PTEN - Earnings call transcript Q3 2019 | Patterson-UTI Energy, Inc.

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to Patterson-UTI Energy Third Quarter 2019 Earnings Conference Call. [Operator Instructions].

I would now like to hand the conference over to your speaker today, Mike Drickamer, Vice President Investor Relations. Thank you, please go ahead.

James Drickamer

Thank you, Mariama. months behalf today' Energy, the conference the and on welcome like results and XXXX. X to XX, you call X morning, of I'd Patterson-UTI to of Good September ended to discuss

predictions company's Participating beliefs, Private in Siegel, of the Andy quick the Chief Chief the XX-K Form the Litigation meaning XXXX. XXXX, disclosed subject for Hendricks, call the reminder Smith, filings Annual or of other Act be and expectations that Officer; plans, and Andy the the in Officer. company's Executive Exchange Act that U.S. forward-looking this These and conference the Report Chairman; and are Securities XXXX Executive and risks SEC. Financial Reform are statements as statements call today's to of on will Act or Mark A with intentions, statements management's future forward-looking of Securities made state within uncertainties Securities in

included measures. available required this conference and SEC financial conference financial our are reconciliations prior and by uncertainties press to SEC's such Statements www.patenergy.com, forward-looking through include These forward-looking company's in or may to actual release website, the The the call company's company EDGAR are revise The what the update to differ or company website system. company obtained or SEC measures suggested could non-GAAP and on through expects. to The publicly company's risks be any no call. and from statements contacting the obligation issued company's this made materially cause the in statement. GAAP the in undertakes the filings results

opening Siegel my call turn the remarks. over it's to for Mark now to Mark? pleasure And some

Mark Siegel

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

join Andy's will call will over the turn highlights ended Smith, for share some can XX. the I comments, This closing well the will on He the to over turn call will questions. that over I call outlook. today. then remarks who September turning results as the Andy? our to some We Andy comments provide Hendricks, are who quarter Andy operational After morning, to will as our before you review us pleased financial

Andrew Smith

Mark, good Thanks, morning. and

in the earnings quarter, totaling pretax charges we set press release of per morning, included million loss after issued which As a million $XXX this net our or or tax. forth third million for reported $XXX share, $XXX $X.XX

third $XX.X Excluding the per quarter share. these or net been million charges, the loss $X.XX for have would

driven in depreciation, which would in $XX.X opportunity our legacy understand near market provide I'd They're $XXX perceivable like there our fact in impairment including primarily noncash in $XXX have expense, impairment better and $X.X the depletion, do pumping, million that a justify XX is and to pressure drilling $X.X not which drilling of amortization at million charges charges. major a in rigs. you terms, drilling, other rates upturn activation is These work visibility the the to by million environment retirement in current term. Included impairment approximately include for million to to the limited directional charge, some million rigs of help these additional and, non-APEX the and segment. information particular, the we in

the the horsepower. in approximately included XXX,XXX pumping of Additionally, impairment pressure charge is retirement

related a highly directional cost businesses businesses. inventory. charge flow write-off for Current -- segment the as service the drilling correlated to Rental Oilfield is a and million Great in goodwill we of overall quarter, activity. of took Power oilfield During is $XX in I the operating of downturn. effect felt such, $XX.X of latest profitability noncash a and remaining Included And million to the the our all $XX third our of direct these million resulting the goodwill impairment The cash Plains

the Included our for in million, for other first top related direct segment, lines is generally drive included cost to longer product Rig in $XX.X lines is electric primarily top our Warrior which business, inventory to These product write-off and hydraulic the Technologies drives. intend generation no support. operating we

expense Additionally, $X.X $X.X have $X.X senior -- other XXXX. of repayment included $XX million in incurred operations million the early connection expense we of charge notes Series A our is SG&A due is make-whole severance locations. ceased is Included interest as segment, our for in with Calgary in million an our an million

charges, these for adjusted the our of the $XXX majority EBITDA quarter were which Excluding been noncash, million. third have would

XX% be from approximately to expenditures totaled reacted as now XXXX budget reduce million, $XXX original down million last year from our $XXX of we quarter We quarter. the million, expect capital conditions second $XX full for spending. expectation reduction year and of from quickly million, quarter, $XXX third to the the market to down a During CapEx have our

by During been the new tranche and a debt term loan and $XXX that repay XXXX. in $XXX third of quarter, a due combination to gross maturity XXXX using nearest million a senior notes have reduced would to we our pushed debt cash of million our

of The is reduce X.XX% which without penalty. continue loan gives currently plus new million prepayment $XXX and term us debt the to to has LIBOR current pricing ability XXX,

sheet line $XXX undrawn XXXX. of in credit, with available million revolving cash position end quarter, of of million liquidity $XXX the matures which on the balance Our at remain and our under strong the

XX, $XXX end XXXX, outstanding quarter. September the reduction prior At million, million of debt from the gross a our was $XXX balance

ratio debt-to-capital Our at XXXX. XX.X% September XX, was net

we shares quarters $XXX cost of outstanding XX we X.X% the at market first quarter, common the of the stock of shares in Through at or third the year our of XXXX, million. During in beginning of for shares the market open aggregate total million X.X million a open the the million. repurchased an repurchased X $XX of

million. Our remaining is authorization $XXX share repurchase

year. the the In have and of repurchases, paid during to we million first dividends million $X.X paid the in quarters addition through share X $XX.X also quarter, this

$XX effective tax expect amortization depreciation, be approximately $XXX SG&A to depletion, we XX%. and million impairment fourth to our be to the Turning quarter, and expense rate to be million,

that, over the Andy to now With I'll turn call Hendricks.

William Hendricks

Thanks, Andy.

an we in the the results, rig third industry with a U.S. decrease of Before give during we're and the our the overall in with to overview been what everyone the market. wanted the year challenging count, decline fastest It's was third quarter into seeing get quarter quarter I year.

For Patterson-UTI, pumping our decrease than count was in we in while was decrease expected. the expectation, in pressure our greater line rig the with activity

year. staying are in low operator to within With conversations back in first their continues further budget activity in quarter, to WTI mid-XXs, in the fourth slowing and the of are operators rig the to in budget that the expected motivated decline our then year, therefore, activity drilling half quarter January. Both and be bottom the but customer by in the outspend activity fourth December recent early half a drilling activity the late increase and pressure modest and suggested pumping of will

how point, visibility on to activity up, we this limited there shape is as At and operators more their the know work XXXX will will budgets. in year later

customers, accordingly. with many forward is and way their the business visit we of at adjusting drilling describe them steady. our completion are Patterson-UTI, I As And programs going

from day in quarter with count for our In our line $XX,XXX $XX,XXX quarter. averaged the per Average the increased in rigs, to third revenue rig the expectations. during second contract third quarter rig XXX drilling,

higher-than-expected a on average dilutive proportion revenue; dayrates. standby, mix of had cross quarter pressure early some the an on termination leading-edge of and to rigs affected revenue, rig currents third The is which including lot increased daily and that improving average

quarter the impact excluding $XXX third and daily average on When a sequentially favorable and increased in standby the the from second from both rigs more rig to due revenue terminations early quarters, mix. third primarily

the we for during third the workers' as during fourth of approximately due future third in rigs rigs average XX in $XX,XXX, contracts XXXX. not in the contracts we cost count increases drilling as primarily expect XX the well September revenue. operating dayrate cost quarter. fourth $XXX Average recur drilling At under and to rigs XX, XX absorption an quarter during term term place, rig of XX, day quarter items, under on steep contracts during rig drop and related increased such average million lower operating an currently of quarter providing operating will ending term assume Based months as contracts had September fixed for which medical we to per insurance, to comp. the the the in

We XX have non-APEX rigs. retired

and opportunity going conditions commercial strong have preference market forward. our current customer super-spec Given for limited rigs these rigs, believe we

current rig be APEX to Our rigs of includes super-spec. rigs, XXX XXX consider we fleet of XXX which

now Turning drilling to our outlook. contract

line We average rig our with our the quarter, rigs to count. in essentially rig current in expect fourth XXX count

for in the We in expect reset quarter operator revenue $XX,XXX. fourth with per and fourth stabilizes in is $XXX to be to our as the the revenues. related increase revenue of assume first decrease that near bottoms levels an the quarter is per budgets rig in early day current quarter some Approximately day the in quarter per Average rig decrease XXXX. termination the average expected day fourth count

With employees have rigs rigs these some going ready go back the are to in are we labor we expectation carry to to work to as additional of have fourth to work, the when quarter going expense reactivated.

the approximately labor operating as expect of cost, quarter. higher items fourth assume we that the these to day are in not rig to some repeat per affected fourth quarter Despite $XXX, third cost decrease the our average quarter

We that spot in decrease, fell lower low are pricing, Gross revenues spreads. of Turning was additional such now million is idled pressure for $XX.X an and as the expected early activity million work spread we continues with quarter. quarter. more pumping. expected at ended the and active XX spread Activity our reduced active count industry the activity an on margin believe during pricing negatively than unsustainably $XXX we to of we levels than level. impacting Lower quarter to fourth

in approximately activity of reduced pressure fourth approximately and $XXX million the increased to pumping space $X active million. for expect the margin quarter be With we calendar with white spreads, revenues

locations continue to operating for and to been have reduce conditions. scale current business We the market order in

spreads in the and be on seeing of operating would frac is increase We're operators materialize the number will work looking in the unclear for XXXX, early but this work if it pricing economic. whether an

a to of the the horsepower in all working market problem to exacerbated We efficiency spreads the evaluate pressure oversupplied, market is years. of of idling on past it the additional been have will The the the added continue end and since completion basis. pumping over economics Improvements spread-by-spread X has versus XXXX.

on our things and capital remain within we focused control. Patterson-UTI, disciplined At

the would with to parts as course support a prohibitive action equipment. equipment be market remaining During the for pressure XXX,XXX thorough quarter, the of that we cost in undertook opportunity pumping to permanently a our process to the reactivated to concluded equipment. equipment oversupplied this active be evaluate this Any components our decided rationalize of fleet used market, be this with best We the from and current third conditions, horsepower retire will and economic would to value equipment.

We rationalization equipment believe in is efficient. capital manner our fleet will that this optimize a

believe More importantly, rationalization entire the that industry. returns for a to provides equipment we in path improving utilization

of and is Our remaining in fleet the retirement over capable in stabilization market challenging million the the is an QX in along of We long in the believe a count pressure horsepower XXXX for the jobs industry, rig more companies X.X and that early most of by pumping increase rig completion write-down slight with in undertaking today's efficient the count horsepower frac number positive manner. of than expected term.

to directional drilling. now Turning

third revenues Excluding million. million $X.X $XX of quarter $XX write-offs, gross of was million margin with

last increased the fourth million of has directional gross margin percent of steadily unusual of items, over profit expect the drilling margin this Outside $X $XX in million. the revenues business For we year. quarter, with

our our correction directional real-time The Superior like success This data correction XXXX, rigs. month, I call count of adoption surpassed Within to business. increased as rig remote and analytics the in has QC, market a survey on survey analytics with Superior has despite segment, falling out data drilling increased. of than this XXX customer for services major the QC more would milestone technology

differentiate provided Over our peers drilling X,XXX survey and correction offerings. being itself more has forthcoming this feet offerings. to nearly Patterson-UTI the Leveraging behind help other past survey guidance automation incorporated correction Superior wells QC technology or million from year, than for bit into Superior The similar further XX technology without of wellbore. technology QC is software

third operations, our expense and direct decision operating million engineering Warrior our quarter includes to Rig from as Technologies in well in other which charge a away technology $X.X now in severance $XX.X we resulted businesses. a Calgary. transition the SG&A. manufacturing business, made to efforts cost million our In Turning and of This as E&P during the our rental in decision

for other the third $XX.X these Excluding during the million operations on were charges, gross quarter profit our revenues $X.X margin million. of

similar we the For quarter. fourth the third quarter, operational expect results to

remarks. concluding now the for Mark will to I back With that, his call turn

Mark Siegel

Thanks, retiring expertise. in attrition note remain participants, the are levels attrition market, pressure the pumping, our help strong, levels. is pricing operational that unsustainably are to ourselves, believe leading market horsepower We high-quality currently Andy. fleet In equipment. Even low-utilization because down low we oversupplied of rig industry correct our leading franchise including will and which this to and

has Patterson-UTI debt strong us allowed to a said, financial which That position, share buybacks. reduction focus has and on

During shares. than XX% XXXX. the repurchased repurchased beginning $XXX Since we the since have beginning XXXX, shareholders we additional shares of Including third XX of we to than have X.X of cash the the end at million XXXX. more returned or of outstanding more quarter, shares million an million of dividends, the

our pursued, have our in of to sustainability in section website. I during which report. call corporate proud found be I are would like also which the that Sustainability the we quarter, highlighted report, third of we published am of can out some initiatives our the

the to share pleased December quarterly of to X, be stock -- cash today holders company also record on on dividend dividend paid declared its to XXXX. on a $X.XX announce December I'm XX, of common quarterly per XXXX,

open and your continuing thank that for to to the make hard-working men Operator, we'd company. both call appreciate commend said, With up women efforts. would this now we questions. We who like and like the

Operator

[Operator Instructions].

with comes question first Sean JPMorgan. Your Meakim from

Sean Meakim

rig indicated year customers' moderate needed. if could I'm crews. frac that both activity. there's concerned they crews first to sustainably you upon a pumping even half in seems me more as us earlier take on year use base give It to drilling the activity? flexibility shareholder take count lower of definitely expected the But won't their your spend kindly perhaps declines Andy, additions and seems your to in too around maybe little frac their next for rig the the maybe actions

of two those markets? important both you about you do guys think how given competitors are those Just dynamics in

William Hendricks

what's to Yes. going It's hard know happen XXXX throughout to exactly so far.

ways out in for have that discussing obviously, of customers put to we have discussions to already go end most work the up XXXX. Our before into what is they operators want visibility early December point been this still, are The rigs their we've with budgets QX. at and towards in been who we've

in So we into have activity some rig increase visibility on QX. some the

us it's makes As putting some we well, customers that clear not also spreads are sense. mentioned, at economic as just there looking but frac for are out it

understand of moving visibility to QX, So I pieces think there are we don't have as still work some certainly but rest through fully on go we the to this full XXXX.

end X But going under more to have we the services agree to towards next with you that But over opportunity operators some the the years, we're the their budgets year rigs the certainly to we have good put than have to last used year. count. back this work take if moderate completion they it early of and all rig terms,

Sean Meakim

the totally your you peers. Right. obviously I noted of but fair. for attrition comments, a the appreciate your That's that. prepared for own fleet, in lot And

but improvement come fence next off maybe is your to attrition, sense horsepower what's not if of maybe confidence is supply-driven heading the in of level that will market of that right? solution horsepower, activity. you an to seeing a with respect that us the the there into give the in underutilization to year? it's is fenced much getting lot first going the Could incremental So not the are necessarily we So clear be how a

William Hendricks

will essence, then pump blenders gone. those the our the whether to particular In be others we're market have and the components some rationalize of means. to case, do that. that any won't and If continue we use -- same. XXX,XXX the components. some return be in low think on that We'll the back of systems that horsepower retiring may I components will or horsepower equipment systems by incomplete and gone of some may that it's like hours, use Yes. We of But the will

would of consider Our seen pressure the going in what in we've down in pumping is than the I past. activity more fourth chunks with quarter slow to white calendar space the

labor some And way of do to the as of to may there, has of of in this opportunity some this early QX. to to fourth with put going work because some seasonality, our that just monitor through continue quarter. we'll budgets. with And this retain We're force equipment back has we to have the do some an to we work

equipment of in -- the spend I'd But the is put on hours on in out quarter, down CapEx terms the we to the CapEx because on also it's maintenance the like on point will come equipment. fourth based based

So we well pumping. in pressure see that quarter the as moderating on fourth

Sean Meakim

the put fix finer still that help do can So on side get demand think is I to just how you a point relying the Or on supply really to it, you guess, underutilization? much there?

William Hendricks

the can will utilization reports There is I side industry today. fix think supply the and what various that about is utilization.

range, well range industry it's needs XXXX since seen haven't plus XX% say in the of Let's utilization. XX% or to that terms in And industry that's minus, end of XX% below the be that we healthy. the

has I been us challenged you're so of market but from you'll with rationalization And retirements seeing long and of others for equipment see equipment. from retirements a time, the and period of continued the think,

the side that think, out. work this supply I will

in will out. It's a work Now but doesn't to supply happen side this overnight. couple of going it not the happen quarters,

Operator

with question next Narra James. Praveen comes Your Raymond from

Praveen Narra

the that And that was bring what spent XXX,XXX about I the too guess, needed retirement. that? of line considered much? of that was thinking you to to be kind to think How back demarcation on do reactivate CapEx

William Hendricks

certainly CapEx consideration. a was Well,

forward, the it an a how working. The to as and in And going that own we no as market as as as oversupplied. much going need is And us need horsepower keep to the just trying have was other point there company none invest just in all us much consideration is we of forward horsepower industry. we do horsepower

had And what within assets term and long do find and on we our it just point so invest we and that of just our need the our to -- horsepower don't that this market list a XXX,XXX the draw would say, of over view line anymore, we horsepower. a based at to to view we of take in line

Praveen Narra

bit kind I should question. hold which better guide, not i should are But bit we assume you maybe incremental guidance, gets look historically decremental better think I pressure on other I And a that? about And pumping. Great. If the we incrementals on guide XQ the because think on guys have you at margin on? higher you're -- run. addressed XQ that we it than the or XQ know about a it's you're giving to willingness Sean's that and Okay. guess, for how guess holding on side. do How we of so

William Hendricks

down Yes. seasonality because of of effects the QX, be better see some going than that budgets. potential has with along we're to their QX because the operator to slowing some in XQ

the to there, that's us. And work through blocky so the fourth important we we gets people still in quarter, white of hold work with space to chunks but rather the need as

good We equipment. have

We company, a as we sheet, balance have and long this term. reiterate great a have for I'll good people. And the in we're

Praveen Narra

if timing? better one Okay. working you a Can third the in and from here quarter. on just If any get It expect go initiatives noncash to side. capital or about looks that really then talk And did could just if how that it like XQ? was you on can working well somewhat into I squeeze more capital the

Andrew Smith

Andy. is This Yes.

into the seen depends of bit sort of then the go, lower a coming and a more of of a XXXX off. as think us little of on XQ a that that. bulk rebound may back back We is improvement the as see come We we market see it's may to some kind in I little we've to but quarter. activity more bit little that have

Operator

Your next Stanley. Connor Lynagh from question comes Morgan with

Connor Lynagh

been right could don't where you characterize early dayrates, specific certainly you those characterize of year rig How but next realized if you now? December compare a to in drilling in your the a Maybe to people's want rate is land -- and in pricing wondering environment Just increase signing work the give now. right that concern minds. could do lot driving the contracts that in you're count. It's are

William Hendricks

about that come there's itself, pressure there dayrates. last don't We've that of pricing. This market should talk bit the rigs. as rig couple been we be have again, dayrates of rigs this very super-spec shown when natural this little that before, on a is of that that when good is they're a using has pressure panic discipline think down. But operators the On the on good for a is value very terms calls. shows many a I market leading-edge I've rigs. acknowledging -- on some in And It's said on

so, think, recognize too. customers And that I our

as is what hear charges a per of some anecdotal float up numbers what rates. number well of a is we So revenue that goes rig have higher yes, rates have than these average And as that remember, layer on on we a are. of there there our pressure being And much rig around. to leading-edge But you that numbers out make on dayrate. leading-edge to some is around combine that a day, anecdotal thrown that number on top which then

Connor Lynagh

Maybe sort quarter much of or ballpark has to characterize over past keep the per X? Yes. dollars day, fair. how moved Any there? the like-for-like, could just market it you That's

William Hendricks

I on think numbers absolute that. any calling we'll pass on out

Operator

James Evercore question next Your with from West comes ISI.

James West

I want Mark, appropriate and on to from iron Mark in actions applaud taking the you removing Andy, market. guys the

you're the thing guys doing and for You once it always done have your shareholders best again.

Andrew Smith

Andy?

William Hendricks

you. Thank

James West

you're edge for reviewed was the won't in horsepower a anytime reassess Is and quarter to near done kind of you you it retire be that be retired forward? now XXX,XXX. Or horsepower term? may and As may additional thorough complete on where during is the that your this review, decided going there that

William Hendricks

versus are the drilling company pressure where board thorough current based conditions, a market the very was pumping drilling side valuations This on directional across that and put trades, outside share review, on on from our inside. the both the and price

good we a everything that in the write term any over period. done on so to write-downs down we've job need that near And think we taking

a very I've heard taking other as that XXX,XXX for well. what us, number I and about and think is equipment retiring good seen encouraged I'm companies

James West

Right.

is on contract then don't late us next standing And but I this to to customers Is handful it If want exactly, in of up contracts our a some count? drilling through in this comes is sense some give idea, conversations, I maybe -- everything that Could yet, the potential rig activity? of you're up you rig the just but you sense. Make side, what's a I year, of it rigs? improvement and quantify not know know your kind nice talking early step Okay. the about know of magnitude rigs year. the

William Hendricks

is I on visibility guess, today, that. looks to had have what there today, that be I or increase increase upside like but we if modest handful could that qualify the

know all intend just we don't think operators do yet. what the I to

discussions are that working other them up more with what rigs to start their year, quantify on and budgets, of they cause through today. than Some going could year know trying what they spent may next this we what

how out up as well. calling on that we could to some because be QX many in cautious that rigs I'm So upside putting exactly there be could

Operator

Scott Your next comes from question with Gruber Citigroup.

Scott Gruber

could the in pumps retired 'XX? going that be limited? components is from CapEx that or to frac meaningful of Could How be to the aid frac much use

William Hendricks

retiring. based a it's quarterly small did this certainly We on so already but It close savings I maybe in in savings million in $X million has quarter, number million had probably to relatively year quarter. fourth of the to budget. CapEx overall potential, say, far a $XX million equipment CapEx were third on capital that basis $XX the to some we in We terms would the $X rationalization

of you it what but yet we XXXX, So we've like looks I so think far. seen don't that magnitude of some the in gives know what

Scott Gruber

And deflations then components around X,XXX Or see be thinking it. starting rig on to the day are there? side, in you in should rig still some we Got CapEx? a

William Hendricks

still XXX,XXX year in solid a that or at it look per we of day It's level, operating how is X,XXX roughly closer.

per that any it's seen deflation -- number but -- in Don't haven't level. in really se. still So that

Some of we're a labor the of reductions lot and any it not -- it's seeing labor. in

not we're labor. capitalizing it it's but also includes So we just when those projects, materials,

Scott Gruber

And math $XXX haven't on the for ballpark Got frac set it. rough with $XXX but know bounce budget million a in activity, you're some a you in kind just maintenance, you'll a high-XXXs, some guys I spend. you seems of other year, like next we on of rigs XQ, Should low-XXXs it possible. figure? have are If is about be be the you high-XXXs in low-XXXs Should annualize the then but figure? we thinking about and modest thinking

William Hendricks

I the appreciate Well, Yes. question.

free I in a to any refrain We'll But think what dive think suffice yet. to on we're we're look process few a still our going focused from getting good it numbers discussions on that XXXX is. take like start weeks what flow. deep to cash into generating we say,

Operator

Your Tommy next question comes Inc. from Moll with Stephens

Thomas Moll

You that mentioned earlier, Andy, that the difference you between guys report. day the revenue per dayrate versus the average

willing guidance for I could that piece want ancillary includes if you quantify share look that, services? that example, other QX we $XX,XXX. stacks if much of that be the think to your been dayrate the Or what lot to Would of per this how at, some a to comparison. commentary So and confusion caused is on you report? on just bridge us of don't from the you apples-to-oranges for the day all you average dayrates has revenue there's with top the

you out could us help anything would to So help. straighten do that

William Hendricks

charge to The great number They've equipment our credit our people done range it to for. in give give a a dollars of qualitatively. per business. to we the lot get drilling across average few of of day, in I fleet. Kind entire providing is on ancillary job thousands Yes. the that of a operators

rental that great adds pipe and up all a drill into other so We along business with have components number.

Thomas Moll

rentals mind what sharing Okay. And other of outside big the if be? components you that just might of pipe drill don't the

William Hendricks

The support the over intensity be us drilling few on the last It's actually operate could the where up. in adding the operations that the on It staff that And of appreciate customer terms years much drilling gone rig so move has the location. to for a rig, operators whether during rigs. variety of number gone extra of extra things. we actually charges those our provide up it's people to personnel we has itself that

Thomas Moll

of clarify Okay. but to the That theme on a to then drilling the helps land sticking bit. quite And technology shifting side. over

include software what far? has more Could hardware side, sides? directional -- both of And strategy if could and going level, that on to to invested what control which much control at to And the a spectrum scale investments might layer both you've how Your of we investment so that. some came of the modest high the the now forward? you versus us fleet to extent of remind can that top how strategy see piece been then you to you wanting across the much software investment -- how us, to you remind full

William Hendricks

engineer add invest And in that spreads, put rigs really for the the link rig, $X is which various ability programs build rig low but to investment that the system operating We're on per technology relatively is terms or right excited over need the exciting technology, we cost to rig. in To time great the Yes. and value the in drilling frac out. The deploy the these And project. million is a to customers' is example to system place wells. in together numbers capital-light per across that we the million Patterson-UTI in round part now that the $X for for of Cortex investment. we large million don't in that us have of about to can businesses in a so shareholders, to individual that's but to cost capital and add range, $XX our return

means, off in any numbers the by the aren't rounding capital fall budget. these big they of So

OpEx, some fact, lot labor. the the are cost In because engineering the a of in are of -- they

So we OpEx part those don't for they're projects, capitalize just of the company.

So to this excited very value brings can overall the to potential about the because we that it's the improve customers. that going provide

the be the of more monetize do relative future. assets. start than field ways ability large return to currently we profile to type to things dayrates the And with we'll company. it out in roll improve it from as And excited Again, moving on in commercial potential to capital in we different test from about the has these the looking these brings products,

Operator

from comes RBC. question with Hallead next Your Kurt

Kurt Hallead

a So through this obviously, flow kind of made you here. out free proven and cycle, generating on there has dynamic the as team emphasis cash you're tremendous go through that

as Just the debt be us not deployment from to the us of some reduction update dynamic? whether vis-à-vis. will think kind about color or capital and terms that, on Give incremental share mindset you How repurchase give on an that Any you'd allocation in curious of of here? great. the cash

Mark Siegel

level by stock managed The carefully, something levels interesting what that about having attractive. percentage we've record manage they clear we out Kurt, will own I in to did pretty free seen reduction me shares feeling XX%, also attractive some to are use debt the you down At my that debt proud and quarter on of here debt we've free very a our both extremely a as think to and time, opportunity at that cash of same be we for back tell was priced of so future as our buy go the in kind very, taking here shares debt reduce our combination think accomplished. debt and it's our kind to focused reduce is that go and and But exactly we percentage to what we hard of for of that as that cash is sit to share pretty will us. were the seems to on well close. about buybacks. XX%, worked It's is

Kurt Hallead

that. -- I know I Mark. Andy Go ahead. that sorry, Right. appreciate

Mark Siegel

think we think lot how a it. about says about I that So

Kurt Hallead

you've any on, I appreciate XXXX. know not commentary dynamics financial to like, Mark. going you're Andy, for make color, mentioned And any I that Yes. then,

minimum Just look you across though, at CapEx bare that what would businesses, the when level portfolio think maintenance CapEx right about of now? like maintenance your

William Hendricks

down. a On I the hours is it's quarter it hard maintenance with to we pumping, It's put know to what where QX think don't of are some CapEx of a and come our revenues function on like. full equipment. example, the blocky down, quarter that pressure work a to come spreads looks are is margins good amount going going of

just really look see what early is pumping we're What or to on in QX pressure visibility in know It's QX. too count what to don't yet. We it's like schedule to that side. the going XXXX things like start on drilling of on going the So of side, level and increase to to the kind rig going look have just like. depend that

Operator

next question Your comes from with Taylor Zurcher Pickering. Tudor,

Taylor Zurcher

for actually think for on white how of Looking the about us calendar space the sequential pumping just you magnitude QX, today? much help QX, the XX have Can there? pressure revenue given at right spreads you the position are now, out have And you of moving the then many XX northeast those or spreads how into you us decline. in remind active have

William Hendricks

kind just that we've think on and horsepower how much called don't a location. where it's in is your we've I question, in working don't each our backwards think, while, of I --

the reacted to operators shape is than bit you just In slowing into the industry, last way early in chunks. of terms going in the that two quarter, to of describe got quarter. been, hard trying some blocky in that third of is a operators ago, it is in XXXX to seasonality years and a up years it's fourth much in they too has the started the it their what to ways. we've This XXXX in I of still going along quarter. react to calendar, we've slowing be. Two And then The seen mark. operators contain different a the down the some by down know question budgets. white after year best is tell the greater combination with happens can space what in it fourth It's

Taylor Zurcher

on follow-up A the rig Okay. side.

out it year. that early handful any You are of market, about what might think maybe But X type these are a there months? in of get rigs reactivation term about embedded this next full incremental you'd year? spot rig talked program for pricing year, out incremental Clearly, as operators late might sort these there an pressure you but is go in element there, well-to-well or a contract contracts conceivable some potentially we Or that rig there. of term a for the think do actually to new want

William Hendricks

Yes.

the be typically one I of bulk up. year in kind shape will X-month these that'll to some range is contract think, term of how the

Operator

Wells And Fargo. your next question comes Voie from with Chris

Christopher Voie

back guess, to pressure I pumping.

you to is to utilization be in decent if very I sense. terms 'XX acted. if which could quarter, in messy, the let's maybe gap first activity XQ levels presumably say, So you for understand from, should to that the makes But return going rebounds XQ of help have what us bridge XQ

So you say, any fleets extent maybe let's to then of you in active in discussions starting all, then the growing work for be first secondly, what XQ say, XX terms or if would potentially have give could what to on visibility levels? And keeping mid-XXXX the extent pricing XX for, before versus, maybe lower color that? of let's

William Hendricks

I November. Yes. December that up the in in say, space It's kind way on of to on more terms previous looks best kind of just what of than, with QX end questions going the We're like. following can up one space of white describe white our

the of entire lot challenges so crews a And quarter. in creates the that managing across

what is as that certainly question year. pumping question whereas some take putting a then as to to to January, think or level rigs pressure decisions with economics. quarter, XXXX, like the those we that. haven't haven't we QX in but on about to pricing the not more early in number And continue new mark the number going some up we are pressure more and And and the to from will it's be still add why of that operators get the of yet as that's having the new the work I a so -- we give is into are still in we look like rigs, bit like tougher But in a to discussions like that's discussions going a pumping, it already much discussions a the it reached definitive any if spreads, and from companies In in we we economics. start ourselves made the whether the QX. and should see mark improvement of we of makes in discussions December And little color to potential in late have determine on

Christopher Voie

Okay. pumping, into closures from sense a as maybe you That's some fair. I get and think, But lowering you like work be tailwind mentioned mentioned basins exiting and cost cost on think the of you much side on XXXX? that. And in fixed per don't get can se. how to might fixed you I then stuff pressure facility fixed any of give a able you cost

William Hendricks

earnings an in we're pieces us calls for you quarter. term. next give update many the just again, mean, playing more moving I And there's the fourth We'll the for on short for that. long term, of this so not the

make We some that of people in -- quarter. to and have lot a first good on many we have decisions the things don't quick want we too if opportunities

that do call of appreciate I in we update give question. we'll you but more So the when the on February, an

Operator

Weil. comes Vebs next Scotia question with Vaishnav Your Howard from

Vaibhav Vaishnav

up could would than last in Or fourth wherever quarter count fourth exit first rig see from XQ? it implying following be that just just is guess, the Chris I higher question, question. quarter? quarter Are you we that we improvement

William Hendricks

know I fully than potential quarter, we the be first that is could There higher don't fourth think that quarter yet.

to first We some we end the into up, going are quarter. the rigs quarter about, talked in discussions the at as put of fourth and

what those put know So are we make the to don't I extent is operators that going to think just full decisions rigs. up

could make with decisions, we As in we budget. year, think season, I And have their quarter, I trying first terms their it some count don't rig be favorable yet. some for think the of going earlier, mentioned that their quarter just budget their into I full still to year, this in operators operators they're but may reconcile know fourth

Vaibhav Vaishnav

it. Got it. Got

clarification question. some Just

I'm mistaken, XX, white about that of some you not will just is X.X decline, are to fleets XX of ends, that with do if fluid $X is it's versus XX today. breakeven back help the of Or like, more in horsepower, If it about million something math, working do not EBITDA just around the Could be with just XQ your left pricing? from because implies to space? in I'm million if I you went is envelope net that wrong, So us about, which, that of think just call the XQ.

William Hendricks

of So mixture that there things is are a happening.

size more number little the spreads, the terms been of that we've increasing, spread a of in deep area. spread some bit in of in off work terms done as and for us first So getting horsepower work per Delaware steadier of has

what's the the depending and on the per certainly we're that's white So we pulling Mid-Continent. that's and personnel. can came space still as down that while margins the in fluctuate Northeast happening blockiness with that and in quarter of amount well have calendar, we Then between raised that and the horsepower Texas fourth spread, have

And that quarter fourth it the seasonality moving us personnel. has manage the some more the budget just various parts make in operators the the to with have. spreads there then So and challenging trying constraint and manage that

Vaibhav Vaishnav

Got it.

quarter, first shuts trying down, I guess, but understand not white quarter the going was like, just quarter way like that then I -- I for, way be, a about directionally. But and fourth if space fleet fair per between think thinking think I -- I don't the if of with quarter a basically profitability it December you to basis? Is about number. know ask somewhere third So I'm should that, on just let's directionally, if and first I

William Hendricks

spread the per early that is improvement should quarter December The to profitability be. level that to be for exit quarter. in down -- but the it's per the Yes. Then going aren't to entire And too lot first spreads January all fourth on but driving of that's come the know so I a but has some of that's spread, see quarter, the improvement, fleet operating per challenge on what mean, from to profitability fourth potential there better. average. directionally

Operator

Energy. next Simmons Your Watson from with question John comes

John Watson

add-ons drilling, within revenue that to per and you day any some of operators difference is mentioned? types ancillary Andy, between discernible acceptance or of of there the willingness their

William Hendricks

can't that look I it's all When Yes. the the -- you across of operators. distinguish operating rigs today, really types different we're

as putting large and equipment various from us pieces both might offer are pipe well. renting of renting that or extra have that personnel rigs companies or We we privates other oil on major

overall fairly really board. it's maximizing customer and of -- say, today. not it's spec and out it's a of across type the that not It's So that it's using evenly, efficiency spread super-spec get about high can you rig out I'd another the one

John Watson

Sure.

less customers versus I'm say, -- the makes you less that trying certain dayrate that But is, to market type anecdotes with would or market between gap use the are to sense? are add-ons. of actual the just bridge the those if accepting willing of there Okay. some where actual

William Hendricks

the board. Yes. I'd even say across fairly it's

John Watson

Okay.

normalizes. things then, as And OpEx trend I'm and environment. flat? But when give Okay. a next could question. declining day you to follow-up, XX,XXX count where -- towards are achieve per this can year spoke OpEx of in guessing In a relatively that's any flat on tough per number a you about rig you assuming I'm us XXXX mid looking the help eventually gave with guidance, past, day OpEx we've talked

William Hendricks

forward we'll level. In that have think I we When to would be the little think, maintenance fast bit rigs, But personnel state, the number. in down it be it's rig the would hard it coming well if and to in at we as a a that reactivating did as you cost of we're OpEx level. that steady could called rigs. third I as get normalized that reactivate that that out, number as counts be number that with quarter,

and on what depends really you consider it So periods. steady how reactivation modeling versus you're

Operator

with Your next AltaCorp Waqar comes Syed from question Capital.

Waqar Syed

capacity or actually or of XXX,XXX of three retiring questions. at the in last you're work the capacity did time when was worked that couple all But horsepower, last for hydraulic so? it the years all, that first A

William Hendricks

last and most three that has us, retired for XXX,XXX consideration the last yes, been has for the not the that list. in just certainly did just work three oversupplied particular the so market in not our And But to in play the active I came horsepower haven't needed it. that determining For worked. so mean, which in years. horsepower years, what that we part horsepower stayed in

Waqar Syed

equipment the that to would that what was And you the the of fleet? the Okay. of age of compare average kind say and rest does how

William Hendricks

average, have fleet. than of was X ages on X getting state the older would into certainly equipment about to average older. On of been fleet, the discussions Without probably current the that years

Waqar Syed

Fair Okay. you've what the in then guidance has footage And on could give let's enough. trend say, year-over-year? of per the drilling seeing per efficiencies how Delaware? day more in change, us you any How you drills are importantly, been, But terms days giving sequentially, terms well? in of seen or efficiencies, maybe

William Hendricks

improve the I Delaware. efficiencies continue So think to in

the In the wells, terms laterals but we're increase. of drilling how also fast

get try setup we've the and in efficiencies the It's the but more of and about sometimes database. well, to over been where you be over with your and we it's to where to significantly some the When how think introduce. seeing we a not per improving to want you tail, to kind and where technology are leveling But to operators of trend intend I longer have from just that that do hard off. we've drill also year a to needle not slower fast are, improve wellbore over occasionally well in things had able quality days see with good next they improving repeatability. So moving the that of well, going do we're pads laterals more a get the you statistical

to be a overall efficiencies, to it's great of to a industry the needle So done bit them. I'd years. improve little the that think going just And the couple has next more challenging about improve over the thinking job

Operator

Instructions]. [Operator

Gendron Blake Wolfe with from comes Research. question next Your

Blake Gendron

you to great have of for for the the deals horsepower. desk, in market But sale. don't into insinuating not horsepower, on you're across I'm visibility that being your the sell scrapped putting come We versus what's block could that you trying are of of never that that think will level, come for in market? current versus be just sale it are viable the never the much price characterize assets sold regardless back, how at high a

William Hendricks

some they to think we're in there no to a they've that got are when and and the a We'll those to the makes we're sense. going with back why suspect the some that suspect come some as see while, just market. active be back XXX,XXX up, cetera, other ever That's should If horsepower similar But is parted where reason our retiring, well. us horsepower many haven't et we'll cut that's rationalize I it, use horsepower. that companies we've components going and of fleet won't retiring, away. that And that horsepower you on of away. I So components because worked in that that other about some XXX,XXX I lower-hour it's out, similar situation companies that's got of on going

oversupplied kind know positive why And have I that's do I'm the visibility pumping. earlier actually discussed long but the that think we side of demand in to on as that's that term pressure hard today, is I today, we've too going from rationalize over it where supply is been for going to rationalize side move time -- industry to that to utilization up long. is sorry, the because number just

Blake Gendron

there versus the Or change instances completion frac DUCs. a year following next drilling recovery the over have in Permian fleets probably folks are see drilling of we even of are there's where especially activity real of quick. not fair. enough for a DUC rig of with increase view because drawdown, in higher-than-expected potentially this to the Now in our lot could your you talking operators inventory any about? year, even something definitely sort in Jumping where Is count. outside that rigs, cadence the simply It's that modest next that own the unsustainable is

William Hendricks

of don't lot the discussions customers. a about just drilled, get get a We visibility don't of but wells. We into from lot uncompleted

with do, spread the of I completion pumping drilling in where the following on think we drilling work most a rig. activity a the line whether or is just it's side steady is pressure

sometimes to DUC pads the pressure our that's through steady operations, Now spaced other. you've changes got full a in are one most work things for rig part cause and and going spread, the But in pumping with move following and the from pad as so the number just that. that out full two between the you

Blake Gendron

the next for was of to I Okay. Great. the you be flow to free pretty guys, is cash out relates biggest somewhat it a for that market get have if of maybe the your in And as dividend kind especially potentially you here peer constraints cash change CapEx liquidity to all on because up investors? in mind-boggling It's to [indiscernible] as play for can free context we they are of more considering then if of me credit upsizing Q&A. buybacks only and of to credit tough we laid build going I It's between year. But getting it whole lot getting the terms a robust a and flow, would credit maybe split how of wondering share kind dividend, general kind cap can. one of

Andrew Smith

expect Yes. We basis every at but of I think buyback, that. size the of Board regular right is We've on We we're every That's this definitely what's times that. We'd many just right so this for about a we'll that the attention in the the pay dividend, the for literally, lost think the the to and quarter we repeated time. been correct this action the for meeting what's Frankly, company. years point if action consider over a plus involved pursuing size I've course us. this at do we have appropriate. not conversation on again And and it's year. the about this we said XX discussion at definitely company, I've emphasize next course

are in see And which fixed for a time. credit something as so of something, consider. we companies but that are period is we lot think dividends, of some going credit a for it understand buybacks we get I over more others And to it's getting not stone, that

which employing months. So the we've that's over XX for shareholders. been we strategy that a a share past is count long-term positive very, been substantially think factor think this our by very very we've reduced sound, We

we've with what pleased we're done. so And

of think right I course. to is thing consider course be alternative to action in was continues that best come right the to whether or we'll And it the do. have the the obviously to quarters course

Operator

question next with Chase of comes Bank Mulvehill from Your America.

Chase Mulvehill

got guess, I questions. two I

technology? think current what to design of if years the changes out see changes first significant or X if to changing about happen in configuration. the we X rig super-spec Do rig rig? to relative expect any specifically configuration one, and The look super-spec that do so, you see you to And any could

William Hendricks

in a mechanical news look is super-spec for see good the don't to like any structure. rig that Well, going is I real what from us change the

is commercial what these spent. And excited us $XX rigs to software have in able technology dollars being about X- $XX think we're million I the having to reconfigure improve or to do time million any type investments the process capital were even or the rig technology avenues well time. was we our spending us to build lighter to a we to finalizing layer capital that X-year see to And customers on were at invest to to per when performance line. give I and with major our terms rig other on don't same drilling spend type

Chase Mulvehill

to about Okay. integrate then success the potentially directional and further kind downhole other you're services you talk the automating That's and additional I opportunities And drilling rig maybe helpful. guess, lines, of see having integrating along into those any you regarding platform? could drilling

William Hendricks

and engineering components still We're various Yes. testing today. field

So about get that. out bit back the details and least to September we there was it are thought on. get little we' working early into you important it's of things But at in a some to that the show

give now, that's year, Some updates happy our going. things to early in will things through test from work how some to time time on year. be are And way as next in field test field we next

Chase Mulvehill

All that. forward one, real right. about hearing to last more quick. Look And

I'd first and will year and add you about quarter. activity Or level XXXX? in you customers the back load will be think half? looking slowdown in up whether the they think E&Ps the try do curious You this talked about to first rigs they loaded half on to thoughts did what do your in actually in some

William Hendricks

Well, I still think that's that's the question difficult is to answer.

the think how I years hit are that's get we the earlier, two year like it in a going As exactly yet know starting the that starting slowdown Maybe things we of quarter-to-quarter. mentioned it's early trend XXXX. too in fourth from this as going quarter, to quarter. into towards XXXX it's look is the brakes to ago, saw level, what was that to But to terms more I get and just move third

Operator

time. this Mark for no will further to questions back closing are There I at now turn the call remarks. Siegel over

Mark Siegel

thank in forward for to all and trouble. analysts call. and I'd the year-end your investors numbers their you February. as to Thanks. participation and Thanks, like And quarter our with look speaking for everybody, fourth we time report in

Operator

concludes you today's and this conference Thank call. participating. Ladies gentlemen, for

now disconnect. may You

Patterson-UTI Energy (PTEN) 24 Oct 192019 Q3 Earnings call transcript