PTEN - Earnings call transcript Q4 2020 | Patterson-UTI Energy, Inc.

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to Patterson-UTI Energy Fourth Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker today, Mr. Mike Drickamer. you. Thank sir. ahead, go Please

Mike Drickamer

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

Andy Hendricks

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

pleased are could that today. you We us join

fourth the since of first For levels driven downturn drilling higher revenues increased and activity. completion quarter for time the by the began,

to over Based I'll for as our who I the are the We encouraged the activity activity on customer has review well turn levels by we highlights confident to call levels engagement, will Smith, on the our Q&A. recovery. results now begun Andy? improve. will the call as before to continue Andy financial the higher then outlook quarter. as industry opening operational that fourth are comment a our will

Andy Smith

and morning. Thanks good

a we For $XX.X of was net million EBITDA loss adjusted per the quarter, or million. fourth $XXX and $X.XX reported share

cash balance end the XXXX, that remaining on $XXX face is million During totaled debt due million during debt XXXX $XX.X year. income to with million our the repayments, the combined open of market gross $X.X notes. purchases that in million fourth of of After and at comes an reflected $XXX is of by in at XXXX year only in year. have which the million million sheet of the end covered statement an value, the of of term senior The debt through purchases our the market $XXX increase loan quarter, balance million we during $XX gross the repayment by $XX.X cash our Capital net open million easily reduced discount at million. were in before debt our interest by resulting to a our made reduction we The offset of expenditures produced over $XX a expense. the $XXX as to gain

XXXX, and for pumping, while CapEx among million for remainder upgrades advantage contract For CapEx capital $XX our of pressure spread technology drilling, to expect a approximately total million $XX purposes. general of maintenance investments the allowing primarily in corporate including to expenditures also position million, and other $XXX take minor leader we segments technology equipment and and focused, our for the our strengthen in performance. is XXXX as recovery and

call $XX quarter, first Before for expense million. back approximately I the turn Andy, of expect SG&A the over we to

million. expect and expense We approximately amortization depreciation, of depletion, impairment $XXX

an approximately expect XX%. we of XXXX, effective For rate tax

With turn Andy as Hendricks. Lastly, XXXX. on our be per back XX, cash quarterly March I'll holders of paying will share of call record now the dividend $X.XX we to of that, X, March to XXXX over

Andy Hendricks

Andy. contract XX% XX from the quarter but were fourth of quarter. average third rigs improved decreased to rigs count rig our rigs XX the in to drilling, that In idle in proportion Thanks, from for fourth the contracted third The XX% quarter quarter. in the the

of XX under year, place, day average drilling negatively XXXX. average XX revenue. any for the idle rigs in Our on to rigs at were of had quarter. idle impacted we sum the average primarily day was Relative increased third termination margin contracts day improved end were term early fourth currently the lump $XXX revenue rigs dayrate operating million lower quarter. the day expectation. XX rig the that expect future proportion was rigs compared for of rig per XX, at of absence for in to revenues Average approximately December contracts but providing Average under $XX,XXX contracted. contracts term third per term which $XX,XXX rigs due which cost rig during an during fourth At drilling quarter, to in count quarter operating by XXXX rig contracted quarter, to contracts the rates to of Based a to but $X,XXX, of of smaller per first we our five the exceeded rigs

a be average proportion first rigs of increase operating of an idle five the part revenue but forward, taxes first expected payroll expected an of improve the costs per rigs is averaging which contracted reactivation approximately is $XX,XXX during to is the With in XX reset for rig of drilling average to and quarter Looking are are that activity to contracted. first but quarter expected small expected rigs quarter day, increase rig expenses. to due to per rig to to approximately also average $XX,XXX day, idle

increased Turning million. revenue now during pumping pressure quarter, seven the the averaged active the active quarter, million to in margin five while We to from quarter. fourth third spreads $XX.X to third pumping. decreased spreads gross from the up $XX $X.X Pressure in million for quarter fourth

the industry completion activity Permian the a significantly have presence we Northeast lower activity completion industry during and first increased as strong we in the While the quarter. where at decreased entered this quarter, remained fourth in level

spreads dual our it As we are a has Texas, work. where relocating from to one Northeast the result, dedicated of fuel

expect in We later the activity. customers utilization our Northeast of low of when until active the suggest plans our spreads in quarter frack the increasing

expect similar time seven margin expected the lower the to quarter. be moving levels are We the the will first while period to quarter Northeast, idle spread first gross a during Texas. in average active to Despite both the be revenue of pumping spreads for to fourth quarter, including and that activity pressure in

we see we increase the expect demand. by have in completion and growth seen rig further encouraged are we forward, will in count the Looking

drilling cost quarter, continue while and to Turning million $XX.X system gain and new for fourth $X.X new margin improved better we directional or coverage was the XX.X% in market in and the revenues the now impact $X.X cost directional the during Mercury introduced of We performance drilling of Revenues quarter share market benefits horizontal million the count outpacing of drilling. sizes, motor in technology, XX% our the this from fourth the implemented measurement reduction XXXX in efforts fix rig quarter. the which directional by the as share to increased during enhanced quarter were revenues the third in business. to growth in million increase X% The early XXXX. the aided of to gross

million $X.X quarter, XX% to increase of For gross revenue to margin approximately first the directional expect with we $XX.X drilling million. approximately

businesses. the other out revenues fourth improve a approximately which a $X profit and Revenues quarter million of our margin million. were XX%, expect million other to $X.X first operations, for rental operations with includes gross our Turning to the gross approximately quarter $XX E&P or approximately while of we technology profit with

we we have downturn and micro-grid controls cruise include in customer Also we base example a the liquidity, the its more full activity has current to debt power, out encouraged looking other are technology and we're The projects, such and to company's continue applications oil the of various of other installation we also systems an stronger first downturn smart-grid of process propulsion were now industrial into the and the team the improve position. the how of this the of technology levels the operations field U.S. and especially every electrical this ship back renewables as start coming electrical controls would recovery in we division, products electrical the Our in emerged industry. this an of time marine broaden business, Like continues industry, sector in Patterson-UTI. delivery to rest division and in history, experience in from grow built bringing before, for a engineering and this be growing as largest encouraging that were than along forward in our employees type controls Marine years. demand the of the completing similar other sectors system products and reduce portion expect of to for to stronger new is recent and micro-grid. industrial the of the expanding to are increase greater

In and which a We’re milestones technology leader operationally, expect the us very well to XXXX, we positioned benefit technology in made investments we financially from during our reached recovery. and and have performance. both several

when fuel excited in our commercialization dual substitution Cortex our The one among First, are hybrid increasing natural system. the a of fuel system this This technology displacing position interest capable is the the to battery in about efficiently gas reduce emissions. in value very ESG engines, fuel energy of maximized technology technology. we as of this strengthened management With is can alternative lithium with with an our used consumption be rate combination and as Solutions, optimized. power we rig customers unit and Ecocell on management leader our gensets both a of

XXXX. power commercialize of operations more our using a drilled than MWD delivery. cost while efficient drilling X experience significant a wellbore our analytics remote it in which measurement for We PTEN+ of XXXX, wells the feet build remote performance key analytical device data, XX the device side improve informed of well with also more at commercialized service operations installed to to and with efficiency. and We be started edge or server during drive can our million the combined decisions high-frequency Cortex of allows streaming This data center with

We service drilling our thus also real remote commercialize of and position Nav HiFi calculate which steering of side. hi-fi transfer the for reducing geologic penetration. to decisions and we well from ensure both placement of commercialize uncertainty state data optimizing algorithm Nav, the in HiFi while the target of of as vertically, time. XXXX, our takes the kind one in knowledge cloud-based cloud-based XXXX, or well rates wellbore and is improving to automated as producing a guidance, a zone geosteering HiFi outfit within wellbore Nav In horizontally the operation expect changes wellbore the including

With to industry the their challenging to both we're and efforts through bring several the working thank excited hard we would to call market and and technologies would Maddy, now our open work general. we like that exciting actively our like employees time in of that have questions. for other on We XXXX. to value in very to in all a are

Operator

Yes, Meakim sir. comes [Operator of Instructions] Morgan. Your line from the first JP with question Sean

Sean Meakim

Thank Hey, you. morning. good

Andy Hendricks

Sean. morning, Good

Sean Meakim

flow of for talking bit. So can start Andy, sort cash about little we a

activity quarter, think we uses just and loan term cash CapEx sources we assumptions. to – the the also repurchase sense just, guide on sense, also we based maybe and consumed should ramp. paydown that the about I than Could in makes debt year. maybe the pieces Can generated little As beyond talk our that maybe more the think about So makes we of we about fourth now starting at the any end of cash moving cash as the even into of thinking a the on year activities and best higher, between materials, working end the capital and cash going maybe that should movement bit XXXX? of the cash be taxes of use be

Andy Hendricks

Yes.

significantly. not do and selling look I because quarter, something So or probably bit – bit talking divestitures, through portfolio think that that constantly we working a of working at a at as you capital higher would not XXXX, equipment built they're looking always really the capital, line than more a about was in more again, We assets. about little our of look talked we we're timing any older we in issue we'll and whether is fourth I things say And properties of but be things our, do little certainly that at divestiture, we're or that. of like were go

see So expect much cash year. that. taxes, from some Cash I wouldn't in you'll the

wash really, So always type EBITDA items of expense already again and about of then CapEx, that we environment in generally embedded flattish are less interest a capital out. with of usually an think kind EBITDA the kind some working sometimes non-cash in

year. of So cash in how free the for that's we went kind our flow

Sean Meakim

helpful. really That's

optimized the touch of battery fleet fuel sense. then a makes dual wanted to on I that and lithium think fleet. I And lot

put the opportunity granularity to there. that all looking together, some on we've So just set more get

So lower for terms market how cases in terms in get material much a the the I like really next What bigger – bottom some budget lower any dual-fuel this story the you or is a this is year, dual that does a line batteries your today? of this guess doing but at Are for net pretty fleet it of competitive a market like look that today, does the piece CapEx it's about or fleet being the things to mix, little also, in capital able are cost expense? conversions? low make I in account fuel, the these? assume is we of just a top – a line the making and is premium

Andy Hendricks

of revenue, increasing mixture I staying think share. competitive a also and for it's increased but us market

rigs when pressure rigs, both do this drilling So look up pumping, years. and all a drilling for had you our for the number we've at dual-fuel kidded rigs dual-fuel, on but we of

customers rigs on number a there that Some but our use it's optionality, some of don't, already.

will and working we've lithium have field with out in – field storage. will there is more we another the we So battery engines really that story for and demand moving in dual-fuel. leaders mentioned, field already out of as and from that's we out that Northeast the of and a already testing the And anticipate add off we've want don't pumping, some what built energy and have but The is the we through that one to in can have been we've the In the to numbers the one the spreads pre-ordered and the shortly, to of that to into Ecocell it's be I I system, able one balancing in some we're to and orders real throw interesting side. don't the it pressure to come energy be on yet, pressure fairly for And engines the kitted us these. of control battery these various pumping, into there But years, today budget. commercialized expect we built we that we've doing Texas spin the already any auto is dual-fuel, engines lithium be one I build and fuel there, CapEx we're Ecocells, but battery that been how the that'll dual any the storage switch system build the CapEx to plan. CapEx we get the have draw control batteries year have and loads on up strong

Sean Meakim

like, traditional quantify there. looks set bill in quantify to just on thing a this like to what set just just level like difference people? say or would look a new to last Are for of let's what something versus you that fleet Just able terms

Andy Hendricks

there, Yes. and that I mean, consumption. there for so we're rigs fuel the is Ecocell is operator value drilling the the it running for reduces when

cost return we to and to rig. cost a a it, drilling so charge there that able on so get that when – refute add And build a that are to investment is we to and

Sean Meakim

Great. Thank you.

Operator

from Your MacPherson Ian Simmons. the line with question Company of next comes of

Ian MacPherson

couple to the guidance. questions on your wanted a for and of you. QX your outlook, of margin morning. both for Thank I components activity ask Good

on Your website, the today activity XX rigs.

continue about where it's to are is activity improve, going but you So like around you guidance your looks to talked today. QX

where of rigs a to just for rate top As I or could here conservatism that the the or plateau in in want your improvement QX? XX quarter, So a get element from nearing see the thoughts of you top rig we're do feel temporary count? there on you through some be go and we like anyway,

Andy Hendricks

for the in up now, QX, we quarter. way XX yes, on site only website projection the on So, but right of the the math XX XX month rig ends the averaged we're the first

likely is to the it's not not where it's roughly So a top, going plateau. but a land. quarter, It's be for the rest just of flattish quarter the to

for anticipate where count look forward of the in the terms year, we drilling just the the As lands that's on we'll up math putting quarter but rest more rigs, be the projection. I of the and

Ian MacPherson

And Okay. at rate day your I should Thanks, then $XX,XXX be think the first in quarter. said you Andy.

is – call cash quarter margins do So your reactivation up then trough you expenses better that? it beyond couple and driving that QX in the early be that too past we necessarily with in pushing of would payroll mentioned is upside What's that that be a costs maybe cost the – absorption some that? in up or visibility first have the toward and are to get you And after if QX, there will quarters. some in QX

Andy Hendricks

QX. for bottom our said would what that, business a thought was sometime we last the on call So QX, around margin see we we that

should is not where XXXX trading Our WTI in earlier trading that on based and the improving see where QX based is today, visibility necessarily margins now likely WTI this but throughout we is quarter. that right was on

So But there I some the a year is is be we likely that view bottom said, if more I'm then be, the the even QX would bit like – hold we encouraged in in quarter. had it somewhat here. actually may from throughout margin of our the WTI say see little is than improvements where margins that I and a and way for little today, viewed should things earlier upside

Ian MacPherson

That's imagine margin... bit little great. of I Thanks, Andy.

Andy Hendricks

Yes.

Ian MacPherson

Improvement would be there.

Andy Hendricks

on Ian, your.

Sorry, go ahead.

Ian MacPherson

down part assume was as with going go absorption that I say, cost average calculus that better I to the right? of

Andy Hendricks

They question first about to would a coming time. idle entirely rates relative work your in day I that's as your rig part but over issue count also Yes. rigs quarter. have contracted in our of mix say the the fourth to quarter should fewer up, almost we first included

Ian MacPherson

Thank Appreciate it. Got you, it. gentlemen.

Andy Hendricks

Sure.

Operator

question line with next Fargo. Your Voie Wells Chris of comes the from

Chris Voie

Thanks. Good morning.

Andy Hendricks

Good morning, Chris.

Chris Voie

first an Maybe to of And rate quarter? us If I any in there within be would pressure the gross about in this having in improvement for us the pumping pumping been in minute. profit help the you time, would that pricing you idle we quarter? into more think improvement a maybe exclude first pressure switching help in year? exit has are there you guess, the maybe that, or can that think wrapped having here can about over impact so the far

Andy Hendricks

anticipate improvement in on in backwards I'll improvement pricing pricing that. no been and first work quarter. any we in the There's certainly don't

to pricing there pumping continues later will and be through in think opportunity move rig up an pressure I the push XXXX, that to year. as count

hasn't fairly as we a presence yet. up in know we fourth in And there in in came down Texas. quarter what just you it So do the happened strong encouraged in a Especially we came as the significant but overall it there, saw as activity amount. we're down Northeast, have well quick, levels industry Northeast, somewhat the it

is operator Texas so to that a gas we're of been an seeing is and spreads the And the into in we're Texas. you're made historically And the in markets, for but thing and Texas. dual-fuel Northeast decision work able move more primarily one Northeast or of and and interesting in us our the phenomenon, because pressure dual-fuel we pumping operators with out

consume the and to production in switch with We they gas to are have it. at Texas. that Starting fields look and deal to in dual-fuel trying their

of we there. fleets, pieces since and there and because be decrease decrease in So that those of equipment, down QX. numbers in able the have industry we're for move have is by moving QX that in But our in we Northeast activity, to opportunity the to activity both a encouraged that the lot

QX just going So QX we're had revenue that flat, spread of is similar to basically and hold the we're to we projecting our movement financials count and activity. in because what margin in

improving customers. in the quarter, As and discussions earlier end of that's don't in Northeast, I the anticipate we the based until the on activity first mentioned with just

Chris Voie

Do lot base. my E&Ps guess. large decent your second Do your group a from like It's That's I thanks. you have of on a activity a I view question, to versus public private a kind Okay. guess you going just forward customers, pretty helpful, it's And the versus from part customer on the have think of of you basis? other? in more here growth private consistent one or

Andy Hendricks

think it. I two components is there of

us been time cases and The more what reactivate I want where quicker the to reaction rigs been you've in publics large smaller, about and the the publics the grow in publics. slow the than still will releasing out but to last faster is that the they versus year nimble the some play large also privates year. have can have are publics the rigs. have the to discussions what react moving privates later to think and activity move in smaller in similar one and did do publics privates with seen the numbers data, to the it of And

large So in process. it's really moving are the this slow that publics

Chris Voie

my questions. taking for All right. Thanks

Operator

comes with of question America. Sabella of Your from Bank line Mike next the

Mike Sabella

morning, Hey, good everyone.

Andy Hendricks

Mike. morning, Good

Mike Sabella

are what for you a you fleet second the of starts about are to little of start that down Are bit costs magnitude percentage business? able you part then us pumping was we guidance to of a And any that understand to fleet of call. kind help if I then just in wondering the you Can us down Texas? working when think if move taking more. just And Northeast help the Thanks kind understand there Texas? that as the earning? of could

Andy Hendricks

the gas we're best going in be later see then and And the Texas, earlier the manage push out that gas fourth Northeast down a the how leaves component quarter. work will in from time the shift spread trying the up changes in with the big quarter the earning are the significant Northeast operators from time clear We're not slowdown in to than cost much move plays revenue our that down the starts certainly will and make approximately it and two lately South some we but take as busier are to the just a the that revenue into not in there the there a so market. say us, us in third that year, for had to minimal. Texas, mix, industry is is to we'll the earning year. to I the too they the fleet and to fuel no and can amount So weeks then in Northeast, gas where busier of the Texas then in majority moving where would fairly costs it Northeast real in activity, in it's activity overall but in But versus the seeing Northeast a shift market and here really was of other

Mike Sabella

then rigs. to And it. switching Got

were you was release rigs this us a kind under XX the it in proportion those of a think I year. of pre-COVID split of press and what proportion give what contract were post-COVID? Can

Andy Hendricks

that I'd mix going – term it's to of COVID and less. or during have pre-COVID. still look that still a that a rig prepayment of been shorter off months then contracts, when today, a number you fleet of a see work were of the say that mix contracts be I in terms contracts. the signed rigs these of six might signing have we timing hand information at but are We're the don't pre-COVID. fair roll-off some, We've

So, it's all today. that a mix of

Mike Sabella

getting that Got spot you today it. any the there contracts where is difference? is close And those to are is term or all are

Andy Hendricks

you Can say that again.

Mike Sabella

term to those those spot a between contracts close sits are where there – two? is today, you're difference are getting there The or

Andy Hendricks

shorter contracts would When as to contract, can we're we're on term as think in the close we shy sign rigs I today what – upside are the negotiate, the today say we typically because term market getting there's we spot later is. term year. signing

Mike Sabella

Got for it. questions. Thanks my taking

Operator

Your next question comes Scott line from with Citigroup. of Gruber the

Scott Gruber

good morning. Yes,

Andy Hendricks

morning, Scott. Good

Scott Gruber

the So, past XX, in I customers the as more in be is lose upturn want cash that here. gleaned there happen would would imagine obviously that we've have the don't over months that the question And Those to efficiencies reverse upturn. market the coming my XX door. you historically. some during

to accelerate sales or are those So, Andy, starting within your here? you ability can app and your talk about to expand conversations potentially ancillary software services, your drilling

Andy Hendricks

for large would the the have a Directional doors is in fact of open that. their that that the that we drilling of increasing successes share and growing that count market seeing some can rig is lot due than I say company to And contracting very Yes. MS faster a

of more certainly a doing for they're we're take service lot level to that. from of their I don't seeing look they're also HiFi which a on providing MS is efficiency of customers quality is because they're away at interesting doing a Directional. synergies software can lot they Directional, benefit terms So customers, as layer from what rig at very wellbore we're such these of they're it's cloud how in – production. Nav, some at placement on services, at services and And from improving in software a look looking has it's and that, following own high who want and our but high. remote seeing Today, operations, MS

and we these services. starting I more dots say, out pull build things – various would levels through connect all these from the technology these the are starting as So, of to all between we're see

Scott Gruber

any Got you. side will And system in inflation is you thing get going get any are creep you on, inflation trucking, realized then frac the into see there passed just any I inflation the back again? and on frac. the starting to turning about sand as to sand frac, starting to chemicals,

Andy Hendricks

out I drivers in some so sand one trucking stands and that a inflation the has standpoint costs. think the Permian, to just be seems area there and the It to moving trucking is harder trucking. find been in challenges more there from creates

Scott Gruber

can receive how do they that? customer, quickly pass the on And you those to

Andy Hendricks

these I In the today is only that market a us ability move to some to in. jobs the slow because would of relatively challenging costs with want in, quote all we're like operators say, baked

suppliers for There at the try more try back-to-back. challenging. the little may to contracts, it part, times the most the I'd during contracts we But be to manage certain we a same manage say with back-to-back So it's time.

Scott Gruber

color. Understood. Appreciate Thank the you.

Operator

the Tudor Your next Taylor question with line comes from Pickering. Zurcher of

Taylor Zurcher

morning, questions but think good are so ask and they I My follow-ups, them important, thank any I'll you. way. are largely Hey,

side space in pressure calendar some white was the on is First the pumping – bit quite there the QX. of on space a of business. white Clearly,

Your average XX% active much sequentially revenues extra lower. spread count but was are spreads, up the two with

like rigs the up And Northeast What in those for in fleets the then us in you the QX? utilization how the clearly define active to in and of in the seven Northeast those are of least were how at those that utilization going spreads XX% in you today is many many Northeast so QX, QX? of look sequentially. help work actually or are be what Can And day's them? understand went – as

Andy Hendricks

issues say also definitely we driven in fair mostly but Northeast, few month-to-month, of in had customer-specific a white the the fourth quarter. changes calendar, I but would the by amount It space a other

similar are on relatively we're in I as transitory, waiting because operators in well, spread up a at down, it up ends Northeast. to quarter those pick So, first the look we but activity looking because moving as the

be QX, to quantify us helps don't in out. those you If white because it's of I that to space equal in the try you for were if going to factors. QX roughly know all

Taylor Zurcher

Northeast? it are versus give where it breakout be Yes, you And would whether a located can today, your does. spreads of Texas us

Andy Hendricks

working varying of are So, and we've the Texas. working two got white with Northeast in the calendar then in others the in degrees space

Taylor Zurcher

driving that margin having sounds drive the I the each to you some going negatively that's QX? like help business. the the margins here bottomed us margins improvement on there you expect that's in Okay, you thanks. Is quarter contract of in impact most and away or report relatively year taxes can that follow-up fixed do be And QX. better margin cost in to if absorption QX it the it of that expect correct, if heard payroll go over understand not my bottom in that you dayrate what's is flat side bottom course to is drilling the correctly, will average But also the QX? of If you

Andy Hendricks

Yes.

Let clarify me that.

some roll in in have I continues that for rigs some we have as the is EBITDA think margin improve as decrease today's pre-COVID quarter contracts, bottoming first company off into going market. year. to the So, pre-existing the to percent through still a We're and then and percentile

margin, And overall, see so we'll should speak percent today. – decrease we'll we in in from some where see we are but growth EBITDA

Taylor Zurcher

Thanks, guys. sense. Understood. That makes

Operator

Lynagh Connor of from comes Morgan with the line Stanley. question next Your

Connor Lynagh

Yes, thanks.

– of me around here. talking consolidation business We've land a thinking for we've the in down your CapEx is, a your heard competitors the one for consolidation, your the deals. sort of in but is of and where prospects top for or of E&P from of Generally smaller transformative why growth pumping competitors the sort on I my Just bit of rig are speaking, the today activity U.S. not of with and some there? more guys of guess industry, fair What's that kind seen of the potential consolidating higher mind? pressure question rolling a others merits terms up you side level few we

Andy Hendricks

at I is view when – and think that business, we rig view the business super-spec operate. we it are we rigs land in when way land the the in looking the we rig APEX

so edge What lot move is up. And seen up consolidation. move dayrates see just later historically think to us I the starts that then it's starts leading count need in a year moves count the move clear we've up, you rig not pricing that to more the and as up, we'll to rig

sure that consolidation more the industry the other need of oilfield not So way needs consolidation. I'm services sectors

Connor Lynagh

you that and for you it fair. prices increase margin push future. rates pull in from spot of how some the cost raise if take to likelihood volume, But some to do the yet. contracts? you – the and way, fixed sort on forward the is release about your better pricing, I of there press absorb your new were think could we're versus improve you of guess maybe the topic guys term comments It's or desire you seen your I pricing haven't I guess, there looking characterize, we commentary, of the in since just

Andy Hendricks

and it's margins pumping can, it's We're we cetera. the those definitely margins drilling focused or et whether maximizing on drilling pressure it's directional rigs, wherever

we're Texas. see to so the pricing get try try to And to on We to It's up before we a push that just more of some pricing market when in the add move frac the market. don't going see reasons frac need capacity we like one we're more to still flat can. to spreads. We'd the spreads into power

because there in so in up they I may dayrates year, opportunity as there for rig And as in year think the pumping, at an And in up be think is we pricing that we need the count to an said pressure I spot. most. later move from move to later that's moves where are the up where drilling, the the opportunity

Connor Lynagh

enough. you. fair right, All Thank

Andy Hendricks

Thanks.

Operator

line next question Palmer. Your Vebs of from Vaishnav with the Coker comes

Vebs Vaishnav

Thank you Hey, guys. for my... taking

Andy Hendricks

Hey, Vebs.

Vebs Vaishnav

Hey.

make So it correctly. sure I want understand I to

and fair? but then that for land are improves, margins, guys rig company is the the You in XQ EBITDA that specifically drops not saying

Andy Smith

Yes, that's fair.

the change of year it could percent could the look margin quarter, are is As first I we rigs and still EBITDA could at down bottoming come happen it as way that what in in later – think I said, is XXXX off in in and where margin and operating. we as how we're potentially rolls on pricing rig depending terms the many does then what

Vebs Vaishnav

Okay.

you So, see we guys think you XQ the was how the and will you add rigs. count visibility you count XQ? shape surprise. much pleasant have like beyond moves how We up? a obviously how rig Can who could still public rig broadly, about thinking here? from U.S. about have How are If talk about how

Andy Hendricks

count commodities what's today rigs the is of were the number rigs months Well, rig industry, that are the when at ago. really of that look number interesting I is trading think in we're the operating based where operating on several you

that in has that and So have shift based the in plans activity commodity is put were we there the three a months price. been today on place ago two and big

going up haven't flow be on into just actual the will So I'm we move for move change but it months cash rig several has activity but based customers, commodity trading and before seen in that later we do, our prices count potential that's where to that to the year. encouraged the are

Vebs Vaishnav

And switching pressure pumping. to Okay. maybe

and XQ, per decline like Just $X $X of moment. if pumping it's XQ, pricing a at fleet the like per be think million pressure way assume we pricing current to million EBITDA saw about average? in on fleet the about to we flat, fair you million in about that holding $X your If EBITDA is for million going a flat but $X thinking to profitability

Andy Hendricks

stages did I think certainly, pumping, overall we up and or is be situation we're Northeast in down whole transitory there came month, of to in with when say, Texas. customers where the per activity low Northeast stages the it's quarter off in quarter moving trying can the challenged the activity then maybe the this and fourth efficiency first per magnitude pick quarter. quarter really maximize that when in assets to maximize still And we in at the and later the in operation align the the it were out would have pressure I it then into Yes. comes Northeast was industry about of who going starting the Northeast. to And the

real and of or on, want their in to are There to of of own the industry are find keep to them, there this that efficient that operators struggling want a equipment budgets, for certain take even cash that's their number because not work processes can the who in for efficient to that's wells on not busy. own They out things number efficient of own be breaks they us and try flow. lot a to a general. going then is but key there's is operators So their

improves, and And so for and be industry. opportunity I think and have is helps it with that to as commodity more consistent the prices the there work an cash helps moved up flow operators us

Vebs Vaishnav

my Thank Got you question, taking gentlemen. it. for

Operator

Research. Your with comes next Gendron from Wolfe question Blake the line of

Blake Gendron

maybe in term a here Yes. different way in on a Thanks. contracts question the longer to aren't maybe customers sort even about for capture the to the possible to It walk morning. commentary I and blocking acquiesce you theory sound if maybe really makes the some of forward like moving that game Good back want circle second in to upside duration pricing your willing to was of – some that the than in others. term. respect if it with ask meant

rig if is a contract to term in level. How you also until elasticity presumably we of gets ideally you perpetuity see? a gridlock, improvement think, or certain shorter is the And first do duration? all, can that to about just or term, of month going And we that are in have percentage to see six term So pricing the count – and there then kind I of more pricing locked like get mean true? then stay you guess, to in this I

Andy Hendricks

there I all drilling think services, out in the pricing the rigs. including is still competitive

that commodity will count. on think rig we're upside, few operator there all based to improve activity and some is translate moved And I thinking I believe I there higher months. last that is cash over have think the flow will prices then that and how

there think is upside. I So

than a year a to willing The more, I certainly for in in, how don't it about into we're we longer keeps long. in we're it's us customer it's long math. particular might lock to discussion a that but pure want so lock we'd we get higher might might price. like over ourselves going And just term, percentage increase let's be or if that who the strategic do mean, say, not locked be to price today too just a a a there term reasons several busy period, other with

terms general, short in but we the math, think to we about upside. not keep trying because just some we're it's So have relatively the

Blake Gendron

give set maybe opportunity in out moving the us or build it nascent, an That have of time. commentary that about lumpy would and idea It of an over renewable the you idea this too at or and near-term is participation early and is if you tell just forward small, and the grid smart was growth sense. what TAM can here in makes point? in imagine I but maybe to microgrids

Andy Hendricks

The interesting big think within of not has potential there. various we I projects we let's business had number vessels in awarded crew the these ship and project. was been team we're a have was doing the over – this it's out scheme do. It's that one it's the for the can years this of the we on confidence we've that know don't been start small. shipbuilders full vessels. systems of what dollars the and larger pleased shows with, We've us. It and install that marine I very types the think of that's build

So and future. that's sector to very that the larger award interesting of this awards in in can kind lead

U.S. the this is and industrial microgrids, fresh all terms new In of in

our little that's of mean what for But engineering a applications. You us that's but or is for Europe, I do are things we and don't that's in to of going mean interesting this more Current something can think Power specific lot new any going custom project bit a really to that pretty division. still what see

us And in from ability that differentiates of America. customize here so companies with our some to compete North larger the we

based And so today, things on industrial because it's the to with companies projects in discussions of our tailor we're ability projects. various why various on

Blake Gendron

can one And I if it one, sneak it. more quick in. Got

you upgrade marked some here dual-fuel. So capital to have

XXk you you like space of terms to build ago if Even a current year looks next-gen could a for in new long if you're to a good Thanks. I'm who maybe think aren't point? get at technology? to relative pricing what was necessarily today yourself, going of have new frac it those a this in been maybe have for time. about economics wondering necessarily what help a on leader dual-fuel You idea entry barriers do and spread not versus it that comment us

Andy Hendricks

making just the exist. new There new hope build a no is economics future economic bet because today and on equipment don't buying a Yes. the just anybody and is

market. investing certainly there or a spread to frac is no capacity the adding full So, now in point right

think things are small can do. you there I

do can upgrades. You

justify You can very on those that things add kits economically. it's of kind you engines own sense, difficult and dual-fuel to can make but already full spreads,

Andy Smith

Yes.

economics your has around we cost If don't that was procuring of the equipment. little believe in question make equipment, Still, a bit. market it that the new for down come sense putting

Blake Gendron

Okay. That's helpful. Thanks, guys.

Operator

All right.

from Markets. line Syed question comes with Waqar of Next Capital ATB the

Waqar Syed

taking inventory. think drill could for you'll call. right talk and my Thanks Andy, pipe when you you buying inventory Are You do enough pipe drill market? in you now? about have your be the

Andy Hendricks

pipe. we're I don't many want but to suppliers excited, drill buying get too

a for So that. on There of great It's are demand is part CapEx paybacks there good It's the budget. our rental business. us.

drill adding actually we're yeah, So, pipe.

Waqar Syed

for then maybe guidance And terms good. your per the at what's some and running drilling Okay, there, rigs crew pumping, you basis? provide in CapEx for it could on of a maintenance

Andy Smith

Yes.

basis, per at $XXX,XXX a $X in And of per on pumping, active $X.X spread that rig basis, range million spread to we're per pressure rig. then of we're per on a per million kind So about ends. rig, still in inclusive fluid

Waqar Syed

or ends like fluid year? And what Okay. running are so million a a at $X

Andy Smith

field them maintaining of north and out that, not better They little themselves. down. in We're life doing much. A but of a useful more getting Yes. of have job come the

usage end some expense. so as down has maintenance our fluid our and So come

Waqar Syed

numbers is months like may and pumping, of year, these one a XX up? it for these you this numbers go number kind especially more think or then sustainable do longer are are Now, term

Andy Smith

think be should We level crew type are year. spend sustainable. at per they relatively this We No. a normalized

Waqar Syed

the think you which and pumping, I thinking second terms of half in your more just Andy, first major line half, of Okay. levels? from know businesses, love both drilling the but you top do of grows business

Andy Hendricks

year. at the the activity than power of our faster pricing pace a some drilling will see grow later think think in combination we different line case, our be of the we'll others, possibility in top may business that's I a and I rig but see, on and maybe

pumping activations spreads. pressure cautious increase on to really activating side, we there very the about see some push want the On spreads. We we're pricing just before

Waqar Syed

Okay.

out per So, cost crew. you of if looks be to you crew before Right where want EBITDA really the take ends, do isn't of reactivate EBITDA your or to like would now, the any fluid there per it crew. want you –

Andy Hendricks

that We to it mean, a Yes. tight. and an running see we'd is. bit to It's move from up business It's little be this today market so and where – I accretive. it's oversupplied pretty challenging want still like

the Our projections year. that are for accretive it's

a various So, it evaluate we we'll just continue as look the basis to case-by-case projects. on at

Waqar Syed

– it EBITDA you maintenance the needs crew a per for to crew? to activate does above So, CapEx be

Andy Hendricks

Correct.

Waqar Syed

utilization okay. Okay. get The price there, get you can you or there, on to need just And minimum there? will increases

Andy Hendricks

get there activity quarter, can increasing because the Northeast with there earlier is the utilization, in explaining in then not I was Northeast in some fourth the slowdown on We in the quarter as activity challenges there. and that to later the then

to Northeast. the that's improve financials activity in when going So the improves

well. reactivation – work costs above that these the it comes we to cover late working, to by of we're some XXXX. spreads want it are – and costs with in when activity we're to So, challenged we're as spreads, we the we're make reactivation, but there certainly cost sure But those takes of

Waqar Syed

horsepower running is Yes. crew, hydraulic terms that per And then average your dedicated on XX,XXX? in around of

Andy Hendricks

higher. a bit It's little

work the Delaware more doing in us see You basin.

the So more Delaware. that in horsepower consumes

Waqar Syed

you Okay, much. Thanks, Thank very great. Andy.

Andy Hendricks

Waqar. Appreciated Thanks.

Operator

with Daniel from And Energy of Partners. the your last John question line comes Daniel

John Daniel

Thank you. guys. Hey,

Andy Hendricks

Hey, John.

John Daniel

question one you thoughts ventures XXXX, there. in just do you're your your that higher, visibility Just out levels gone Northeast, recovering now. the see just for exceeded and to The it

Andy Hendricks

with natural terms gas negatively lead the discussions they're that in about it. concerned of My believe to price Northeast impacting me up overproducing operators in there and the of are

levels And their trying keep to they're in check. activity so

So Northeast. they in the don't overproduce

flat. see we that's rig count proxy is going a When back relatively at and online. were the look in better think in to completions, those was terms the and happen and levels we a that of Northeast what rig early we going to of lot QX what's into in wells the saw in bringing count that probably I QX activity for inventory going the

flat. the quarter, in in looking our Northeast. have the will not activity we're increase rig count a for there We specific in huge some later out relatively is So us customers do with but the projection increase that activity

John Daniel

activity, back Texas they little a And fill crew that? filling bit the how crew Okay. does [indiscernible] a that come that when moving space back more you white a or necessitate or – manage is reactivating with from up

Andy Hendricks

It's then stage and we'll a really busier on just be in filling space per white month basis.

John Daniel

Thank it. you Got for including me.

Andy Hendricks

Thanks.

Operator

at no And there are further time. questions this

Andy Hendricks

to right. All again, we'll they're today. quarter. everybody great Well, all doing, want work and all we want thank us of Appreciate joining Patterson-UTI you we it. employees to for the thank And see next the for

Operator

concludes today's call. this And conference

disconnect. may You now

Patterson-UTI Energy (PTEN) 4 Feb 212020 Q4 Earnings call transcript