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Weak Earnings Weigh on Pioneer Energy Services Corp's Stock

By Matthew DiLallo – Jul 28, 2016 at 4:52PM

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The contract driller sees tepid signs that the worst might be in the rear view mirror.

Image source: Getty Images.

What: Shares of Pioneer Energy Services (PES) slumped on Thursday and were down more than 12% by 3:15 p.m. EDT.

So what: The onshore contract driller reported revenue of just $62.3 million, which was down 17% from last quarter and 54% below the year-ago quarter while missing analysts' expectations by $3.3 million. Weak oil and gas prices drove lower demand for the company's services and pushed down service pricing. On an adjusted basis, the company lost $20 million, or $0.31 per share, which was actually $0.01 per share better than analysts expected.

Revenue in Pioneer Energy Services' drilling services segment was down 16% from last quarter to $28 million. That was primarily due to lower rig utilization, which slumped to 39% in the quarter, down from 46% last quarter. Meanwhile, average drilling revenue per day was roughly flat. Revenue in the production services segment slumped 18% over last quarter to $34.3 million. Driving this decline was well servicing average pricing, which was down from $519 per hour in the first quarter to $485 per hour in the second quarter as well as a decline in well servicing rig utilization from 44% to 40%.

Pioneer Energy Services was far from the only land driller to report a weak second quarter. Rival Patterson-UTI Energy (PTEN 3.05%), for example, saw its revenue plunge 59% year over year because of the steep decline in rig utilization. Over the past quarter alone, Patterson-UTI Energy's rig count slumped from 71 to 55, though the company did note that its rig count has started to stabilize. Patterson-UTI Energy also pointed out that its pressure-pumping activity stabilized, though pricing remains unsustainably low.

Now what: While the second quarter was brutal, Pioneer Energy Services CEO Stacy Locke said, "we are pleased to see some early signs of improving activity levels." That said, the company has a bit of a mixed outlook for the third quarter. On the plus side, it anticipates production service revenue will improve by 10% to 15% thanks to an increase in customer spending, but it also projects rig utilization will fall to an average of 35% to 38%. That muted outlook suggests the worst is not over for Pioneer Energy Services just yet.

Matt DiLallo has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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