PTEN’s drilling and pressure pumping business performance diverged in Q1: Patterson-UTI Energy (PTEN) averaged 131 rigs in the US in Q1 2023. Its Tier-1, super-spec rig utilization was robust in Q1. But, its average rig count can decline by two to three rigs in Q2 as its moves to natural gas-heavy regions. Although revenue and operating margin in its Contract Drilling business improved in Q1, the margin from the pressure pumping business faced challenges. Read more about this in our recent article here.
Contract drilling performance improved in Q1: Quarter-over-quarter, PTEN’s revenues in the Contract Drilling segment increased (by 5%) in Q1 2023. Its revenues from the Pressure Pumping and Directional Drilling segments declined in Q1, due mainly to weather disruptions and an increase in whitespace in the calendar. Similarly, gross profit increased only Contract Drilling segment in Q1 2023 compared to Q4 2022. Renewal of drilling rig contracts at current rates and higher average rig revenue per day led to the top line and margin improvement.
PTEN’s cash flows improve: PTEN’s cash flow from operations increased tremendously, by 596%, in Q1 2023 compared to a year ago. Free cash flow also turned sharply positive in Q1 2023. Backed by strong FCF generation, it plans to “continue to target a return of 50% of free cash to shareholders through a combination of dividends and share buybacks.”
Thanks for reading the PTEN take three, designed to give you three critical takeaways from PTEN’s earnings report. Soon we will present a second update on PTEN earnings highlighting its current strategy, news, and notes we extracted from our deeper dive.
