7.23 DEP Earnings Observations: PTEN and PDS

A few quick operational nuggets from today’s Q2 earnings releases.  Main takeaway is both PTEN and PDS see flattish U.S. drilling activity.

Patterson-UTI:

• Averaged 82 rigs in Q2 with an expectation to average 59 rigs in Q3.
• According to the company’s website, PTEN is running 59 rigs today.
• Q2 revenue/day = $22,970 vs. $23,810 in Q1
• Q2 rig margin/day = $11,280 (includes $8.6M of lump sum payments or ~$1,150/day).  Q1 margin/day = $9,310
• Closed its Canadian land rig business and is attempting to sell those rigs.  We believe it’s about 18 rigs total, but we’ll check later this morning.
• Pressure pumping revenue totaled $59.5M vs. $125.1M in Q1 (-52%)
• Gross  profit in pressure pumping was $3.3M.
• Pressure pumping results were in-line with the company’s guidance.
• Q2 included one-time charges of $55.8M.
• Cash increased $95M to $247M.
• Total debt = $967M.
• Cost reduction efforts implemented this year are expected to reduce costs by $100M.
• PTEN will provide formal Q3 guidance on its earnings call.

Precision Drilling

• Consolidated revenue totaled $190M with adjusted EBITDA of $58M. (Canadian $$).
• Cash = $175M, up from $97M at the end of Q1
• Total debt = $1.45B with first large maturity in December 2023.
• Averaged 30 rigs in the U.S. in Q2 vs. 55 in Q1.
• Averaged 9 rigs in Canada in Q2 vs. 63 in Q1 (seasonal break-up)
• International held flat at 8 rigs.
• U.S. revenue/day totaled $29,370 but included ~$19M on contract cancellation, idle but contracted rigs and/or turnkey revenue.
• A clean U.S. revenue/day would be closer to $22,400/day if our math is correct.
• A clean implied U.S. margin/day is roughly $8,300/day.
• Company’s investment in technology continues.
• PDS commercialized two drilling apps in Q2, bringing total to 6 with another 12 under development.
• The company highlights success with its AlphaAnalytics technology which reduced drilling times in the Haynesville by 8% q/q in Q2.
• The AlpahAnalytics have been used on 110 wells this year.
• Company sees flattish U.S. activity, in Canada the Q3 normal seasonal rebound will be muted while the company’s Kuwait and Saudi rigs remain contracted.
• PDS cost savings expected to be more than originally prophesied as total annualized fixed cost savings now expected to be 35% vs. 30%.
• Normalized G&A savings expected to exceed $30M.
• In recent years, PDS has consistently been focused on FCF / debt reduction – this focus appears to be continuing.
• 2020 capex expected to total $48M.

Apologies for being late on the earnings takeaways….we overslept.

No views on the stocks….not our thing.  We’ll summarize the conference calls, hopefully today, but most likely this weekend.