What happened

Shares of Patterson-UTI Energy (NASDAQ:PTEN) declined as much as 11.5% by 3 p.m. EDT on Thursday. Fueling the slump in the onshore contract driller's stock: its second-quarter earnings.

So what

Oil prices have been quite volatile over the past year, enduring their second decline of more than 20% during the second quarter. The most recent slump caused oil producers in the U.S. to tap the brakes on their drilling programs, which negatively impacted contract drillers like Patterson-UTI Energy.

That was evident in the company's second-quarter results, as revenue declined from $854 million in the year-ago period to $676 million during this year's second quarter. Meanwhile, the company reported a net loss of $35.9 million, or $0.17 per share. On the bright side, the drilling contractor's results weren't as bad as analysts feared; revenue beat their consensus estimate, while the company's net loss wasn't as bad as they anticipated.

A drilling rig at sunset

Image source: Getty Images.

Patterson-UTI Energy isn't optimistic about what lies ahead. In the earnings release, CEO Andy Hendricks said of the exploration and production sector: "E&P companies are being extra vigilant this year in monitoring their spend due to commodity price volatility and the increased focus on spending within their budgets. We believe E&P companies are slowing drilling and completion activity to smooth their spending run rate and reduce the risk of budget exhaustion later in the year." Because of that, the company anticipates that its revenue and margins will continue declining in the third quarter.

Now what

Oil companies have been burned by oil price volatility over the past few years, which is why they're extra cautious in 2019. That's leading them to cut back on their drilling activities following the latest downdraft in oil prices, so that they can continue generating free cash flow. That spending discipline will keep downward pressure on profitability for the oilfield service industry this year.