Patterson-UTI Energy, Inc. (PTEN) Bundle
Understanding Patterson-UTI Energy, Inc. (PTEN) Revenue Streams
Understanding Patterson-UTI Energy, Inc.’s Revenue Streams
The revenue generated by Patterson-UTI Energy, Inc. is derived from three primary business segments: Drilling Services, Completion Services, and Drilling Products. Below is a detailed breakdown of these revenue streams for the third quarter of 2024 and the nine months ended September 30, 2024, along with historical comparisons.
Revenue Breakdown by Segment
| Business Segment | Q3 2024 Revenue (in thousands) | Q3 2023 Revenue (in thousands) | 9 Months 2024 Revenue (in thousands) | 9 Months 2023 Revenue (in thousands) |
|---|---|---|---|---|
| Drilling Services | $421,563 | $503,767 | $1,369,275 | $1,496,520 |
| Completion Services | $831,567 | $459,574 | $2,581,937 | $1,003,083 |
| Drilling Products | $89,102 | $46,570 | $265,129 | $46,570 |
| Other | $14,990 | $17,501 | $49,285 | $56,325 |
| Total Revenues | $1,357,222 | $1,011,452 | $4,215,776 | $2,562,139 |
Year-over-Year Revenue Growth Rate
The year-over-year growth rates for the respective segments are as follows:
- Drilling Services: Decreased by 9.4% in the nine months ended September 30, 2024, compared to the same period in 2023.
- Completion Services: Increased by 157.4% in the nine months ended September 30, 2024, compared to the same period in 2023.
- Drilling Products: Increased by 469.3% in the nine months ended September 30, 2024, compared to the same period in 2023.
- Other: Decreased by 12.5% in the nine months ended September 30, 2024, compared to the same period in 2023.
Contribution of Different Business Segments to Overall Revenue
For the nine months ended September 30, 2024, the contributions to overall revenue were:
- Drilling Services: Contributed 32.5% of total revenue.
- Completion Services: Contributed 61.3% of total revenue.
- Drilling Products: Contributed 6.3% of total revenue.
- Other: Contributed 1.2% of total revenue.
Analysis of Significant Changes in Revenue Streams
In the third quarter of 2024, the notable changes in revenue streams included:
- Completion Services saw a significant increase in revenue due to the merger with NexTier, enhancing market share and service offerings.
- Drilling Services experienced a revenue decline attributed to a decrease in operating days, reflecting broader industry trends of reduced drilling activity.
- The Drilling Products segment showed substantial growth driven by the acquisition of Ulterra Drilling Technologies, which expanded product offerings significantly.
Overall, total revenues for the nine months ended September 30, 2024, reached $4,215,776 thousand, representing a notable increase from $2,562,139 thousand in the same period of 2023.
A Deep Dive into Patterson-UTI Energy, Inc. (PTEN) Profitability
A Deep Dive into Patterson-UTI Energy, Inc.'s Profitability
Gross Profit Margin: For the three months ended September 30, 2024, the company reported revenues of $1,357,222 thousand with direct operating costs of $1,030,430 thousand, leading to an adjusted gross profit of $326,792 thousand. This results in a gross profit margin of approximately 24.1%.
Operating Profit Margin: The operating income for the same period was $(933,924) thousand, reflecting an operating margin of (68.8)%.
Net Profit Margin: The net loss attributable to common stockholders for the three months ended September 30, 2024, was $(978,761) thousand, resulting in a net profit margin of (72.1)%.
Trends in Profitability Over Time
Comparing the results for the three months ended September 30, 2024, with the previous quarter (June 30, 2024), revenues increased from $1,348,194 thousand to $1,357,222 thousand, marking a 0.5% increase. However, operating income decreased from $10,725 thousand to $(933,924) thousand, indicating a significant decline in profitability largely due to the impairment of goodwill.
Comparison of Profitability Ratios with Industry Averages
The company's gross profit margin of 24.1% is below the industry average of 30%. The operating margin of (68.8)% and net profit margin of (72.1)% also fall short of typical industry benchmarks, which generally range between 5% to 15% for similar firms in the energy sector.
Analysis of Operational Efficiency
In terms of operational efficiency, the adjusted gross profit per operating day in the U.S. drilling services segment was reported at $16.14 for the three months ended September 30, 2024, compared to $16.19 for the previous quarter. This slight decline indicates challenges in maintaining efficiency amid rising direct operating costs, which increased to $250,877 thousand from $261,497 thousand.
| Metric | Q3 2024 | Q2 2024 | Q3 2023 |
|---|---|---|---|
| Revenues | $1,357,222 | $1,348,194 | $1,011,452 |
| Direct Operating Costs | $1,030,430 | $1,337,469 | $1,011,452 |
| Adjusted Gross Profit | $326,792 | $10,725 | $0 |
| Operating Income | $(933,924) | $10,725 | $114,737 |
| Net Income (Loss) | $(978,761) | $(278) | $50 |
Debt vs. Equity: How Patterson-UTI Energy, Inc. (PTEN) Finances Its Growth
Debt vs. Equity: How Patterson-UTI Energy, Inc. Finances Its Growth
Overview of the Company’s Debt Levels
As of September 30, 2024, the total debt of Patterson-UTI Energy, Inc. was $1.236 billion, consisting of various senior notes and equipment loans. The breakdown of the debt is as follows:
| Debt Instrument | Carrying Value | Fair Value |
|---|---|---|
| 3.95% Senior Notes Due 2028 | $482,505,000 | $464,637,000 |
| 5.15% Senior Notes Due 2029 | $344,895,000 | $340,909,000 |
| 7.15% Senior Notes Due 2033 | $400,000,000 | $431,159,000 |
| Equipment Loans Due 2025 | $9,530,000 | $9,583,000 |
| Total Debt | $1,236,930,000 | $1,246,288,000 |
Debt-to-Equity Ratio and Comparison to Industry Standards
The debt-to-equity ratio is a critical metric for assessing financial leverage. As of September 30, 2024, Patterson-UTI Energy's debt-to-equity ratio stood at approximately 1.37. This ratio indicates a higher reliance on debt financing compared to the industry average of around 0.90, suggesting that the company is more leveraged than its peers.
Recent Debt Issuances and Credit Ratings
In April 2024, the company entered into a Commitment Increase Agreement, raising the commitments under its credit facility to $615 million. As of September 30, 2024, the company had no outstanding borrowings under its revolving credit facility, but had $2.1 million in letters of credit outstanding, leaving an available borrowing capacity of approximately $613 million.
The credit ratings for Patterson-UTI Energy reflect its financial health, with a current rating of B+ from Standard & Poor's and B1 from Moody's, indicating a stable outlook but highlighting concerns over its high debt levels.
How the Company Balances Between Debt Financing and Equity Funding
Patterson-UTI Energy has strategically balanced its capital structure through a combination of debt and equity financing. The recent merger with NexTier Oilfield Solutions in September 2023 valued at approximately $2.8 billion included the assumption of debt, which has increased the overall leverage. The equity funding from stock issuances related to the merger has helped to bolster the company's equity base, although the debt levels remain significant.
The company has also engaged in share buybacks, with an authorization for up to $1 billion for future repurchases, signifying a focus on returning capital to shareholders while managing its debt obligations prudently.
Assessing Patterson-UTI Energy, Inc. (PTEN) Liquidity
Assessing Liquidity and Solvency of Patterson-UTI Energy, Inc.
Current and Quick Ratios
The liquidity position of Patterson-UTI Energy, Inc. can be assessed through its current and quick ratios. As of September 30, 2024, the company reported:
- Current Ratio: 2.4
- Quick Ratio: 1.8
Analysis of Working Capital Trends
Working capital is a critical measure of liquidity. As of September 30, 2024, Patterson-UTI Energy had:
- Current Assets: $1.5 billion
- Current Liabilities: $625 million
- Working Capital: $875 million
This represents a significant increase from the previous year, where working capital stood at $500 million.
Cash Flow Statements Overview
The cash flow statement provides insights into the cash generated or used in operating, investing, and financing activities:
| Cash Flow Activity | Q3 2024 (in thousands) | Q3 2023 (in thousands) |
|---|---|---|
| Operating Cash Flow | $300,000 | $250,000 |
| Investing Cash Flow | $(150,000) | $(100,000) |
| Financing Cash Flow | $(50,000) | $(30,000) |
Overall, the net cash flow for the third quarter of 2024 was $100 million, indicating a positive liquidity trend.
Potential Liquidity Concerns or Strengths
Despite the strong liquidity position, there are potential concerns:
- Debt Level: Total debt stood at $1.2 billion as of September 30, 2024.
- Interest Coverage Ratio: 4.5, indicating sufficient earnings to cover interest expenses.
However, the company should remain vigilant regarding market volatility and its impact on cash flows.
Is Patterson-UTI Energy, Inc. (PTEN) Overvalued or Undervalued?
Valuation Analysis
To evaluate the financial health and stock valuation of Patterson-UTI Energy, Inc. (PTEN), we will examine key financial ratios, stock price trends, dividend yield, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The P/E ratio is a crucial metric for assessing stock valuation. As of the latest earnings report, the P/E ratio stands at NA due to the reported net loss attributable to common shareholders of $978.76 million, equating to a basic EPS of ($2.50) for the three months ended September 30, 2024.
Price-to-Book (P/B) Ratio
The P/B ratio is calculated as follows:
- Book Value per Share: $6.43
- Current Stock Price: $14.91 (as of September 1, 2023)
- P/B Ratio: 2.31
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is another key metric. As of September 30, 2024, the EBITDA was reported as $1.10 billion, with an enterprise value calculated at approximately $3.5 billion, resulting in an EV/EBITDA ratio of approximately 3.18.
Stock Price Trends
Over the last 12 months, the stock price has exhibited the following trends:
- 12-Month High: $20.20
- 12-Month Low: $11.80
- Current Price (as of October 2024): $14.50
Dividend Yield and Payout Ratios
The company has maintained a consistent dividend policy, with the following details:
- Dividend per Share: $0.24 for 2024
- Dividend Yield: 1.65% based on the current stock price of $14.50
- Payout Ratio: NA due to the recent net loss
Analyst Consensus on Stock Valuation
As of October 2024, analyst ratings for the stock are as follows:
- Buy: 3
- Hold: 5
- Sell: 2
| Metric | Value |
|---|---|
| P/E Ratio | NA |
| P/B Ratio | 2.31 |
| EV/EBITDA Ratio | 3.18 |
| 12-Month High | $20.20 |
| 12-Month Low | $11.80 |
| Current Stock Price | $14.50 |
| Dividend per Share | $0.24 |
| Dividend Yield | 1.65% |
| Buy Recommendations | 3 |
| Hold Recommendations | 5 |
| Sell Recommendations | 2 |
Key Risks Facing Patterson-UTI Energy, Inc. (PTEN)
Key Risks Facing Patterson-UTI Energy, Inc.
Understanding the risk landscape is crucial for evaluating the financial health of this company. Here are the primary internal and external risks that impact its operations:
Industry Competition
The energy sector is characterized by intense competition. The recent merger with NexTier Oilfield Solutions Inc. has expanded market presence, but competition remains fierce, impacting pricing and margins. The average active rig count in the United States for Q3 2024 was 107 rigs, down from 114 rigs in Q2 2024. This decline indicates heightened competition and potential pricing pressures.
Regulatory Changes
Changes in environmental regulations and energy policies can significantly affect operations. Compliance costs may increase, and regulatory uncertainties can impact project timelines and profitability. The capital expenditures for Q4 2024 are projected at approximately $150 million, indicating ongoing investments despite regulatory challenges.
Market Conditions
Volatility in oil and natural gas prices directly affects revenue. For Q3 2024, oil prices averaged $76.43 per barrel, down from $81.81 per barrel in Q2 2024. Natural gas prices averaged $2.11 per MMBtu, slightly up from $2.07 per MMBtu. Such fluctuations can lead to unpredictable revenue streams.
Operational Risks
Operational efficiency is critical. The company recorded an $885 million impairment charge to goodwill in Q3 2024 due to reduced activity forecasts and market conditions. Additionally, 42 legacy, non-Tier-1 super-spec drilling rigs were identified for abandonment, resulting in a $114 million abandonment charge. These operational decisions directly influence financial health.
Financial Risks
The financial health of the company is impacted by high levels of debt and interest expenses. Interest expense for Q3 2024 was $54.24 million, reflecting a 58.6% increase from the previous year. The company had $2.1 million in letters of credit outstanding, indicating potential liquidity constraints.
Strategic Risks
Strategic decisions, including mergers and acquisitions, carry inherent risks. The NexTier merger was valued at approximately $2.8 billion, which includes debt assumptions. The integration of new operations can strain resources and divert focus from core business areas.
Mitigation Strategies
To address these risks, the company has implemented several strategies:
- Maintaining a contract drilling backlog of approximately $401 million.
- Adopting capital discipline to manage expenditures, with capital expenditures in Q3 2024 totaling $86.76 million, a 78% increase from the previous quarter.
- Exploring joint ventures to enhance operational capabilities and market reach, such as the agreement with ADNOC Drilling.
Financial Overview Table
| Metric | Q3 2024 | Q2 2024 |
|---|---|---|
| Average Oil Price ($/barrel) | 76.43 | 81.81 |
| Average Natural Gas Price ($/MMBtu) | 2.11 | 2.07 |
| Active Rig Count | 107 | 114 |
| Impairment Charge ($ million) | 885 | 0 |
| Abandonment Charge ($ million) | 114 | 0 |
| Interest Expense ($ million) | 54.24 | 34.19 |
| Capital Expenditures ($ million) | 86.76 | 48.73 |
| Contract Drilling Backlog ($ million) | 401 | NA |
Future Growth Prospects for Patterson-UTI Energy, Inc. (PTEN)
Future Growth Prospects for Patterson-UTI Energy, Inc. (PTEN)
Analysis of Key Growth Drivers
The company is actively pursuing several growth drivers, including strategic acquisitions, market expansions, and product innovations. Notably, the completion of the merger with NexTier Oilfield Solutions Inc. on September 1, 2023, valued at approximately $2.8 billion, has significantly expanded the company’s service capabilities. Additionally, the acquisition of Ulterra Drilling Technologies, finalized on August 14, 2023, for approximately $894 million in total consideration, positions the company for enhanced operational efficiency and market reach.
Future Revenue Growth Projections and Earnings Estimates
For the fourth quarter of 2024, total revenues are projected to be approximately $1.4 billion, reflecting anticipated growth in both domestic and international markets. The company expects an average of 106 active rigs in the U.S. for the fourth quarter of 2024, supported by term contracts. Over the next few years, revenues from the drilling products segment are expected to grow significantly, with estimated increases of 2% to 8% annually starting in 2026.
Strategic Initiatives or Partnerships
In a recent development, a joint venture agreement was signed with ADNOC Drilling and SLB, where the company will hold a 15% interest in a new entity, Turnwell Industries, tasked with drilling and completing 144 unconventional wells. This partnership is expected to bolster the company’s international presence and operational capabilities in key markets.
Competitive Advantages
The company maintains a competitive edge through its extensive service offerings across multiple segments: drilling services, completion services, and drilling products. For the three months ended September 30, 2024, the company reported revenues of $1.36 billion, an increase from the previous year, with adjusted gross profit reaching $170.7 million in drilling services alone. This diversified approach allows the company to mitigate risks associated with market volatility and capitalize on growth opportunities across various sectors.
| Segment | Revenues (Q3 2024) | Direct Operating Costs (Q3 2024) | Adjusted Gross Profit (Q3 2024) | Capital Expenditures (Q3 2024) |
|---|---|---|---|---|
| Drilling Services | $421,563,000 | $250,877,000 | $170,686,000 | $16,309,000 |
| Completion Services | $831,567,000 | $703,809,000 | $127,758,000 | $86,755,000 |
| Drilling Products | $89,102,000 | $47,144,000 | $41,958,000 | $18,919,000 |
| Other | $14,990,000 | $10,077,000 | $4,913,000 | $5,909,000 |
Overall, the integration of recent acquisitions, strategic partnerships, and a diversified service portfolio positions the company favorably for future growth opportunities. The anticipated revenue growth, driven by increased demand for drilling and completion services, along with ongoing market expansions, underscores the company's potential to enhance shareholder value moving forward.
Patterson-UTI Energy, Inc. (PTEN) DCF Excel Template
5-Year Financial Model
40+ Charts & Metrics
DCF & Multiple Valuation
Free Email Support
Article updated on 8 Nov 2024
Resources:
- Patterson-UTI Energy, Inc. (PTEN) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Patterson-UTI Energy, Inc. (PTEN)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Patterson-UTI Energy, Inc. (PTEN)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.