Shares of oilfield services provider Patterson-UTI Energy Inc. (NASDAQ: PTEN) fell on July 26 after the company reported weaker-than-expected results in its pressure pumping business, stoking investor concerns that the market is over supplied.
Patterson said it would temporarily stop deploying new pressure pumping fleets to hydraulically fracture oil and gas wells due to oversupply of such gear. The company pointed to a sharp uptick in deployment by rivals and a slowdown in spending by some exploration and production companies.
The pressure pumping business in North America had been expanding as a result of growing U.S. shale production, which in July hit 7.3 million barrels per day, according to government estimates. However, pipeline constraints in the Permian Basin and additions to hydraulic fracturing fleets earlier this year have threatened to undermine some of those gains.
Patterson's shares fell as much as 7% shortly after the market opened, hitting a two-and-a-half-year low. They later rebounded, trading around $16.03 at 10:45 a.m. CT, off about 1%.
“Patterson-UTI’s pressure pumping results in the second quarter will likely add to investor concerns around a slowing of growth trajectory of the U.S. pressure pumping market,” James West, a senior managing director for Evercore ISI, wrote in a note on July 26.
Patterson-UTI’s decision to halt additions comes after leading pressure pumping provider Halliburton Co. (NYSE: HAL) saw its shares plummet more than 8% this week on a forecast of moderating growth in the Permian Basin, the largest U.S. shale field.
Patterson’s expects pressure pumping revenue for the third quarter to decline by 5%, while gross margins in that business to fall 7.5%, the company said.
It said oversupply issues were not limited to the Permian Basin.
“It’s disappointing to hear our peers are continuing to add additional horsepower,” one executive said on the call with analysts.
“It’s made it difficult for us to fill the white space in our calendar when we had delays. Normally we’d be able to shift some spreads and do some fracks for other companies,” the executive added.
Recommended Reading
Exclusive: Dan Romito Urges Methane Mitigation Game Plan
2024-04-08 - Dan Romito, the consulting partner at Pickering Energy Partners, says evading mitigation responsibility is "naive" as methane detection technology and regulation are focusing on oil and gas companies, in this Hart Energy Exclusive interview.
Wanted: National Gas Strategy for Utilities, LNG
2024-02-07 - Chesapeake CEO Nick Dell’Osso and Mercator Energy President John Harpole, speaking at NAPE, said some government decision-makers have yet to catch on to changes spreading across the natural gas market.
GOP’s Reaction to White House LNG Pause Takes Shape
2024-01-31 - The U.S. House Energy, Climate and Grid Security subcommittee set the date for a hearing on the Biden administration’s recent pause on LNG export approvals for Feb. 6; Republican Louisiana Sen. John Kennedy pledges to block Biden nominees.
Venture Global Seeks FERC Actions on LNG Projects with Sense of Urgency
2024-02-21 - Venture Global files requests with the Federal Energy Regulatory Commission for Calcasieu Pass 1 and 2 before a potential vacancy on the commission brings approvals to a standstill.
From Satellites to Regulators, Everyone is Snooping on Oil, Gas
2024-04-10 - From methane taxes to an environmental group’s satellite trained on oil and gas emissions, producers face intense scrutiny, even if the watchers aren’t necessarily interested in solving the problem.