Patterson-UTI Energy(PTEN) - 2022 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Net income for Q4 2022 was $100 million or$0.46 per share, up from $61.5 million or$0.28 per share in Q3 2022 [12] - Adjusted EBITDA for Q4 2022 was almost 5 times that of Q4 2021, indicating significant profitability improvement [5] - Average rig revenue per day in the U.S. increased by $9,800 or 44$2,970, driven by successful contract renewals at favorable pricing [12] - Pressure pumping revenues increased to $307 million in Q4 2022, with an adjusted gross margin of$86 million [38] - Directional drilling revenues improved to $59.5 million in Q4 2022 from$58.9 million in Q3 2022, with adjusted gross margin rising to $11.2 million [14] Market Data and Key Metrics Changes - The average rig count in the U.S. rose by 3 rigs to 131 rigs in Q4 2022 [8] - In Colombia, contract drilling revenues for Q4 2022 were$15.1 million, with an adjusted gross margin of $4.9 million [13] - The company anticipates an average rig count in the U.S. of 130 rigs for Q1 2023, with an expected increase in average rig margin per day by approximately$1,000 [13] Company Strategy and Development Direction - The company remains optimistic about being in a multiyear up-cycle, with high demand for Tier 1 super-spec rigs and premium pressure pumping equipment [6] - The strategic focus includes converting engines to Tier 4 dual fuel to reduce operational costs and emissions, and enhancing technology in directional drilling [10] - The company is shifting towards higher-margin rotary steerable work, with revenues from this segment increasing to approximately 20% of directional drilling revenues in 2022 [35] Management's Comments on Operating Environment and Future Outlook - Management expects continued high utilization of Tier 1 super-spec rigs to support current leading-edge rates, despite potential softness in gas markets outside the Northeast [31] - The company anticipates significant increases in earnings and cash flow during 2023, driven by repricing drilling rig contracts to current leading-edge rates [31] - Management acknowledges potential downside risks in gas markets but believes the Northeast remains stable due to long-term contracts with well-hedged customers [83] Other Important Information - The company plans to return 50% of free cash flow to shareholders through dividends and share buybacks [44] - Capital expenditures for 2023 are expected to be approximately $550 million, with a focus on maintenance and reactivation CapEx [16] - The company ended 2022 with$836 million of long-term debt and a cash balance of $138 million, reflecting improved profitability [18] Q&A Session Summary Question: Outlook on rig count and market demand - Management noted that while there may be a decline in gas rig counts, demand for oil rigs is expected to offset this, maintaining a tight market for high-spec rigs [23][31] Question: Reactivation of rigs and market conditions - Management confirmed plans for eight rig reactivations in 2023, with sufficient demand to support these actions despite potential softness in gas markets [82][87] Question: Pricing and operational costs - Management indicated that they expect to reprice around 30 contracts in the first half of 2023, with significant increases in revenue per day anticipated [66][88] Question: Pressure pumping market dynamics - Management highlighted that pressure pumping services remain robust, with supply constraints limiting equipment availability [34][38] Question: Hydrogen blending project - The trial for blending hydrogen with natural gas was successful, and the company is excited about the potential for reducing emissions in the future [121][100]