Key Drivers And Outlook: Patterson-UTI Energy’s (PTEN) management expects to benefit from steady drilling activity in 2H 2024. However, energy operators’ budget constraints and weak natural gas prices can adversely affect completion activity. In Q3, adjusted gross profit in the Drilling segment can decline following a lower rig count, leading to lower fixed cost absorption. Adjusted gross profit in the Completion Services can increase in Q3 due to higher utilization. Also, West Texas expects natural gas activity to recover. So, it is deploying a new CNG and fíeld gas blending technology in that region. In Drilling Products, growth in International operations, including Canada, will become the positive driver despite the lower expected rig count in the US. Read more about PTEN in our previous article here.

The Segment Results Analyzed: Quarter-over-quarter, PTEN’s revenues in the Drilling Services segment decreased by 4% in Q2 2024. Average rig revenue increased slightly, but the margin per operating day remained unchanged in Q2.

Revenues from the Completion Services segment declined by 15%, marking the second consecutive fall. This was due to lower revenue per pump hour and higher downtime. Adjusted gross profit also declined sharply (by 24%) in this segment in Q2 from the previous quarter.

Revenues from the Drilling Products segment decreased by 4%, quarter-over-quarter. A spring breakup in Canada affected sales adversely, although a higher market share and steady pricing arrested the fall partially in the US.

Cash Flows Increased As Share Repurchase Continued: PTEN’s cash flow from operations increased substantially by 42% in 2H 2024 compared to a year ago. Its FCF increased by 40% during this period. It repurchased shares worth $309 million in the past three quarters until Q2 and expects to convert ~40% of its adjusted EBITDA to free cash flow in 2024.

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.