Patterson-UTI Energy(US:PTEN)2023-04-27 18:54Financial Data and Key Metrics Changes - The company reported a net income of $99.7 million or $0.46 per share for the first quarter [32] - Adjusted EBITDA improved to $256 million for the first quarter from $239 million in the fourth quarter of 2022 [32] - Average adjusted rig margin per day in the U.S. increased by $2,430 to $15,880, driven by higher average rig revenue per day [32] Business Line Data and Key Metrics Changes - In contract drilling, revenues from Colombia were $10.6 million with an adjusted gross margin of $2.1 million for the first quarter [33] - Pressure pumping revenues were $293 million with an adjusted gross margin of $73.2 million, expected to decline to approximately $277 million with a gross margin of $61 million in the second quarter due to increased white space in the calendar [30][32] - Directional drilling revenues were $56.3 million with an adjusted gross margin of $8.2 million, expected to increase by approximately $1 million in the second quarter [34] Market Data and Key Metrics Changes - The overall rig count has declined, primarily affecting lower-spec rigs, while demand for Tier 1 super-spec rigs remains strong [17][18] - The company expects a modest reduction in rig count due to current natural gas prices but anticipates an increase in the second half of the year driven by activity in oil basins [21][22] Company Strategy and Development Direction - The company aims to capitalize on its position as a leading provider of Tier 1 super-spec rigs, focusing on profitability and cash flow over activity levels [19][40] - The strategy includes maintaining capital discipline and prioritizing cash flow and margin over activity levels, with a target to return 50% of free cash flow to shareholders [41] - The company plans to continue upgrading rigs to dual fuel capabilities, with expectations to have 9 out of 12 frac spreads dual fuel capable by the end of the year [23][76] Management's Comments on Operating Environment and Future Outlook - Management noted a transitory pause in activity due to softness in natural gas prices but expects stability in rig counts for Tier 1 super-spec rigs [17][21] - The company anticipates that improving market fundamentals for oil will positively impact drilling activity levels, despite near-term challenges in natural gas basins [19][22] - Management expressed confidence in the ability to improve drilling economics through operational excellence and technology integration [20][39] Other Important Information - The company repurchased 5.6 million shares for $73.6 million and $9 million of long-term debt for $7.8 million, indicating a strong belief in the undervaluation of its shares [16] - The effective tax rate for 2023 is expected to be approximately 17%, with no significant U.S. federal cash taxes anticipated [36] Q&A Session Summary Question: Can you speak to the timing and cost of bringing rigs back out when the market recovers? - Management indicated that the timing is relatively short and costs are low, with minimal budget growth CapEx required for rigs down for only a few months [8][12] Question: What are the dynamics in different basins? - Management noted stability in the Northeast and long-term growth in the Permian, with near-term challenges in Mid-Con and South Texas [48][70] Question: How does the company view pricing dynamics in the current market? - Management stated that they do not see a need to reduce rates on rigs, emphasizing the quality of their rigs and the ongoing demand in oil basins [56][75] Question: What is the company's outlook for rig count in the second half of the year? - Management expressed confidence in an increase in rig count driven by customer discussions and expected demand in oil basins [81][94] Question: Are there any changes in cost inputs like steel or labor? - Management noted that while labor remains tight, there are some cost savings in materials like sand, but no significant changes in service rates [92][100]