PTEN - Earnings call transcript Q4 2017 | Patterson-UTI Energy, Inc.

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Operator

Good morning. My name is Kristen, and I will be your conference operator today. At this time, I would like to welcome everyone to the Q4 2017 Patterson-UTI Energy Earnings Call. [Operator Instructions] Thank you. Mike Drickamer, Vice President of Investor Relations, you may begin.

Mike Drickamer

Kristen. you, Thank XX, on welcome and the Patterson-UTI I'd ended Energy, of Good to behalf today's to December months XX you three discuss conference like the morning, and of XXXX. call results to Participating Hendricks, Andy Executive Andy Siegel, Chief call in Financial Officer; Officer. will today's Chief Mark Chairman; be Smith, and within or the the statements beliefs, expectations intentions, that reminder conference future quick plans, forward-looking in the of call predictions management's for the that A made state U.S. are statements the meaning company's or Litigation XXXX. Securities XXXX, Securities Private Act Reform the Securities Act of the and Exchange of XXXX Act of These risks Form in XX-K disclosed are SEC. forward-looking on filings the other statements the with subject and uncertainties and report to Company's annual as from the These statements such uncertainties risks the expects. company company's and cause suggested materially or those forward-looking could what differ actual in to results The to company revise statement. update any forward-looking or undertakes obligation publicly no may company's the available and are or SEC by the The EDGAR company company's through filings contacting the SEC and SEC's the be through obtained website system. this in non-GAAP conference include made Statements financial measures. call The GAAP press website, company's are and measures to www.patenergy.com, to financial included the our issued conference on call. in prior this release reconciliations required for And pleasure to Siegel the to some opening call now, Mark remarks. over turn my it's Mark?

Mark Siegel

quarter to welcome conference Mike. morning, Good Thanks and call XXXX. for Patterson-UTI's fourth

We are are today. able pleased you to us join

fourth the recently occurred that accident I reviewing some for would discuss the financial tragic the time quarter, in Before results like to to take Oklahoma.

and five deeply us lives. that including heartbroken of of UTI lost saddened are our their All at Patterson three individuals, employees

out Our loved of those thoughts all affected to their go ones. to continue and and prayers

their of accident. all concern. local would responders, that support courage once thank There dropped in those and affected from from and I have messages everything the and much also the to like we community for people Patterson of authorities by appreciate many efforts. tremendous to first those your important partner thankful we us I are UTI We players condolences more the very like numerous to especially offer the the and personnel, of to thank others with and at in our safety you, us is the and field. numerous would received nothing around to Quinton the than emergency again of for support

Turning after-tax results quarter, earnings $X.XX per $X.XX by or share in share. morning, quarter earnings press for financial revenues now These million to set $XXX items we on our affected positively forth fourth issued net or as million. fourth that the include of release net income million our results $XXX reported this $XXX per

the been balance our of the the of fourth loss items, share to legislation. include per would sheet, lower share $X.XX part related tax from non-cash arising the rates per for quarter items as benefit corporate have deferred tax tax a revaluation these million Excluding $X.XX. recent $XXX These or items

line a the debt outstanding In balance. were approximately $XX increased $X.X the Additionally items and largely and share million the the credit. million X.XX% remainder million oil on and gain XXXX merger certain million two pretax each per of of $XXX With call our there of last our We Andy. pretax of and which drawn offset related balance included and with proceeds will issued senior turn investment-grade to to to repay after-tax XX revolving cash million cash ended credit used integration XXX sale over January the other. interests. I on notes, These year were expenses gas of that line $X.XX borrowings now each sheet million and of an portion our approximately on the were of $X.X of $XXX

Andy Hendricks

Mark. Thanks

out that that accident were Oklahoma. colleagues impacted by say First our like hearts in the the and to to go I’d families

on providing focused have primary Our been for families. efforts support the

fourth resilient the of during in rebounded count count the in industry proved to widespread quarter, in fourth Canada rig during typical rig wide the the drilling XXXX. highest now count our of near our the despite rig and with ended our drop quarter, year contract related slowdown business an the in concerns Turning Even holiday the quarter. level

Our quarter. of as day rigs term rate million contracts December the the $XXX higher providing average average day rig first million $XXXX third increase fourth expected rigs XX, was Average average rig of of $XX,XXX XXXX. Averaged we have in for of strength average million such $XX XXX for we quarter was in September operating contracts than function increased offset fourth for future costs the sequentially term XX seen as our day under both rigs operating operating expect low This rates. rig rig quarter in rig At increased well of as during approximately and the spec count some per costs on in of an revenue, we day that the for day January. per number was from increase expected that an our during under rigs an in currently level in per rigs from term day. increase contract XXXX of drilling day $XXX Based XX count in $XXX an contracts backlog better the and margin rig a in to increase count increase for approximately quarter early market XX. average drilling tight. had under as an per rig operating average $XXX a $XX,XXX a average super at of term place, revenue rigs term contracts, unusually rig revenue in per the $XXX Average XXX remains

seven The rigs continues count the exceeding we currently fleet, be seeing and to in XXX own many announced our tight. the We Turning the further are have as our super-spec of the land the of now approximately in XXX the super-spec one estimate in rig utilization strength designs industry the rig to XX%. rig rig with remains have Within completed for our outlook of upgrades most for and in of are market all customers. U.S. rigs choice contracts. super-spec APEX-XK likely there previously rigs mentioned, APEX-XK we of our working. modern industry to which which XX% We

Additionally, rigs. incremental we've seen APEX-PK in also customer interest

to rigs the on have As contracts rigs, five become customer support two to of additional APEX-PK will expected and such first will XXXX. upgrades rigs these three we of delivered APEX-XK be rigs. which All become half in are

an as the is by first favorable quarter rig $XXX large rigs, additional operating the Given day day sequentially rig as expected increase these average be well the in first to cost revenue to contracts, per per to part the proportion of our typical count in upgrades, expect will With of higher taxes. well Average for quarter short-term quarter of in approximately quarter rigs, we expected rigs. rig reactivation increase average increasing first payroll super-spec due XXX the repricing as the first is in as average.

For the day per first average quarter approximately margin of expect rig we $XXXX.

to now pumping. Turning pressure

fourth in revenues million. million or increased quarter to Gross X.X% $XXX revenues, quarter. pumping pressure increase third pressure During XX% XX.X% from margin an pumping the sequentially the of was $XX

expected the margin underway. and did for we fully While fourth pressure pumping, gross benefit quarter as improve expectations, the our much us order as not strength revenue have In to several exceeded in from to initiatives improve. expected still for has room our growth

XX optimize gain order we spreads extra We million to XXXX with average First, active we already spread the active in active comprising to an with horsepower quarter our ended spreads. to Early from go working million spread horsepower. expect X.XX in active same to X.XX are equipment. the size XX second

out of more Second, to we profitable spreads plan the active Mid-Continent two to markets. reposition region

Finally later the strong as our assuming demand we a additional plan from to remains spreads idle currently year. expected, equipment in reactivate

as to January first be quarter. the revenues approximately $X down is quarter. part alone Pressure first revenues quarter Despite million are to increase to the the in now margin impacted in our slightly $XXX $X by to for million. related gross pumping downtime in expected decrease, we by this estimate negatively revenue to pumping due pressure is first approximately million. This outlook weather Turning approximately weather decrease expected

Turning contribution the MS. MS and Drilling. on XX, fourth include quarter We Directional results acquisition completed from now as such XX post-acquisition of to Directional of October days

Drilling revenues margin a For with of gross Directional contributed of the $XX.X million quarter XX.X%. fourth

quarter Drilling revenues will of Directional a million approximately expect the with we $XX contribute XX%. For gross first margin of

his I back for to an Before me several other concluding Mark let remarks, on the matters. turn update provide call financial

Plains Rentals, Our include Warrior other Oilfield business. Rig E&P operations our Great and Technology

million of $XX first revenues operations approximately gross margin XX%. expect to with of quarter For the the we other generate

accident to For all is be approximately to first expenses the related million. quarter the of the for to expense quarter be for is Patterson Oklahoma. $XX million excluding first $XXX expected in expected SG&A depreciation UTI,

We we we to but what Liability, the want know based share Worker's assessing maintain of we impact financial this and still Employer's General including limited at believe types customary accident are coverage. the industry, insurance the and that of amounts Oklahoma, in Liability time. but Compensation, the coverage to Equipment not in following on to be We

the that impact information become we we on time not the this at accident. aware the collision were believe While care meaningful we losses and This investigation. subject any available cover the and information today. that insurance is have after excluding related to expectation insurance any time, at coverage, from we may of applicable available to environmental this we insurance to deductibles preliminary adequate expenses Based have

interpretations the the new items projecting benefit our tax rate. breakeven, our to tax an tax have Based effective the -tax XX% the impact have tax for our Moving on rate to fourth approach earnings potential understanding be are the recent on XX.X%. of from small taxes pre re-evaluation of remember to items was law, deferred exclusive of for XXXX. tax Please rate effective that as our current our quarter, our effective we and approximately outsized currently relatively

our spent fourth XXXX million. $XXX on quarter, we bringing CapEx, approximately CapEx the year full million $XXX to During

of million pumping, and activity levels both rig $XXX and for XXXX, corporate expect and $XXX approximately and $XXX for is for we drilling operations With budget XXXX directional the in comprised million pressure $XX our for drilling, increasing pumping CapEx. count million million CapEx $XX for general pressure for million drilling other

free generate The upgrades We drilling including of maintenance growth flow to for $XXX remainder in budgeted for for opportunities, reactivation. million million rig strong approximately and $XXX with XXXX. CapEx spend includes expect cash the

delivery provides super the of which scheduled any not already will a rig six are has already strong in rig We contracted what been XXXX, builds delivery budget and into X but announced. second of market during XX the were The in of XXXX. this Of year. half additional half for believe for first optionality five we be deploy for new rigs XXXX, to remaining in XX one and spec allows another rigs, for previously major delivered this these upgrades budgeting are

add for for directional With million point our Mark systems, we drilling do our budgeted circulating fleet. concluding drilling million is call we to systems, keep to addition locking additional pressure of now drill CapEx this In I pressure the as have we including with and grow The not to MWD and as market for budgeted fleet we additional remarks. PSI, $XX have XXXX to upgrades, turn to times super-spec primarily expand for his incremental well the equipment growing for rigs. pumping spread demand to back as that, is reactivation. mode plans and generators motors major will At directional larger maintenance growth drilling. The and upgrades pace $XXX for horsepower as diameter need high for the pipe, primarily

Mark Siegel

and both transformational a rentals. also adding acquisitions our strengthened the These pressure pumping We while year Seven XXXX MS and UTI. drilling Thanks and new Energy Directional. was and diversified oil Seventy through services strategic scale our for improved acquisitions in Andy. of fields drilling company interactional Patterson

reached also significant of recognized with rating. investment another an credit in We milestone being terms grade

directional most has limited One U.S. of rating. investment the to stage. We women the $X.XX holders be the appreciate demonstrate a drilling, this a on is UTI world. taking its your only of to announce its who paid note worthless a hydraulic than Through with to quarterly credit service in starting This common oilfield hard with to the today market decade dividend resilience X, the declared XXXX Also that, Patterson the companies and them is in I share a market up company. company were in by to some Within drilling. pumping global transforming commend advancements U.S., scale drilling in made and is make on company March proven and men XXXX. pleased to is fracturing, I'm and record considered number more and only important of as geology XX, working position would of conventional on grade With stock possible almost cash has dominance prolific today continuing thank March significant downturn an of into ago the both it pressure the this like unconventional the framework, the been efforts. and per of horizontal

UTI, Before and thoughts we'll closing of behalf Oklahoma and affected by questions. I'd all are for the those that, prayers in open again call with Operator, like Patterson express conclusion, our on With to tragedy. the turn

Operator

Your comes [Operator of Instructions] Simmons John go & first line Company. the ahead. question Daniel Please from from

Your line is open.

John Daniel

Just for speak the potential the on to of a start fleet timing kind segment. reactivations? me the you and couple magnitude ones and I’ll just Can frac of

Andy Hendricks

X.XX spreads XX have same XX far today, X.XX So horsepower. early we access second in with is said so spreads what we'll we that that million horsepower from currently the quarter, with to go million

we'll Given a on called timeline further occur. spreads be the we that will year, we anticipate out when acting necessarily in market the haven't strength, that'll but

John Daniel

the of fleet? Can you the potential spreads be maybe quantify what number from could stack

Andy Hendricks

think is I that how through on of that going comfort well. to some of level the as have the moves market with we'll wait-and-see our And strength depend XXXX. to

John Daniel

sharpen right us And at sales turn have slack from pencil then E&P whether RFP perspective. several But frac participating seeing time for in competitive reported impression sum, processes. of to to following to had it one all, Can we've people we're system speak, had now comprehensive and you've share some you from sort you're order frame inbound just work? you're that calls your so the just and win the companies speak gives me, tenders starting see in to a benefits Last few when which but that the strategy are to pricing in I'll pricing a rising real what over. from

Andy Hendricks

saw is up, pricing XXXX, XXXX. saw what XXXX, that saw what First, with well. moved to But what we continue QX, along the frame count it up QX we can that to I'd at and in least in like and pumping you was expect pressure like in as you do that and doing just pricing move is rig that was up increases on

that market. pause in EMPs took moving worked We RFP fourth leveled the that super-spec count competitive overall, see higher spread in we and rig then off pricing in the a pressure continue on But the With during first well. early fourth in released, I'm this quarter that expect as they the felt quarter. move the this increases in as up QX. a a probably short-term pause effect, quarter as so to spec like QX our running in rig sure in XXXX. the there some count are the when that of And happened, to up in took since process and some spot rigs EMPs in of And pumping view, a terms were

outlook, pumping some see coming of in of numbers the horsepower consumed more likely based for basis expect our pressure in activities. on bearish We with pressure will demand Even horsepower new to higher due XXXX. still the demand in increase in, this continue we rig and drive pumping, is this that to by with

Operator

Your next of go James comes ISI. from question West Evercore ahead. the from line Please

Your line open. is

Alex Nuta

active horsepower, first for you looks that's is Alex James. the driving the I cost pumping for that, if seeing CapEx, stacked consumable or curious increased pretty you average it are the My question I'm at you've what's even spreads, end active This for it And pressure equipment like anything higher if [indiscernible]. significant. relates and guys on guess of to that

Andy Hendricks

what some million there you versus we're our that is reactivations CapEx just on pumping The for majority pressure maintenance. 'XX in 'XX. saw just as of we of anticipation in for XXX increase see terms know really of projecting most we There's really maintenance, on in the well, in but its and that what in it's maintenance. It's around activity of based average

Alex Nuta

upgrades maintenance major of whatnot? timing the like Just and

Mark Siegel

any No timing levels an year in just CapEx maintenance increase based on of activity this maintenance, year. main is particular on major increasing

Alex Nuta

weather, And sense expectations the expect seems we I present. and late within some driving a pumping, your then guess, presence? as that spread higher we given that commentary revenue or guess, count what's on XQ pricing? for kind your relative I pressure of it second impact then should is And with in flatness even Ontarian on increases that of Is progress to

Mark Siegel

we this $X in Well, the freezing actually delays a that lot in back this ‘XX little a revenue, move in a mentioned, pricing pause I of bit upwards primary is carried quarter of or for movement Take January, continues I the million the over to early driver West that of that pumping majority that as the expect quarter. in pricing We saw to discussion, the temperatures the into weather Texas. call pressure we we first in month. the in bit the But pricing fourth XXXX. saw a is But in held up.

Operator

go comes next Citigroup. line ahead. Your the Gruber from of Please Scott question from

line open. Your is

Scott Gruber

that shareholders you not have Look, you accident can just But is just guys Mark you cash think the that achieve raise rating. a cash I realize cash did to returning around tragic a enhancing some you debt enhancing incremental as What and you - program? monitoring to appropriate the to program? return discussed And else think the parameters about you're are the monitoring IG well. about return

Mark Siegel

and Scott, cash we being do this generate continue which Most it's as a that. progresses, to to think year going thinking we regularly. we've year the recently, in of we're think it terms I about year free about to flow. And been great expect it question in a substantial re-evaluate

our capital into our of and over pressure the entering fleet businesses. fleet amount we've As spent years considerable last retooling increasing pumping new you and know, drilling a several

board sense make sort think dividends to commitments the we while or while, how in management I unfolds changes what’s and year on increases. consider buybacks part, little so, and of And of in – terms effect we a the wait the of there's a any before a actually share

Scott Gruber

And and via how do enhancing dividend program can you return you one around just versus just the up base special available discuss, buyback or other? weigh thoughts the

Andy Hendricks

are and direction of the how of at own a other comfortable research I've of that personal the time, history, is of see view think And and that. the payout studying spent that's extend not is their to in dividends. about lot necessarily My what I both a investors investors dividend that what a persuasive consistency I've and looking particular with the company companies useful anything that, academic we most consistent is on dividend a else topic. Scott anything our is for lot time thing to matters most yet thinking companies about and actually that

token felt So you a a quite comfortable that wanted know same if that it, same to going the would they I it know I had that while, something counting on we've per to dividend, $X.XX long confidence change By but have if were dividend have investors you it not have we've you it think had would share have worry a be we for away. to about it. in

variable of any and So, and payouts. I'm that or more the that the school more dividends about sense makes Hope by are less persuaded much If certain. chaos that in predictable and helps? variable research consistent less

Scott Gruber

seeing does. in Andy, Pricing what and would terms one I that Directional? quickly you it in slip agree No of today thought. I could are more with If

Andy Hendricks

to Directional that What our XXXX has move up, budget. move we see to in and continues because up, rig Drilling is CapEx count our seeing Pricing that and expectation you're that continued is for

move I continues moves Drilling count to So pricing up, as industry think rig up. Directional

expect quarter. in be on to to little to But and first margins parts based forecasted suppliers, parties a sometime with transitionary, caught normalized our this the to quarter equipment up discussions and What more that the that Directional having we in is of third Directional in bit. with some second margin to its Our be expect we rent Drilling. drop in back is and from just Drilling availability spare related to

Operator

the from comes SunTrust line Ken question Please ahead. of next Humphrey. from go Robinson Sill Your

open. is line Your

Ken Sill

addition. on questions ones Drilling. just of one of my answered quick on Couple the Directional You here

of to So of potentially six to they do rigs are that rigs going budget, the you're are add working those all you upgrade that guys the to or five and upgrade out the super-spec and going any rigs you the could more that then there idle to fleet? are in

Andy Hendricks

majority rigs are So originally. XXXX that built looking working. point. us the we're market upgrading because such for rigs. And XXXX majority not upgrade to idle or that the in horsepower of I are majority the horsepower, that the be going current as XXXX that to to are those the horsepower Marcellus are rigs being be expect available to upgrade these some plan, rigs typically the Barnett we'll to do the super-spec will And be at The

working, horsepower we'll XXXX So work schedule do upgrade. we the which rigs that to we as have some and actually ones into

Ken Sill

you existing fleets think the get out doing of the you're X.XX active, you pumping plan then capacity? many many or XX, of to - reactivate back one million do how a top your And getting pressure for restructure be available size you're yet in horsepower how could how they're capacity of issue, cost. But stack more we more the how fleets to going out don't fleet on you your is much given your have going could from your that to

Andy Hendricks

the frac out around still that. of we stacked, additional Well, five horsepower have of $XXX,XXX out that's should we that spreads get

Ken Sill

XX,XXX spreads kind things are. where of So horsepower is

Andy Hendricks

Roughly.

Ken Sill

on a down How a pressure little are you will in be I your question softer out then And fleets? guys turn I to QX. final how beyond committed far and or Revenue in committed of pricing, pricing you of terms far then guess over. because weather, pumping kind is that on are of schedule flattish and it fair out

Andy Hendricks

getting a have contracts. we details, basket the So of without into

to to a term that up pricing agreements Some year. six are longer with be may months

we're reactivation during for move directly some right Some for spot market just feel investing spreads spreads, activating spread. the million when the are have balance different customers have the month we the and stack the and that we because quarter. $X work we're shorter-term, and on between during We

there, assets a to And to know like right some want that continues feel we have market of spreads to these price mix the that feel for investment. we way do upwards. to as work under our and we that pricing the do have upwards so fair the certainly ability But have move we

Ken Sill

into that without your I'd guess work next most XX or think much to least days too of for priced. I next getting is details, the at is to XX But XX XX days

So to QX. fair decline any kind price improvement you're of up be not that bearish show if probably price would or say? going until in your Is numbers to

Andy Hendricks

projection we're XQ in the it in not give in and next baking then there, call. increase QX, the any significant Internally price we'll at

Operator

Your line Please Howard next Hancock from of question ahead. comes from Weil. Blake go the

Your line is open.

Blake Hancock

you could you if of impact in XQ magnitude payroll the the margin? first for Andy, drilling the - could quantify

Andy Smith

Andy Smith. This is

cost XQ, probably about $XXX increases in the On it's day.

Blake Hancock

I the year? that into of operation movements maybe Andy you be? guess, how then revenue already seeing those those of those how margin and some they talk abate? expand is could I are down and - reactivation potentially And then, from and and XQ about, prospective, you expected absorbing full Can Can is some you're may XQ an as some Pressure costs you maybe the down, the what talk about with to Pumping And the up. but be

Andy Hendricks

impacted deliver doing are think revenue improve to their control, our cost continue cost we've a where ability to our But teams margins. I QX think the really operations better operations their efficiencies million delays had at what seeing and their and our same labor with recurring in that manage even weather for their job projections you're time. $X for costs by I and though

the is existing the active that I lot of terms think, a of of in intend for because to out we add hardware. quarter not reactivations, spread cost we're first coming carrying

Operator

Your Suisse. comes ahead. Credit next Wicklund James from question the of line from Please go

line open. is Your

James Wicklund

year feel the rates willing contracts not duration competitive – commit me, On day I'm duration year reactivating the want if of that and these the to you to more don't can commentary, anything going to correct that assume release at that's been interested are And rigs kind about have to wrong. we're and closure talk to that for those in these ENP you one to customers of which to seeing low three for mid that XXs contracts. the five. but it Are or both your press mid you away, are are give is what in this free the you're point? in I'm contracts the I

Mark Siegel

the on APEX-PK off, your don't million to correct to First to to I rig. level a would feel $XX and regarding see, to or $X you get that to what million the to the we APEX-XK need assumptions discussing rig we're spend upgrades do like reactivate super-spec

That In continues terms say improve XXXX. year that pursue of E&Ps. and that us still but rigs one and upgrades, anticipate moving and there's happy to about upside ourselves this average the gets in durations, market pricing that's with, in for between these been our has we're the rig I think in would I we prospect mutual market the direction

James Wicklund

if ask more spreads And pumping, that of the are A the can't than are contracted. I pressure lot the I could same move today question. working dedicated

When to just go Is know contracts could dedicated? up in don't than the sign want to you frac market, moment company Goldman $XX you Sachs didn't know was oil them year? this to start a do pricing a want any that sign going going calling months now. spreads E&P short. we're of because happen ago when You contract guys to we contracting couple rather

Mark Siegel

I'm not sure, year. this see changing I that

But I with working or of are good gives how market we looks how that trouble on a structure we're service towards do don't good side agreement I contract to business a moving are program any the doing work work that any do. what teams that teams the there. think see with good with the don't think much like. marketing E&Ps to us drilling I our going of contract real job getting a believe pricing understand the visibility rigs. job I we we had

James Wicklund

of contract What or say without would new don't Would that you how build this budget, much discuss think horsepower have how of But go do it of price. build brand hypothetical. a take new your you build it you wanting is in a, year the a you spread? or spread? so I term, a a know would two spread you industry new XX,XXX contract to to for much a

Mark Siegel

in equipment returns on we'll would a stacked new think think that of in XXXX. with with horsepower that XXX,XXX customers have buying we hardware. that we have reactivate to a we case, have I we comfortable gave discussions year But and some get still program us buying to don't at I start our we least that remember were until and that

think in - into and a very for million reactivated worked us reactivations terms X.X levels multiple with we we one through least at the wanted I in states. horsepower we’ve pricing integration company of huge and combine those of assets operations just how for that

So right now yet. more push that that’s for we than I to get an we just work least gives not to know activating has our efficient turns even can for would operation focus new back that the our have just us acceptable to been margin a now. that pricing that we’re we XXX,XXX Again and the a in after it best year program working potential there can any want to best make we’re And that get going but we for builds us at horsepower. come quite of pricing

James Wicklund

too? we if we I do per revenue why one And day could instead of it use is to dayrate sneak like refer

Mark Siegel

In terms of drilling.

Jim Wicklund

And revenue else contracts the for to is that we everybody noticed then dayrate for I refer terms because and - meant why it and per rig sorry you add things I I is instead that’s day because of it refers a base was are as in extra didn’t on that to structured revenue am know different Yes, charge and now add per of because there day. dayrate. that drilling the if it of you

could quick has why you in If dirty just on and semantics? the the change occurred

Mark Siegel

correct the how the Jim want that of I revenue you when what number total got things of of as paid days think in particular factor for you’re and rig member, your took also this industry think there. to we’ve the of all incremental you say that what this time of things for that’s ultimately kinds I’ll you got and what pricing to second been additional of there that kind piece you base customer et total very long paid for equipment that add now cetera, had decided an reflective is very, But to and when for for moved Mark additional was on we may fact against what’s that all just it a rig a – crew you going then doing we’re that additional a actually jump cetera. incrementals to moving the et

Andy Hendricks

we certain want as were asset in think or of such more to look ancillary we’re we XXXX the Mark’s going shorter better at return major equipment a looking adding or we’re and for payback we diameter rig pipe that. things talking when this it to back other base be and and larger said as I XXXX returns drill a about capital terms in on dayrate for

those. structure that’s So we how

Operator

of Tommy go line question next the comes ahead. the Moll Stephens. from from And Please

open. is line Your

Tommy Moll

more the First I just well. any you weather you in impact West days many as that just or that their parts were weeks or give country And saw of in talk you us to how was of in impact sense impacted January can West other Texas isolated Texas? of to the wanted about

Andy Hendricks

due $X we first the majority was that but So of was revenue we first impact West have that said was did the the of in impacted some we to other quarter of few majority The weather were Basins had January. weeks West million Texas there Texas. in

more called get versus the many We didn’t days. how days about or that haven’t really that we necessarily pump stages its like out anything

Tommy Moll

strong that super Once And eligible to or upgrade and about of dozen the a commentary spec. the for how are those you then follow-up how get hear for currently rigs do demand this through upgrades good it’s you’ve you more year so the rate more have on many many in as to got active? budget

Andy Hendricks

we’ll fleet of rig upgrade rig. just of for wait And to rigs super-spec sense So an makes progresses. decision some and and to could economically it to us it be our but really see the could if in technically upgraded our all all as be rigs these more rigs have upgraded XXXX technically how economic super-spec becomes

Operator

line comes Please Marc of question from go Cowen. Bianchi next from Your the ahead.

line open. Your is

Marc Bianchi

from guess locked of that's just conflicts I that are sounds right? and I It created customer a optimization. Did that My first the been of question new fleet couple from on then the those is one get like moving - has traditional in.

Andy Hendricks

spread for We for haven't have the fleets to mid-con existing move we'll in line a called and out to any early our quarter. out certainly plan that particular it's and the active of reactivate we'll customer information up on the XXth those second fleets. those and we'll horsepower But that customers going and our customer we're

Marc Bianchi

midcon the are for us fourth working from the quarter? where And fleets

Andy Hendricks

Yes, working. been they've

Marc Bianchi

quarter up the the I bucks. drilling like talked per first implied over about day on but looks increase guided cost the guess XXX you side, in the payroll cost about

continuing some So other thinking increase we reactivation that's be about you as some Should labor cost in know inflation. there? - there? going I don't there's that on perhaps some have there's maybe

Andy Hendricks

to quarter. of we're Some labor the related And increase contract. our to then a that's through business do large the drilling labor we when that's pass not contract increases going if in reactivations be not first in OpEx essentially in have expecting a

Operator

Your ahead. comes Please RBC. from of go next from question Kurt Hallead line the

Your line is open.

Kurt Hallead

head, your heard commentary positive across pretty much out a so all your scratching stock of the why down or about is lot my to lines outlook, sitting here trying your business figure I X%.

when have. an you But per your stock I of translate on of for and count the remainder of little kind outlook the frac could spread outlined today. look number think that perform Andy to frac at could horsepower maximum specific fleet jobs what the into So wondering you in year. help questions you basis plug little as a you for spreads the relative the with was in performance average quarter? horsepower your the if us I you

Andy Hendricks

XX in we'll I horsepower. equipment some don't of XXXX be We'll stacked close to pump. think know you I early said, million into XXX have of detail, existing the able but activate get to and you at be that out in QX up by like point to reactivation spreads spreads do want further we I to know or will levels out those another pressure of five spreads five

Kurt Hallead

second, question of you third basis quarterly and and is jobs of a on frac the kind XXX for really XXX Nature our report in quarter. and my fourth know between through

you wonder guys just that were I range. if kind in So XXX of

going there's fleet to your hitting given up your efficiencies maximum and on. going or You're you're number additional gain some of to frac so existing jobs

some So that? on kind looking for of I was just color

Andy Hendricks

the have efficiencies. improve we to continue to think ability I

two allow our level doing the well. job. is to we are month pricing per But that great improve the continue on of will as spreads E&Ps are think to working. I teams teams of operations efficiency number will Our of when spreads the well relocation those Part the to stages improve get a of and efficiency as as us two

Kurt Hallead

some business talked for less what range. of And ’XX? only incremental very frac margins number and think versus know Drilling companies you margin the talk for companies versus drilling then business your peer Directional than XX% about incremental that directional be type about in related I business Patterson XX% anything reason ‘XX the service on intensive frac maybe have a of freight different business Patterson should group and on previous ’XX to The of and

Andy Hendricks

why to would any improvements know be it pricing. you in you give of pricing. in else's less terms pricing anybody XXXX our improvements see I don't than in I'll in

especially pumping actual see know well. field that going to increasing we're drilling to a drilling. and we're in rental that increased drilling activity and pressure teams for contract the as Our the whether whether We it's pumping it's count levels. through do great activity job drive our pressure in or And going you in business year that's and projecting rig see directional the

Kurt Hallead

been overall per yet? on have in you just terms and job per experiencing up as contracted use in that, any a so follow one, sand or Permian of final well as sand One you Basin of what have

Andy Hendricks

we’re delivery to its So the see sands West off the customers per any to of probably start using the well we the that per customer quarter-on-quarter. Regional volume in sands to or first see to mine. have use that change acceptable of pad And per big in more the start terms accepted sign some in be of starts started from we’ll we’ll and as job pump or sand increase. have technically I think regional And sand. some We to seeing quarter. by not of regional Texas the the line just that

Operator

from line next Waqar Your Sachs. question Syed of Please ahead. comes from Goldman the go

is line Your open.

Waqar Syed

sands? regional E&P Andy so has any far no said to

Andy Hendricks

their E&Ps any lab looking the process of that testing that the not any but a said have no, I’m results if going wells for said is process it’s to for no from aware have approval. This at of applicable determine qualification not they’re I’m aware through yet.

Waqar Syed

And been all regional the where is it mesh been sand or pumped has you've mostly it XXX XX-XX? also

Andy Hendricks

first quarter I information. don't that It have started just the in and

Waqar Syed

XX now, going all kind the with On CapEx fairly $XX guidance CapEx over kind us the right relative some size give next Directional current Is at of Drilling when I business could months investment? that that - look this and high of you that seems million on where the growth business. you number see to of this do

Andy Hendricks

of of good use company a increase great was have been systems. and Directional now electromagnetic have their operations. roughly rental equipment. motor right impacted by they some two-thirds is challenge for think So margins their technology The growth. with great of that a MWD of with very and million MS $XX technology also an with They their suppliers We their capital planned with

to have we a so the And funded rate that with count faster they the at rig a believe opportunity capital. grow and

So is two-third of for that earmarked growth roughly capital. $XX million

Waqar Syed

year just how source cash you guidance me capital, if and your could a also so then working whether provide what’s or projections of cash much? uses of And would that this it for on this be

Mark Siegel

of it the the long We'll At cash. end sort continue and we’ll that forward of number on will capital might big run X% bounce the a rate were number a it we revenue around be see but to think source about going accurate to I as grow fourth working in it neutral number be an quarter probably close. of probably would us I that's

Waqar Syed

first the spent And in much quarterly may half? some be versus on then CapEx, could on of how of the one CapEx guidance half just question the final give projection second maybe you us

Mark Siegel

that have don’t information me today. just with I

Waqar Syed

the But it would equally throughout or front-end more for be more of kind year? loaded still base

Mark Siegel

really to year. the we’re these half now kind loaded year. contracts without in some going million some more up going we not around for Right rig of on potential sign rig certainly because upgrades on for It's deliver it end agreement depend if of to the upgraded a second contracts based $XX front of

Operator

Research. question go from comes Please the ahead. next Your of Chase Mulvehill Wolfe from line

is line Your open.

Chase Mulvehill

of the guess a guess rig potential answered and lot I I upgrades. few be we has kind may for about been a ups already, but think of questions follow

seven this XX excludes year, You about talked announced last that year, did think the from correct? was you that XX it I

Andy Hendricks

and XXXX budget previously those. we’re that we announced major upgrades rig allowance saying XX of for So three

systems is million other of there walking there high-pressure budget smaller but for its piping. the Now upgrades for well. million XX upgrade as well, is major in some in $X as There upgrades. $X The

Chase Mulvehill

upgrade to limit super-spec, want spend. to ordering basically And on spend your entire then a obviously about fleet actually having you talked limit could much upgraded, to amount of someone before newbuild? asked how then you that – there's would a is be you and significant upgraded What a to an want but

Andy Hendricks

a is same not all the the at rather a also as with what's rig market upgrade disappoint with technically market. upgraded. build market economics, discipline think that happy this rigs well think that, in been market But market. relative I we would rigs the that in can as a about be the And the provides I discipline this No, we rigs have new continued point we're pleased oppose fact to than know upgrade to there's in to the is opinion you our in And important relative new building up but this opportunity time. this rigs the we're where

Chase Mulvehill

much how rig, a the rig? upgrade you longer to life that does add When

Andy Hendricks

when years $XX million XX these ago that of we're million gives way rigs and The these really upgrades, XX $X another to some were years invest on upgrading them these we of built life. rigs it

We are of and sub-structure. the major including the many mass changing components

Mark Siegel

going the when They're one major time rigs to at upgrades. virtually these they're finished new of

have new they life the rig. build of So

Chase Mulvehill

go were you cost the today what’s if of build And super-spec the to to new the market?

Andy Hendricks

$XX spec million. we building XXXX high ‘XX they million from rigs and $XX back range in When were to

Chase Mulvehill

squeeze real quickly. in one And will then more

for one On that rates rate those gave recent of led your Is now super of fair the part five? low day spec day five mid is rigs? to the rate, that these call it competitors most average some mid-XXs kind for information term some that got, of XXs the you a term of that

Andy Hendricks

the the one you XXs. to that $X earlier we mid year looking kind to invest call, to Well low for be in of million and term would in contracts with in this I able of be around acknowledge to that dollars for know us million range, $XX rates

Chase Mulvehill

So we out take the low now?

Andy Hendricks

We'll see XXXX how progressive.

Operator

Your Wells from ahead. from the Wallace comes question of Fargo. next line Chris Please go

Your line is open.

Chris Wallace

Just filling in for Judd.

Just wanted mobilizations of you XQ? the from if in mid-con to impact the clarify, quantify could maybe

Andy Hendricks

in quarter. any expecting the mobilizations big not first impact from We're the

Operator

the call question at turn have I'll time. for the remarks. over queue this to We closing the back in no presenters

Mark Siegel

Thanks.

thank Thank on with call April. our earnings XXXX fourth you to would first everybody look like everybody. quarter I forward for quarter in us call for speaking you conference our joining XXXX and to First,

Operator

conclude does participation. your call. This you Thank today's for

may disconnect. You now

Patterson-UTI Energy (PTEN) 8 Feb 182017 Q4 Earnings call transcript