This week’s Stock of the Week supplies high-quality equipment to an industry that has been under pressure.
Patterson-UTI Energy, Inc. (PTEN) is the second-largest land driller in North America, with more than 240 rigs that it leases to oil and natural-gas companies in the US and Canada.
The company also provides services for hydraulic fracturing (fracking), now the primary method of oil extraction for the firms it serves. Patterson-UTI focuses on onshore drilling, not offshore, and has such high-quality technology that its rigs command higher day rates than those of other suppliers in the field—they are simply better built and more efficient.
The firm bought oil-service company MS Energy last October—without taking on additional debt—and expects the acquisition to add to revenue and earnings starting this year. Revenue was $2.3 billion in 2017 and will likely be $3.275 billion this year and $3.625 billion in 2019. Patterson-UTI will likely break even this year as the energy sector continues recovering. It is one of the few oil-service providers that pays a stock dividend—$0.08/share/yr., which recently yielded 0.41% and which is likely to increase as earnings improve.
Fiscal year: December. Earnings per share: 2019 est./$0.70…2018 est./$0.01…2017/–-$0.80.
Daniel M. Miller is executive vice president at Gabelli Funds, and portfolio manager of the $120 million Gabelli Focus Five Fund (GWSAX), Rye, New York. Gabelli.com