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PATTERSON-UTI (PTEN) TEAMS UP WITH ADNOC DRILLING IN THE UAE

Zacks Equity Research May 16, 2024

PTEN Quick QuotePTEN HES Quick QuoteHES SUN Quick QuoteSUN AROC Quick QuoteAROC

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Patterson-UTI Energy, Inc. (PTEN Quick QuotePTEN - Free Report) disclosed a
significant development involving its subsidiary, Patterson-UTI International
Holdings, Inc. The subsidiary has entered into a non-binding term sheet with
ADNOC Drilling, a subsidiary of Abu Dhabi National Oil Company (“ADNOC”).
Subject to definitive agreements and regulatory approvals, Patterson-UTI expects
to acquire a minority equity interest in Turnwell Industries LLC OPC, a company
newly established by ADNOC Drilling. Additionally, Abu Dhabi-based oil and gas
equipment company, Schlumberger Middle East SA, a subsidiary of SLB, is
anticipated to also hold a minority stake in Turnwell.


TURNWELL'S $1.7 BILLION CONTRACT WITH ADNOC

Turnwell has been awarded a substantial $1.7 billion contract by ADNOC. This
contract entails drilling and completing 144 unconventional wells. In return for
their minority equity interest, Patterson-UTI will offer its extensive drilling,
completion, and oilfield service expertise to Turnwell, along with a limited
cash contribution to support working capital. Notably, Patterson-UTI does not
plan to contribute or provide initial drilling and completion equipment, but
this could change based on long-term capital return opportunities.





STRATEGIC IMPORTANCE OF THE PARTNERSHIP

Enhancing Position in Key Oil and Gas Regions: This partnership highlights
PTEN's recognition as a premier drilling and completions company and a
technology leader in the industry. According to Andy Hendricks, PTEN's CEO, the
company is eager to bring its expertise to the initial phase of this project.
Hendricks emphasizes the significance of this collaboration with ADNOC Drilling
and SLB, which aims to enhance Patterson-UTI's presence in one of the most key
oil and gas regions globally.

Leveraging U.S. Shale Expertise: PTEN aims to apply its extensive experience
from the U.S. shale industry to the United Arab Emirates’ (UAE) unconventional
resources. The company is confident that its expertise can help Turnwell achieve
U.S. shale-type efficiencies in drilling and completions. This strategic move is
expected to provide substantial growth prospects over the coming years.


FINANCIAL STRATEGY AND SHAREHOLDER RETURNS

Capital-Efficient Growth in the Middle East: Hendricks has highlighted the
capital-efficient nature of this growth opportunity. PTEN does not plan to
contribute capital equipment initially, which aligns with its strategic capital
deployment approach. This move is not expected to alter Patterson-UTI's
previously announced capital expenditure budget.

Commitment to Shareholder Returns: Patterson-UTI remains committed to its goal
of returning at least $400 million to its shareholders in 2024 through dividends
and share repurchases. The potential collaboration with ADNOC Drilling is viewed
as an opportunity to participate in the early stages of a project that could
generate significant value for partners, customers and shareholders alike.


LONG-TERM PROSPECTS OF TURNWELL

Development of Unconventional Resources in the UAE: The partnership between
Patterson-UTI and ADNOC Drilling is focused on the long-term development of
unconventional resources in UAE. This venture is expected to capitalize on the
vast unconventional resources available in the region, driving growth and
efficiency in the oil and gas sector.

Potential for Significant Value Creation

Patterson-UTI's involvement in Turnwell is anticipated to create significant
value. By leveraging its expertise in drilling and completions, Patterson-UTI
aims to deliver efficiencies akin to the U.S. shale industry. This strategic
move positions Patterson-UTI to benefit from the growth potential in one of the
world's most important oil and gas regions.


CONCLUSION

The announcement of this strategic partnership marks a significant milestone for
PTEN. The collaboration with ADNOC Drilling and SLB through Turnwell is expected
to open new avenues for growth and efficiency in the Middle East's oil and gas
sector. By providing its drilling and completion expertise, Patterson-UTI aims
to enhance operational efficiencies and deliver substantial value to all
stakeholders involved. Overall, this partnership signifies the company’s
strategic move to expand its footprint in a key oil and gas region while
maintaining financial discipline.





ZACKS RANK AND KEY PICKS

Currently, PTEN carries a Zacks Rank #4 (Sell).

Investors interested in the energy sector might look at some better-ranked
stocks like Archrock, Inc. (AROC Quick QuoteAROC - Free Report) ,sporting a
Zacks Rank #1 (Strong Buy), and Hess Corporation (HES Quick QuoteHES - Free
Report) and Sunoco LP (SUN Quick QuoteSUN - Free Report) , each carrying a Zacks
Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank
stocks here.

Archrock is valued at $3.13 billion. The company currently pays a dividend of 66
cents per share, or 3.30%, on an annual basis.

AROC, together with its subsidiaries, works as an energy infrastructure company
in the United States. The company operates under two segments — Contract
Operations and Aftermarket Services.

Headquartered in New York, Hess is valued at $48.83 billion. It is a leading
global independent energy company focused on the exploration and production of
crude oil and natural gas.

The company currently pays a dividend of $1.75 per share, or 1.10%, on an annual
basis. It conducts production operations primarily in the United States, Guyana,
and Malaysia, while exploration activities principally offshore Guyana, the U.S.
Gulf of Mexico, and offshore Suriname and Canada.

Sunoco is valued at $5.42 billion. It is a major wholesale motor fuel
distributor in the United States, distributing over 10 fuel brands through
long-term contracts with more than 10,000 convenience stores, ensuring
consistent cash flow.

SUN’s extensive distribution network across 40 states provides a robust and
reliable source of income, and the Brownsville terminal expansion will add to
its revenue diversification.

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PICK ONE FREE REPORT - OPPORTUNITY MAY BE WITHDRAWN AT ANY TIME


Patterson-UTI Energy, Inc. (PTEN) - $25 value - yours FREE >>

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