in Canada) compared with 91 rigs operational in the prior year.
During 2010, Patterson-UTI’s total number of new Apex(TM) rigs added up to 19, of which 7 were completed in the fourth quarter. The company targets to have 25 new Apex(TM) rigs in 2011 and has already entered into long-term contracts for 12 such rigs.
Segmental Performance
Contract Drilling: Contract Drilling revenue jumped 113.3% year over year to $340.4 million in the fourth quarter. Average revenue per operating day was $19,090 (up 13.8%), while average direct costs per operating day increased slightly (by 1.2%) to $11,000. The segment recorded an operating profit of $68.2 million as against a loss of $17.4 million incurred in the year-ago quarter.
Pressure Pumping: The segment reported revenue of $156.4 million, much higher than $48.0 million generated in the prior-year period. The results were buoyed by the newly acquired assets operating in the Permian Basin as well as the Barnett and Eagle Ford Shales. Consequently, the segment posted an operating profit of $33.4 million, which increased considerably over $1.6 million in the prior-year quarter.
Oil & Natural Gas: Revenue generated from the Oil & Natural Gas business climbed 48.6% year over year to $8.9 million and segment operating income of $4.2 million increased from $2.1 million earned in the prior-year quarter, on improved oil drilling activity.
Capital Expenditure & Balance Sheet
During the fourth quarter 2010, Patterson-UTI incurred a capital expenditure of $224.4 million, with approximately 89% targeted toward the Contract Drilling segment. For the full year, the company’s capital spending totaled $738.1 million. As of December 31, 2010, the company had $27.6 million in cash and no long-term debt.
Outlook
Our Neutral rating on the stock reflects the company’s large, high-quality fleet of drilling rigs, exposure to the fertile basins across U.S. and a healthy financial position partially offset by the weak natural gas fundamentals, uncertain commodity prices and technological disruptions.
Patterson-UTI, which competes with other U.S. onshore drilling companies, such as Helmerich & Payne Inc. (HP), currently retains a Zacks #3 Rank (short-term Hold rating).
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