Industry Drivers And Outlook: Patterson-UTI Energy’s (PTEN) management sees two trends converging in Q2. While it will face challenges from natural gas price’s weakness and energy operators’ consolidation, by Q3, it expects the US drilling and completion businesses to start improving. Profit per operating day in drilling, too, can decline in Q2. However, the benefits of the NexTier merger and Ulterra acquisition will relieve the pressure for the rest of the year. The company continues to expect to operate ~140,000 horsepower of electric frac equipment by mid-2024. Read more about the acquisitions in our previous article here.

The Segment Results Analyzed: Quarter-over-quarter, PTEN’s revenues in the Drilling Services segment remained nearly unchanged in Q1 2024 as the US onshore rig count remained steady. The average rig revenue and margin per operating day also decreased modestly in Q1.

Revenues from the Completion Services segment declined by 7% in Q1 from Q4 2023 due to lower activity in natural gas basins. Adjusted gross profit declined sharply (by 14%) in this segment in Q1 from the previous quarter.

Revenues from the Drilling Products segment increased marginally, by 2%, quarter-over-quarter. Here, the company benefited from higher revenue per rig for Ulterra’s US operations.

Cash Flows Increased As Share Repurchase Continued: PTEN’s cash flow from operations increased by 56% in Q1 2024 compared to a year ago. However, its capex increased by 93% during this period. So, its FCF increased by 19%. It returned $130 million to shareholders in Q1 and plans to spend $400 million on dividends and share repurchases in FY2024. It has $945 million in remaining share repurchase authorization.

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.