Investment Thesis
Patterson UTI Energy is unprofitable with negative free cash flow of -$52.8M, indicating the business cannot sustain itself internally despite $1.1B in revenue. While the company shows modest operational improvements (EPS +90.2% YoY) and maintains adequate liquidity, it remains unable to cover interest expenses from operations and faces minimal revenue growth in a cyclical drilling downturn.
Strengths
- Strong liquidity position with 1.84x current ratio and $335.1M cash providing runway
- Moderate leverage at 0.39x debt-to-equity ratio offers financial flexibility relative to industry
- Positive operating cash flow of $63.9M demonstrates some operational viability despite losses
- Significant earnings improvement trend with EPS advancing 90.2% YoY toward breakeven
- Solid equity base of $3.2B provides balance sheet cushion against $2.2B liabilities
Risks
- Negative free cash flow of -$52.8M unsustainable; company burns cash despite operations
- Operating income and net income both negative; -1.3% operating margin and -2.2% net margin
- Interest coverage ratio of -0.8x means debt service cannot be covered from operations
- Capital expenditure of $116.6M far exceeds operating cash flow of $63.9M, requiring continuous financing
- Negligible 0.7% YoY revenue growth amid cyclical oil and gas drilling sector weakness
- Negative ROE (-0.8%) and ROA (-0.5%) signal poor capital efficiency and asset utilization
Key Metrics to Watch
- Free cash flow trends - path to positive FCF critical to assess sustainability
- Operating margin recovery - timeline to return to profitability
- Cash depletion rate versus $335M reserve - months of runway remaining
- Operating cash flow adequacy relative to capex requirements
- Oil and gas commodity prices and drilling rig utilization - sector cycle inflection points
Financial Metrics
Revenue
1.1B
Net Income
-24.6M
EPS (Diluted)
$-0.06
Free Cash Flow
-52.8M
Total Assets
5.4B
Cash
335.1M
Profitability Ratios
Gross Margin
N/A
Operating Margin
-1.3%
Net Margin
-2.2%
ROE
-0.8%
ROA
-0.5%
FCF Margin
-4.7%
Balance Sheet & Liquidity
Current Ratio
1.84x
Quick Ratio
1.63x
Debt/Equity
0.39x
Debt/Assets
40.9%
Interest Coverage
-0.78x
Long-term Debt
1.2B
Disclaimer: This analysis is generated by AI based on publicly available SEC EDGAR filings.
It does not include stock price data and should not be considered financial advice.
All fundamental data is sourced from SEC public domain filings.
Always conduct your own research before making investment decisions.
Data Source: SEC EDGAR |
Analysis Date: 2026-04-29T14:16:50.503522 |
Data as of: 2026-03-31 |
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