Patterson-UTI Energy, Inc. (PTEN) Price Target - Feb 10

[dan_s]

Patterson-UTI Energy, Inc. is one of my Top Picks among the onshore drilling companies.

Raymond James: Solid 4Q22 Results Overshadowed by Fears Over Higher Capex
PTEN-NASDAQ | $14.39
Strong Buy 1 | $24.00 target

Following strong 4Q22 results, we’re slightly increasing estimates after the lower
rig-count induced cuts earlier this week. In the midst of rising concerns over activity levels in light
of materially weaker natural gas fundamentals, the company’s 26% higher capex budget
that includes eight incremental rig reactivations and one incremental frac fleet reactivation
went over like a vegetarian in a steakhouse. The resulting decline in share price and implied
valuation/free cash flow yield keeps us at a Strong Buy rating and 12-month target price
of $24/share . Although management’s reiteration of tight high spec equipment echoes
what other competitors have said, investors just don’t seem to be buying it right now. We
suspect that companies will continue to defend margins rather than utilization given recent
discipline and promotion of returning free cash flow to shareholders, but only time will tell.