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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
Connor Lynagh Morgan Stanley
Don Crist Johnson Rice
Ian Macpherson Piper Sandler
Taylor Zurcher Tudor, Pickering and Holt
John Daniel Daniel Energy Partners
Call transcript
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Operator

Please standby.

We are about to begin. Good morning, ladies and gentlemen, and welcome to the Patterson-UTI Energy First Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode and please be advised that this call is being recorded. After these speakers’ prepared remarks, there will be a question-and-answer session. time, things this to Now Instructions] I’ll over turn Mr. [Operator Vice President, Drickamer, Investor Mike Relations.

Mike Drickamer

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

Andy Hendricks

first illustrates contract day expected our am you day per very during than welcome quarter first are our increasing. Thank conference quickly today. Patterson-UTI’s quarter revenue the I to joining Thanks, morning with within better for quarter rates drilling especially results, and how Mike. Good where call. pleased us

increase driven in in by an $X,XXX day increased in $X,XXX additional adjusted per revenue day. further growth per first average margin we per U.S. day average margin in by second the the quarter quarter the and $X,XXX a expect Our rig of

and this XX,XXX base rigs growth edge For $XX,XXX driven rates strongest leading XXXX equipment day and XXXX. The daily the increasing upper seen and since in at by a X demand ancillary day limited supply including perspective, margin over leading easily the Tier the per readily is edge, is now available we of have for rigs.

some XXXX, With to backlog. which in already drive tight and the for contracts their needs market longer-term customers additional we for expect are increase demand also planning contract

more pumping offset seeing Smith I we the also downtime. the directional the services to business, for significant both pressure financial turn pressure drilling. will quarter. who pumping are are in favorable We obtaining price our terms now first and With standby call results for Andy to over in our will increases that, help related review And customer

Andy Smith

good and Andy, morning. Thanks,

our our pleased first said, with we As results encouraged are Andy outlook. by quarter

pricing to basis. drilling, day activity, the expect costs increased per over total our count the XXXX quarter fourth our for our increasing quarter rigs first as lower day services for nine contract and on and increasing significantly momentum the to In In to We to operating higher expectation for rates a rigs. continue the adjusted $XXX sequentially U.S., XXX due rig by for million. and exceed increased are such, margins we revenues EBITDA

the compared day day, per U.S., for $X.X and average approximately cost at of the in by million during contracts rigs improved million operating first addition the fourth second providing contracts revenue the Colombia, $X,XXX per In to term under currently had ending Based average rig $XX revenue, expect average quarter. future from and to fourth to March per to $XXX and rate to we increased quarter drilling million the the At operating of rig day from XX, $X.X the XXXX, $XXX under day in In quarter. the for contracts contract the fourth increased of rig up million margin quarter decreased quarter, drilling drilling margin million $XXX. contracts increased adjusted in by $XX.X end term U.S. operating for on in approximately for as revenues place gross higher average million an an $X,XXX four term XX, rigs day we by XX of average quarters March per during adjusted XXXX. count, the XX per rigs day $X,XXX rig

that the day by average improved U.S., day. For driven and the million quarter and the of spread a our revenues In per $X,XXX expected better expect margins during the $X.X expect $XX to XXX Colombia, first pumping the is quarter. margin day, Pressure the pressure of we in impact reactivated to pumping, revenues average per fourth the is increase due full quarter generate second quarter to pricing $X,XXX to $XXX first by count increased rig during increase $XX.X second million the use million a revenue million to benefit while adjusted gross we in and per sales of in refund. to $X.X rigs, rig improved million tax quarter revenue margin margin. approximately gross a in In related included and adjusted average which with to to quarter approximately rig grow

stay maintenance to of was margin work $X.X on issues and we impacted during quarter in receipts items Additionally, Adjusted by we any of spare million downtime. approximately parts the increased gross expenses supply due the to ahead critical customer-related as quarter chain items. of incurred

been reactivate XXth the our tight recently now spread XXth components. market of current to expect the increase spread for conditions able quarter. We standby receive second we in has the The late reactivation With chain for tightness, hardware to supply been downtime. due we rates to have delayed the our customer-related

directional to pressure increase drilling margin revenues the million. into gross Directional account, pricing. in to more quarter For the during XX% to million and reactivation quarter expect increased increase activity $XX.X margin quarter improved to million In and the million. pressure pumping expect to increased $XX the gross at the margins we $X.X and drilling, to pumping first second quarter, our improves. we and favorable weather revenues adjusted Taking higher delayed as first to $XXX improve second adjusted spread activity due revenue

For the revenues gross improved adjusted we approximately $X million to of an Revenues operations, quarter increase to and margin which E&P In for million. improved approximately $XX expect adjusted other our our million technology million. second margin businesses. gross the $X.X to with first and quarter, to $XX.X includes rental

Selling, a that impairment total and expect we depreciation, quarter, depletion, be basis, we in our other million quarter. second margin expense to during On to the operations to be similar the the revenues adjusted gross quarter. levels. than price for our in general the the million and expense increase second first in higher $X.X compensation administrative consolidated quarter first the expect late share related quarter $XXX and expected directly expense included approximately amortization to of For

approximately taxes second to expected million. for not be a SG&A XXXX. quarter, did For is expect of the or amount $XX meaningful We expense cash tax

CapEx, For of approximately million. our are forecast $XXX maintaining XXXX we

for We and ahead of lead more we to of heavily expect to parts be spend say half CapEx our times increasing weighted the to as the various try components. year first

to capital With moderate to function the over largely was of some during We flow worked accrued Increasing and quarter now made the our of was timing off a Hendricks. prepaid balance payments the and working on Turning first we revenue the a working flow. expenses. to I’ll capital now as the quarter, call during cash some and expect this increase cash turn of back cash that, drag our to we believe remainder year. large Andy

Andy Hendricks

are people order while the was the tragedy. increase Thanks, moved in haven’t catalyst and that has to recruiting, times I need. this up operators led global last of gas tubulars, used there challenge services demand start while This increasing steels, we rapidly. The able supply has tragic this service for contractors across structural meaningful a is capacity. The And pricing materials completion completions but chain where high hire suffering training happening and companies, pricing where was I regards as as equipment it quality increase increase year, in and and levels. onboarding by climbed the for the and drove oil Andy. fundamental has is want I’ll by reopening where systems of the world can’t is activity we what electrical demand is this and raw that a components event get labor the ramped and such to components. driven to no last for picking imagine fully rigs phone a any economies. rapid increase for not any don’t current in industry is and oil limited has And supply engines, U.S. leading people. demand to drilling day and strong market another higher, recall in drilling we up in the various retain driven our E&P to equipment and world in With is months, region. have prices and the excess being completion drilling people very period by equipment human It for for up recognize discussed challenges, from before, of edge saying the this manufactured what drilling now lead we work, limited they the rates markets. that in Ukraine it the gas to in further quickly. environment the we steel longer are find in six it over longer the market or oil and missed And drilling capacity

similar had conditions XXXX the to such Some from market operators recall the the has as may period past not XXXX. industry in

a then seen I’ve no to recently we had or the step another the were operators in the an may or market. market reasons have point, have said, a for if activity are have rig X commit in don’t up. and few as this At And you super have now, looking pricing tight a been you your an situations challenge increase We a slow taken to available assets are various longer where for frac spec operator you to want. spread, you Tier a for what agreement and find very

industry try its equipment need, but ability respond will to our in customers quickly get in constrained We to industry the as with customer the past. now the to work is services and as always the had them they

will prices they going higher crews commit that keep forward to operators is have Our to and today. have the expectation equipment to

equipment growth. the global to has energy don’t been we to turn With the continues to drilling they Based and lose a we we each seen drill them operators. efforts to Bove, decade. for forward continue for other to It hard employees would current and our continue tight the services likely to contract complete to Market So time increase. be financial like expect that, our exciting and like in Patterson-UTI, market the conditions that for other of wells their to on questions. for best oil field to pricing be now for and continuing all we’d to better over look successes are call for and services to situation, the thank work, remain day. and an

Operator

Hendricks. go at this you, We Stanley. Thank Connor [Operator first to Lynagh Morgan Mr. Instructions] morning

Connor Lynagh

a the simple both Obviously, pumping to on that? pricing even hearing that later recommend you we early Or as your terms of how twenties do guess expect set, we level is of this you. to anecdotes up year? think Thank we’re be your year, day on strong. off, should that pressure drilling leading about it to ability something just edge numbers if think at leading your in are that price just contract I to looking you to very in roll that and book $XX,XXX that next in you high as to see edge, the would sort

Andy Hendricks

a I day. think rig in per still revenue average to upside we and what lot there’s our margin have of

a As move are number of to place have upward. in that we but work reprice continue they’re as currently things in been through that agreements to that, a have while, place for we going just

Connor Lynagh

sort get at we price think that I lower? guidance of sort high indicative I’m to So is it on most you of too the that market risk is directional just to what trying it, some point rig best of should your that. and trying probably clear, but rigs be put fine here. the a in XXs or do appreciate can of to just

Andy Hendricks

Yes.

increase this spec we’re I upgrades XXX as in is super working of that’ll do X fleet Tier day this for our think, rates edge rigs. and those Today, leading year. we

leading it’s move see year. on I base XX,XXX so, move XXs edge when and pricing in, hard still that in with room all it’s for it’ll lot to but the timing up the or a in everything there’s And into continuing extend to the to put XXXX. the to up of to going It’s rate over move upper next

Connor Lynagh

for more do needs wages Okay. Got obviously, price to, on potentially lot for that see, in it. be higher labor see to addressed and of side supply industry chain general a things a And issue things, the, to labor the going you it’s of then either or included. you potential or have move is Do can’t yourselves with to attract in to the view order you structural price? do labor, a raise of

Andy Hendricks

have the maybe still time, some large at to increases and increases extent we And visibility least on recruiting on need we’re have and we current since forward, been year, visibility. We last a wage not those from to at gave baked our numbers that into we’re are, year, don’t QX raise did we But but some still our this at small going wages results. time, where strong last and this hiring.

Connor Lynagh

it much. All right. Thanks very I’ll back. turn

Operator

go Thank at Crist you. now to We Johnson next Don Rice.

Don Crist

Good How you morning, all gentlemen. this morning? are

Andy Hendricks

Good. Good morning.

Don Crist

have do count is moved is or I over as rig may the today. range, lot the here fast all at at it that end? all count the past the think, all in range scratched of frictional thrown a know or market? where think heads rig XXX so that kind has. from it think is in kind the rig last our out Are Obviously, tight gets market of you as year I end. of year still count rig quarter But the very to rig sticking be as the you us XXX-ish you And

Andy Hendricks

the the would end XXX. rig year numbers depends the to saying by XXX it in I go the for the So industry I was think that market. overall somewhat that you’re on at how last couple rig the looking of market to quarters

on I think that. I was wrong

I think be going it’s higher. to

rigs end I count total the think in it’s the going to be year. above the at XXX of

we’re think as rigs continued year. going this of to I work activation see through we

is market right now. the So just strong that

Don Crist

rigs any back significant a impediment, drill that casing amount saying spec impede there the super XX other a pipe out coming rigs but market market obviously impediments or other And into are coming of there other perspective a Okay. an could any to are the from or today? rigs

Andy Hendricks

Yes.

operators place count et going talk over their up that that in casing have have I when programs rig XXX, order includes cetera. So about that on

number, So I don’t think impeded. that is

it’s times. constraints are I on for longer think, about us – pipe buying planning and casing lead for operators drill whether there buying other just components. around But

increasing side. their working count So need they’ve the our with to in operators that the be have the the lined the visibility up and things we need on side, we up tells in on we’ll we’re that they on things already us line rig discussions

Don Crist

higher Okay. the roll duration And to average What just at to of this if prices I your one contract sneak contracts it is your more could now are in the majority end and going here. year?

Andy Hendricks

But our prices, all duration over question. going been higher shorter. – no work backwards of range. have increasing year we’ve start we we’re that month is going the the extend six tight be work that contracts rates signing we’ll certain are as and to year. market that more to majority contracts short the last We’ve in The to signed roll yes, are to through the signed high backlog So, has been that contracts day that just

Don Crist

turn Okay. for back. I’ll the it Thanks answers.

Andy Hendricks

Thanks. Sure.

Operator

now Ian Sandler. next to go We you. Thank at Piper Macpherson

Ian Macpherson

Andrew. morning, Good and Thanks. Andy

Andy Hendricks

Good morning.

Ian Macpherson

a frac do of and will in the than seen think So demonstrated and year, an beyond rigs activity hybrid rigs – of year-to-date. this more second capacity and tight. you the ratio over spreads year? see know recovering a be has little that maybe into and everything there’s we’ve ratio as we half this how more of unique been frac Do I in perspective the you’ve obviously half got ability the driller being back balance constrained that Maybe the of trend you is unfolding XXXX? but year see in pumper,

Andy Hendricks

Yes.

data to spread at our started into saw count data if look spread you about look move and rig months count, start and you before to count really you count back six rig So specifically at our XXXX, up the move on up. our

up. that the had ups. and operators saw we after count still number And reactivating of spreads a the XXXX. so through frac It then about start to in go downturn following were after And rig count we up existed XXXX ramp of ramp spread six months to the that

are rigs this you’re of think the normal number back numbers, I So things to while level year’s a seeing front of in where that have in spreads. we normalizing a

efficiency improved, efficiency is even improved. is frac And so yes, but also drilling though

So the back the in in of we’ve front I the think get had that levels. But think rigs efficiencies number improvements, same I had in of we because we’ve back those spreads pre-XXXX, to to we’ll both. get normal past

out and drill I wells. new duck through we’re think the has essentially worked having to

Ian Macpherson

Yes.

the options go to go is, new super running So we’re have for with rigs expensive if much spec have points. I and you question to get to to we can at accepting lower rig of is Where other upgraded first or are count reactivations or combination do demand gets you that closer whatever, SCR go customers what rigs, that do the to or high. I getting price we’ll for you builds, from those X guess of lower going too when rigs to probably think point? spec we’ll have three – think the a we’re get then substantial we more have to likely rigs out more Andy to to on be upgrades Tier happens had

Andy Hendricks

options. scratch First, I’m going your to of one

the spec. on upgraded be to are not rigs quality super rigs There’s that table. Tier X spec number is good of can and rigs super build new sufficient that So a

happen. So still that can

when budget. new dozen And call look we and got another Tier at X can upgrades or not two at what spec. that low XX them budget got builds. we’re to that our relatively rigs this get plan considering year, we’ve doing super the CapEx even So we’re our you to We’ve about in upgraded be thinking

to rigs to think the are do ability some you There’s have those that, go of do But next still to need back have that. And upgrades, two we take rig get significant But pointed if because going So work. can wait can well, that. does the I It existing done. see the without to you want if take out the there that you as upgrade. you’ll you’re work time. in times to well, just and as a lead you components today back exists need something we go months, that till to a to that get

Ian Macpherson

Okay, great. Thank you.

Andy Hendricks

Thanks.

Operator

We Tudor, you. now Zurcher at go Holt. next and Pickering Thank to Taylor

Taylor Zurcher

of thanks you are When I question. you My XXs, to extending just and you low respect about years lock durations, contract Hey, for we there XXs, in extending the for EMP pulse about I durations? contracts term the taking the a from on talk about come or talked And that’s longer happened momentum one, appetite customer guess suddenly operators talk high when the pricing talking little bit perspective mean, durations, of first an terms today moving in I’m likely multi pretty my about XX-month forward. to the is kind with curious here.

Andy Hendricks

tried so contracts getting of market. pulse can I But you evolving, to lock I protect to conversations for longer is number this to stated, about operators as think, again. while call think sorry, like, it’s programs just think the among and back, the operator, about And it’s back that has market is and do of to or have they as themselves. explain, I still what they really talk when they want market’s moving This up periods, in go appetite, especially large used they’re still we that that fast. a us with asset operators moved there had the gone they we’ve been

but some that’s market those what’s in happening And the so today. with discussions been operators, have tough

Taylor Zurcher

a then And it. drilling. Got on follow-up contract

don’t the for least correctly if type quarter on basically I you’re per reactivation OpEx non the cost a optically. $XX,XXX day QX day math much I So and mid doing at at a was guidance, you where mean,

somewhere these So all just day new moving the the rig at curious mid forward. dynamics I’m with at $XX,XXX play, level the inflationary type if in normalized is OpEx range

Andy Hendricks

et depend going XX,XXX on we’re working but cost it’s it’s cetera, the day. to think XX,XXX think a and around activations, that on or the with to we I rigs number depend quarter of fixed coverage,

Taylor Zurcher

one And here last one point of the it. balance me Got to to sent today, at there for some imagine pricing, not mark tight at already it’ll is get more be it’s the least if likely XXXX. there I pumping, for to pretty you pressure spread. reactivating consider a

latest and it for So the XX, XX Patterson? spread to comes and when reactivating greatest for there curious beyond

Andy Hendricks

Yes.

this We’re at not even discussing reactivations point.

to to job today. a working doing We’re pricing. and in leading closer with that’s things very focused great terms our focus edge the team’s get the And at customers of our

Taylor Zurcher

for answers. Thanks the Understood.

Andy Hendricks

Thanks.

Operator

[Operator you. We Daniel Instructions] Thank Energy go to Partners. next at John now Daniel

John Daniel

for quick just for ones what’s drill Thanks on pipes? Andy, me. time the you, Two including today lead

Andy Hendricks

around time a high torque is running pipe shoulder So on lead year, connections. would say for double I drill

And were we November delivery November. drill pipe this ordering so for in

a So last staying times we it’s adjusting year And our matter and just lead that. orders started for of ahead.

John Daniel

to tight you. a reason XXXX, who everything is that slow XXXX, is Okay. talking the second today, you’re or step the just in forward is, we try one you to have to reactivity how just grind change higher? look then to in Thank customers a given suspect as And increase see do it

Andy Hendricks

programs led is worked I have there. in especially is we been large of really into you’re think count increase the by XXXX some kick XXXX their with rig what XXXX rig some to the counts of privates going privates and terms in larger And with of publics and increases, programs. see

predict are I in based of pace terms kind XXXX chart and somewhat see you going on on think we’re what to to just that’s that it’s hard to so, like but having. step in all, of of look a exactly going And up discussions a

John Daniel

much. very you Thank Okay.

Operator

further we you. Mr. this Thank Hendricks, no questions have appears And it morning.

any to conference turn I’ll for the you comments. So closing back

Andy Hendricks

know at it’s we of thanks We of again, appreciate day fine. a that team Patterson-UTI That’s everybody and Thanks. quarter. questions busy And for a number our a the appreciate for calls dialed in Bove. and today. Thanks, great all to

Operator

Thank ladies thank great that and us today’s you so like gentlemen, Energy first call. all and you earnings XXXX wish Good you. We’d much a day. bye. Patterson-UTI joining all And conference quarter conclude to will for