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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
Chase Mulvehill Bank of America
Ian Macpherson Piper Sandler
Scott Gruber Citigroup
Taylor Zurcher Tudor, Pickering, Holt
Keith Mackey RBC Capital Markets
Waqar Syed ATB Capital
Vebs Vaishnav Coker Palmer
Dan Kutz Morgan Stanley
John Daniel Daniel Energy Partners
Call transcript
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Operator

Ladies and gentlemen, thank you for standing by. My name is Brent and I will be your conference operator today. At this time, I would like to welcome everyone to the Patterson-UTI Energy Fourth Quarter 2021 Earnings Conference Call. [Operator Instructions] Thank you. It is now my pleasure to turn today’s call over to Mr. of President Vice Drickamer, Investor Relations. Mike ahead, go sir. Please

Mike Drickamer

could X on Thank plans, company results you differ call or measures. that Energy, quick any Patterson-UTI this in Good today’s made cause GAAP the uncertainties included for include to to no conference in XX. in undertakes forward-looking measures are be release ended it’s opening And in statements And Executive for you, financial and morning. Smith, state as prior company’s behalf are These the results I’d Andy Officer; the update disclosed Hendricks, company’s the remarks. materially. statement. to conference call to to which the for the over Hendricks that or of and website, forward-looking Participating The Andy expectations and conference call year Chief to subject forward-looking December reminder Brent. Financial intentions, non-GAAP or today’s discuss future filings, the company’s the months Andy? Andy company’s publicly to like Chief my statements will obligation made revise required Statements actual The on press now, call financial patenergy.com call. management’s to to conference this predictions in to Officer. call some turn beliefs, issued A reconciliations and statements. pleasure our this welcome risks SEC are

Andy Hendricks

and an for exciting welcome the fourth Patterson-UTI Thanks conference This Patterson-UTI’s quarter is to us Thanks morning for general. joining in industry and Mike. Good call. time today.

to of drilling fair equipment time for since throughout tight. our X believe was has premium the momentum service Tier is the Leading it’s margins as pricing pricing are day this increasing long strong rigs expect it oilfield edge a for outlook increasing. the strong. rates that become I year say been to due We availability

are that, more now discussions you for is day we to and where total rig, base that some $XX,XXX further pumping, technologies to expect or for high is more at in fuel revenue day detail maintenance due more mid-XXs the be The improvement a with growth premium in drilling for opportunities services of both in generate which ancillary activity our rates pressure the related For With further increasing the in majority see on expect is CapEx forecast. cases, and and million. to of And that equipment adjusted we above business. payback quick we contract revenue Smith the Andy to in activity exceeds market. than this begin. will include than day In $XXX per pricing pricing, of conventional readily CapEx when dual on and lack accretive. million in the available by forecast the reactivation CapEx CapEx margin we EBITDA from XXXX, spreads CapEx our provide $XXX our return, to focused our

dividend quarterly flow, for we our With share. I the announce am to are $X.XX to outlook that cash pleased increasing per improved

that our Turning now fourth the of levels the despite am acquisition. first, of businesses tight to our quarter surge of I the rigs for were in XX a able activity by in Pioneer achieve a my fourth quarter the operations, labor rig our proud continue part providing cases the COVID review high including of higher XX U.S. exacerbated customers. drilling, to In and way count were contract of market by recent level rigs in each service was quality quarter-on-quarter, that increased

the tight more growth our in a Pioneer. organic while labor two rig count achieved count growth rig the than integrating our prior was was perspective, in This despite of For the quarters acquisition market organic rig and XX combined.

rig. style the the wellheads growth the rigs evolve, market the The Basin XXX the these is changed receiving We the rigs. hasn’t Tier have contracted what activity at generally hydraulic Furthermore, are that Within in drawworks are higher Operators’ of The than for are super-spec. preferences XXX U.S., in their the the more we the Across upgraded under equipment third contracted. and see operators. ground older are for operators rigs on tight rigs existing believe super-spec have more rig believe Permian super-spec across much on allows We rig include the utilization. rig clearance by our less rig the can in increasing and extra of and we since are the the market in limited there just and we Tier rigs to clearance less floor rig U.S. have a day rigs currently mud drilling the rig floor rigs production X a With currently industry, pump that a capabilities Tier X industry, super-spec walk floor industry, of market be redundancy. underneath for rigs XXX continued requirements while underneath meet to XX% U.S. as XXX the referring X to our fleet, definition of the a is the is in the to premium rate. tighter of room desirable X pad because approximately XXXX. the Tier additional the to to are are and for over looking all which in what that around apparent than super-spec horsepower

comes rigs are to the to of However, number the super-spec will already with be We rig potential current it upgrades rigs a clearance over economically justify when walking is rig a limiting up, believe upgrades our X design the and extensive these become drawworks to systems. we prohibitive we have is the X ground, will higher these upgrades. the of under Tier to the located market in where the on financial we half With floor. structures have rig day require rigs Tier rates needed large these style an advantage drawworks fleet, and older of and operational clear as believe

have we Tier can each. within super-spec for our X $X example, be capabilities XX fleet million upgraded For approximately rigs that

such needed, of than to we from rig X to In ESG also our expect or capability consumption highline to and which to rig Tier both energy costs addition by fuel than the uses alternative or XX%, that demonstrated reduce fleet, our engines rigs our grid, system. dual and operate EcoCell, thereby Within our electric our energy power provide capabilities fuel has more differentiate management the more fleet. proprietary fleet, the today fuel lithium stored power sustainability are we capabilities have help with to natural the when sources hybrid gas-powered as battery emissions. equipped EcoCell XX reducing power

higher sustainability willing during We continue pay sustainability for who in to to continue our customers to our a increase that demand day to plan rate and environmentally-friendly are to XXXX reduce we fleet investing see help fuel costs solutions strong solutions. from emissions and

overall levels pre-pandemic throughout For EcoCell activity instance, to deployed. levels we recovered. continue units our customer while spread recovered not fourth to ended yet we our XXXX, count in strong have pumping, with X adding fully demand, In industry the during pressure quarter, XXXX. fleet by And units EcoCell plan driven

improved. streamlining profitability our has importantly, operations, of our pressure More due pumping and efficiency significantly the to increased

sustainability up profitability pumping edge. of active maximizing dual spread reduce XXth have spread, will costs fourth we leading fuel the reactivate to not are plans do our be spread, spreads pay During pricing improved XXth spread, to reactivated emissions. and X customers XXth quarter, focused in the XX are activate dual And spread, a we fuel fuel and solutions we of XX at expect our spreads. late which overall willing a quarter. is after X spreads this as first to our fuel any for capable, we that When Tier our additional important dual XXXX, has the the on in We Pressure spread. reactivate

fourth I better review for Mpower quarter benefited engines the time operations, management will who increased the pump other we XX% drilling, control is higher trials for quarter, monitor our it commercialization XXXX, which also over in Moving the it With and the resulting differs operations systems, financial activity we from Andy conventional our fuel approximately expect which In field to to increase mud market share. allows will resulting – into of between now and in complete emissions. and third In reduced the EcoStart. idle engine during motors call EcoStart helped from we eliminating first to results technology, during integrated to the system, because with that, service turn our idle start new quarter. the rollout of the fourth Smith, quarter, MWD and our of new Systems, stop pricing. and directional in start consumption continued systems, engine of to impact and pumping stages, quality, new

Andy Smith

Andy. Thanks,

the million for acquisition-related our of drilling equipment, horsepower, directional XXX million share, a the for million for directional million us quarter, of all retirement For write-off The of $X.XX of $XXX a U.S., impairments $XXX in SCR-powered of of million. includes million of the in million non-cash with non-cash includes in frac loss we loss rig pre-tax $X.X U.S. our which included or the on the assets, per XXX,XXX of charges, drilling retirement million other rigs and fleet. charges expenses, a and rigs impairment $XX.X million our rig $XXX approximately million drilling inventory. fourth business. totaling million These of rigs E&P AC-powered drilling reported and include retirement charges non-cash of $XX.X $XXX $XXX leaving the assets $X $XX net sale of $X.X The charges retirements

class having third super-spec rig pump. the fleet our of our super-spec In floor frac million XXX and now clearance consists Tier X.X which U.S. mud X of approximately added now APEX a All are in including rigs, pumping, XXX pressure are horsepower. rigs rigs, under of rigs, the

the are increase EBITDA on each in by $XXX I basis, in higher day a we completion XX, drilling during margin. for average average encouraged than XXXX, providing drilling Energy million will the during $XXX the go At more resulted Andy a for of and under we rate primarily margin drilling rigs Patterson XX% million million rigs rig and for activity day the for and better per increase due of adjusted outlook per expect total during exceed contract day costs. contribution a average December in reactivation forecast to labor term the of more our XX CapEx as per drilling, In Pioneer future of decreased in and quarter from expect in contracts In $X,XXX Based than place day by $XXX through an I on $XXX the contracts revenue term U.S., and an quarter increase operating expected to mentioned, segments. on gross we XXXX. had rig of fourth as adjusted detail operating forecast pricing activity, provide under more million. CapEx XX As our an contracts XX% term the in XXXX U.S., total revenue. in contracts drilling pricing our to first approximately and currently our rigs of and approximately contract U.S.

average per for the day. we intended activity increase average day the million first margin. of and strong from XXX our the majority million XXXX. approximately quarter, market is to by million items total day, of average decrease first is expect In upgrade terms evaluate the gross margin to $XX by incremental customers. $XXX reactivation for of strong CapEx of directly million drill adjusted This increase revenue specialty to market to $XX $XX CapEx approximately expected contract we million. solutions for upgrades, is of activity is Colombia, high-demand CapEx EcoCell generate expect and cost approximately with that tied $XXX appropriate in sustainability rig $XX existing collectively In for of Tier each For CapEx of quarter for the X approximately includes spend $XXX $XXX and in such revenue meet our our for contract first gas with The $X,XXX increasing rig rig in of leading quarter an majority approximately The for levels in we per of to additional growth U.S., rig $XX super-spec the rigs. customer to amount fleet. CapEx The to revenue increase and this as pipe drilling, a remaining expected expect purchase rigs. is XX expected Average rig U.S. in we rigs rent charge that for approximately upgrades day per million in to quarter natural count and with $X.X per another our economics. We engines, million opportunities opportunities demand the to million maintenance

to upgrade these rigs expect upgrades XX to so and paybacks. year. with rates includes our fuel to margin solutions eco-friendly Premium natural financial additional expect maintained during Tier sustainability high approximately rate from We X XX fourth are X this engines. be a day our with pumping be pricing. quarter, to we paybacks pay $XXX rigs alternatives, we spent as are million all be higher adjusted the With to third-party dual from status the In day challenges on results CapEx accretive and margin improved a X to of managed fourth and receiving revenues. efficiency accretive gas will demand expect expectations million $XX.X units Pressure EcoCell strong for customers ranging who these willing of while higher million quarter-on-quarter cost-saving and effectively on margin level gross quarter pressure upgrades we by exceeded achieving for of to better pumping, years. delivery $X quick

$XXX and first impact quarter, quarter. the due full of already of as CapEx. expected approximately pumping weather-related fuel higher additional Pressure for CapEx first first be $XXX is pricing maintenance upgrades some better activated delays, XXXX, approximately delays typical not includes upgrade tied quarter remaining increase the three to quarters an to million. fuel the expect are spread more for when for engines some the approximately margin gross equipment adjusted to spread in are and supplement dual well million engine of CapEx we the than and these market. that X the as XXth beyond to pricing related existing dual we that XXth quarter, garner some with expect for considering any fuel our do experienced fourth The levels for is million which reactivation pressure spread to the dual we fuel Dual to the CapEx is directly quarter in We to additional quarter. activity our Tier spreads. sustainability first to revenue in continues reactivating necessary to pumping reactivation of For the the have current Even $XX

non-cash tools. quarter our margin useful adjusted of of Turning of inventory subsurface included a engineered overall gross reliability of is now no tools tools. to of directional drilling, write-off for $X This inventory. next-generation as million the the acquisition million $X the improve MWD and fourth our These quality longer we to data transition in-house

fourth write-off, expectations. margin gross adjusted our this Excluding exceeded quarter

approximately quarter, approximately to For we of to the an margin gross $XX first adjusted million increase expect million. $X.X with revenues

retooling The expect MWD we of motors of the which million to in majority directional approximately our XXXX, and to For systems. for mud is next-generation invest $XX drilling. CapEx fleet of

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

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

million administrative our invest million related During and expense first On depreciation, Selling, million $XX.X XXXX, consolidated basis, quarter. we quarter. to $XXX which to a approximately is $XX.X general other expected operations and to of for maintenance primarily approximately expect first amortization for approximately CapEx. we segment, expense impairment be expect depletion, the total in is the

rate our be rate cash We close XXXX. and to effective zero for expect both tax tax to

principal due repaid the us XX that on net leaving million approximately we will balance I’ll at fourth the payments Turning with XXXX. approximately term our end our no our during $XXX outstanding that, Hendricks. EBITDA of X.Xx now adjusted of net Andy the be to the by exceed XXXX sheet, $XXX With expectation to expect EBITDA now million, debt $XX until at with quarter, December debt to balance we back million to call trailing turn With XXXX. loan,

Andy Hendricks

Thanks, Andy.

production to would Energy I work all had fourth effectively keynote was parties and integrate and for involved at business all weeks being business. work of the of the done . like efficient my the divest at the accomplished Pioneer team the to This ago, was of successfully XXXX thoughts the of I Oil a the thank Patterson-UTI huge quarter. First, speakers I and amount some industry’s within the was outlook. Services of couple one highly acquire gave honor the on environment Forecast A our drilling that World where macro

If on now. you economic have lead to a upbeat alignment a the quarter various had the to stability. factors multiyear thought more time long since as even we the It’s was of potential call, industry, third I an have been scenario that I’m upbeat

On now this to to either supply where going aside. OPEC+ increasingly now geopolitical side, years, with decade, or surpass to to could over had and growth, projected global last have year, difficult lead U.S. few to levels less the and have all and the over cash next the focused more this the demand And over they oil towards shareholders an interesting easily situation oil cash OPEC+ the than pre-pandemic leads which risks free pricing become control more is may fill E&Ps global will protection returning stability pricing for on it demand gap. U.S.

premium of longer with those cycle multiyear period the drilling tight, in equipment have potential over us making is a contract For we decade. seen has been than and price activity last up the a commodity of services higher where this oilfield sectors for stability

in But technology spend. earnings to the As growth planning a CapEx, a investments CapEx in market, areas CapEx activity, strong multiyear our majority a looks with position our our And the of the some pricing Overall, a is of and that free we are up improved are prospects levels CapEx Patterson-UTI are reactivation flow, of am but improve and and as result, upbeat higher I very higher year-on-year. we payback quick maintenance through progress to in able increase have which with what provide we ensure cycle. addition, will we projecting at a to Patterson-UTI, shareholders returns EBITDA high for of and we to stronger activity, like the stronger be careful return. cash to

over We past a returning to history billion of have decade. the shareholders, over cash long $X

forward will returns continues to pleased exciting to are this the time to cash for looking the that, it’s to are value and work, further we all to provide thank improve call like of efforts We for flow cash and questions. drill like their to options to we’d if continuing better shareholders. we we’d each open raise Again, growth. and our be With at successes the and all able dividend complete wells improve, reasonable financial Brent, now to and hard day. Patterson-UTI, for our time evaluate to an employees

Operator

line America. the Chase Bank [Operator Your Mulvehill with of question from first Instructions] comes of

line Your is open.

Chase Mulvehill

good today. are Hey, you well doing morning. guys Hope

Andy Hendricks

Good morning.

Chase Mulvehill

Andy. Hi, Andy. Hi,

guidance So really I guess question first is XXXX. around for the

You really gave strong some EBITDA guidance.

million. said greater than $XXX You

total hit year Basically, exit rig that mark? to So you kind assumptions macro million onion need peel year? $XXX the need count this get to of to little of of that kind and or does back horizontal count, some guidance where where do million, where could rig the to go a bit if rig we to I ask able be count $XXX the to greater than the does to

Andy Hendricks

that. with Yes, I’ll start

is XXX goes call last So haven’t throughout more businesses between earnings somewhere see the budget. changed XXX think industry in look count that we said in year. to each way for our the we continued and become and rig the we that in we at Andy? XXXX pricing we really in at the the to the do our profitable improving, thesis that we’ve But of

Andy Smith

we’re lot don’t given we’ve would in that rig pretty. to I to even be add terms as with fleet, say we have to projection, of that. our EBITDA Yes. a look across I what you that going

work. to pretty projection isn’t rigs be won’t back put And will our on new to a to rigs we just work. constructive – going it ton we really as think look – I will that based be of

gets showing increase, we’re anywhere we are an the increase really but have showing would not that near that rigs We an available.

Andy Hendricks

each we’re this when And based really continues this is you Yes. – that EBITDA, to profitability giving our it’s quarter. on improve view

Chase Mulvehill

margins would be in And year? we care where us Alright. a you much on gross the thousand how – you daily give day be the to quarter? Okay. the kind Are you of half that can reported can go think in to throughout five higher color we to some and fourth going

Andy Hendricks

leading XX,XXX rigs level. our edge, that with of mentioned that that the earning year equipment earlier, and we’ve contracted day last some or start lesser that to up At over is I And move technology closer are XX,XXX ancillary terms my revenue day. in of rigs a earning were at to per as got sometime some expectation

So expansion we margin why that’s see quarter-on-quarter. and improvement

Andy Smith

of I but and Yes. period a of contract we’ve our longer-term held in it of lot off, held this term deals. we’ve seen you’ve backlog, in signing sort mean off pricing, lower

that come and so now back pricing has rapidly. it’s back And come pretty

You’ll see at higher levels. our to re-rate start those portfolio

Andy Hendricks

on rate call And low we day base was leading-edge we’re the you the base in rate and of XXXX, said rig the February are the for quarter is mid-XXs. third here in the previous the XXs. in telling We now earnings

tight of is an moved appreciation the for don’t market it’s so the been quick. type how rigs for think I And people want. is up there that

Chase Mulvehill

Perfect. Okay.

don’t XXX follow-up, there. work. to Michael rigs. But I and super-spec if I know if out know I the is was to this he’s rigs unrelated that X XXX know I have I going in recall, Tier Mike about there, guys talked I total probably come super-spec done and if comment on think or there So noted is it. you And on

So X what call Tier I’ll it’s Tier obviously, X. and

be X upgraded. than that about just $X but rigs. and rig. $X across be would a do guys, million that day mean, today’s upgraded expensive there about we a costs you industry, the to it Tier we it’s XX XXX rigs? what super-spec year mean, be what’s being obviously look can ton cost million you those heard and less in when to could X for that not about Tier think XXX X got like I you – will that the structure a those means think look that most the And but So talked upgrade for to XXX, When making be out we people from you upgraded I rates, just Tire

Andy Hendricks

we it’s think the in rigs super-spec. XXX Tier about upgraded can So, that U.S. to be X

have You out rigs over drawworks number that large down a got there, of half maybe have design.

so a we’ve the spend to able conversion make XX get up. to got that drawworks that’s be to conversion. And significant rigs capital require In case, that our particular don’t that

it’s $X Tier XX super-spec. about for bring X up each to so And that million to those

in So XXXX. – area an situation we we find get X building up that in operational where interesting since just think advantage we been ourselves we’ve to these we Tier to and because super-spec – drawworks financial days have an design that

Chase Mulvehill

sense. makes I X. to Tier competitors having million mean of spend That one your $X.X get $X.X to million, to

price. the So at that, I’ll Thanks, half can that over. it turn Andy. nice see you do that With to

Andy Hendricks

Thanks.

Andy Smith

Thanks.

Operator

Piper Macpherson Your next question comes of Ian the from line with Sandler.

is open. line Your

Ian Macpherson

good morning, Thanks, gentlemen.

Andy Hendricks

Good morning.

Ian Macpherson

you way I was means in you this day for edge the term about to and leading are contract curious, are to rates or second reprice? as this first they know dilutive accretive trying I contracts are I’m your quarter. quarter year they roll neutral but or just expected the realized into margins quarter? what below think the

Andy Hendricks

is Yes, up. rolling everything

is nothing dilutive. So

Andy Smith

has up. gone backlog If right, term understand Yes. pricing contract I your certainly, the within question,

Ian Macpherson

a QX, guidance? rate above to average total – are rate relative term are the question. that below or rigs earn contract or in fee higher going the to This That’s under your

Andy Hendricks

be is of don’t continue The to lot We rolling of a older have legacy going to contracts push down. we up. that majority those have would everything

Andy Smith

Right.

Ian Macpherson

Okay.

that I’m your you maybe million right upgrade a pricing. $X,XXX I if super-spec based on you it. that day that backwards Tier about rate and super-spec Tier market today’s a $X,XXX between a And Okay. $X to Got million Is $X,XXX X right? Tier X on about the would expect – premium deriving paybacks Would working then to or be super-specs. described X from in $X

Andy Hendricks

might think I it that. higher little even a be than

Ian Macpherson

Okay.

in we highest fleet super-spec want and of I next – extrapolation Really entire your for broadly. question, quickly be your following XX data and upgrading and I $XX,XXX to take But reflective as point of your if Okay. doesn’t repricing mean, you’re year’s next change the just don’t Chase’s the to all fleet too we to up understand best to crazy with a today’s think a per market day your want it? too X year, point that Is spot extrapolate if on months be it’s within almost average you’re rates most next Tier not rates. revenue

Andy Hendricks

not out why You fall think get EBITDA wanted that’s what clarify it to but that just to is and we could think we a and extrapolation going big pricing explain think in we there, what so this certainly with in what year businesses, normally thought we was drilling important in happen we to we’re call all help don’t going the going is be We your has that line that ramp could do. such to call . out XXXX. EBITDA. our been in But to this material

Ian Macpherson

revision, Then we methodically from thinking about be would here is windfall that to dividend just are higher me another expect thanks. one for last if free bump? towards forward? allocated how another incremental there you cash Okay, flow Or

Andy Smith

I’m not sure...

Andy Hendricks

Yes.

In a question. free flow, terms be of cash the is dividend bump it could

upside So free to some we’re look buyback budget that’s we’re meeting. increase because forward, dividend, But special all there the use with to do the what whether back options at going talking on further in free just raising of Board could process. table. XXXX cash, all anything to be went as at and the in options. share going our what through look the getting of And I of dividend cash we when think we’re yesterday’s is dividend, we’re on Yes, going potential to we’re going about

shareholders we to We’re to on highly continue flow. free cash as returning focused cash produce

Ian Macpherson

Andy. you, Thank Understood.

Andy Hendricks

Thanks.

Operator

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

Your line is open.

Scott Gruber

Yes. Good morning.

Andy Smith

Hi, Scott.

Andy Hendricks

Good morning.

Scott Gruber

wanted I line of question. morning. similar Good to start pumping the of kind

likely gross over year? that in kind embedding like think of You course about teens the half. do guys you’re the in margin XQ. fair? Is that It you forecast second trends the high Where XX.X% of seems

Andy Smith

I that’s fair. think

Andy Hendricks

Yes.

margin progression teens. So year the into a the we that continued business high gross in up see throughout in quarter-on-quarter

Scott Gruber

about Got planned fuel incremental of have it type business do what level have incremental then there obviously on the to reactivation, from no it. that see capacity as – need a sideline on And And Do you today? you you would to you upgrade profitability spread? to spare dual said in market? equipment the you were into the likely bring what back would or think reactivations have But another here. if you

Andy Hendricks

Yes.

So, to spread it focus the XX, in our right don’t be spread. now, another activate spin when have We our to we going to And any plan that’s CapEx reactivation improving months some is of profitability agreements plan. were that have on we pushing year months X the where can on the signed and that maybe we ago. spreads X activate pricing or throughout the on

do a business, business well the I this – of becoming need year of And This year etcetera. a pumping the team job. really They and add great to spend, to our that’s profitability. a terms actual don’t three so on maintenance of doing share. all just is market the the of really going is roughly not focus, that’s repair our I’m in think efficient, but this pressure then in fuel. has just quarter improving fantastic CapEx profitability. to increase and be pumping. has a just our quarters you pressure is with costs, growth and at this doing operation continued of the We that this team’s to of dual in interested profitability job done are business maintenance at And the improvement the the And more look site, focus improving When

We’re not share. market chasing

to that business. profitability cash for flow the We’re the and in really improve margin company trying and

But still but In on will we terms to we of five we’re spreads, excess I’m where depends they to that is around we say, to pricing spreads do rest spreads capacity, I’d we because could do year. deep continue we to Based signed on could pricing And simul around we high the going it’s happy have activate. five just they just continue on spreads so. to that agreements think frac, we going of now, the don’t it five for of are activate. have right plans to are pressure, going last year, some move the what at. around

Scott Gruber

teens that’s the And incremental of – appropriately low high and teens, from upgrade or is the kind in that there priced go that here from margins just secured repricing reflect marketplace? dual embedded fuel the the in expectations pricing getting does been to already

Andy Hendricks

tight. I think market is the

months, throughout the and I of I edge market there ago. year. of still up is I easily re-pricing that’s that months agreement of But the that lot leading easily from short high-quality think six also a activated. the rest can said, equipment nine some think signed do available like is And pushes here with, we

Scott Gruber

color the for Thanks Understood. Andy.

Andy Hendricks

Thanks.

Operator

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

open. line Your is

Taylor Zurcher

the are across is mean of rigs for I for U.S.? making capital I that that in the out Thanks Andy. or and guess am broad-based super-spec topic for designs equipment demand Andy about. And seeing in rigs back talked sort basin-specific? rigs. various kind the differentiating I my on Hi basins just equipment circle taking that question. wanted items the designs vogue the of more rigs the well curious, called plays on these these this you just of And more such sort demand of I X and Are are pad to premium there you Tier you

Andy Hendricks

have that’s And the but of with seeing and out a versus a drawworks are pads the and that, with a rig rig. the is and move the all production equipment around around of pad operators the you being you are their we pad capable their has that the a pad enjoy just wellheads recess rig. enjoy deeper up. can and on sellers then the like down around designing that designing and the able And things to certainly, having can drawworks maneuvering the What industry want engineer you of however can the operators the equipment flexibility flexibility dig around rig lay and design moved that they

Taylor Zurcher

going staff easiest Got is as Still imagine the to QX and labor thing and do seems labor success to not issue, the some you the today. labor, I through like it. an A follow-up have on equipment QX. get passing more inflationary are in we it world of into costs

to reactivations if likely XXXX? curious in that’s you just could drilling, so most update of specific given an And where us the your give will contract things on labor all be

Andy Hendricks

to is definitely new Yes, recruit labor some compensation we the industry the harder tight. have as we to means we field in did work It people increases grow. last into continue to year. But significant

XXXX, address. into right to compensation challenges still we need think activity. any I baked numbers QX have of results. in increase And in already was field that kind to But into don’t now, the going are looking forward that we the the we so And

here of for I think in compensation that. there, nothing and things terms taken care individuals be may the we but major have the There field. the some of small already in

I we baked job various items addressing have to consider some we in overall, that that what into a the inflation there, There consumables, going think numbers. got are to we good year. be materials did but last be

Taylor Zurcher

Understood. you the but And has XXXX segment growth drilling, been I will super squeeze one last in for smaller Directional impressive. one. guys,

about So, are I you. tools growth that higher-end products we for think just you some business potential dynamics business? the you and curious for know in you top newer could out. as if And that that have play rolling XXXX different margin line Thank us and that frame trajectory in got

Andy Hendricks

to few efforts in was – steer. and things few The say Yes. a has run in the things navigate at done launched our It some ago about we that fantastic can’t a technology over good team wells over improve to we them. the there I years. the directional tools job enough that in last some years

have where numbers are over onshore days. saw service And directional point we depending share we all has probably the and improved the last to you in quarter reliability, in quality number look improved three each in which drilling the X.X in our increased so that these you for U.S. the XXXX. And market report years, on at,

very And so we position. have strong a

looking not this point. are to share at market We increase

U.S. will there out will we are as and overall directional track with this well. opportunities more business be some some so technology our improve year to And rolling rig think activity. But profitability, we do

how really that business So, is doing. excited about

Taylor Zurcher

a it. lot. Got Thanks

Operator

line of with Mackey the Markets. from RBC Keith comes question Capital next Your

line Your is open.

Keith Mackey

taking and Good questions. for Hi. my thanks morning

in off focus that growing an of start in beyond add into the to incremental maybe to XX pressure the need the and to that fleet get on spread fleet fleets. field? of terms profitability kind is per in the XX, with to EBITDA profitability pumping and wanted what question would back another see you certainly Just margins your business sticking appreciate But and

Andy Hendricks

to I have another It’s get just spreads, think plan. not five don’t Yes. want needs It’s even that do to that don’t radar. I our the have into discussion. just in but to I think don’t we it. need not just said, I we on our Like the activate it. potential market

think tight. And I we sector, profitability everybody. to is back in not think this market I the just us, need get but

are market. And happy pressure so in pumping profitability bring not into we in try more equipment work and on ‘XX to to the

Keith Mackey

Yes. enough. Fair Got it.

super-spec or and just Okay. we as capacity super-spec that. are capacity so regular the Tier pricing side also seeing on of super-spec and come And part X X rig tight certainly Tier the tight, certainly, now, generally the getting capacity on

to all, happen are conversation builds, at if you the we new do not that? to – think on close starts it when still or even So,

Andy Hendricks

That’s not the a not discussion, even even table. on

have that that require just don’t think is there, are rig out overall We there see all. rigs have count is happening. any I at – I the and that Don’t don’t newbuilds. going visibility on to

where are happy with are at. We we

to rigs have continue much. that us that over of XX We number don’t got we cost can very upgrade a

are not just so you to in think the in going a discussion. good I position, And we the are in see That’s not works, newbuilds. and don’t

Keith Mackey

any in or it. groups, or particular one-off? rigs it design clearance. customer trends tends finally requiring or more higher Very whether happen, Got just the pad is just customers it the to good. specific And on Are there

Andy Hendricks

It’s their across and you having want you engineer of around pad the that want more just layout a the operators the – that publics, have they have mean all seen you can seen they change see of board. rig – maneuver And the for flexibility the the to privates I rig pads. less equipment.

– just across it’s board. it’s So, the

Keith Mackey

Perfect. so Alright. Thanks much.

Andy Hendricks

Thanks.

Operator

Capital. with of Your Syed line Waqar next from ATB question is the

open. is line Your

Waqar Syed

how what’s the you taking Andy, were Thank prospects the many for in for question. active in QX? rigs year? And this Colombia

Andy Hendricks

Yes.

So QX. five had we working rigs in

We the expect maybe year, this of majority six. going to likely

of programs standpoint are varying basically rig it’s rigs on. steady per from depending number they So, the and days then month a work the at count on

Waqar Syed

Are in there increases prospects market Colombian any of price the well? as

Andy Hendricks

it. at We are looking

are to for we still that I that these still But customers the that and Colombia happy the new still doing with us are are and are very in programs we and see. think we a profitability the on that’s customers. we right are to But now. with wait market We new get on know to and

Waqar Syed

height being X And What an Okay. clearance, talked then you do is optimal rigs? these the you rig about the for Tier that rig need What issue. clearance?

Andy Hendricks

It’s – on up up. feet to XX the it’s floor when feet you put XX and drawworks rig the

optimum since the XXXX. that building been So, we have design, and rig design that’s

Waqar Syed

just then And question. last

for contracts mentioned XX XXXX. XX that average the XXXX? rig about – are You on there What’s for number

Andy Hendricks

Yes, I that…? have don’t

Andy Smith

that handy. don’t I have

Waqar Syed

Thank had. you I all That’s much. very Okay.

Andy Hendricks

Thanks.

Operator

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

open. is line Your

Vebs Vaishnav

Hey, the good questions. first, guess, land I touching you thank and on my morning side. taking for drilling

rate. $XX,XXX talked day per about revenues So, and $XX,XXX we day around

say in run can services. that services? you Is rigs So, $X,XXX those actually – way provide a maybe it you many you how like on

Andy Hendricks

levels what in back So, doing that number add we up, on revenue the we the $XX,XXX. number as fourth so drill rigs. everything different provide are in rental or ancillary above pipe, it day is large rigs of looking of we of were that have just technology total services per you a quarter and at a got And when we happens at

of are well. connections market for that’s a pleased going. we rental supplier the in real how so with pipe very But premium And as large

Vebs Vaishnav

you think normalized it. us cost, there can maybe And services? to about those way think or a do – costs, guys you about then including help excluding Got operating switching like how daily is daily what either

Andy Hendricks

what mean are Yes. we to per to to do, XX are that day. about in general, back I – gets saying we XX.X going cost it’s in were

Vebs Vaishnav

it. Got

Okay .And pressure if pumping, maybe last in. just on one can I squeeze

fleet. to mid-teens And EBITDA the it we at per least way like if talking into quarter, like get are low I probably EBITDA. around high-teens is or want first you I million to assuming So, $X fleets, back the XX guess

that’s jump. So, a big

– just rolled to If much or pricing? those acquired like terms more the all in of the us help be books in much were to to that, other is needs will up understand that you fleets that how already get levels can just of how to

Andy Hendricks

So, I am just looking at some numbers.

And we see we already what going we do in teens the – think we in So, the the of gross the of in that first towards we end into percent, year. profit quarter. upper are near are the mid-teens are terms already progress to steadily

gross into continues what is, spread but improve. margin So, per backed haven’t EBITDA to adjusted I

Vebs Vaishnav

Alright. much. so you Thank

Operator

next Dan is line Morgan the of Kutz from Stanley. with Your question

Your line open. is

Dan Kutz

morning. Good Thanks. Hi.

that wanted lot reduce you of to I come horsepower, we to back cost that maintenance ask, kind pull that appreciate parts of just wondering active those if So, of into segments? just be maintenance given am an us I did estimate here. on in to the with the you But off opportunities for would any there capacity pressure your equipment a some your rigs have guys retirements of I the pumping CapEx, could from detail and probably kind

Andy Smith

Yes.

rig retiring when sort an those as carry about are as components. we way example, that assets get talk them of we So, carried a the

and it’s useful. rig So, have that necessarily not right. retired, piece no charge, was that marketable on not is been that kit. That on doesn’t rig of mean retired, majority of every every included necessarily component weren’t the necessarily longer would But was rig the that but a component that those in

books, So, our those assets be are useful on forward. still they going will and

Dan Kutz

would be maybe guys open just other open might wanted wanted or would That’s to to be kind there. guys any of a, else if helpful. about I opportunities anything perspective Pioneer And I service side or coin, you wondering some cash of to is you there? guys of, ask to the there bring acquisitions the I from to best assets. ask ask Thanks. – from that Just and rig any guys bolt-on it. did be on kind in anything the for to your wanted Got you you the technology looking or sustainability? I And opportunities just guess, a to other then, invested

Andy Smith

the After we services I part what wanted we take Yes. is Pioneer. acquired are the business, left will of production on first sale what we when with the Pioneer.

nothing So, we there left get that off. rid is want to would

will I the Andy side, bolt-on address that. let acquisition On

Andy Hendricks

Yes.

acquisition with for coming of improved engineering organic out. now, happy are we really right terms our products any sustainability, In projects and and are services that

things management do and on emissions. works for We the control. battery maximize and the management refined the software power engine continue loads We fuel reduce of way be to the that lithium EcoCell and able output savings to to

are say I right So, real on processes, well. just our we going now, focused would organic and that’s

Dan Kutz

color. appreciate Great. lot the I guys. Thanks a

Operator

Your Instructions] John Daniel [Operator line from Energy question next Partners. with comes the of Daniel

open. is line Your

John Daniel

Good What this and we scenario, do? to to Hi “Hey, comes you really I guys. curious But do an you solution.” want I frac electric capacity morning. want know don’t you providing hypothetical Andy, am year. evaluate customer bring back says, you us the a to more of

Andy Hendricks

I not solution. am don’t it. electric interested just think in I

you it’s natural everybody me to want So, electric, says gas. –

engine call electricity, have it natural some just to or to what it source, gas a producing you have kind have is. generator of turbine got you Let’s you have And got have have to got I to we you VFD how you to do. know not And trust to want to It’s me, got cables, house, that do got it. have wiring. something

our VFD in We rig thousands We motors division. control. have with an engineering own electric electrical of business

very return are familiar. electric. just I – on we the see So, I don’t But

John Daniel

enough. Fair

If take better just let’s fence to like Let the what’s do want retrofitting it? five try trailers that’s the those fleets or fuel one of of me versus new doing packager, you buying upgrades. this. other Are parked off X Tier from advantage assume more – you one brand do and you the dual it against the – put

Andy Hendricks

in earlier, are to will a we to with path. and going if package that’s swap at back the engines write-down I for it done new fuel I of number us were sense a as equipment it just today. of dual the XX which are up, In we make high core do But that on would of the a fleet have do just have quality coming go really We a and said hypothetical, equipment, more to and happy we with out go coming that what is it. down we

John Daniel

No, that. a trying of understand I just to am I get things. couple

Andy Hendricks

everybody us But do would – new sense But for engine put just to more economically economically on us, core existing is make a it trailer. different. for a swap and an

John Daniel

am answer I this. And can curious if Okay. you

the to will, now? you X I major that this today in one engine know of engine, going are the budget. some – and if year, time What if you sort look you out As the it’s called you is swaps, mentioned on do lead OEMs of Tier you right

Andy Hendricks

you full some of to are to round equipment, XX, I think do number I that’s things on just out. at. I engine on kits we swap, are that think do months fuel out to is the more going and – where nine we engine we going some – do But the a would range are spread think going are swaps is in all so of six to not the dual months

John Daniel

one business, if Alright. on the that am towards any, – more call of concept, ask The at going EcoCell And here. the what’s the can frac this am to end then point? I you since the application to I

Andy Hendricks

to horsepower drilling power in difference frac would there. and and could with EcoCell took a terms horsepower take and the six But – spread, electric them it total just by the So, requirements consumption. see you we then is minimize the I equivalent rigs turn of power only blenders frac of application that the would in is because helping the of a to five spread if

And large kind that lithium of so an number very be talking do some system. to large of a on about number of would a you EcoCell and batteries electric

John Daniel

I enough. appreciate fair Okay, time. the

Andy Hendricks

Thanks.

Operator

call There time. Andy at turn back this now questions I will Hendricks. over are to Mr. no further the

Andy Hendricks

just for it. thank Patterson-UTI. today thank our would at to again once like everybody and team I dialing Appreciate in

Operator

thank gentlemen, This concludes participation. your and you today’s Ladies for conference call.

disconnect. now You may