Intrinsic value of Patterson-UTI Energy, Inc. - PTEN

Previous Close

$8.97

  Intrinsic Value

$3.54

stock screener

  Rating & Target

str. sell

-61%

Previous close

$8.97

 
Intrinsic value

$3.54

 
Up/down potential

-61%

 
Rating

str. sell

We calculate the intrinsic value of PTEN stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 1.9

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  3,394
  3,472
  3,561
  3,661
  3,772
  3,894
  4,026
  4,170
  4,325
  4,491
  4,668
  4,858
  5,059
  5,274
  5,501
  5,742
  5,997
  6,267
  6,552
  6,853
  7,171
  7,506
  7,859
  8,231
  8,623
  9,036
  9,470
  9,927
  10,408
  10,913
Variable operating expenses, $m
  3,498
  3,577
  3,668
  3,770
  3,883
  4,006
  4,141
  4,287
  4,444
  4,613
  4,746
  4,938
  5,143
  5,361
  5,593
  5,838
  6,097
  6,371
  6,661
  6,967
  7,290
  7,631
  7,990
  8,368
  8,767
  9,186
  9,628
  10,092
  10,581
  11,095
Fixed operating expenses, $m
  230
  235
  240
  245
  251
  256
  262
  268
  274
  280
  286
  292
  299
  305
  312
  319
  326
  333
  340
  348
  355
  363
  371
  379
  388
  396
  405
  414
  423
  432
Total operating expenses, $m
  3,728
  3,812
  3,908
  4,015
  4,134
  4,262
  4,403
  4,555
  4,718
  4,893
  5,032
  5,230
  5,442
  5,666
  5,905
  6,157
  6,423
  6,704
  7,001
  7,315
  7,645
  7,994
  8,361
  8,747
  9,155
  9,582
  10,033
  10,506
  11,004
  11,527
Operating income, $m
  -334
  -341
  -347
  -354
  -361
  -369
  -377
  -385
  -393
  -402
  -363
  -373
  -383
  -393
  -403
  -414
  -425
  -437
  -449
  -462
  -475
  -488
  -502
  -516
  -531
  -546
  -562
  -579
  -596
  -614
EBITDA, $m
  597
  611
  628
  647
  669
  693
  719
  749
  780
  815
  852
  892
  935
  980
  1,029
  1,081
  1,136
  1,195
  1,257
  1,323
  1,393
  1,467
  1,545
  1,627
  1,714
  1,806
  1,904
  2,006
  2,114
  2,228
Interest expense (income), $m
  37
  60
  63
  65
  68
  71
  75
  79
  83
  87
  92
  98
  103
  109
  116
  123
  130
  137
  146
  154
  163
  173
  183
  194
  205
  217
  229
  242
  256
  271
  286
Earnings before tax, $m
  -395
  -403
  -412
  -422
  -432
  -444
  -455
  -468
  -481
  -494
  -461
  -476
  -492
  -509
  -526
  -544
  -563
  -583
  -603
  -625
  -647
  -671
  -696
  -721
  -748
  -776
  -805
  -835
  -867
  -900
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  -395
  -403
  -412
  -422
  -432
  -444
  -455
  -468
  -481
  -494
  -461
  -476
  -492
  -509
  -526
  -544
  -563
  -583
  -603
  -625
  -647
  -671
  -696
  -721
  -748
  -776
  -805
  -835
  -867
  -900

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  5,581
  5,710
  5,857
  6,021
  6,204
  6,404
  6,622
  6,858
  7,113
  7,386
  7,678
  7,989
  8,321
  8,674
  9,048
  9,444
  9,864
  10,308
  10,777
  11,272
  11,795
  12,346
  12,926
  13,538
  14,183
  14,861
  15,576
  16,327
  17,118
  17,950
Adjusted assets (=assets-cash), $m
  5,581
  5,710
  5,857
  6,021
  6,204
  6,404
  6,622
  6,858
  7,113
  7,386
  7,678
  7,989
  8,321
  8,674
  9,048
  9,444
  9,864
  10,308
  10,777
  11,272
  11,795
  12,346
  12,926
  13,538
  14,183
  14,861
  15,576
  16,327
  17,118
  17,950
Revenue / Adjusted assets
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
  0.608
Average production assets, $m
  4,507
  4,610
  4,729
  4,862
  5,009
  5,171
  5,347
  5,538
  5,743
  5,963
  6,199
  6,451
  6,719
  7,003
  7,305
  7,626
  7,965
  8,323
  8,702
  9,101
  9,523
  9,968
  10,437
  10,931
  11,452
  12,000
  12,576
  13,183
  13,822
  14,493
Working capital, $m
  183
  187
  192
  198
  204
  210
  217
  225
  234
  242
  252
  262
  273
  285
  297
  310
  324
  338
  354
  370
  387
  405
  424
  444
  466
  488
  511
  536
  562
  589
Total debt, $m
  1,159
  1,205
  1,257
  1,316
  1,382
  1,454
  1,532
  1,617
  1,708
  1,806
  1,911
  2,023
  2,142
  2,269
  2,403
  2,545
  2,696
  2,855
  3,024
  3,201
  3,389
  3,587
  3,795
  4,015
  4,246
  4,490
  4,746
  5,016
  5,300
  5,599
Total liabilities, $m
  2,004
  2,050
  2,103
  2,162
  2,227
  2,299
  2,377
  2,462
  2,553
  2,651
  2,756
  2,868
  2,987
  3,114
  3,248
  3,391
  3,541
  3,701
  3,869
  4,047
  4,234
  4,432
  4,641
  4,860
  5,092
  5,335
  5,592
  5,862
  6,145
  6,444
Total equity, $m
  3,578
  3,660
  3,754
  3,860
  3,977
  4,105
  4,245
  4,396
  4,559
  4,734
  4,921
  5,121
  5,334
  5,560
  5,800
  6,054
  6,323
  6,607
  6,908
  7,225
  7,560
  7,914
  8,286
  8,678
  9,091
  9,526
  9,984
  10,466
  10,973
  11,506
Total liabilities and equity, $m
  5,582
  5,710
  5,857
  6,022
  6,204
  6,404
  6,622
  6,858
  7,112
  7,385
  7,677
  7,989
  8,321
  8,674
  9,048
  9,445
  9,864
  10,308
  10,777
  11,272
  11,794
  12,346
  12,927
  13,538
  14,183
  14,861
  15,576
  16,328
  17,118
  17,950
Debt-to-equity ratio
  0.320
  0.330
  0.330
  0.340
  0.350
  0.350
  0.360
  0.370
  0.370
  0.380
  0.390
  0.400
  0.400
  0.410
  0.410
  0.420
  0.430
  0.430
  0.440
  0.440
  0.450
  0.450
  0.460
  0.460
  0.470
  0.470
  0.480
  0.480
  0.480
  0.490
Adjusted equity ratio
  0.641
  0.641
  0.641
  0.641
  0.641
  0.641
  0.641
  0.641
  0.641
  0.641
  0.641
  0.641
  0.641
  0.641
  0.641
  0.641
  0.641
  0.641
  0.641
  0.641
  0.641
  0.641
  0.641
  0.641
  0.641
  0.641
  0.641
  0.641
  0.641
  0.641

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -395
  -403
  -412
  -422
  -432
  -444
  -455
  -468
  -481
  -494
  -461
  -476
  -492
  -509
  -526
  -544
  -563
  -583
  -603
  -625
  -647
  -671
  -696
  -721
  -748
  -776
  -805
  -835
  -867
  -900
Depreciation, amort., depletion, $m
  931
  952
  975
  1,001
  1,030
  1,062
  1,096
  1,134
  1,174
  1,217
  1,216
  1,265
  1,317
  1,373
  1,432
  1,495
  1,562
  1,632
  1,706
  1,785
  1,867
  1,955
  2,046
  2,143
  2,245
  2,353
  2,466
  2,585
  2,710
  2,842
Funds from operations, $m
  537
  549
  563
  579
  598
  618
  641
  666
  693
  723
  754
  789
  825
  865
  907
  951
  999
  1,049
  1,103
  1,160
  1,220
  1,284
  1,351
  1,422
  1,498
  1,577
  1,661
  1,750
  1,843
  1,942
Change in working capital, $m
  4
  4
  5
  5
  6
  7
  7
  8
  8
  9
  10
  10
  11
  12
  12
  13
  14
  15
  15
  16
  17
  18
  19
  20
  21
  22
  23
  25
  26
  27
Cash from operations, $m
  533
  544
  558
  574
  592
  612
  634
  658
  685
  714
  745
  778
  815
  853
  894
  938
  985
  1,035
  1,087
  1,143
  1,203
  1,265
  1,332
  1,402
  1,476
  1,555
  1,638
  1,725
  1,817
  1,915
Maintenance CAPEX, $m
  -867
  -884
  -904
  -927
  -953
  -982
  -1,014
  -1,048
  -1,086
  -1,126
  -1,169
  -1,216
  -1,265
  -1,317
  -1,373
  -1,432
  -1,495
  -1,562
  -1,632
  -1,706
  -1,785
  -1,867
  -1,955
  -2,046
  -2,143
  -2,245
  -2,353
  -2,466
  -2,585
  -2,710
New CAPEX, $m
  -87
  -104
  -118
  -133
  -147
  -162
  -176
  -191
  -205
  -220
  -236
  -252
  -268
  -285
  -302
  -320
  -339
  -358
  -379
  -400
  -422
  -445
  -469
  -494
  -520
  -548
  -577
  -607
  -638
  -672
Cash from investing activities, $m
  -954
  -988
  -1,022
  -1,060
  -1,100
  -1,144
  -1,190
  -1,239
  -1,291
  -1,346
  -1,405
  -1,468
  -1,533
  -1,602
  -1,675
  -1,752
  -1,834
  -1,920
  -2,011
  -2,106
  -2,207
  -2,312
  -2,424
  -2,540
  -2,663
  -2,793
  -2,930
  -3,073
  -3,223
  -3,382
Free cash flow, $m
  -420
  -443
  -465
  -487
  -509
  -532
  -556
  -581
  -606
  -633
  -660
  -689
  -718
  -749
  -781
  -814
  -849
  -885
  -923
  -963
  -1,004
  -1,047
  -1,092
  -1,138
  -1,187
  -1,239
  -1,292
  -1,348
  -1,406
  -1,467
Issuance/(repayment) of debt, $m
  39
  46
  53
  59
  66
  72
  78
  85
  91
  98
  105
  112
  119
  127
  134
  142
  151
  159
  168
  178
  188
  198
  209
  220
  231
  244
  256
  270
  284
  299
Issuance/(repurchase) of shares, $m
  467
  485
  506
  528
  550
  572
  595
  619
  644
  669
  648
  676
  705
  735
  766
  798
  832
  867
  904
  942
  982
  1,024
  1,068
  1,113
  1,161
  1,211
  1,263
  1,317
  1,374
  1,433
Cash from financing (excl. dividends), $m  
  506
  531
  559
  587
  616
  644
  673
  704
  735
  767
  753
  788
  824
  862
  900
  940
  983
  1,026
  1,072
  1,120
  1,170
  1,222
  1,277
  1,333
  1,392
  1,455
  1,519
  1,587
  1,658
  1,732
Total cash flow (excl. dividends), $m
  86
  89
  94
  100
  106
  112
  117
  123
  129
  135
  93
  99
  106
  112
  119
  126
  133
  141
  149
  157
  166
  175
  185
  195
  205
  216
  227
  239
  252
  265
Retained Cash Flow (-), $m
  -467
  -485
  -506
  -528
  -550
  -572
  -595
  -619
  -644
  -669
  -648
  -676
  -705
  -735
  -766
  -798
  -832
  -867
  -904
  -942
  -982
  -1,024
  -1,068
  -1,113
  -1,161
  -1,211
  -1,263
  -1,317
  -1,374
  -1,433
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  -381
  -397
  -412
  -427
  -444
  -460
  -478
  -496
  -515
  -535
  -555
  -577
  -599
  -622
  -647
  -672
  -698
  -726
  -755
  -785
  -816
  -849
  -883
  -919
  -956
  -995
  -1,036
  -1,078
  -1,122
  -1,169
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  -365
  -363
  -358
  -352
  -344
  -334
  -323
  -310
  -296
  -280
  -264
  -246
  -228
  -209
  -190
  -171
  -152
  -134
  -116
  -100
  -84
  -70
  -58
  -47
  -37
  -29
  -22
  -17
  -12
  -9
Current shareholders' claim on cash, %
  84.0
  70.4
  58.8
  48.9
  40.7
  33.7
  27.9
  23.1
  19.1
  15.8
  13.2
  11.1
  9.2
  7.7
  6.5
  5.4
  4.5
  3.8
  3.2
  2.6
  2.2
  1.9
  1.6
  1.3
  1.1
  0.9
  0.8
  0.6
  0.5
  0.5

Patterson-UTI Energy, Inc. is an oilfield services company. The Company owns and operates a fleet of land-based drilling rigs and a fleet of pressure pumping equipment in the United States. The Company's segments include Contract Drilling, Pressure Pumping and Other operations. The Contract Drilling segment markets its contract drilling services to independent and other oil and natural gas operators. As of December 31, 2016, the Company had 202 marketed land-based drilling rigs. The Pressure Pumping segment provides pressure pumping services to oil and natural gas operators primarily in Texas (Southwest Region) and the Appalachian region (Northeast Region). The Other operations segment includes the Company's pipe handling components and related technology business, the oil and natural gas working interests and the Middle East/North Africa business. In addition, the Company owns and invests in oil and natural gas assets as a non-operating working interest owner in Texas and New Mexico.

FINANCIAL RATIOS  of  Patterson-UTI Energy, Inc. (PTEN)

Valuation Ratios
P/E Ratio -4.2
Price to Sales 1.5
Price to Book 0.6
Price to Tangible Book
Price to Cash Flow 4.4
Price to Free Cash Flow 7.2
Growth Rates
Sales Growth Rate -51.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -83.9%
Cap. Spend. - 3 Yr. Gr. Rate -28.9%
Financial Strength
Quick Ratio NaN
Current Ratio 0.2
LT Debt to Equity 26.6%
Total Debt to Equity 26.6%
Interest Coverage -12
Management Effectiveness
Return On Assets -7.1%
Ret/ On Assets - 3 Yr. Avg. -3%
Return On Total Capital -10.2%
Ret/ On T. Cap. - 3 Yr. Avg. -4.6%
Return On Equity -13.3%
Return On Equity - 3 Yr. Avg. -6.1%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 29.1%
Gross Margin - 3 Yr. Avg. 32.5%
EBITDA Margin 22.8%
EBITDA Margin - 3 Yr. Avg. 26.1%
Operating Margin -49.8%
Oper. Margin - 3 Yr. Avg. -20.8%
Pre-Tax Margin -54.1%
Pre-Tax Margin - 3 Yr. Avg. -23.2%
Net Profit Margin -34.8%
Net Profit Margin - 3 Yr. Avg. -15.1%
Effective Tax Rate 35.7%
Eff/ Tax Rate - 3 Yr. Avg. 35%
Payout Ratio -7.5%

PTEN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PTEN stock intrinsic value calculation we used $3327 million for the last fiscal year's total revenue generated by Patterson-UTI Energy, Inc.. The default revenue input number comes from 0001 income statement of Patterson-UTI Energy, Inc.. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our PTEN stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for PTEN is calculated based on our internal credit rating of Patterson-UTI Energy, Inc., is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Patterson-UTI Energy, Inc..
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of PTEN stock the variable cost ratio is equal to 103.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $225 million in the base year in the intrinsic value calculation for PTEN stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for Patterson-UTI Energy, Inc..

Corporate tax rate of 27% is the nominal tax rate for Patterson-UTI Energy, Inc.. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the PTEN stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for PTEN are equal to 132.8%.

Life of production assets of 5.1 years is the average useful life of capital assets used in Patterson-UTI Energy, Inc. operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for PTEN is equal to 5.4%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $3505.423 million for Patterson-UTI Energy, Inc. - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 213.669 million for Patterson-UTI Energy, Inc. is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Patterson-UTI Energy, Inc. at the current share price and the inputted number of shares is $1.9 billion.

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