PATTERSON UTI ENERGY INC (PTEN): what the price assumes
In the published model solve dated 2026-Q2, anchored at $9.56, PATTERSON UTI ENERGY INC (PTEN) is priced for -2.7% growth. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-06-28.
Generated: 2026-08-10 · Exported: 2026-08-12 · Source: https://boothcheck.com/report/PTEN
Headline
| Field | Value |
|---|---|
| Ticker | PTEN |
| Company | PATTERSON UTI ENERGY INC |
| Current price | $9.56/sh |
| Composition | Drilling Services 32% / Completion Services 60% / Drilling Products 7% / Other revenues 1% |
What The Price Assumes (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin (value-band context) | 1.9% |
| Operating margin (mid-cycle) | 11.9% |
| Margin compression (value-band) | -10.0pp |
| Trailing margin (depressed year) | -1.5% |
| Implied growth | -2.7% |
| Multiple paid | 8x mid-cycle operating income |
The operating-margin figure is value-band context at year 5: derived from the framework's value band, a separate calculation — not part of the priced-in solve.
Solve inputs: computed at a 11% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~4.4pp.
How unusual the bet is: within-range (limited comparison data)
| Reference | Value |
|---|---|
| vs own history | +0.49σ |
| implied end-window share | 0% |
Valuation X-Ray
The price is supported by asset-based and relative-multiple value, while earnings-power/growth-DCF land below the price. A value/asset-supported name, not a pure growth bet.
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 1.21x | 2 | expensive |
| Earnings | 2.00x | 2 | expensive |
| Relative | 0.65x | 1 | justifies |
| Growth | 3.23x | 1 | expensive |
Families that justify the price: Asset, Relative Families that call it expensive: Earnings, Growth
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 7.2%); the inversion above states its own rate.
Per-Model Detail (n=6)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $5.42 | 1.76x | no | FCF base $0.3B, growth -9% (input: historical growth), terminal g 0.5%, WACC 7.1%, 5yr projection |
| DCF Exit Multiple | Growth | $9.50 | 1.01x | no | Exit EV/EBITDA: 35.2x / 40.2x / 45.2x (bear / base = today's held flat / bull), 5yr |
| Relative Valuation | Relative | $14.74 | 0.65x | yes | P/S fallback (negative EPS): Sector P/S 1.2x × TTM revenue — excluded from consensus |
| Simple DDM | Growth | $2.96 | 3.23x | yes | DPS $0.40, g=-3.8% (sustainable: ROE (TTM) × retention; not the terminal-growth assumption), ke=9.3% |
| Two-Stage DDM | Growth | $0.05 | 191.20x | yes | Stage 1: -87% for 5yr, Stage 2: 3.5% perpetual (excluded from median) |
| Simple Excess Return | Asset | $8.32 | 1.15x | yes | Reference only (book value floor): BV/sh $8.32, ROE negative |
| Two-Stage Excess Return | Asset | $7.49 | 1.28x | yes | Reference only (book value with convergence): BV/sh $8.32, ROE converges to ke |
| Discounted Future Market Cap | Growth | $4.37 | 2.19x | no | Rev $4.7B, growth -9% (input: historical growth; tapered), Terminal P/S: 0.6x / 0.8x / 0.9x (bear / base = today's held flat / bull, cap 6x) |
| Peter Lynch Fair Value | Relative | $0.00 | — | no | Negative/zero EPS — earnings-based value floored at $0 |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | — | — | no | — |
| Residual Income | Asset | — | — | no | — |
| Graham Number | Asset | — | — | no | — |
| EV/EBITDA Relative | Relative | $0.01 | 956.00x | yes | EBITDA $0.11B × sector EV/EBITDA 6.0x (excluded from median) |
| FCF Yield | Earnings | $5.34 | 1.79x | yes | FCF $273.1M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $4.32 | 2.21x | yes | SBC-adj FCF $0.24B (FCF $0.27B − SBC $0.04B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | — | — | no | — |
| ROIC-Justified P/B | Asset | — | — | no | — |
| P/Sales Sector | Relative | $14.74 | 0.65x | no | Revenue $4.66B × sector P/S 1.2x |
| PEG Fair Value | Relative | — | — | no | — |
| Earnings Yield | Earnings | — | — | no | — |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net debt | $898.9m |
| Net debt / NOPAT (after-tax) | 2.06x |
| Net debt / operating income (pre-tax) | 1.62x |
| Interest coverage | 7.9x |
| Share count CAGR (dilution) | 15.2% |
| Burning cash | no |
Leverage and coverage are computed on normalized mid-cycle operating income (mid-cycle margin 11.9%); the trailing year was depressed.
Bullet Takeaways
- This is a deeply cyclical oilfield services company at a trough, so the trailing loss is not the signal. On mid-cycle margins the price is about 8 times normalized operating income and implies operating income shrinking, a very low bar.
- The reverse-DCF fair band centers above $22 against a price near $10, because the static frames anchor to depressed trough earnings while the normalized solve uses the company's through-cycle margins.
- The risk is the cycle itself. Activity is driven by customers' oil and gas price expectations, the first quarter showed a $25 million net loss on $1.1 billion of revenue, and the share count has grown sharply from past mergers. Management sees an activity rebound and pays a $0.10 quarterly dividend.
Bull Case
Valuing an oilfield services company requires looking through the cycle, because the trough numbers make a healthy business look broken. That is the lens for Patterson-UTI. Trailing operating margin is slightly negative, but the company's own through-cycle margin is closer to 12%, and on that mid-cycle basis the stock trades at only about 8 times normalized operating income while the price implies operating income actually shrinking. For a business at the bottom of its cycle, paying eight times normalized earnings for a price that assumes no recovery is the kind of setup value investors look for in cyclicals.
Patterson-UTI is one of the largest US land drilling and completion providers, and its fleet is positioned at the higher-spec, more efficient end. The 10-K describes how the company "addressed our customers' needs for drilling horizontal wells in shale and other unconventional resource plays by improving the capabilit" of its rigs (FY2025 10-K, accession 0000889900-26-000013), and in completions it uses "fracturing services in plug-and-perf well completion to maximize efficiency for our customers" (accession 0000889900-26-000013). Scale and efficiency matter in a service business where operators consolidate around providers who can drill faster and complete wells at lower cost per foot. The combined drilling and completion offering lets Patterson-UTI capture more of the well lifecycle.
The near-term data points to a turn. First-quarter 2026 revenue was $1.1 billion with adjusted EBITDA of $205 million, the company averaged 92 rigs, and management expects to exit the second quarter near 92 to 95 rigs, signaling an activity rebound. The reverse-DCF fair band centers above $22, more than double the current price, reflecting how much value the normalized earnings power implies. With a $0.10 quarterly dividend and a balance sheet carrying interest coverage near 8 times on mid-cycle earnings, the company can return cash while it waits for the cycle. A trough-cycle services leader priced for stagnation, with a recovery in sight, is the bull case.
Bear Case
The advantage Patterson-UTI relies on, premium rigs and efficient completions, is being eroded by the very efficiency it sells, and that is the place to start the bear case. As drilling and completion get faster and more productive, operators need fewer rigs and fewer frac fleets to produce the same volume of oil and gas. The US rig count has trended structurally lower across cycles even as production has risen, which means the addressable market for land drillers can shrink even when energy demand is fine. A company that helps its customers do more with less is, over time, shrinking its own unit of demand.
The cyclicality is severe and outside the company's control. The 10-K is explicit that "demand for our services is generally driven by our customers' expectations of future oil and natural gas prices" (FY2025 10-K, accession 0000889900-26-000013). When commodity prices soften or operators tighten capital budgets, activity falls fast, and the first quarter showed the downside: a $25 million net loss on $1.1 billion of revenue. Oilfield services has high operating leverage, so margins swing hard in both directions, and a prolonged weak-price environment would keep the company in or near the red. The price assumes a recovery; a delayed one would test patience.
The balance sheet and share count add to the caution. Net debt is roughly two times mid-cycle operating income, manageable but not trivial for a business with this much earnings volatility, and the share count has grown about 15% a year as the company used stock for acquisitions, diluting per-share value. The static valuation frames are mixed: the relative-multiple frame supports the price, but the earnings-power and growth-DCF frames read it as expensive on current economics. For a cyclical at a trough, the bear case is not that the business is bad but that the recovery the price assumes may be shallow, slow, or undercut by the long-term decline in rig demand, leaving a diluted, levered company exposed to the next downturn.
Valuation
Patterson-UTI must be valued on mid-cycle earnings, not the trough, because trailing operating income is slightly negative. The inversion does exactly that, applying the company's through-cycle margin of about 12% to current revenue, which puts the price at roughly 8 times normalized operating income. That solves to operating income shrinking about 1.6% a year over five years, computed at an 11.2% cost of capital. A low-single-digit decline assumption on a trough-cycle services company is a conservative bar, which is why the overall priced-in level reads as within range.
The family pattern carries the usual cyclical caveat. Measured against depressed current economics, the earnings-power and growth-DCF frames read the price as expensive, while the relative-multiple frame supports it. But the reverse-DCF, using normalized earnings, lands far above the price: the reasonable-value band centers around $22.54 with a low near $19, against a current price near $10 (June 28, 2026). The reconciliation is the cycle. The static frames anchor to weak trailing results, while the normalized solve anchors to the mid-cycle earnings power the company demonstrates in better years, and for a cyclical the mid-cycle anchor is the more meaningful one.
The honest framing is that this is a deep-cyclical at a low, where the upside is a normal-to-strong activity cycle and the downside is a prolonged trough plus the structural decline in rig demand. The balance sheet, with interest coverage near 8 times on mid-cycle earnings and moderate leverage, can survive the wait, and the dividend provides some return in the meantime. A buyer at this price is underwriting a recovery toward mid-cycle earnings and accepting the dilution and volatility that come with the sector. The methods say there is significant value above the price if the cycle turns; the risk is timing and the long-run erosion of demand.
Catalysts
The near-term catalyst is the activity rebound management has signaled. First-quarter 2026 revenue was $1.1 billion with a $25 million net loss and adjusted EBITDA of $205 million, and the company averaged 92 rigs. Management expects to exit the second quarter near 92 to 95 rigs and guided to roughly 90 average US drilling rigs with about $130 million of adjusted gross profit in Drilling Services and about $105 million in Completion Services. The next earnings reports are the checkpoints for whether the rig count and completion activity firm as expected.
The swing factor is commodity prices and customer budgets. Demand for drilling and completion is driven by operators' expectations for oil and natural gas prices, so the path of crude and gas, and the capital-spending plans of exploration and production companies, are the catalysts that matter most. A sustained move higher in prices would lift activity and pull mid-cycle earnings closer; a downturn would extend the trough. The $0.10 quarterly dividend provides a modest return while the cycle plays out.
The risks are concentrated in the cycle and the balance sheet. Oilfield services has high operating leverage, so a weak-price environment hits margins quickly, as the first-quarter loss showed. The structural decline in rig demand, as efficiency lets operators do more with fewer rigs, is a long-term headwind. Leverage of roughly two times mid-cycle operating income and a share count that has grown through acquisitions both temper the upside. A delayed recovery, a drop in commodity prices, or a customer pullback on capital spending would each weigh on a stock that is already priced near a cyclical low but assumes the cycle eventually turns.
Peer Cohorts (Per Segment, With Filing Citations)
Core business (reported)
- HP (Helmerich & Payne, Inc.)
- FY2025 10-K: …various stages of commercial testing. Markets and Competition Our business largely depends on the level of capital spending by oil and gas companies for exploration and production activities. The level of capital spending has traditionally been correlated to oil and gas prices. Oil and gas prices can be volatile at…
- FY2025 10-K: …to maintain our pricing and to increase our pricing as costs increase to offset rising costs and capital expenditures could adversely affect our rig utilization and profit margins. Various factors within our industry could cause there to be substantially more drilling rigs available than necessary to meet demand even…
- NE (Noble Corporation plc)
- FY2025 10-K: …the failure of actual results to reflect the assumptions we use to estimate backlog for certain contracts, could have a material adverse effect on our business, financial condition, and results of operations. A substantial portion of our business is dependent on several of our customers as well as dependent on…
- FY2025 10-K: …gas to consistently remain at or above a level that encourages our customers to expand their capital spending, the inability of our customers to access capital on economically advantageous terms, including as a result of the heightened focus on climate change by investors and regulators, a global recession, reduced…
- SDRL (SEADRILL Ltd)
- FY2025 10-K: …in those regions. Consolidation in our industry may impact our results of operations. In the past several years, the pace of consolidation in our industry has increased, and may continue to increase, leading to the creation of a number of larger and financially stronger competitors. For example, in February 2026, two…
- FY2025 10-K: …future commodity prices and expectations regarding future demand for hydrocarbons typically have a greater impact on demand for our rigs. The level of oil and gas prices has had, and may in the future have, a material adverse effect on demand for our services, and we expect that future declines in prices would have a…
- PUMP (ProPetro Holding Corp.)
- FY2025 10-K: …quarter of 2026. In addition, the effect of fluctuations on supply and demand may become more pronounced within specific geographic oil and natural gas producing areas such as the Permian Basin, which may cause these conditions to occur with greater frequency or magnify the effects of these conditions. Due to the…
- FY2025 10-K: …hostilities in the Middle East or increased tariffs; • competitive conditions in our industry; • our ability to attract and retain employees; • changes in the long-term supply of, and demand for, oil and natural gas; • actions taken by our customers, suppliers, competitors and third-party operators and the possible…
- LBRT (Liberty Energy Inc.)
- FY2025 10-K: …of activity in the industry. Any prolonged and substantial reduction in oil and natural gas prices would likely affect oil and natural gas production levels and therefore affect demand for our services. A material decline in oil and natural gas prices or U.S. activity levels could have a material adverse effect on…
- FY2025 10-K: 634.1 million for the year ended December 31, 2025 compared to $921.6 million for the year ended December 31, 2024. The decreases in EBITDA and Adjusted EBITDA primarily resulted from lower pricing and changes in activity levels in 2025 as described above under the captions Revenue , Cost of Services, and General and…
- RES (RPC, INC.)
- FY2025 10-K: …competition as companies seek to keep assets utilized; ● our belief that there is potential for M&A activity to continue as well as become more frequent in the smaller exploration and production (E&P) and OFS companies; ● our belief that capital discipline has and should generally reduce the volatility of the…
- FY2025 10-K: …with the Securities and Exchange Commission. Item 1A. Risk Factors Risks Related to our Business. Demand for our equipment and services is affected by the volatility of oil and natural gas prices. Oil and natural gas prices affect demand throughout the oil and gas industry, including the demand for our equipment…
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.