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Patterson-UTI Energy (PTEN)

Participants
James Drickamer VP, IR
Andy Hendricks President, CEO & Director
Andrew Smith EVP & CFO
Michael Sabella Bank of America Merrill Lynch
Vaibhav Vaishnav Coker & Palmer
John Daniel Daniel Energy
Scott Levine Bloomberg Intelligence
Call transcript
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Operator

Good day. Thank you for standing by and welcome to the Patterson-UTI Energy Second Quarter 2021 Earnings Conference Call. [Operator Instructions]. I would now like to hand the call over to your host, Mike Drickamer, Vice President of Investor Relations. Please go ahead.

James Drickamer

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

Andy? the addition, to press turn find you for of information and release statements over to my call In the some included And end remarks. the issued for important cautionary prior now call. opening this at to conference stockholders it's will company's pleasure Hendricks Andy

Andy Hendricks

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

today. join can are us pleased you that We

since the our the completion beginning on of quarter, pricing. Based we remainder has has into second by last adjusted rig In For the X about of from expect with the of drilling Contract increasing activity early quarter, and and increased revenues XXXX, and this rigs. increased lows customers count second conversations increasing activity the as EBITDA Drilling, steadily year improved sequentially and summer.

believe these the power to technologies, through lower emissions increasing we addition of sources, leadership have interest the differentiator. a alternative use in continue our we position, where see we increase industry, in and In to a overall customer reducing emissions are

the by intends international our activity next within notified be of the for recently we quarter X performance expectations in rigs accretive major the were we I'm natural took coverage with powered a are rigs. example, These This of of spreads over that customers quarter. activated as cost adjusted help met to improve we will powered fixed quarter. going to spreads while end will year. late X utility these opportunities our X Pressure very expected Pumping, activating E&P our this costs an major program multiple reactivation and spreads average our their be EBITDA and of forward. incurring the spread pleased high-line drilling our As gas use at increasing customer a combination In they to plans, accelerate reactivation advantage per to margin our we with and team our and the also

we opportunities to continue We fourth economically such, early see spread the additional in spreads, to as expect reactivate and quarter. reactivate another to

also has a has greater and improve team pricing margins. great done costs job controlling operational achieved successfully Pumping through Pressure in efficiency higher Our to

a meaningful third pricing, improved improvement the margins. With our expect Pumping Pressure we quarter in

for Tier continue X our capital to with fuel. trailers disciplined plan approach with technologies we pump spending, consistent existing well emissions increasing lower the on to As upgrade and demand to dual engines to

Mercury experience electric the also performing and flexibility X premium the have and reality, us share. for gaining technology very which, fracs, Measurement Tier reliability gain and dual frac has While especially burn in Patterson-UTI. believe few In We simul operational fuel in in of continue system the one to over generates the continue offers spreads, both we completed believe customer are Permian. gas. Drilling, to our allowed of our market have impact Northeast simul this We motors directional I drilling natural the Drilling economics started many companies for We've to Directional and better to and advantages, savings believe also that and fracs performance considerable

quarter, of provided the rigs turn call that, number but Smith, we a by who will second margins the Andy saw which to XX% With costs services, reactivation review second increase revenues, we drilling quarter. the led in the will financial directional were better-than-expected results higher for over During the the we grew. to I impacted which on now as

Andrew Smith

and morning. good Andy, Thanks,

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

forward. at rate operating currently million general challenge, labor place, up of XX the contracts market, an this expect contracts average as quarter recur averaged was with We XXXX. oilfield margin industry, per low-cost June complexity the standby, into on higher first rigs quarter that levels second to increasing in the average due of I the sales improved quarter activity for day see In XXXX, our attracting starting with for rig combined are rig the rigs is rig to and not Before did June XX third a of on quarter we providing in quarter Drilling, the rigs expenses, the our rig going segments, term tax rigs equipment. the term term $X,XXX. cost X premium consecutive operating segments. under increasing challenge during an cost from and quarter. second XX, get use quarters across fewer This Average increased employees the drilling third tightness combined believe contracts the completion Within in support segments. for per and inflation drilling future the day we the and operating our rigs in Average the comment, quarter, improving contracts of to due first and inflation, $XXX refund for the reactivating quarter. second increasing pricing relative primarily of overall in to the had in XX the drilling during ending rigs XX, higher to services, Contract will increasing XX At Based count demand revenue. during first day average general reactivation approximately we under

For of spreads extra improve gross spread, expect quarter as to the XX million. second increased rigs. margin associated XX Pressure ending Drilling improved costs profit we rig revenues Pumping Pumping, Pumping June. of expected during averaged $XX of to X at rigs, with active to X we quarter, In flat Contract to average second margin rig day to is expected during an third Even is approximately be month Pressure the second reactivation gross million. $XXX $X.X quarter, spreads Pressure to for quarter the count the the level. Average XX% the our after sequentially expectation to improve the of the approximately our ahead spreads reactivated X million for almost we quarter. with per

to $XXX average third $XX XX% the margin expect Pumping by more and million is are we quarter, Pressure active X revenues improve expected quarter to to than For million. expected to spreads. approximately gross approximately second from levels be

provided during the $XX.X by $XX.X Drilling. number increased quarter. rigs from the Turning XX% now second the to million Directional Revenues increased the which second XX% quarter, of directional first as we in on for million quarter services drilling to

$X.X reactivation slightly with increase million. for the the in gross second margin However, costs, to quarter decreased

levels $XX quarter, the expect XX% from higher to is to approximately Gross quarter increasing sequentially with third be profit activity further benefit million. for expected $X revenues we third to million. For the

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

and a quarterly to including with of expense items tax and CapEx well XXXX, Based basis including For consists of generate drill total a Selling, $XXX back quarter. about for approximately of approximately $XX as that Drilling, ESG-related September high-demand XX, CapEx the $XXX XXXX be into expense record margin specialty our higher as CapEx Hendricks. million. for million as for budget and expected $XX conversations per are year XXXX. our maintenance we $X.X Andy forecast a Contract to on and Directional for share the will cash in for expect million, depletion, amortization million due Pumping XXXX, with activity corporate. quarter, revenue, third million. call rate increase Drilling, XX%. revenues quarter, million pipe customers million to paying approximately dividend full in to activity. of an the $XXX investments primarily X, Also, technologies general the we On on general now we Pressure and With increasing ancillary holders for turn improve other third to be $XX of effective increasing we levels million of we that, gross expect increasing I'll The September expect $X.XX $XX to And of the XXXX, impairment administrative is to consolidated depreciation, third

Andy Hendricks

since into demand we level completions. we've this Thanks, in of I'm the and are Andy. E&P It's had been a for drilling visibility increase and future seeing encouraged services that very continuing by in our quarters, while

and our the X continues by months, efficiency level as also XXXX. was performance at well ESG-related commodities last by driven of this it driven demand as into site While the primarily of this I ranges trading is expect technologies. well Patterson-UTI's over high least overall

For activity this our and we've increasing as discussed, pricing in both increasing means Patterson-UTI, businesses.

and and Services. in in Subject and on update the to and we forward our efficient their of valuable efforts Colombia approval half close operations for of thank approvals, that, stronger employees addition quarter. business. will to the general, Felita, provide expect industry like Pioneer the Services we Pioneer experienced successes assets year. people, we a States to second all me closing a our look short fourth in high-quality of regulatory work, in stockholders, and of a continue both the would be customary United will let acquisition like open conditions our to this call Finally, to to the our Pioneer's acquisition now and to Energy Energy With hard pending questions. we would

Operator

from your with of And America. [Operator Bank Instructions]. comes of the Mike line Sabella question first

Michael Sabella

through Andy, an think from economics you Tier of us mentioned in is frac of upgrades. idea, today all I the frac announced fuel. the terms guess, So of today. And that, CapEx give capacity on fleet and maybe fleets you have any dual we that equipment Maybe bump we are those just the you on today on if us could see then what where upgraded talk to some as about upgrades of you frac X next-gen kind

Andy Hendricks

is fuel. older engines X doing Tier engines Yes. we're dual What new actually from to changing the we're the models of

year this a ago to going year we're with continue engine into to swap this rest We started do it's ready the in and CapEx few trailer. full not a next but have spread invest fuel, on ready as Tier of to for in CapEx change this I for for it's even solution another adding to the and the dual of on So mean get horsepower, it's some the a next to see compared months relatively QX existing without to an X is technology upgrade amount -- into a there, the there's overall year. this horsepower to cost-effective company. small equipment market. we But level our very the CapEx certainly some This

Michael Sabella

just, the from it's year, -- then And is by a as like private can public E&Ps. customer you DUC on little inventory rig of demand coming this where through Obviously, out? further dominated describe by was I has exhausted. guess, demand just Understood. Maybe E&Ps, looks been side. that been look talk largely you the The us incremental think kind rig held rig we maybe interest the

that's like dominated So way, assessment? And Patterson means agree seems talk rigs if the kind back guess, for come well. through it the it there, with what have more out for a it relative E&Ps by E&Ps. market to plays that public that as private setup would that is of you, I to just been

Andy Hendricks

going Yes. international off into half you it's and mean large downturn last XXXX, are it's it's But we add was quicker. in as second year that I that E&Ps. Certainly, of year, look publics. It's seeing broad. privates really private midsized came rigs, this to when the the into moved it we're what

seeing that broad-based are happening uptake going just more we're the So of in rigs into a early with 'XX. discussions

Operator

Vaibhav -- Your & next Coker Palmer. from question come Vaibhav Coker from the line of Vaishnav

Vaibhav Vaishnav

market, talk I in can could better about get if think where the guess versus actually today Pumping, So ESG-friendly fleet we conventional for we like pricing Pressure us help we you fleets? are about

Andy Hendricks

the the up for I out mean, that and of on in savings. that dual customer believe Tier better But earlier, lot pricing there's by We trailers offering existing a good Yes. I with changing particular pump for X -- we it that also more only but can us. work. on engines offers economics not as can terms margins and benefits cost work, get also fuel pick of mentioned

Vaibhav Vaishnav

land Switching Okay. drilling. to

not move providing we to do like in to versus are cycles? rig. into here number, think on the go back trying change how you As you drilling more prior margins the generally, a XXXX, I'm Obviously, just pin about one what from services now same the XXXX, land down could saw we you where is but for

just in So helpful. putting be that would context

Andy Hendricks

got and still decisions a the rigs they next So that evolving I we just are the not haven't it's that and this going in be across time, running customers of half want. rigs while. long in by for they've 'XX, we've And of way already concern available. that second I this actually that some year discussions they Like process is had And late been into some on my interesting. operators, until may up or we're this quite level budget see working mentioned, early through year because not that visibility of make their the to even this used of year our putting rigs are to

that, going some there. best a and the about we And now And of super-spec have out that a think lot little I bit you early going want to when have. situation in out. best-performing But margins. to rigs pricing, to they're the high-spec so slower a of rigs. for operators they think rigs that to not this a space that they're on big when are fear on missing in all into and see scramble push more you that's that's that while budget the a land that's of in of have seen to super-spec going a going with been move since a more happening be cycles, their we as you're necessarily I in the talk too. big push cycle, And 'XX It's there's rigs XXXX And a granted, have of really the we've

they hear get do they slower have that kind cycles. that I bit the larger higher are and of pay decide with we to the contractor got want, some other in to back rigs those when into evolves a it all may drive of the get past what now seen into to want they've And so And get that to part drilling think the And drive work that add for can't they we've and to think that as margins little you'll operators possibility pricing. some the specs that we 'XX is more of that XXXX. these and upgrades of of discussions I

Vaibhav Vaishnav

your based about So conversations, of can this, customer see fair me rig prices fourth I'm Is saying? maybe the as what you're more typically opposed hearing correct hearing is I'm to misinterpreting XQ. in in we when on what think that commodity is we -- are, where really I'm interpretation but decline, if increases like given really what a quarter, actually,

Andy Hendricks

think year. I it quarter decline and take throw fourth out this you the can window

at are If where oil decline. above natural $X, not trading, you considering barrel prices a WTI above $XX look in a fourth we're gas quarter commodity

Operator

[Operator Instructions].

Your Daniel is line of John Energy. from the next with Daniel question

John Daniel

the they're -- about trying be see they and frame like If asking suggest as rigs us. -- obviously, a rigs. but in you can't, And asking you would fine. just going huge. you that think I'm multiple privates name could today? the X, all if when I we reason everything changes it is can't to happen? the you the like curious and the company. not X just to picking rigs talked up we And mean international large guys would as maybe these that, what percentage from to of I the being guess change going typically but adding X maybe that's X, versus are significantly. are for I'm to one large hazard disciplined, presumably thus, Just where you E&P I'm relative incremental for a know E&P, I'm

thoughts. your just So

Andy Hendricks

So that their I -- to share but is has may likely grow may programs we're within that large be think to a that's this existing that because drilling drilling be situation not their us specific a program somewhat major E&P a may this very growing program. drilling

been performance because So discipline ramp-up efficiency offering a I see emissions-related part as the job, think of because last of there's of and great and or relative share equation still I'm calling out of program. particular growing technology has a few team we we've well. not with technology, years, discipline But there. over particular big that lack their ESG our and done that this ourselves in operator and are a the the

John Daniel

Okay. Fair enough.

the to On that the right, to just X Is side, you're X? today. want running I've got frac make sure I going sequencing right,

Andy Hendricks

Correct. X going to X.

John Daniel

you... And did then

Andy Hendricks

X. just late We're And -- early QX. We then XX be QX, X. likely Could just going we're but QX. number to early at we finished activated

John Daniel

it. this, number would And At investment? of fleet, the the if just what given X -- roughly year-end, Got you be apologize. Tier DGB split year-end. said within Okay. The I say, let's your

Andy Hendricks

have of a we our things in fleet. number So different

X. X dual we We have have Tier Tier fuel,

dual tier dual X up for have changing year fuel fuel X spread then end out fuel of be by more also engines. spread and to this next We or second up We'll we'll the of a of a be with -- Tier full Tier dual second X set year. Tier

Operator

Bloomberg. from of the Levine line Scott question next is with Your

Scott Levine

heard I expected So sense comments, for for I think out about quarter, you your DUCs of said to But pricing and your competitors get we year. I drop hold of inventory your yesterday. you back your considerably I If prepared pumping pressure wanted net heard of for and of correctly the recently. drilling the activity outlook one daily increasing, in that's both seen your can to and see a this flat if in margins levels are of average what we've the third rig half pretty

So accelerates, Pumping? a from bit behind Just point is assume your the but activity it the it from curious net lags of drilling are pace different the vantage a seeing pricing fair maybe and net pricing perspective? you Or there. that Pressure recovery to in

Andy Hendricks

Yes.

inflation also is but increase HX view XXXX. into steady seeing in we're count some had well. seeing cost our and throughout increase we've a in We're also So an rig pricing, as

the expect after that. then margins flat keeping improve cost we margins the is quarter-on-quarter, to So but inflation

Scott Levine

on it situation? And the Or pumping trend far you can side, is is the any different? as is different similar a Or it magnitude as roughly say?

Andy Hendricks

say I'd of number better bottom. margins mixture challenging increasing And coming improving then we we're a pumping pricing spreads cost as the as is and coverage we're off increase a by well. operating, more of fixed

Operator

There this time. no Instructions]. questions other at [Operator are

Andy Hendricks

All Thanks. we morning, right. for call thank and into have quarter. a Well, our everybody dialing good this earnings

Operator

This conference today's call. concludes

You disconnect. may now