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Patterson-UTI Energy (PTEN)

Participants
Mike Drickamer Vice President, Investor Relations
Andy Hendricks Chief Executive Officer
Andy Smith Chief Financial Officer
Mike Sabella Bank of America
Taylor Zurcher Tudor, Pickering, Holt
Waqar Syed ATB Capital Markets
Call transcript
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Operator

Ladies and gentlemen, thank you for standing by. And welcome to the Patterson-UTI Energy First Quarter 2021 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] Please be advised that today’s conference is being recorded. you. Thank Instructions] [Operator my Mr. turn now to call your host, pleasure is the to over It Drickamer. Mike the Sir, yours. is floor

Mike Drickamer

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

Andy Hendricks

Good welcome call. conference Mike. first morning. Patterson-UTI’s to Thanks, And quarter

can are today. pleased We that us you join

quarter, pressure in despite For associated the the and first and adjusted winter with posted increased revenues extreme drilling pumping EBITDA and contract by impacted storm Both our from was downtime sequentially results, Southwest. the directional while exceeded better-than-expected the challenges expectations, drilling storm.

completion trading and consistent pressure drilling we looking the and our further now on pumping Excluding expectations. with storm, of supportive been Crude have in with conversations in around based forward, have results have oil tight from the improvement band activity, impact would increasing confidence winter $XX prices in been greater customers, a activity.

XX reach our late expect approximately quarter coming rig growth We with that will next and the rigs in second quarter. in the over three early of third months, count most the

margin reset pricing downturn, things by leadership better such, achieve pricing I per believe would successful our team where to higher and through currently are trucking. this the to in starting customer’s pricing input cycle encouraged sand signs day In our high our has of on in of for service we the since for pumping, been been rigs We’ve quarter of quality. be the business, our are we pushing as for the Additionally, second and in of active improvement. and additionally low we this pressure to the costs will as And like beginning drilling, level such congratulate most

margins. squarely improving on and remains Our focus in pressure pumping pricing

have lot directional to eight expect our spoken of to our our for with there Within quarter. our happening. quarters Mpact second while system segment, to we spread reliability measurement demand reliability improve, late our a directional of allowed Mercury I to have directional the business and drilling the due market we now share continues drilling base. strong combined several activate are As an drilling has exciting now us in contract captured performance drilling and drilling customer of broaden and alignment performance the with in motors. This things

Additionally, in different worked a with number based have directional, of we contracts. performance on customers

customers higher innovate drill to demand continue We to wells. meet to quality our

of During a field motor higher new X-inch [ph] design inch completed the tested the successfully a drilling quarter, for performance. new we first motor and X.X/X design

Additionally, With for data wellbore reservoir placement tested we I algorithms quality to review financial quarter. productive the for higher now our the results new call for MWD field will will Andy the successfully over wells. that, more a the Smith, in first compression that turn allow who

Andy Smith

Thanks, Andy.

first net million reported quarter, EBITDA $XXX on to $X.XX share X% or while -- a $XX.X per per the loss For $X.XX grew sequentially revenues. million sequential increase we of in adjusted XX% share, a

to average revenue. concerns in this first one went sales to first but a and quarter the to of idle our contracted Contract per improved not revenue work of from quarter rigs early back taxes. but XX refund drilling, XXXX, used the ultimate $X per proportion for in higher-than-expected $X.X in to contracted, that for April. ended of the a operating lower during drilling the now three were quarter from $XX,XXX. a to was revenue rates million rigs about revenues benefited with of at but benefit costs included services. day benefit idled ancillary revenue rig fourth contract was earned We This reduced and average on included that from also the million Turning which time rigs Compared count Average from rig day during a rigs collectability segments. our rig XX quarter. fourth the downturn the quarter due the that from In recognized quarter, first

during even day quarter. excluding benefits At than day, drilling for XXXX, we benefit, contracts discussed expectation per the lower-than-expected this I cost the we average expected. per operating currently on first rig rigs revenue rig With during four XX, contracts and average place, better an March term favorable previously Excluding margin the operating average had was and exceeded our second rigs providing costs, future drilling March an operating XX contracts million $XXX the quarter contracts Based XX expect in for rigs rate approximately XX, term under of ended quarters of term operating during [ph]. revenue. we of average under higher-than-expected day XXXX

effective delayed gross during mobilization revenues $XX.X quarter rig approximately to rigs were the spread was we XX expectations. storm. of the first quarter quarter expected and also one in during Texas an spreads day winter effects For was our a pumping, to of In of But average consistent the that count the our The second to $X,XXX. per quarter. Pressure to during with from with with margin active the second spreads. is rig seven be during revenue quarter to improve storm, approximately quarter, we the the storm of Downtime of utilization the was to associated for winter mobilized from X.X of pumping with and pressure an averaged the quarter, to the margin the the primarily Northeast spreads expect startup the decreased of $XXX,XXX. first due million our in Texas. the loss Average quarter first XX results rig first winter $XX,XXX

pumping improving million the from to expected are spreads with improve we first quarter, million. Pressure expected second utilization seven to to margin gross to the active average revenues level. is expect improve and quarter For to $XXX X$

to margin $XX.X now improved and improved quarter drilling, $X million. revenues to for to the million Turning directional gross the first

margin For the second directional improve quarter, $X.X with drilling gross expect revenues to we of million, $XX.X million. to

our improved technology the quarter to businesses. and $X.X million. now operations, and Turning improved other margin includes our $XX.X first which to to gross million rental, Revenues E&P for

quarter, other $XX operations approximately a to improve we million. gross second the profit expect For to $X.X revenues with of million, approximately

of the to Also, second be $XX impairment turn as amortization for general I With for depreciation, $XXX we I’ll approximately we and to second is a Hendricks. of June will rate quarter, call we be expect per quarterly paying effective holders now cash approximately expense X, share June XXXX. depletion, back the XXXX, an the of expense dividend expected the that, to call quarter. and year Andy to record Before tax the Selling, of million turn expect $X.XX XXXX, And back on million. for XX, full approximately of administrative Andy, XX%.

Andy Hendricks

shift traded Across the timeframe, over capital this rig nearly industry, cash revolution. as on budget doubled private for customers operators had discipline the in is has crude been relative growth publicly rig the rate our growing prices. within they flow more have count majority the land balancing a on on their operators months. U.S. nine to discipline than industry The conventional’s and count the pressure and it of were oil while the XXX%, a U.S. and Over to increased by years more exercise has the modest capital have in past work

we improving months. operator with few discipline, point year. that interesting budgets, to see increasing funded As This through lower relative our believe see is can this into prices and the line we activity further the with cash be increases discipline is which in over more capital to we’ve had The cash and I based still were continued XXXX from that And XXXX, flow, discipline greater as in activity. than operators activity last the exited capital within progression capital flow. we orderly is commodity in will moved on a XXXX

customers technology the We’re that well-positioned. energy performance opportunity contractors we allows where equipment. and activity, industry for increases still Within where environment, for as offerings with they across encouraged as more and further value are the increase sector capital this premium there be will be provider, the service a for activates rewarded premium by industry the discipline superior pricing create this in will to

in be integrate we remote use in automation the the the Through the drilling We’re of operations, of rig a certain contractor performance. uniquely and wellbore with positioned and directional technology better or directional drilling to quality significant drilling operations the are U.S. only drilling. into presence improve operations it

and well-positioned also help emissions reduce alternative costs our in leadership and our are benefit customers to sources We to the use position at well of from the fuels site. power

For have burning to of cleaner drilling natural frac rigs spreads. the many and diesel ability substitute for we our example, gas in

reducing EcoCell the consumption the emissions. our energy with battery thereby manage fuel have generated and more power efficiently the at rig, system lithium we hybrid to ability Additionally, management

to we power on further As from as site, drilling run minimize utility. have at the the to emissions the well ability rigs high-line well

updated these driven thank Sylvia, to of we refer forward information are more Corporate for their successes like technologies, our first customers quarter. very year encouraged steadily a XXXX We through we initially our in and For much would all for and With time for our from activity, a public and efforts Patterson-UTI. better questions published of hearing then Sustainability are we’d industry by a by as by on and to year both that, we that ahead. we private we that the challenging general, and to agile report hard please look the like operators the open operators, call work, see during major increasing employees our in opportunities to now. and

Operator

Thank Instructions] America. first the you. Sabella question of line from comes of [Operator Your Mike from Bank

Mike Sabella

kind rate, the give on of XQ? or did it you quick it real Just miss just all did guided margin for I on

Andy Smith

was what question? Mike, the

Mike Sabella

Just all give missed just XQ. drilling I you or… on it for the and guide Did margin in it

Andy Smith

Yeah. day. It $X,XXX per was

Mike Sabella

$X,XXX.

Okay.

the think year. Andy, you being XQ I know, So when kind of for low about the XQ mentioned we point and

possibly of peers out pricing. One about talking your is pushing

can all maybe in today where where leading overall second talk possible spot total You into pricing and rates we well. day half? as maybe plays to edge seem go that, how are are we relative the they about rates Can to think like that’s

Andy Hendricks

on the of seen the where up and I’ll typically a second a pricing don’t out of industry. what that with still up in as then rigs past price into into And we quarter there. the this the we start range they the we reasons. publicly and we’ll are the later move there’s we quarter third competitive to bit have day the rigs the at believe think rates end of year. for through downturns more quarter put that in super offer in other spec the that tell especially But we’ve rest opportunities But the in you to We get spot for of second

opportunity As the the as rig has to pricing up, starts well. up move count move to

Mike Sabella

several you’re it. the a then of, I years Got question, the just move M&A guess, company. level And for kind last from away higher big

are years, the As kind anything is you the about there internationally looks we kind sit internationally, interested of could the fitting If If internationally guys of here, portfolio? there the better. see a you well anything of in? in we outlook Patterson couple little is next over in U.S. not think

Andy Hendricks

for answer history. say, just we this the try that I best find me of our healthy sheet. to exercise sheet happens these see balance just That’s our to the we’ll come maintain way out question think we to is opportunities point. balance strength to we of what have a to And at cycles and when

Mike Sabella

Thanks, Understood. guys.

Operator

comes Your Zurcher from from Tudor, the of Pickering, Holt. next question [Operator Taylor Instructions] line

Taylor Zurcher

there. storm. morning whole based you. utilization incrementals Hey. guidance the Good on much get really QX seem up it strong. uplift curious the pricing following and the pumping, Revenues lot doesn’t of in I’m pressure huge thank you’ll baked into there’s the guidance obviously just In winter looks better a like as that QX in implied

pumping some for what a, however, be lot define day weather-related improvement And term it you of mean, I pricing could you to trend back then per a margin rate curious activity stages improvement can as maybe double-digit of looking to just a whole for want of I’m from So longer without sort this run exiting higher? you for you efficiency pressure to normalize us think continues might gross get if of and do you or noise XXXX, seeing sort if metric? frame you

Andy Hendricks

Yeah.

going put may to structurally back being companies that’s the on challenging put reason certainly another be towards that over to through put in before more we’re it the Every forecasted flow so That out. We year. sector a only to and even starting spread said, companies quarter. become and a second of end positive we’ve becomes last various pressure year better We’ve our putting spread or end the out put work for accretive to the think work. more place. would I the spread put seen spreads of has the couple out back is to to pumping and a the cash we spread been plan consider a out attrition

been for opportunity And we to up in as opportunity pricing thing. the to at about that, activity Having moves so moving pumping we when up. to look there’s pricing of that rare talk the continue up through year believe rest pressure has a move the

I XXXX. did the this was think third time of last quarter I

lot spreads we chance years, this year. then So that on I a pricing of the we has up. for move market we don’t a and In while to had get spreads. industry. some tightening few out had couple think it a will the overhang move that equipment to the positive But a we some put it’s in us, the haven’t certainly of numbers. pricing was a to up and as a but the see as for as into we second I quarter, continue lot the And accretive think that in want seen

Taylor Zurcher

to like as and that looks drilling you to you contract that absorption? the guided day. number to remind trend OpEx about activity us expect less is And just revenue get encouraging. that That’s the margin the a take fixed you trend Could continues where cost you higher if better guidance, Okay. you $XX,XXX

Andy Hendricks

we’ll big the think change in the have number. to day don’t rates year. think a that on opportunity But I I of we’ll rigs push the end towards see

force and year going bottom through So improvement margin drilling I per that and we’re this rest the we’re in of see the that why that’s have that, a is the day. to margin projecting for QX cycle

Taylor Zurcher

hear. Good Okay. to Thanks, guys.

Operator

-- from Markets. Waqar you a from Syed sorry, line ATB Capital question further no see I have the I’m of

Waqar Syed

is a both of Andy, mix Thank seeing or drilling the it maybe demand both? you question. E&Ps, that pumping, from, that? characterize it private taking coming you incremental is public Could for where my in and you’re

Andy Hendricks

and the even well. then up out change out that some a It’s kind IOCs nimble, first Yeah. privates and in gate a to U.S. of larger rigs the initially downturn putting landscape refer were the of the more whereas been really discussing in of coming public the put the the some nimble of the But of rigs lot of publics. we what the up some are as of really as

through encouraged into so these the even year this of And by somewhat we’re XXXX. rest and discussions

is this doing were considering that they that think, still the of So, all these it’s classifications investors like forecasts they a lower that that XXXX while initial for we it And it’s that’s view companies, market have transition, on of based working talking the of were up the operators they that, like seems rigs. discipline -- capital or rig made want the various again, within actually price our today. from a than were about customers been have commodity I I mentioned, putting because

our So number -- activity putting they’re reconsidering the for might their year. potentially more and large operators the are better have and throughout are year we that better cash a flows cash discussing projections customers rigs customers, flow of seeing the be what and the levels up towards

Waqar Syed

you was we a of numbers? on as type that working industry say, in there’s type Now, roughly view around those of into your production is into do kind that let’s Based -- XXX think about, keep you you capped overall going pressure -- those numbers been need flat. maintenance discussions, to of production get of crews activity industry and ahead that kind the for rigs or active a there XXXX look pumping to XXX

Andy Hendricks

a WTI to It’s really they’re a interest can even to activity Bakken that is picking and South little to rigs improve what and starting and production. producers bit economic up a the they economics of seeing discussion operators moving up afford where doing where increase we’re is basin-by-basin level Permian increase Texas.

over of Texas from in that. in course, got, discussion. which is the really even East a lot And And North Louisiana, it’s separate you’ve a and that Haynesville then completely So basin-by-basin number gas customers Henry that our to you’ve got from land have because contracts in a Hub or export of area. cases, they’re drilling of for LNG there commodity, hold separate

So a to in really there’s basin-by-basin look it case at have the on economics each one. -- you days and these

Waqar Syed

Just in months, that high any LNG theme about the LNG, on and rigs additional terms the that for had operators locking next, on what’s set months? -- discussions end your with long-term you let’s question of opportunity rig activity -- Have XX up that? what’s XX for the of say,

Andy Hendricks

that. area to long-term overall, the I that And while that, say, operators as for the best lock think necessarily slightly seen is increasing, in up activity that improve characterize I contracts, the economics steady would could is and you haven’t well. year way over

Waqar Syed

right just question Okay. given And super-spec is move fleet, of ready kind that. utilization in final see your then it of Where quite activity going to on go a do the seeing rigs? whether now peers bit, up then your the kind for pricing and rig think end is some super-spec you you be And do of also decent when high increments? up could

Andy Hendricks

Yeah. to But to as us the missing phenomenon too. that’s the we’ve and is operators always a pricing of commodity and you numbers seen out work much. in happen out getting doesn’t towards end tends which is The want I those they good what for historically a super-spec super-spec now. up. creates rigs year item And I’ll could really the is, it rig they of fear where likely this rig not to then the also move rig our have don’t utilization have so matter throw hot right go and for also -- on that start

Waqar Syed

much very the comments. you appreciate Thank Great. and Absolutely.

Operator

the And now Hendricks. I questions no back to turn this time. show Mr. Andy I further at will call

Andy Hendricks

the and first a storms want just Patterson-UTI Sylvia. Thank and navigating for Thanks, did the work winter team especially thank the all thanks in at I for quarter, good great quarter. you. everybody they to the

Operator

participation. for does conference. gentlemen, today’s you again conclude and that Thank Ladies your

You may now all disconnect.