Industry Overview - The Zacks Oil and Gas - Drilling industry includes companies providing rigs and services for oil and natural gas exploration and development, with operations both onshore and offshore [2] - Drilling for hydrocarbons is capital-intensive and technically challenging, primarily influenced by contracting activity rather than oil or gas prices [2] - Offshore drilling companies exhibit higher volatility compared to onshore counterparts, with their share prices more closely correlated to oil and gas prices [2] Current Challenges - The industry is facing significant challenges due to contracting delays, soft gas prices, and macroeconomic uncertainty, leading to a Zacks Industry Rank of 235, placing it in the bottom 4% of 245 Zacks industries [1][7] - Earnings estimates for the industry have declined sharply, with a drop of 85.2% for 2025 and 51.7% for 2026 over the past year, indicating a negative outlook [9] - The industry has underperformed compared to the broader Zacks Oil - Energy sector and the S&P 500, with a decline of 38.6% over the past year versus a 2.1% increase in the sector and a 9.1% gain in the S&P 500 [11] Market Trends - Macroeconomic uncertainty is causing hesitation in customer decision-making, slowing the pace of tenders and contract awards, and making near-term earnings visibility difficult for drillers [3] - There are concerns about premature rig reactivation leading to oversupply, particularly in deepwater segments, which could undermine pricing power and margins [4] - Despite short-term challenges, long-term demand for deepwater drilling is expected to grow, with forecasts indicating a 40% increase in investment by 2030, supported by large undeveloped reserves and major project approvals [5] Company Highlights - **Transocean Ltd. (RIG)**: Reported contract drilling revenues of $906 million in Q1 2025, an 18.7% increase year-over-year, with a market capitalization of $2.9 billion and a projected earnings growth of 123.1% for 2025 [18] - **Patterson-UTI Energy (PTEN)**: Generated $51 million in adjusted free cash flow in Q1 2025, with a market capitalization of $2.5 billion and a dividend yield of nearly 5% [21] - **Precision Drilling Corporation (PDS)**: Canada’s largest drilling rig contractor, with a market capitalization of $687.3 million, has seen its earnings estimate for 2025 increase from $3.84 to $4.13 per share in the past 60 days [24]

Company Overview - Patterson-UTI Energy is an oil and gas service provider primarily operating in the United States [1] Industry Context - A recent decline in crude oil prices has led several producers to slightly reduce drilling activity [1]

For the quarter ended March 2025, Patterson-UTI (PTEN) reported revenue of $1.28 billion, down 15.2% over the same period last year. EPS came in at $0.00, compared to $0.15 in the year-ago quarter.The reported revenue represents a surprise of +7.67% over the Zacks Consensus Estimate of $1.19 billion. With the consensus EPS estimate being -$0.04, the EPS surprise was +100.00%.While investors scrutinize revenue and earnings changes year-over-year and how they compare with Wall Street expectations to determine ...

Financial Performance - Total operating revenues for Q1 2025 were $1,280,537, a decrease of 15.2% compared to $1,510,360 in Q1 2024[13]. - Net income attributable to common stockholders for Q1 2025 was $1,005, down 98.0% from $51,235 in Q1 2024[13]. - The company reported a comprehensive income of $1,001 for Q1 2025, compared to $50,713 in Q1 2024, indicating a significant drop[15]. - Operating income for Q1 2025 was $16,945, down 80.5% from $86,999 in Q1 2024[13]. - Net income for the three months ended March 31, 2025, was $1,290 million, a decrease from $51,706 million in the same period of 2024[20]. - For Q1 2025, total consolidated revenues were $1,280,537, a decrease of 14.1% from $1,510,360 in Q1 2024[116]. Assets and Liabilities - Total assets decreased to $5,765,426 as of March 31, 2025, from $5,833,466 at December 31, 2024, representing a decline of 1.2%[10]. - Current liabilities decreased slightly to $818,288 from $841,993, a reduction of 2.8%[10]. - Total liabilities decreased to $2,330,021 as of March 31, 2025, from $2,357,622 at December 31, 2024, a decrease of 1.2%[10]. - The weighted average number of common shares outstanding decreased to 386,521 in Q1 2025 from 408,182 in Q1 2024, a reduction of 5.3%[13]. - The company’s total current assets, including other current assets, were $124,148 thousand as of March 31, 2025, compared to $123,193 thousand at the end of 2024, showing a slight increase of about 0.77%[41]. Cash Flow and Capital Expenditures - Net cash provided by operating activities was $208,141 million, down from $365,891 million year-over-year[20]. - Capital expenditures for Q1 2025 totaled $161,831, down 28.7% from $226,941 in Q1 2024[117]. - The company anticipates $44.7 million in capital expenditures for the remainder of 2025 related to various contractual obligations[189]. - Cash dividends paid during the three months ended March 31, 2025, totaled $30.9 million, with a declared dividend of $0.08 per share[191]. Debt and Financing - Long-term debt as of March 31, 2025, was $1,220,083 thousand, slightly up from $1,219,770 thousand at December 31, 2024, reflecting a marginal increase of about 0.03%[64]. - The company issued $400 million in 7.15% Senior Notes due 2033, with net proceeds of approximately $396 million used to repay prior credit obligations[74]. - The total debt to capitalization ratio must not exceed 50%, and the company was in compliance with this covenant as of March 31, 2025[68]. - As of March 31, 2025, the company had no borrowings outstanding under the Credit Agreement and approximately $498 million in available borrowing capacity[69]. Segment Performance - Segment operating income for Drilling Services was $76,314, while Completion Services reported an operating loss of $18,836, resulting in total segment operating income of $64,206 for Q1 2025[116]. - The Completion Services segment generated revenues of $766.1 million in Q1 2025, accounting for 59.8% of total revenues, compared to 62.6% in Q1 2024[145]. - Adjusted gross profit for the Drilling Services segment in Q1 2025 was $165.2 million, reflecting a year-over-year decline of 11.1%[146]. - Revenues for drilling products were $85,663,000, a 1.0% sequential decrease and a 4.8% year-over-year decrease[157]. Market Conditions and Risks - The company anticipates potential risks including commodity price volatility, competition, and operational hazards in the oil and natural gas industry[122]. - The company’s revenues, profitability, and cash flows are highly dependent on prevailing oil and natural gas prices and customer capital deployment[207]. - Global economic conditions deteriorated post-March 31, 2025, due to new trade policies and tariffs, impacting market stability[207]. - Customer consolidation and focus on capital returns by exploration and production companies are impacting demand for services[207]. Legal and Regulatory Matters - The company is involved in ongoing legal proceedings that may impact financial results, with a trial scheduled for October 27, 2025[89]. - The effective income tax rate for the three months ended March 31, 2025, was 51.9%, compared to 27.9% for the same period in 2024, primarily due to permanent differences against earnings[107].

Patterson-UTI Energy (PTEN) Q1 2025 Earnings Call April 24, 2025 09:26 PM ET Company Participants Michael Sabella - VP - Investor RelationsWilliam A. (Andy) Hendricks - President & CEOAndrew Smith - EVP & CFOArun Jayaram - Vice PresidentScott Gruber - Director - Oilfield Services & Equipment ResearchAtidrip Modak - Vice President - Energy Services & E&PsEddie Kim - Vice President - Equity ResearchKeith Mackey - Director - Global Equity Research, Oil & Gas ServicesStephen Gengaro - Managing DirectorConnor Je ...

Financial Data and Key Metrics Changes - Total reported revenue for Q1 2025 was $1,281 million, with a net income attributable to common shareholders of $1 million and adjusted EBITDA of $251 million [24][25]. - The company generated $51 million of adjusted free cash flow during the quarter [24]. - The working capital headwind was approximately $37 million, typical for the first half of the year [25]. Business Line Data and Key Metrics Changes - In the Drilling Services segment, Q1 revenue was $413 million with an adjusted gross profit of $165 million [26]. - The U.S. contract drilling business had 9,573 operating days, with average rig revenue per day at $35,700 and average rig operating cost per day at $19,600 [27]. - The Completion Services segment reported revenue of $766 million and adjusted gross profit of $108 million, with strong demand and high utilization in both oil and natural gas basins [30]. - The Drilling Products segment generated $86 million in revenue with an adjusted gross profit of $39 million, showing steady performance across major regions [32]. Market Data and Key Metrics Changes - The company noted a strong recovery in completions activity and steady drilling activity across U.S. shale, with positive momentum in natural gas basins [6][15]. - The Haynesville region saw significant demand growth, benefiting from the company's solid footprint in key natural gas plays [19]. - The company has an outsized exposure to the industry's largest and most stable operators, which are less reactive to short-term commodity price fluctuations [11]. Company Strategy and Development Direction - The company's strategy focuses on optimizing core operations and disciplined capital allocation, leveraging integrated agreements in drilling and completion businesses [8][10]. - The company aims to enhance efficiency and unlock value for customers through a comprehensive suite of services and products [8][9]. - The company plans to continue growing integrated work as a proportion of its overall business, emphasizing value-accretive services over the lowest price [10]. Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the natural gas market, anticipating increased drilling and completion activity to meet growing demand [15][43]. - The outlook for oil remains uncertain, with potential softening if prices remain low, but operations are currently stable [14][68]. - The company is prepared to adapt its strategy across various commodity price environments, maintaining a strong balance sheet and liquidity [12][41]. Other Important Information - The company closed the quarter with $225 million in cash and an undrawn $500 million revolving credit facility, maintaining low leverage and an investment-grade credit rating [12][38]. - The full-year 2025 net capital budget is set at approximately $600 million, with flexibility to adjust based on market conditions [37]. Q&A Session Summary Question: Discussion on the evolution of the commercial model and integrated services - Management highlighted the unmatched breadth of offerings in U.S. shale, including drilling rigs, cementing services, and logistics, which enhance efficiency for E&Ps [49][50]. Question: Thoughts on replacement CapEx and impacts of tariffs - Management indicated a measured approach to replacement CapEx, focusing on Emerald 100% natural gas systems, while monitoring potential tariff impacts [51][55]. Question: Clarification on completion guidance and expected activity levels - Management acknowledged a strong ramp-up in Q1 but expressed caution regarding potential white space in the second quarter due to oil price fluctuations [61][64]. Question: Insights on potential activity declines in the second half of the year - Management noted that if oil prices remain low, some activity softening could occur, particularly among lower-spec rigs, but higher-spec rigs would likely remain stable [100][102]. Question: Performance-based contracts and their adoption - Management reported that about 10% of operations now involve integrated performance-based contracts, with expectations for continued growth in this area [114].

Financial Performance - Patterson-UTI reported break-even quarterly earnings per share, compared to a Zacks Consensus Estimate of a loss of $0.04, and earnings of $0.15 per share a year ago, indicating an earnings surprise of 100% [1] - The company posted revenues of $1.28 billion for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 7.67%, but down from $1.51 billion year-over-year [2] - Over the last four quarters, Patterson-UTI has surpassed consensus EPS estimates just once and topped consensus revenue estimates two times [2] Stock Performance - Patterson-UTI shares have lost about 28.8% since the beginning of the year, while the S&P 500 has declined by 10.1% [3] - The current consensus EPS estimate for the coming quarter is -$0.03 on $1.23 billion in revenues, and -$0.09 on $4.83 billion in revenues for the current fiscal year [7] Industry Outlook - The Oil and Gas - Drilling industry, to which Patterson-UTI belongs, is currently in the bottom 14% of over 250 Zacks industries, indicating potential challenges ahead [8] - Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact Patterson-UTI's stock performance [5][6] Future Expectations - The estimate revisions trend for Patterson-UTI is mixed, resulting in a Zacks Rank 3 (Hold) for the stock, suggesting it is expected to perform in line with the market in the near future [6] - The upcoming earnings call will be crucial for understanding management's commentary on future earnings expectations [3][4] Competitor Insights - Noble Corporation PLC, another company in the same industry, is expected to report quarterly earnings of $0.31 per share, reflecting a year-over-year change of -31.1%, with revenues expected to be $853.91 million, up 34% from the year-ago quarter [9][10]

Financial Performance - Total revenue for the first quarter of 2025 was $1.3 billion, with a net income attributable to common stockholders of $1 million[7]. - Revenues for the three months ended March 31, 2025, were $1,280,537, an increase of 10.2% compared to $1,162,135 for the same period in 2024[28]. - Operating income for the same period was $16,945, a significant recovery from a loss of $31,335 in the previous quarter[28]. - Net income attributable to common stockholders was $1,005 for Q1 2025, compared to a loss of $51,582 in Q1 2024[28]. - Adjusted EBITDA for Q1 2025 was $251,211, up from $225,391 in Q4 2024, but down from $375,038 in Q1 2024[34]. - Cash flows from operating activities decreased to $208,141 in Q1 2025 from $365,891 in Q1 2024[30]. - Adjusted free cash flow for Q1 2025 was $50,652, down from $141,339 in Q1 2024[36]. - Total capital expenditures for Q1 2025 were $161,831, compared to $226,941 in Q1 2024[32]. - The company experienced a net income of $1.29 million in Q1 2025, a significant recovery from a net loss of $966.40 million in Q4 2024[43]. Revenue Breakdown - Drilling Services revenue reached $413 million, with adjusted gross profit of $165 million, showing a slight increase from $163 million in the previous quarter[4]. - Completion Services revenue totaled $766 million, with adjusted gross profit of $108 million, reflecting strong customer demand in oil and natural gas basins[9]. - Revenues from Drilling Services were $412,860 in Q1 2025, slightly up from $408,385 in Q4 2024[32]. - Completion Services revenues increased to $766,080 in Q1 2025 from $650,848 in Q4 2024[32]. - Drilling Services revenues for Q1 2025 were $412.86 million, a slight increase from $408.39 million in Q4 2024 but a decrease from $457.57 million in Q1 2024[38]. - Completion Services revenues increased significantly to $766.08 million in Q1 2025 from $650.85 million in Q4 2024, but decreased from $944.99 million in Q1 2024[38]. - U.S. Contract Drilling revenues were $341.99 million in Q1 2025, up from $339.36 million in Q4 2024[40]. Shareholder Returns - The company returned $51 million to shareholders in the first quarter, including $20 million in share repurchases and a declared quarterly dividend of $0.08 per share[7]. - The company paid cash dividends of $0.08 per common share for both Q1 2025 and Q1 2024[28]. Future Expectations - The company expects adjusted gross profit in the Drilling Services segment to decline slightly in the second quarter due to reduced average contracted revenue as legacy contracts roll[14]. - The company anticipates selling, general and administrative expenses of approximately $65 million and depreciation, depletion, amortization, and impairment expenses of approximately $230 million for the second quarter[18]. - Following the first quarter, the company absorbed a portion of the Great Plains Oilfield Rental business into other units, expecting a proportional decline in adjusted gross profit for Other businesses in the second quarter[17]. Operational Metrics - The average rig revenue per operating day in U.S. Contract Drilling was $35,720, with adjusted gross profit per operating day at $16,170, benefiting from APEX rig technology[5]. - Average revenue per operating day in the U.S. increased to $35.72 in Q1 2025 from $35.29 in Q4 2024[40]. - Approximately 80% of the active fleet is capable of being powered by natural gas, with expectations for this proportion to increase in 2025[10]. Debt Metrics - The company reported a Debt-to-Adjusted EBITDA ratio of 1.21x and a Net Debt-to-Adjusted EBITDA ratio of 1.00x as of March 31, 2025[43]. Other Financial Metrics - Adjusted gross profit for Drilling Services was $165.23 million in Q1 2025, compared to $162.91 million in Q4 2024 and $185.84 million in Q1 2024[38]. - Adjusted gross profit for Other Drilling Services was $10.41 million in Q1 2025, down from $11.76 million in Q4 2024[40]. - Total revenues for Drilling Products were $85.66 million in Q1 2025, slightly down from $86.52 million in Q4 2024[38].

Core Viewpoint - Value investing remains a preferred strategy for identifying strong stocks across various market conditions, focusing on undervalued stocks for potential profits [2][3]. Group 1: Investment Strategy - The Zacks ranking system emphasizes earnings estimates and revisions to identify winning stocks, while also considering trends in value, growth, and momentum [1]. - The Style Scores system allows investors to find stocks with specific traits, particularly in the "Value" category, where stocks with "A" grades and high Zacks Ranks are highlighted as top value stocks [3]. Group 2: Company Analysis - PattersonUTI Energy (PTEN) - PattersonUTI Energy (PTEN) currently holds a Zacks Rank of 2 (Buy) and a Value grade of A, indicating strong potential as a value stock [3]. - PTEN has a Price-to-Sales (P/S) ratio of 0.61, significantly lower than the industry average of 0.92, suggesting it may be undervalued [4]. - The Price-to-Cash Flow (P/CF) ratio for PTEN is 3.03, compared to the industry's average of 9.79, indicating a favorable cash outlook [5]. - Over the past 52 weeks, PTEN's P/CF has fluctuated between 2.32 and 5.16, with a median of 3.10, further supporting its valuation [5]. - The combination of these metrics suggests that PTEN is likely undervalued, bolstered by a strong earnings outlook, making it an impressive value stock at present [6].

Core Insights - Momentum investing contrasts with the traditional "buy low and sell high" strategy, focusing instead on "buying high and selling higher" to capitalize on fast-moving stocks [1] - Identifying the right entry point for momentum stocks can be challenging, as they may lose momentum if future growth does not justify their high valuations [1] Group 1: Momentum Investing Strategy - Investing in bargain stocks that have recently shown price momentum can be a safer approach [2] - The Zacks Momentum Style Score is useful for identifying strong momentum stocks, while the 'Fast-Paced Momentum at a Bargain' screen helps find attractively priced fast-moving stocks [2] Group 2: Patterson-UTI (PTEN) Analysis - Patterson-UTI (PTEN) has shown a price increase of 4.7% over the past four weeks, indicating growing investor interest [3] - PTEN gained 2.8% over the past 12 weeks, demonstrating its ability to deliver positive returns over a longer timeframe [4] - The stock has a beta of 1.99, suggesting it moves 99% higher than the market in either direction, indicating fast-paced momentum [4] Group 3: Valuation and Earnings Estimates - PTEN has a Momentum Score of B, suggesting it is an opportune time to invest in the stock [5] - The stock has a Zacks Rank 2 (Buy) due to upward trends in earnings estimate revisions, which attract more investor interest [6] - PTEN is trading at a Price-to-Sales ratio of 0.61, indicating it is relatively cheap at 61 cents for each dollar of sales [6] Group 4: Additional Investment Opportunities - PTEN is not the only stock that meets the 'Fast-Paced Momentum at a Bargain' criteria; there are several other candidates worth considering [7] - Investors can explore over 45 Zacks Premium Screens tailored to different investing styles to identify potential winning stocks [8]