Drilling contractors Nabors and Patterson post improved earnings

Sam Fletcher
OGJ Online

HOUSTON, Oct. 23 -- Despite a sharp drop in drilling activity, the two biggest land drilling contractors, Nabors Industries Inc. and Patterson-UTI Energy Inc., posted improved quarterly earnings.

Nabors Industries Inc., Houston, the world's biggest land drilling contractor, posted record earnings per share for the period. "This quarter represented the best performance in the history of our company," said Gene Isenberg, chairman and CEO.

Nabors had earnings of $108.2 million on revenues of $621.1 million in the latest quarter, up from $38.7 million on revenues of $369.1 million a year ago.

The period also started out strong for Patterson-UTI Energy Inc. in Snyder, Tex., the second-largest operator of land-based drilling rigs in North America.

"The third quarter began at a record pace and then began declining in August and continued through September," said Cloyce A. Talbott, CEO of Patterson-UTI. "In September, there was a sudden downward shift in demand, which resulted in a commensurate steep decline in rig utilization."

Yet despite an accelerating decline in drilling activity and an 8.3% reduction in total days worked, the company increased its operating income by 7% over the second quarter. "Our average margin per operating day increased by 16.9% to $5,673 from $4,851/day for the previous quarter," Talbott said.

Patterson-UTI reported earnings of $60.4 million on revenues of $289.1 million during the quarter, up from $10.3 million on revenues of $149.1 million a year earlier.

The company was formed through the merger of Patterson Energy Inc. and UTI Energy Corp. earlier this year (OGJ Online, Feb. 5, 2001).

"Although short-term industry trends are currently unfavorable, we believe Patterson-UTI has continued to demonstrate the benefits we sought to achieve through the combination of its predecessor companies," said Chairman Mark S. Siegel.

"Furthermore, we believe that the current short-term decline in drilling is likely to lead to future natural gas shortages, which should again cause the demand for drilling rigs to increase," he said.

Patterson-UTI had an average 225 rigs operating during the third quarter, compared to an average 248 the previous quarter. As of Thursday, however, the number of working rigs had declined to 154, Talbott said.

At Nabors, Isenberg said, "The rapid weakening of natural gas related activity in North America during August and September restrained the quarter's results and led to lower expectations for our US Lower 48 drilling and Gulf of Mexico workover jack up operations over the near-term."

He said, "We look for a strong gas drilling market in Canada through the upcoming winter season, although not quite as robust as previously expected. Our Canadian unit's recent tender offer for the shares of Command Drilling Corp., if successful, will further improve the scope and efficiency of services we provide in Canada, where a number of our key US customers have an increasing presence."

However, Isenberg said, "We expect to experience most of the deterioration in North American gas rig activity during the fourth quarter, with utilization and pricing likely bottoming in the first half of next year. This will have an adverse impact on our consolidated results despite stability and improvements in our other markets."

Meanwhile, he said, "Our more oil-driven operations -- international, deeper water Gulf of Mexico, and Alaska -- performed well with good to substantially improving outlooks."

For Nabors's well servicing operations in the Lower 48, Isenberg reported "a strong quarter with higher average margins derived from previously implemented price increases."

He said, "Although over 70% of this unit's income is derived from oil-related work, the loss of some gas-related workover and completion activity should exert a dampening on their near-term outlook."

As for offshore operations, Isenberg said, "Our marine transportation unit is fairing well despite the weaker jack up market in the Gulf of Mexico. All of our new deepwater-class vessels are continuing to see full utilization and stable pricing while the older platform supply vessels are slipping modestly."

Nabors owns and operates more than 500 land drilling and 740 land workover and well-servicing rigs worldwide. Offshore, it operates 43 platforms, 15 jack ups, and 3 barge rigs in US and international markets. The company also operates 30 marine transportation and support vessels in the Gulf of Mexico.

Patterson-UTI owns 302 land-based drilling rigs that operate in oil and natural gas-producing regions of Texas, New Mexico, Oklahoma, Louisiana, Utah, Mississippi, Alabama, and western Canada. It also is engaged in other oil field services, including drilling and completion fluids and pressure pumping. In addition, it has an exploration and production arm.

Contact Sam Fletcher at [email protected]