Yahoo Finance Patterson-UTI (PTEN) Teams Up With ADNOC Drilling in the UAE
Patterson-UTI Energy, Inc. PTEN 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,sporting a Zacks Rank #1 (Strong Buy), and Hess Corporation HES and Sunoco LP SUN, 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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