Citi Downgrades Pattersion-UTI (PTEN)

The stock of Patterson-UTI Energy, Inc. (NASDAQ:PTEN) has recently been downgraded by analysts at Citi. Let’s shed some light on the development.

A drilling site in the wilds of nature, highlighting the company’s commitment to exploration.

Patterson-UTI Energy, Inc. (NASDAQ:PTEN) is a leading provider of drilling and completion services to oil and natural gas exploration and production companies in the United States and other select countries. On May 19, 2025, Citi analyst Scott Gruber downgraded the stock from Buy to Neutral, reducing its price target from $8 to $6.5. The revised outlook comes as a result of a tough macroeconomic environment for the oilfield services industry, primarily due to a plunge in crude oil prices and the resultant decline in drilling activity. The tariffs on steel and aluminum have raised costs for the industry, which is already anticipated to struggle with a decline in rig counts and day rates, along with shrinking margins and free cash flow. Citi forecasts a 9% decrease in active rig count for Q3 compared to Q1, equating to a reduction of nine rigs for Patterson-UTI Energy. Moreover, the analyst anticipates a 10% decline in day rates as existing contracts expire.

However, it must be noted that these issues are not specific to Patterson-UTI Energy, Inc. (NASDAQ:PTEN), but are affecting the oilfield services industry as a whole. The low oil prices, coupled with a projected slowdown in demand, have forced many oil majors to reduce capital expenditure and decline drilling activity. Travis Stice, chairman and CEO of Diamondback Energy, recently stated:

“We believe we are at a tipping point for U.S. oil production at current commodity prices. As a result of these activity cuts, it is likely that U.S. onshore oil production has peaked and will begin to decline this quarter. This will have a meaningful impact on our industry and our country”

That said, Patterson-UTI Energy, Inc. (NASDAQ:PTEN) reported a steady performance in the first quarter of 2025, beating estimates in both earnings and revenue. The company also returned $51 million to shareholders, including $20 million in share repurchases.

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Disclosure: None.