ATB Capital Markets has revised its price target for Patterson-UTI Energy (NASDAQ: NASDAQ:PTEN), dropping it to $11.00 from the previous $12.00. The firm maintained its Outperform rating for the company.
The adjustment follows Patterson-UTI Energy's investor presentation on Tuesday, where the company provided an operational update and revised its third-quarter guidance for 2024.
The company's latest report indicated a decrease in expected U.S. rig activity and a reduction in Completion Services gross profits for Q3 of 2024. Consequently, ATB Capital Markets has decreased its EBITDA forecasts for Patterson-UTI Energy by 3% for 2024 and 8% for 2025.
The firm also noted key points from a sell-side analyst dinner hosted by the company, which included discussions on the current state of the industry and company operations.
According to the update, U.S. drilling activity continues to be sluggish with limited visibility into future oil-related drilling, although there is an expectation of increased activity in gas-related drilling in 2025.
The company highlighted a distinction within its drilling and completions assets, with Tier 1 super-spec rigs showing higher utilization and rate stability compared to the broader super-spec rig fleet.
Additionally, in the Completions business, electric fleets and direct-drive natural gas-powered pumping assets are seeing higher utilization and pricing compared to lower-end Tier II and Tier IV dual fuel fleets.
Patterson-UTI Energy is set apart from its peers by offering a high degree of integration in both drilling and completion services. Despite this, the benefits of such integration are not yet reflected in the company's return on capital employed (ROCE) or trading multiples.
In other recent news, Patterson-UTI Energy reported a steady average of 108 drilling rigs in operation throughout July 2024. The company also disclosed an agreement to retain James M. Holcomb, the Executive Vice President and Chief Business Officer, until at least the end of 2026.
Following his executive tenure, Holcomb will transition to an advisory role through September 2030. Patterson-UTI's Q2 2024 earnings showed a total revenue of $1.348 billion, a net income of $11 million, and adjusted EBITDA of $324 million.
Analysts from JPMorgan (NYSE:JPM) and RBC Capital Markets have revised their price targets for Patterson-UTI Energy shares to $14.00, down from $15.00, due to a weaker than expected outlook for the company's Completion Services segment and U.S. land margins.
InvestingPro Insights
As Patterson-UTI Energy (NASDAQ:PTEN) navigates a challenging market, insights from InvestingPro offer a deeper look into the company's financial health and stock performance. With a market capitalization of $3.43 billion and a P/E ratio that has adjusted to a more attractive 15.64 in the last twelve months as of Q2 2024, PTEN shows signs of valuation that may interest investors. The company's ability to maintain dividend payments for 21 consecutive years, highlighted by a current dividend yield of 3.67%, reflects a commitment to shareholder returns even in turbulent times.
Moreover, PTEN's revenue growth has been robust, with an impressive 77.86% increase over the last twelve months as of Q2 2024, signaling strong operational performance. This is further supported by a gross profit margin of 29.25%, indicating healthy profitability. An InvestingPro Tip emphasizes that management has been aggressively buying back shares, which can be a positive signal about the company's future prospects and confidence from leadership.
Despite recent price volatility and trading near its 52-week low, PTEN is predicted by analysts to be profitable this year, as per another InvestingPro Tip. For those considering an investment in Patterson-UTI Energy, additional InvestingPro Tips are available to provide further guidance, with a total of 7 more tips listed on the platform.
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