Patterson-UTI Energy, Inc. (PTEN) Gabelli Research Analyst Simon Wong

Patterson-UTI Energy, Inc. (PTEN) Gabelli Research Analyst Simon Wong

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transcript:With current WTI crude prices over $65 per barrel and Brent near $70, the animal spirits in the oil patch are back. E&P operators are optimistic. They are exploring, sanctioning projects, drilling and completing wells. This is great news for oilfield service companies.

We are recommending Patterson-UTI Energy as our best idea for 2018.

Patterson-UTI Energy, headquartered in Houston, TX, provides contract land drilling, pressure pumping and directional drilling services to E&P operators

Pro forma for the acquisition of MS Energy, the company has 223 million shares outstanding, trading at 18.77 dollars per share for an equity market cap of $4.6 billion dollars.

We like Patterson-UTI Energy for three reasons: 1 Due to growing demand along with equipment attrition and lagging new supply, the pressure pumping market is undersupplied in 2018.

Patterson-UTI has a pressure pumping fleet consisting of 1.5 million horsepower and we estimate this business will account for 55% of total sales in 2018.

Improved equipment utilization and higher pricing in this segment will help drive overall company profit growth. 2 The acquisition of MS Energy strengthens Patterson's product offering and adds a third leg to its business portfolio.

MS Energy provides directional drilling services. These services can be packaged with an Apex drilling rig, which will help further boost the drilling rig's day rate or sold as a separate service and further drive company growth.

Finally, the company completed two acquisitions in 2017 and its land rig upgrade program is coming to an end.
Over the next few years, Patterson-UTI plans to focus on Free cash flow generation, which can benefit shareholders as it could pay down debt, increase its quarterly dividend or buyback shares

For 2018,
we are estimating company's revenue to grow almost 30% to around $3.0B,EBITDA to grow 50% to 810 million. Utilizing a sum of the parts valuation, we calculate Patterson-UTI Energy's Private Market Value to be 30 dollars per share

Source: Gabelli TV (via YouTube)
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