Key Drivers And Outlook: Patterson-UTI Energy’s (PTEN) management expects completion activity to see a sequential slowdown due to operators’ capital discipline. However, the Completion segment adjusted gross profit can recover in 1H 2025 compared to 2H 2024. However, lower natural gas prices and M&A activity caused some customers to delay completion activity. In Q4, an average of 58 rigs are expected to operate under term contracts. In completion, it will have retired and decommissioned nearly 400,000 horsepower of older Tier 2 diesel equipment by the end of 2024, or a ~10% reduction in its pressure pumper size.

In another significant development, PTEN reported an $885 million charge related to the impairment of goodwill from the NexTier merger following an underwhelming macro-outlook for the industry. Also, following an updated outlook, the company identified 42 legacy non-Tier 1 rigs and equipment to be retired because of limited commercial opportunity. These rigs are unlikely to return to work without a significant capital investment. It recorded a $114 million asset retirement charge in Q3. 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 Q3 2024. Average revenue per operating day decreased while gross profit decreased by 5% in Q3 compared to Q2.

Revenues from the Completion Services segment increased by 3%, marking a turnaround from the fall in the previous quarter. This was due to additional wellsite integration services and increased activity in natural gas basins. Adjusted gross profit declined sharply (by 16%) in Q3 due to unplanned gaps in completion activity, which impacted fixed cost leverage.

Revenues from the Drilling Products segment increased by 5%, quarter-over-quarter as activity recovered after the spring breakup and higher U.S. revenue. The segment gross profit also improved due to market share gains and steady pricing.

Cash Flows Increased As Share Repurchase Continued: PTEN’s cash flow from operations increased substantially by 55% in 9M 2024 compared to a year ago. Its FCF increased by 1.25x during this period. It repurchased shares worth $40 million in Q3. The company plans to return at least $400 million to shareholders in 2024 through dividends and share repurchases.

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.

Premium/Monthly
————————————————————————————————————-