Earnings call transcript Q4 2022

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Operator

Good morning. My name is Colby, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Patterson-UTI Energy Fourth Quarter 2022 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator

turn Investor over Relations. now Vice Mike President of the will to call Drickamer, I

You begin. may

Mike Drickamer

Thank you, today's Colby. months Patterson-UTI discuss Energy, Good results ended morning. And like the welcome on December to XX, you the to for conference XXXX. to I'd call three behalf of

Executive Mike in Operating Holcomb, Participating Chief Officer. call Chief Smith, be will Andy today's Chief Financial Hendricks, Andy Officer; Officer; and

to this beliefs, risks company forward-looking conference management's and quick results filings, or in update call no state uncertainties company's A made reminder differ statements. cause future to publicly the or Targets any statements undertakes the company's These which are the plans, for actual and in revise the intentions, statements. forward-looking SEC obligation expectations that predictions disclosed company's forward-looking The materially. subject that are statements to could or

call press conference GAAP website, financial this company's the financial in prior call. are The to patenergy.com included measures made include on our to this release required in reconciliations conference non-GAAP Statements issued and measures.

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

Andy Hendricks

Thanks fourth conference Mike. joining you thank quarter call. for today Good morning us and Patterson-UTI's for

to EBITDA fourth almost results solid quarter another improving profitability. fourth quarter XXXX, with our Xx Adjusted pleased of quarter are grew We in report quarter EBITDA every financial with adjusted XXXX.

to exceptional Our million fourth million quarter our dividend during through Also, execution. and fourth share improvement driven the we of by pricing results and $XX shareholders were regular in repurchases. quarter, returned continued $XX quarterly

million $XX indebtedness purchases. Additionally, open of through long-term we market retired

notable pumping the years. growth levels. in high super-spec to a leading-edge to in optimistic rigs utilization and are in sold out strong continues a X due multiyear pricing increase current The led Tier ahead, activity equipment look remain effectively support we in we we to demand pricing X.X over are As and XXXX, high past premium pressure the up-cycle. that

to continue as we we oil primary contracts prices to cash to the expect oil earnings activity From levels at reprice current flow will support higher during acceptable rates. be a and foreseeable to leading perspective, we significant and to in increase picture anticipate industry, edge expect the drilling our continue We for XXXX rig future. big remain of driver a

which completion to natural managed total Northeast, smaller primary markets. than volatile a gas have much other respect Northeast. With is operators growth, and less been drilling Due industry capacity activity, to gas of on in plans careful Northeast and is count, the their constraints part the exposure our the takeaway the in gas long-term their to tightly have goals align drilling production with making rig

be reactivated to X result, other our pricing. work will As high, drilling growth rigs count, the well the go effect we go rig Northeast Tier in short-term rigs long-term basins expect contracts. very are oil some of This but of moderating positively in in expect utilization basins. to we remain outside the typically supporting may the gas of have to super-spec Northeast have the and the a hedged In are near-term, in under rigs our rigs while customers let

Turning now to operations. my review of

in by increased our per revenue $X,XXX. the count and rigs, average quarter, fourth the XXX average by During to rose rigs day rig X U.S.

day growth, which for sharpest in that team achieving per marketing Our effort deserves their in quarterly have increase we recognition this revenue sequential was the seen.

or continue analytics forms meet in Patterson-UTI their will helping where in whether technology to a data offerings, our remote position leadership play in has it's customers Looking forward, low-carbon in with key various objectives, automation our and operations. of role solutions, technology a

hydrogen drilling for XXXX to fuel operations. and rigs to reduce first outputs drilling tested they battery blend see fuel hydrogen emissions on both We the as engine and expect usage were drilling automated that an in continue our operating believe uptake recently that to have a rig. we EcoCell and system as from management and lithium shown We will even power

this are potential about We excited the future. significantly has the to reduce in emissions

In quarter, and limited season, minimal favorable achieved strong the outcome to and despite disruptions saw key our alignment fourth services. operations, for in weather. with on and has the our with capitalize pumping, allowed high customers our during downtime the utilization weather pricing we pressure secure This efficient holiday exceptionally strategic focus us on through which demand

equipment be capacity. for new equipment, pumping The demand it which services difficult lead usual, quickly pressure constrained. times engines the for will the are remain of still particularly advanced add anticipate to while will robust, than X longer We makes to dual-fuel supply for existing continue Tier to

customers' as will which per grow, spreads. flow of availability increasing, spread is demands amount for rates further also horsepower the pumping higher Additionally, the pressure limit of

to key costs faster XXXX, new used with and many performance better on continue convert our motors technology consistency, impact and quality, fuel primary drilling service ability improve In wellbore tool that benefit of for regards engines chain. to integration focused and have X from our we downhole and Mpower supply so and With placement fuel components natural approach operational to has and with improved Tier to and steer reduce our gas to to transmission continue control developments dual we drill vertical use the drilling, can wells, This and better our by emissions. our teams quality. systems. measurements In the we and they wells directional remain of data as the to will to engineering costs

our from strategic also increased XX% are margin revenues XX% towards revenues, approximately XXXX, steerable from of steerable We approximately up work benefiting in shift work. rotary drilling In XXXX. higher the directional rotary to from

steerable to will rotary continue XXXX. expect grow work our in We

who fourth will will turn call the I financial for Smith, review over With Andy to now that, the the results quarter.

Andy Smith

$X.XX quarter for the from Thanks. quarter. per the third $XXX or million share, share Net income per $X.XX up $XX.X million fourth or was in

more $X,XXX U.S. projected, which of day $X,XXX. significant favorable the increase at Our $X,XXX This the increased business a in XXXX increase rig or contract successful revenue the by On quarter average a drilling quarter than fourth per from in of sequential in driven had day U.S., adjusted in margin growth the XXXX. pricing average in was resulted per a to contract renewals in per of year-over-year XX% average day revenue U.S. rig the basis, fourth

had for XXXX, million Based expect year. contracts quarter contracts the for contracts operating XX, of revenue, in XX of quarter. of we drilling in an rigs under XX future an the and drilling term term $XXX operating the U.S., of rigs we first million currently during average dayrate in average under December term the from place U.S., end rigs the full approximately contracts approximately XXXX At third for providing on of $XXX at the up

In quarter fourth $XX.X gross Colombia, $X.X margin adjusted were million contract drilling million. and revenues was

average in For the rig the U.S. XXX rigs. anticipate quarter, be our will first we count that

cost that increase anticipate allows rig rig in of which approximately average during we per million. to $X.X for and to $X,XXX, revenue day contract also margin of We with Colombia, rig approximately day gross margin in quarter, drilling the expect average approximately In million reactivations cost an $X U.S. related by the increase per generate adjusted will inflation. first

quarter. to improved pressure $XXX In and and million, margin margins $XX increased revenues increased to revenues during gross Pressure the fourth pumping adjusted million. pumping,

adjusted and expect disruptions experiencing than For gross pumping approximately of weather normal, revenues the pressure quarter, million. first more margin therefore, we with be $XXX to are $XX an million,

gross with second adjusted weather that will revenues the disruptions. fewer margin expect and improve quarter We in

In million fourth $XX.X quarter, directional adjusted the drilling, to million from gross quarter to million million. revenues improved third improved $XX.X the $XX.X $XX.X and in margin in from

technology total million. an revenues quarter, we quarter $XX.X $XX expect the operations, adjusted adjusted E&P and for other our were In with $X.X our revenues an of For rental, the margin million, includes million of with businesses, margin $X million. first of gross fourth which

quarter, margin similar to expect quarter. fourth gross adjusted revenues For and be to we the the first

quarter. On included a expect Selling, first million we million to not approximately first recur mark-to-market the compensation, the million SG&A consolidated the expected is administrative for is million for in Accordingly, approximately depletion, for in of to impairment quarter. expense adjustments the total expected $XX fourth quarter. depreciation, general quarter amortization $XX.X to be and $X.X be $XXX incentive-based basis, which of and expense first

expense million to the debt gain fourth Interest the repurchased the in quarter million fourth of from $X.X $XX we extinguishment related $X.X for debt million a included of quarter. the of early

quarter, expense to interest million. approximately For expect the $XX be we first

tax tax rate effective effective expect approximately was XXXX XXXX for for rate With Our X%. increase a our profitability, we our more to improved to significantly XX%. normal

local any be approximately so limited However, for XXXX, $XX we pay not jurisdictions. cash should to to foreign in We be million. and taxes significant do currently U.S. expect to state, cash XXXX federal taxes cash taxes and expect

expect we CapEx return, CapEx focused We of be is $XXX quick expect approximately CapEx XXXX to with reactivation for be Most CapEx million. high on growth opportunities this payback margin accretive. activity-related that maintenance and to

and which $XX million to approximately reactivations. drilling the existing that margin high $XX incremental in drill for market for for approximately Contract budgeted fleet, of $XXX rig remaining million expected $XXX is our increase equipment, million rig of is including million maintenance CapEx for CapEx be and opportunities is upgrades CapEx XXXX, and revenue premium upgrades rental items rig customer-funded including is pipe.

including be and Directional approximately motors the CapEx drilling is the million with in to CapEx equipment, million, CapEx, equipment to the for million fleet $XX support which mud underfunded of XXXX approximately going for Of pumping $XXX customer upgrades $XXX demand. CapEx, majority XXth $XX million, and maintenance to and activation systems for XXXX is maintenance of which our for the MWD growing be has expected next-generation of $XXX years. of meet is maintenance our remainder Pressure expected to spread. is been of recent million

for of steerable remaining shift continuing also our CapEx is steerable the rotary XXXX systems. work are with for We other corporate of million purposes. purchase higher-margin segment $XX The towards our strategic general rotary and additional

million in with fourth of to We now ended debt XXXX sheet. after quarter. balance $XXX Turning $XX approximately long-term of we million our repurchased debt the

net for approximately to debt metric improved quarter or than basis, EBITDA adjusted X.Xx and debt to fourth to a on X.Xx EBITDA of gross XXXX, cash. annualized less was X.Xx adjusted XXXX Our

profitability quarter. a to liability. large benefit This million of at the end sheet Our in prepayment is reflected a due improved customer as balance the $XXX cash our and XXXX the fourth balance during short-term prepayment improved to of

As during the first half the in capital liability will increased we work XXXX. of resulting working the off decrease, prepayment,

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

Andy Hendricks

drilling rates. be foundation contracts equipment edge rapid Tier the rigs premium improved for from reprice super-spec pressure Thanks, leading given we growth high These as growth and current supportive a strong continue to utilization year pumping higher In company in rates. Andy. the XXXX a pricing. rig rates edge primarily provide we resulting continued expect margins the leading earnings contract was of current to X drilling, to for great of

in super-spec growth am by overall, basins markets should year significant the another the the over be increase to with the near-term and increases protect as upbeat for expect as gas free support I tightness for Northeast. for continue the softness increase rigs, next rig year, leading-edge rigs activity Higher flow. basins, as the expect the and the XXXX outside the We Throughout Looking for cash of rates growth rig I completion over U.S. services in for this equipment super-spec will increase, activity to count forward, continues believe in well. year. we overall combined next very these oil count Tier the and X margins to and in in driven there year, may that for acknowledging see industry I especially and

like a in cash XXXX, target would the Given shareholders products share and of our outlook we to that to flow dividends and through oil successes continue we higher efforts provide combination and that, employees of for of cash gas hard lives make to their of a free to people’s our significantly for better. With help buybacks. thank and flow the for all world with work, return profitability XX%

call we would open like the now Colby, to to questions.

Operator

question comes from Chase. of from Jayaram Arun first line Your the Instructions] [Operator JPMorgan

open. Your line is

Arun Jayaram

gas know since a key Good on meaningful thoughts. time. you the And highlighted that. could that demand than your pretty the rig what’s I that you changed follow-up morning. thoughts you in months is a just it ago? your customers you a Obviously, quite But have in thought October, did some lower of I Andy, increases count. has planned on wondering guys postmortem survey a because market trending do on shed a bit was if and XX I a few as

Andy Hendricks

problem. No Sure.

was yes, trading at back the At a early barrel was end WTI certainly that September, of So much did we $XX survey higher. natural gas time, that October. around and

seen count I was about so some bit was And We’ve changes. little rig the there we from more going think E&Ps do. a enthusiasm certainly their to talk what that to

Now X the you has interesting thing we’re and rigs, look at the the steady. but AC through when breakdown Tier when the that with especially you we rigs, year, look rig super-spec changes we work is, of as count, what seen have doing at held market in

So few and months, growth rig the while we overall supporting not you’ve the pricing. last market over seeing seen count, is the high that mechanicals the participate a in get certainly rate in keeping SCR we’re edge utilization because released leading very high-end

Arun Jayaram

terms And through follow-up, decent including of the could gas the that on XX just there’s side? balance Is enough a the the my prices on to just amount of the trying call gas to observers, own, estimation, to on than declines Andy, of response – rig market side offset decline XX a demand we in gas oil decline Great. could to see potentially your terms count in happen in the rig our market. supply it the more it,

Andy Hendricks

already we’re And that. seeing Yes.

We’re already and gas, two into to go seeing we’re rigs oil seeing we’ve and go for requests where had rigs in markets. down discussions

So we we’re and doing rigs I think in customers, rig our what to with expect that we’re when XXXX. still be also may reactivating And rigs. count down, net-net, you we’re at look grow coming what seeing while

in the Remember, not long-term contracts. release. They’re participating to types we’re rigs of on Those mechanical SCR easy market. aren’t

look in Northeast, primarily have to large under some those rigs customers. we going So happening we AC what’s with recognize outside in still we rigs, for markets see hedged There’s natural market certainly contracts are with when tight one, and But outside very gas, be high-spec the number a super-spec those at gas we rigs. term of of a that. and that the softness of

Arun Jayaram

Andy. lot a Thanks Great.

Andy Hendricks

Thanks.

Operator

of from Rollyson Raymond question Jim next comes Your James. line from the

Your line is open.

Jim Rollyson

view guys. Just spread, year, Good trajectory right get flattening you that? the of the count saw… curious Hey, when process guys and morning, up the with through and just on obviously, more the kind your kind of decision Andy, the of to everything XXth was from go to rig and last out we reactivation

Andy Hendricks

XX what what’s maintenance, reactivate we absorbing as what take XX the since would more at we’ve is what is a and we the our looking spread now running. over to add been for we’ve happened We’ve it slowly start that pumps in had Yes. would market XXth pumps field have of reactivate the year ready And customers for circulation and on to all doing existing between in the getting spreads pump calculation seeing and that across active been supply. that, spread in have been to

of high-end the in rates to believe industry. those that’s we the amount and pumping. we I spread places high-end And of the seen per And happening higher in pressures. E&Ps and the flow just the – pump we’ve Delaware for Utica, participate are type The that want like across markets we work that in, horsepower higher do at pressure

that so seen we’ve absorb. And

our with happening what’s has words, other in XXth been just So pushed.

the active just be get been end But spreads. should free of our some XX do that’s horsepower XXXX so at activate been sufficient the it current And into a we that of horsepower, XXXX, we as there existing and of we’ll absorbing have been have into to to thought XXXX, towards to end might chance up while able we that spread. we’ve

Jim Rollyson

a late that’s like? add, sounds So it year

Andy Hendricks

be late It’ll a add. year

Jim Rollyson

flow it the kind on executing periodically year? kind and above free the of see fourth then opportunistic? Or guys is you of you you’ll Is across follow-up on do obviously, plan the the Curious Or generate just to that buy just dividend as good that quarter. see that? is that? as cash how over it the And actually you Okay. the during share repurchase a side, for program how

Andy Hendricks

then start, Smith. I’ll to I’ll it and hand over Andy So

giving flow dividends our committed XX% at least to We’re free back share to cash shareholders through of and buybacks.

As we blackout periods traded have a the during company, publicly year.

buybacks we’re to we shares So open that there’s looking to points, over back those and hand to when windows can only and acquire dividend it that at us. windows we’ll our market at do are into outside buy get the I’ll the shares, of best certain in those Andy.

Andy Smith

to reiterate lot have we to that again, don’t our to I are than that Yes, metrics. add return other say, to a committed

back again, or form we’re flow that free on XX% coming the certainly, So more in be XX% committed to shareholders opportunistic of to that cash we’ll buyback side, some another, return. but

Jim Rollyson

Thanks. Helpful. Great.

Operator

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

open. is line Your

Scott Gruber

morning. guys, Hey good

Andy Hendricks

morning. Good

Scott Gruber

Andy, you additional contracts rig have kind this reactivations? how many sight of the reactivations today? do embedded many the budget on how are those, have of in line contracts year? what And of for And

Andy Hendricks

now, in on right planning line we’re eight So the have and sight eight. budget, reactivations CapEx those of we

softness But do we there’s to XXXX. – still think going near-term with overall, see see we recognize rig markets. we’re think, our through the We count some grows. gas growth I So

Scott Gruber

to potential it. the And Got Arun’s downside question just risk circling side. back gas on on

And if about of of about think a pull of of Just your kind guys downside rigs? kind of do fleet? of what’s scenario of kind – kind get analysis, of better help a fleet case downside how about replace them back? you how kind you the count? of Just the do scenario? you crew do marketed as marketing in Or how you modulate do and materializes, do the some kind older more think kind trying us reactivations the think the you those to sense think I mean managing management of about

Andy Hendricks

drilling affects our Yes. behaving, the way And but customers and believe the Northeast case, differently. for for gas market relatively that completions. certainly I back companies recognize And basins, of both there’s to discussions we remains with it think been we versus potential and us in our customers, discussion that downside different a the in other have steady

contracts. there. The working well are Our under customers hedged long-term rigs are up

Texas, the Haynesville, materializing, number count. maybe outside where of the in likely rig Texas, South happening it’s that’s only of with of Oklahoma, you we North our the have still East Haynesville, areas whether XX% lot production. it’s So Louisiana, there’s of a have downside Northeast, if gas But case a working rigs of

I case So, basins. we’re think downside a of in those kind in limited

Scott Gruber

it the color. I’ll turn Appreciate it. additional Thanks, Got Andy. back.

Andy Hendricks

Thanks.

Operator

line comes of the America. from next Saurabh Your Bank question from Pant of

Your line is open.

Saurabh Pant

Hi, Andy and Andy.

up quickly from the on prior Just question Scott. following

trying going right is If right said to I I’m say right reactivations. duration, in eight eight you think willing whatever approach? to the not that are the to rigs rig CapEx get budget number flexible right? four on just be the I how I’m okay, doing you don’t trying or just understand, mean, right? understand your to you five or pricing, be rigs the how I’m you looking would contract, only stock. that, rigs, reactivating again, I’m flexibility is, baking at because, I’m

So a to your XX% decision concerned flexibility if stock is would right? after are process? your people quarter, can you down and fourth appreciate demand, Obviously, talk in I fantastic making about that

Andy Hendricks

today. will we’re and had are change No, we the always out enough rate. a pricing we not if continue to spend necessary. the react, to XXXX I is available XXXX leading we’ve thing do that I’ll one support have I contracts But see flexibility going CapEx not any pricing. that to in utilization leading-edge and XXXX say it’s to from early is not edge to expect reprice up there there rig

will any line we growth we’re didn’t margins, flow growth rigs, so steady projecting sight. in throughout do XXXX And have because free activate if because of of we cash we even that, still but in steady

budget. our CapEx And so reactivations rig eight planned we’ve in got

can ignoring what super-spec demand for do it’s the we in of the Northeast, X on we Tier the what happen strong We’re certainly rigs. markets because limited outside think effect gas potentially not a but of

Saurabh Pant

Okay.

quarter. the solid that. fourth I XXXX. expect day. through think, I the you average in what reprice very $X,XXX, I guiding more got how to the the the of first per In in quickly margin of And of increasing in improvement terms than Andy, revenue quarter, Obviously, course right, Now, appreciate number then $X,XXX in if are terms rigs to, cash

to between OpEx, split revenue much year? what OpEx you your expect seasonally just how be quarter because year? should First, the you the of of a we And bunch that. remainder quarter of If to is higher versus the book can first in general, course to talk just the factors? then talk can split quickly, due between How going the does reprice up to through per maybe a tends the day through

Andy Hendricks

Yes.

reprice we the I what’s think right all today discussion to early now our from in where XXXX rigs XXXX. lost getting in to levels are is ability

We’re XX in probably contracts of going around reprice the XXXX. to half first

$XX,XXX, be rigs of contracts a other revenue? extra you to that’s contracts. drill when recent of pipe Those going margin Some day. the and in $XX,XXX despite are on still These doesn’t for and those rig and X around spec plus right SCR people what a still overall that to is rates super more at add you’re affect are happening have people day Tier $XX,XXX happen in in per releases up just want, we’re day. working are these doing per movements And still $XX,XXX day to because upgrades going going now. revenue day, high the in a repricing at comment what’s want utilization still that Andy, to do you rigs mechanical huge

Andy Smith

Yes.

can $X,XXX on per day and up So per about about $XXX. you expect and a day revenue up day, revenue cost cost

Saurabh Pant

perfect. Okay,

back. thank Andy, very turn I’ll much. it and you Andy Okay,

Operator

from question Kurt Hallead Your of from next the line Benchmark. comes

line Your is open.

Kurt Hallead

Hey good morning everybody.

Andy Hendricks

morning. Good

Kurt Hallead

going be play out? rollout? year. of back-half to kind weighted mentioned of coming eight of today the or got in Andy, you crew of a that Do sense on so. some were to could guys the the on you more rigs how some land discuss context of a didn’t Hey sounds on with same be Maybe kind to think unique a sight opportunities rates, activate like your hold may cadence later you true competitors that these could conference – give seem the there it line Is calls frac of their it

Andy Hendricks

the steady this That’s got XX I of know announced so understand. but is these for they’re a the relatively so as hard why back spread throughout a on top in five three We’ve big So to we is September, event, five. not of more on we the don’t rigs, the year. of activations discussed, QX And more then, number.

So, of see how sight we’ve we on that’s progress. got and this, line this

Kurt Hallead

Great. customer waiting Okay. come where now situation then crew they contract and And the are that here, addition out? then? to Are to crew between in that a context on you up identified you marketing have opportunity be and a it? And it is frac the of coming a going actively for

Andy Hendricks

So, lower compete discussions. market, pressure try don’t end, participate the Basin we’re in In pumping in the pressure we Midland lower or Marcellus. to or lower pressure

are those deep set and working and higher higher the crews Our Delaware, deep Utica, up higher end, higher pressure, technology, areas. rates

we’ve so what And great reputation that a for at got level do performance. we of

And they’re to because to got they’re are drilling adding year. rigs we’ve expand what few customers this that be doing so looking going a

And for some sight our so possibilities of we on line yes, do have crews.

Kurt Hallead

then And follow-up last Great. here.

it, a You first that the What to let’s you’ll your point $XX,XXX fleet leading call kind XX of rig mentioned on, $XX,XXX vast have in the majority of half do rigs edge? day year. repricing think the you of

Andy Hendricks

year, it get the in throughout continue clarify I’ve don’t times, few kind I just loaded edge in we think front-end certainly XXXX. for everybody. up to this but will a discussed of everything leading It’s but to XXXX. And

but of of some continues the into weighted certainly XXXX. think heavily into this first XXXX, I half

Kurt Hallead

Thanks. Andy. Appreciate,

Andy Hendricks

Kurt. Thanks,

Operator

from Your line next of question comes from RBC. MacKey Keith the

open. is Your line

Keith MacKey

good thanks morning. Hi, and

in land and the to Do of drilling out. start expect than to a pumping be you Maybe markets? you’re and pressure between to Just other the wanted time what terms here of compare rates bit could and one stronger equipment? of utilization move or just take seeing XXXX ability profitability, you contrast if

Andy Hendricks

I’ll with So, the pumping. start pressure

done have a teams to push good really continuing Our job pricing.

pumping leading our fair of have a percentage we – of So, a we still pricing. that working amount that’s at good pressure edge –

per quartile right now. top producing spread EBITDA We’re

I of think side signing real were the in is of on we opportunity because that early drilling term XXXX. the for us number the contracts

half we’re – big be on in and first contracts to XXXX, like are these repricing XX about And of movements I we’re so mentioned, the going

contracts to is to these where the today. up customers just market get

year rig paying the over been with the benefit where to. a market’s They’ve rates last huge been certainly had moving they’ve the versus

story we in why putting part And if I that the that’s so of that’s weren’t even going XXXX. is because more if rig said happen count rigs, these to are we’re think grow adjustments I I to – projecting, to see our of ability, going the was flat, underappreciated any not, still margin we’re out and And the which grow what repricing. be flow even free our going cash is

Keith MacKey

$XX.X you maybe a pumping Got you QX. sense. little and drilling? the And little for terms that talk going [ph] extent in you comment Makes the pumping to see seeing maybe drilling Where OpEx do just about of costs about can you just what on it. day if you’re can bit side. operating was or so per in well then if the as And the could a bit side? on pressure

Andy Hendricks

I’ll hand that over to Andy Smith.

Andy Smith

Yes.

looking per an day. in a about little creep. cost about with quarter increase the $XXX We On the still first bit drilling side, talked seeing of we’re look, of

do math So you there. the can

business. some pumping side on little the side, on same bit On a a on labor bit more and pressure probably maybe real the Inflation of little of thing, R&M. – is less that the so although more

crept ahead So it. of bit, has pricing stayed a up but it’s little

net So, pricing still gains. seeing we’re

Keith MacKey

color. Okay. Appreciate the Thanks very much.

Operator

line Don Crist question of from Rice. next Your from comes Johnson the

Your line is open.

Don Crist

are all? Good morning, gentlemen. How you

Andy Hendricks

Great.

Don Crist

the second year end Two questions half could count. pretty thoughts are dip a analysts I you year? and this comes overall the through strip for in assuming you’ve it the that you much first the of the that Can year me. of the lot in up Number may on the this on kind lot progressed maybe back. a the year, one, build of of in kind saying half print know offer past, how in see work moderate that your possibly rig gas of done and where count the it land rig

Andy Hendricks

because right now, parse near more And visibility high-spec, classes need rigs, AC kind of what working we’re market is really two and super-spec But tight on contracts of repriced kind seeing our in I are primarily business into around on rig a drilling to do spot the and types AC rigs. high-spec, So, just utilization of our today. be to do that term SCRs that different super-spec XXX% then getting they market. treated and mechanicals

our sector grow continues XXXX. count to that expect We in in rig that

you mechanicals, SCR year, those part a of market the beginning do. doesn’t participate. just from we look probably separate since but if where what Now that at this XX are That’s down of we the affect rigs

what’s going predict what And the count going on Those is happening I the have in – in so kind overall don’t of demand. of of But of visibility leading-edge market super-spec customers because the that pricing don’t the X, movement for. Tier to the just that, work do. any aren’t because to and you’re to and we it’s to utilization going rig rigs that’s really And types natural effect part any we overall see there of have hard necessarily gas. that some

in oil with in the activity discussions in still We’re E&Ps basins. increasing oil the basins on

Don Crist

Okay. of little little seeing Are bit the with steel in the up hasn’t back chain the gears supply moderating bit, at of you pipe Rolled And pricing kind just moderated has you really quite supply loosen count, weakness and overall pricing pricing seeing all. shifting particular. cost chain, but in rig and bit kind just to side – some? come a a a are of

Andy Hendricks

consumed used SCR new that torque, pipe lot shoulder a pipe lot of in the of pipe, is type pipe. our on that’s the That’s we buy, a drill rigs. drill rigs. that’s market. which on way We we and do on double we buy what of high So mechanical what call rent not We it the

connection double SCR it high-spec when moving come buying pricing time slow in it’s shoulder, lead tour been drill change around still anything mechanical down, really lead pipe. year times rigs So a the market. has haven’t up, drill pipe And doesn’t down, for high

high-end for to market on advance, pipe, have low Tier which to by rigs, super-spec use in slowing we tight. that is going be drill We still that’s affected end down. not a So X still rigs year and order

Don Crist

on maybe may duplicated lower-quality or anything pumps equipment other And on those that be any mud rigs?

Andy Hendricks

different are these just It’s No. – systems. very

on AC are SCR have you are the that mechanical Ours what rig. mud motor-driven same not as our pumps

Don Crist

the Okay, turn I I’ll back. appreciate Thanks. color. it

Operator

Partners. Daniel of the from John comes question Energy next Daniel Your line from

open. is line Your

John Daniel

guys. morning good Hey,

one Andy, on long did was the right off, me, in center? it speed trial? go elaborate was of And the that a and can And how you ways for hydrogen not talked kind The now. adoption the that’s modeling what involved? you project about, then just just exactly First opportunity of blended

Andy Hendricks

that overall, along really a that the went of gas, natural engines a try to the that The went. under And percentage sure on are hydrogen. good. would about properly high use test environment. you technically, to function excited to It of back, overall, of to ignition step engines wasn’t still systems, the So overall, to that blend well. – hydrogen blend today try say, just how successfully the would worked percent trial I make you hydrogen, point I test type going the increase when some was presents But economics the hydrogen, but spark say of probably step the is still next the for success, with really challenges.

testing do you things this I to or But get how about worked probably the and we’ll well move think uptake the transport some be next potential storing to year. are has year doing an I gas and those with we’ll more hydrogen, as so, it on hydrogen pumping It’s systems that think putting quickly. pressure blending too, hydrogen, the do natural there. And then Now going of how out, it on think all I over procure the into systems? and see there you market

John Daniel

– Okay. that region say was you Can where what in? tested

Andy Hendricks

Northeast. in up the our test We did

John Daniel

gets fleet it assume that’s reactivated, Okay, fuel cool. The is Tier safe upgrade? to a XXth dual when X it

Andy Hendricks

Correct.

John Daniel

of type what willing months call it, entertain duration to versus, then are ago? today And XX contract to X customers Okay.

Andy Hendricks

or for rigs. for We’re year contracts more still drilling a discussions in seeing

John Daniel

Yes.

Okay.

improve? if is just that validates, lower, going, get kind but to way [indiscernible] of might mean like with to to bifurcation rig the share to rig you the then you you trying will, market count continue it, those where what’s your rigs seems where is going but this sense down describe all scenario high-spec Because dumb it little for the bit you everyone when a have the I I lead hurdle So of with the me, a on. see count overall

Andy Hendricks

not today. rigs. do do with SCR my they term they’re covered going to And and mechanical am operate those to we rigs because spot view. certainly our That’s best markets I the what contracts, are on The doing don’t explain

affect AC the I it count doesn’t that are the overall going but drilling rig rigs. about it’s because it’s count, contractors running of to overall So think quarter rig affect high-spec, super-spec

John Daniel

to up Permian Fair that it place and five number, enough. Haynesville sort just that of assume create tight is of here, an but those is you one this will. fleets you you say, and to owners Is there four headache Or can oily move go let’s you make double think for where reactivated, me basin." easily? half back west, Last them absorb those if naturally that four the it like get And fleets the plus see do frac the of this "Well, year? you are a to the do the downer market a in to not five ones fleets And a let’s to be enough softening – displaced, – does so look then incremental getting Midland. a

Andy Hendricks

is and we as One are. this pumps of teams there’s horsepower think industry are equipment it pumping market things I us market day absorption type underappreciated the our to increased is you’re in happening spread operate in are are unless living that like for to others per spreads. So that pressure try keeping those that two day, probably more straining into that the

to need now. stretched the so is back cycling to And maintenance pump have right

operate to at efficiently needs still our equipment higher so into the horsepower come per And spread to systems rate.

that’s tight, absorb going more So that’s horsepower. to and

be and are is pumps loaded potentially coming to coming how equipment from of going of projections or and tight either availability still XXXX because engines is the it’s out spreads is, other manufacturers. in back-end the delayed many The

in, for so I many pushed And forecast year. are spreads coming the how think that in the gets

that’s going an per absorbed so to oil up coming East going going Louisiana, or planned where Texas, spread, the horsepower be And up is going go freed show increased of to it’s to horsepower to equipment think North delayed. that’s – out spreads get to into why either are in basin is I that any to work

John Daniel

it. Got

Okay, my for thank entertaining you questions.

Andy Hendricks

Sure.

Operator

from question Barclays. comes Podhaizer of from line Your next Derek the

is open. line Your

Derek Podhaizer

– and opinion require biggest on investors, would the the you’re out you can significant leading CapEx threat to a edge? Hey their day biggest on be leading-edge type edge, in level leading-edge those these day little the way supported, the doesn’t $XX,XXX of Not lot required I softening they’ve Andy, at some been guys. any They’ve see what look about $XX,XXX what’s your that it, leading sort threat earned to on churn know what the now given rigs, a belabor of maybe but these seeing, mean think to rigs, they’ll of they rigs of that point the move that maybe And rate? for reactivate the be I market talked bit. being maybe you payback. rate. utilization would that $XX,XXX

Andy Hendricks

have We at But on of the is focus lot day, discussion that. the our a of end about margin.

and is our to to margin. Our duty focus our our maximize shareholders

But rate, one what do. demand plan is so that’s we other and day still to side, the try going that leading-edge on just we’re tight. on And side, to to protect the

going work over going absorbed the a XXXX, eventually, back to spec Tier reason rate super for day at into even And no term, XXX% utilization. it’s us at in at day to there’s system. to up in X go something if lower term, long rig get the it’s price We’re rate. the a that short back to frees that And knowing

risk rate. we edge see on any XXXX don’t So leading in just that

Derek Podhaizer

it. Got

international, It of Okay. countries? into going down of rigs Can are then And maybe some there? that what like Switching potential talk the region a different Columbia. to little weak seems those idle? overall other the any move was opportunities you the are you prospects active are And just over there America in about there. how there? maybe Are guide could to growth out Latin where Columbia idle rigs many

Andy Hendricks

Yes.

So up working it’s the market. rig rigs, coming due as six, our there has – changes lot a up seven count there. in count how Colombia to some It’s and move the down. changes is been again and Colombia. set in to affect to We them. operators down going that’s the were for that of The see now rig operators do are through work fiscal We in our trying expect to

We continue some also see work that. as possibilities in well, potential and on to for we Ecuador

Derek Podhaizer

Great. Thanks it. Appreciate the Got color. guys.

Andy Hendricks

Thanks.

Operator

question from next of comes Your Piper Instructions] Sandler. from Luke Lemoine line the [Operator

open. is line Your

Luke Lemoine

incremental mentioned little is what else maybe you your of and talk Andy, are investments? CapEx opportunities. could you Hey, could this also that good about the budget some you rev drill I more kind see wanted morning. initiative? this paybacks EcoCell, pipe, but what in $XX to guess a million for if you you budget premium in refresh on kind on getting where and I is of just of are these us drilling

Andy Smith

rig going little like bit gen third a go Yes. upgrading more potentially market a pretty It’s or third things rate. putting that’s rig would one, it’s a into all Obviously, new general fourth big pipe to Drill out or look, It’s upgrades, a pump fourth – be EcoCell. pumps, a there that. out is generators, and good returns. getting they’re and working

sort quick la pipe two maybe years. back those a pay items are X.X of EcoCell, pretty drill of carte inside the On and the that years,

Luke Lemoine

That’s it. for got it me. Okay,

Operator

now Andy for to time. over will questions call turn CEO There this remarks. are no closing further I back at the Hendricks,

Andy Hendricks

day. everybody’s time morning. dialing-in, Thanks We questions. the this we for and appreciate Have you. Thank good appreciate a

Operator

concludes today’s conference This call.

now disconnect. may You

Patterson-UTI Energy (PTEN) 9 Feb 232022 Q4 Earnings call transcript