Shares of energy services company Patterson-UTI Energy (PTEN -16.40%) rose out of the gate on April 24, jumping 10% at the open of trading on Wall Street. That followed days of gains, with the company's share price rising along with the price of oil. Including the early Friday gain, the stock was up roughly 50% in just five days. However, almost as quickly as the stock had jumped, it started to give back those gains and then some. By 11 a.m. the stock had fallen roughly 8% for the day. Although oil had been the driving force for the previous gains, earnings news was the likely cause of the quick change in perception as investors started to digest the company's financial results.
Patterson-UTI reported a first-quarter 2020 loss of $2.28 per share. That was much worse than the $0.14 per share it lost in the first quarter of 2019. The massive loss in the current quarter included $1.83 per share in one-time impairment charges. So the loss from ongoing operations was more along the lines of $0.45 per share -- a better number, but still much worse than the year-ago period.
Falling oil prices were the big driver of the weak earnings results, as the company's energy industry customers pulled back on their spending plans to conserve cash. This shouldn't have come as any surprise to the market, given the weak oil price environment over the past year. That said, Patterson-UTI noted that it expects the rest of the year to be even more difficult. Its rig count started to fall by the end of the first quarter as oil plunged amid oversupply issues, but the decline got even worse after the close of the three-month span. It now expects to see its rig count drop by a third in the second quarter.
The company is working to rein in costs, as you would expect. However, that large a drop in its rig count does not augur well for the future. And since the broader oil market remains out of balance, with too much supply and too little demand, even the recent price gains in oil won't be enough to change the current trajectory of Patterson-UTI's business.
Patterson-UTI is using the standard game plan when it comes to dealing with a fall in demand -- cut costs and preserve liquidity. Drilling for oil and natural gas is a cyclical business, so downturns aren't a surprise. However, the current hit, related to the worldwide efforts to contain COVID-19, is deep. With a global recession likely at this point, it is probably going to be a while before this energy services company's business picks up in a notable way again.