Two big U.S. oilfield services operators are expecting lower profits for the first three months of this year because of the severe winter weather.
Houston-based Patterson-UTI Energy Inc. (PTEN) late Friday indicated its pressure pumping business in the Appalachia region was negatively impacted through March.
"We now expect pressure pumping revenues of approximately $240 million for the first quarter, with a margin percentage of approximately 17%" from 21%, PTEN management said. "The margin percentage is lower than we had projected as a result of having crews and equipment on location that were unable to provide revenue generating services during the unusually severe weather." Margin is revenue less direct net operating costs, while margin percentage is margin divided by revenues.
"While on location, we continued to incur labor, demurrage and other costs, including fuel costs to run our equipment in order to protect it in these extraordinary weather conditions." The winter weather, however, failed to impact other PTEN operations significantly "and demand remains strong for both our pressure pumping and drilling services even in the areas impacted by weather."
Nabors Industries Ltd.'s management team on Monday also blamed the unusually cold winter for missing 1Q2014 consensus estimates. The impact essentially was confined to the Completion Services segment and is forecast to cost close to 7 cents/share.
"As we noted on our fourth quarter earnings call, our first-quarter outlook for the Completion Services segment was cautious," said Nabors CEO Tony Tony Petrello.
More than half (60%) of Nabors' pressure pumping horsepower is in the Rocky Mountains and Appalachia. Severe winter weather in those areas affected pumping operations through February and into early March, and to a lesser degree than in January. The weather also impacted many northern-based fracture sand mines, which has tightened availability "and could further impact our results. Our other operations appear to be in-line to favorable compared to expectations."
The miss in operating performance through March is temporary, said Petrello. "Weather notwithstanding, improving underlying demand for pressure pumping gives us a constructive, though tempered, outlook for this business through the remainder of 2014. As for the balance of our business lines, our near- and longer-term outlooks remain intact."
More important for North American onshore oilfield services will be the "magnitude of March/April improvement and whether/how many of the contracted newbuilds are incremental to current activity versus replacement," said Tudor, Pickering, Holt & Co. on Monday.
Wunderlich Securities Inc. analysts said they weren't surprised by the impact to PTEN's profits, given the weather. However, given the recent pricing issues for natural gas in the Marcellus Shale there may be another drilling slowdown going forward, "that would be related more to fundamentals than the temperature."
Meanwhile, multinational oilfield services provider Weatherford International Ltd. on Monday sold its pipeline and specialty services business to a subsidiary of Baker Hughes Inc. for $250 million, including $241 million in cash and $9 million in retained working capital. The sale is part of Weatherford's plan to divest noncore businesses.
"This sale is an important first step toward Weatherford's refocus on its core businesses and becoming a leaner, more efficient and stronger company," said Weatherford CEO Bernard J. Duroc-Danner.
The purchase complements Houston-based Baker's existing process and pipeline services business, said CEO Martin Craighead.
"The substantial demand for Baker Hughes' process and pipeline services indicates the growing importance of midstream infrastructure in supporting the expansion and sustainability of the energy industry. The addition of Weatherford's pipeline and specialty services not only will augment our asset assurance and integrity capabilities, but also will help us leverage our existing technologies and global supply chain network into profitable, growing markets."