On Tuesday, JPMorgan maintained a Neutral stance on Patterson-UTI Energy (NASDAQ:PTEN) with a set price target of $10.80.
The firm highlighted the company's commitment to returning substantial cash to shareholders despite a decline in North American spending. Management is prioritizing stock buybacks due to the stock's appealing valuation, with a forecasted 2024 free cash flow yield of around 13%.
During a recent non-deal roadshow and a fireside chat, Patterson-UTI Energy's CEO Andy Hendricks and VP of Investor Relations Mike Sabella discussed the company's strategies and outlook. The discussions revealed expectations for a stable U.S. rig count of around 114 for the remainder of the year. However, the company does not foresee an increase in drilling activity in natural gas basins until mid-2025.
Patterson-UTI anticipates a sequential decline in frac utilization in the second quarter of 2024 due to increased calendar white space from completion efficiency gains. Nevertheless, the CEO expects frac activity to improve sequentially in the third quarter of 2024. Despite softer activity levels in the first half of the year, pricing for U.S. land rigs remains relatively stable, with Super Spec day rates in the low-to-mid $30,000 range.
The company acknowledged minor pricing impacts from competition but indicated that its 2024 capital expenditures might come in below the previously guided $740 million. This adjustment is attributed to a strong focus on cost control and reduced maintenance capital requirements amid softer activity levels.
Patterson-UTI Energy plans to return at least $400 million to its shareholders in 2024, which includes approximately $130 million in dividends and at least $270 million in buybacks. This return is expected to surpass the company's minimum target of 50% of its annual free cash flow.
InvestingPro Insights
As Patterson-UTI Energy (NASDAQ:PTEN) navigates the current market landscape, InvestingPro data highlights some key financial metrics that could interest investors. With a market capitalization of $4.34 billion and a P/E ratio of 17.93, the company shows a substantial revenue growth of 66.04% in the last twelve months as of Q1 2024. Additionally, the company's gross profit margin stands at a healthy 30.61%, showcasing its ability to maintain profitability.
InvestingPro Tips suggest that despite the downward revision of earnings by 9 analysts for the upcoming period, the company's stock has historically exhibited low price volatility. This can be an attractive feature for investors seeking stability. Moreover, Patterson-UTI Energy has a commendable record of maintaining dividend payments for 21 consecutive years, which aligns with the company's plan to return at least $400 million to shareholders in 2024. For those interested in further insights, there are additional InvestingPro Tips available at https://www.investing.com/pro/PTEN.
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