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Patterson-UTI Second Quarter 2020 Results

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   |    Thursday,July 23,2020

Patterson-UTI Energy Inc. reported financial results for the three and six months ended June 30, 2020. 

Financials

The Company reported a net loss of $150 million, or $0.81 per share, for the second quarter of 2020, compared to a net loss of $49.4 million, or $0.24 per share, for the second quarter of 2019.  Excluding items discussed below, the net loss for the second quarter would have been $105 million, or $0.56 per share.  Revenues for the second quarter of 2020 were $250 million, compared to $676 million for the second quarter of 2019.

For the six months ended June 30, 2020, the Company reported a net loss of $585 million, or $3.10 per share, compared to a net loss of $78.1 million, or $0.37 per share, for the six months ended June 30, 2019.  Revenues for the six months ended June 30, 2020 were $696 million, compared to $1.4 billion for the same period in 2019.

Financial results for the three and six months ended June 30, 2020 include second quarter, pre-tax charges totaling $55.8 million ($49.4 million after-tax, or $0.26 per share), consisting of $38.3 million of restructuring costs and impairment charges totaling $17.5 million.  The impairment charges include a $9.2 million charge in other operating expense to reduce the carrying value on our balance sheet of a deposit for future sand purchases and an $8.3 million impairment charge related to the closing of the Company's Canadian drilling operations.  Partially offsetting these charges is a pre-tax gain of $4.2 million ($3.7 million after-tax or $0.02 per share) included in other operating income from the realization of insurance proceeds.

Andy Hendricks, Patterson-UTI's Chief Executive Officer, stated, "We are very pleased with our performance during the second quarter in both contract drilling and pressure pumping.  With our largest business, contract drilling, we are especially pleased with our results, as we were able to act quickly to reduce costs and increase margins.  We greatly appreciate our strong customer base for their support, and we believe we have seen improvements in market share in active contract drilling rigs and in pressure pumping spreads as a result of the strength of our commercial relationships.  Additionally, we were able to increase our cash on hand at the end of the quarter by $95 million to $247 million. 

"We have acted decisively to scale down our business in order to reduce indirect support costs by what we estimate will be approximately $100 million annually.  On a quarterly run rate basis, we expect to recognize substantially all of the cost savings in the third quarter.  

"In contract drilling, our average rig count for the second quarter was 82 rigs, which was in line with our expectation.  Recently, the rate of decline in the industry rig count has slowed, and we believe our rig count has stabilized.  We expect that our rig count for the third quarter will average 59 rigs, in line with our current rig count.

"Profitability within our contract drilling segment exceeded our expectations during the second quarter.  Average rig revenue per day of $22,970 and average rig margin per day of $11,280 both include the benefit of $8.6 million of lump-sum early-termination revenue during the quarter. 

"Given our longer-term outlook for the western Canadian market, we closed our Canadian drilling operations during the second quarter.  We are currently marketing those assets for sale.   

"As of June 30, 2020, we had term contracts for drilling rigs providing for approximately $335 million of future dayrate drilling revenue.  Based on contracts currently in place, we expect an average of 51 rigs operating under term contracts during the third quarter and an average of 38 rigs operating under term contracts during the four quarters ending June 30, 2021.   

"In pressure pumping, despite challenging market conditions during the second quarter, both activity and profitability were in line with our expectations.  Pressure pumping revenues were $59.5 million and gross margin was $3.3 million during the second quarter.

"Pressure pumping restructuring costs during the second quarter were $31.3 million and included expenses for closing and consolidating facilities, severance, and exiting contracts with vendors that we no longer intend to utilize.  We believe these changes are structural to the business and will result in significant cost savings, making our pressure pumping segment leaner and more competitive. 

"In directional drilling, revenues were $11.7 million and operating costs were $12.3 million.  Directional drilling restructuring costs during the second quarter were $3.2 million, and we expect to reduce annual directional drilling operating expenses by approximately $10 million.

"While oilfield services activity declined at a record pace, I am pleased with our team's response to align our structure with the changing activity levels, our better than expected margin results, and our continued strong liquidity position.  Our liquidity at June 30, 2020 improved to $847 million, including $247 million of cash and $600 million of availability under our undrawn revolver.  Patterson-UTI is well positioned to emerge from this downturn even stronger."

The Company declared a quarterly dividend on its common stock of $0.02 per share, payable on September 17, 2020, to holders of record as of September 3, 2020.

Financial results for the six months ended June 30, 2020 also include pre-tax, non-cash impairment charges totaling $406 million that were incurred during the first quarter.