HOUSTON (Reuters) - Shares of oilfield services provider Patterson-UTI Energy Inc (PTEN.O) fell on Thursday after the company reported weaker-than-expected results in its pressure pumping business, stoking investor concerns that the market is over supplied.
Patterson said it would temporarily stop deploying new pressure pumping fleets to hydraulically fracture oil and gas wells due to oversupply of such gear. The company pointed to a sharp uptick in deployment by rivals and a slowdown in spending by some exploration and production companies.
The pressure pumping business in North America had been expanding as a result of growing U.S. shale production, which in July hit 7.3 million barrels per day, according to government estimates. However, pipeline constraints in the Permian Basin and additions to hydraulic fracturing fleets earlier this year have threatened to undermine some of those gains.
Patterson’s shares fell as much as 7 percent shortly after the market opened, hitting a two-and-a-half-year low. They later rebounded, trading around $16.03 at 11:45 a.m. ET (1545 GMT), off about 1 percent.
“Patterson-UTI’s pressure pumping results in the second quarter will likely add to investor concerns around a slowing of growth trajectory of the U.S. pressure pumping market,” James West, a senior managing director for Evercore ISI, wrote in a note on Thursday.
Patterson-UTI’s decision to halt additions comes after leading pressure pumping provider Halliburton Co (HAL.N) saw its shares plummet more than 8 percent this week on a forecast of moderating growth in the Permian Basin, the largest U.S. shale field.
Patterson’s expects pressure pumping revenue for the third quarter to decline by 5 percent, while gross margins in that business to fall 7.5 percent, the company said.
It said oversupply issues were not limited to the Permian Basin.
“It’s disappointing to hear our peers are continuing to add additional horsepower,” one executive said on the call with analysts.
“It’s made it difficult for us to fill the white space in our calendar when we had delays. Normally we’d be able to shift some spreads and do some fracks for other companies,” the executive added.
Reporting by Liz Hampton; Editing by Chizu Nomiyama and Marguerita Choy