Patterson-UTI Energy(PTEN) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total reported revenue for Q2 2024 was $1.348 billion, with a net income attributable to common shareholders of $11 million or $0.03 per share, which included $11 million in merger and integration expenses [22][23] - Free cash flow for the first half of the year was $206 million, with $164 million returned to shareholders, including an $0.08 per share dividend and $132 million used to repurchase 12 million shares [23][51] - Adjusted EBITDA for the quarter totaled $324 million, excluding merger and integration expenses [50] Business Line Data and Key Metrics Changes - In the Drilling Services segment, Q2 revenue was $440 million, with an adjusted gross profit of $179 million. The average rig revenue per day was $36,430, and the average adjusted rig gross profit per day was $16,190, showing a slight increase from the prior quarter [24] - Completion Services segment revenue totaled $805 million with an adjusted gross profit of $152 million [77] - Drilling Products segment revenue was $86 million, down 4% sequentially, with an adjusted gross profit of $40 million [27] Market Data and Key Metrics Changes - Approximately 80% of the active fleets are capable of being powered by natural gas, with a strong rollout of electric frac equipment [19] - International revenues are expected to be up mid-teens percent year-over-year, particularly in Saudi Arabia [48] - The company began Q3 operating 111 rigs and is currently operating 107 rigs, with expectations for a modest improvement in rig count as larger customers prepare for 2025 [45] Company Strategy and Development Direction - The company is focused on a capital-efficient operating strategy to maximize returns through the cycle and is excited about growth opportunities in integrated drilling and completion offerings [4][10] - There is a strong emphasis on power services, with discussions around increasing demand for power in the oil and gas industry and other sectors [11][39] - The company aims to leverage its unique operational footprint and integrated service offerings to enhance competitive positioning and drive growth [31][49] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the long-term prospects for the industry, anticipating a modest recovery in U.S. shale activity in 2025 with steady oil markets and growth in natural gas markets [44] - The company remains disciplined in capital deployment and expects to generate strong free cash flow in the second half of the year [44][80] - Management noted that while the overall market is steady, they are selectively choosing projects to protect pricing and margins [68][95] Other Important Information - The company has committed to returning at least $400 million to shareholders in 2024, evaluating the best use for the remainder of the free cash flow [43][56] - The company closed Q2 with no amounts drawn on its $615 million revolving credit facility and $75 million in cash on hand [80] Q&A Session Summary Question: What is the magnitude of the power services business today? - The power services business is a significant revenue generator, exceeding $100 million, and is expected to grow as the company expands its electric frac fleets and enters new markets like data centers [61][85] Question: How is the performance of electric fleets compared to dual fuel fleets? - Initial reactions to electric fleets have been positive, with efficiencies observed, but the industry is expected to continue relying on dual fuel for the foreseeable future [63] Question: Can you elaborate on the integrated drilling and completion offering? - The integrated offering aims to provide services across the spectrum to improve efficiency and productivity, with a focus on sharing value with E&P customers rather than simply bundling services [92][94] Question: What are the expectations for pricing and competition in the market? - Pricing is stabilizing, but there is pressure from older diesel assets. The company is not competing at lower pricing levels and is focused on maintaining stable pricing for its services [133]