Patterson-UTI Energy(PTEN) - 2022 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Net income for Q2 2022 was $21.9 million or $0.10 per share, compared to a net loss of $28.8 million or $0.13 per share in Q1 2022 [11] - Adjusted EBITDA forecast for 2022 is now expected to exceed $600 million, with a slight increase in CapEx forecast to $390 million due to rising activity and cost inflation [4][11] Business Line Data and Key Metrics Changes - In contract drilling, average U.S. rig count increased by six rigs to 121, with 127 active rigs currently [5] - Average adjusted rig margin per day increased by $2,220, while average rig revenue per day increased by $2,770 [11] - Pressure pumping revenues reached $238 million, a 26% increase from Q1, with adjusted gross margin improving to $46.9 million [15] - Directional drilling revenues increased by 27% to $54.8 million, with adjusted gross margin improving to $9.4 million [15] Market Data and Key Metrics Changes - Tier 1 super spec rig utilization is greater than 90%, with Patterson-UTI's utilization exceeding 95% [6] - The active rig count is at its highest level since early 2020, indicating strong demand and limited supply [6] Company Strategy and Development Direction - The company is positioned to benefit from strong market fundamentals, focusing on contract drilling, pressure pumping, and directional drilling services [19] - Plans to push day rates and contract terms while maintaining a disciplined approach to activity growth [19] - Emphasis on technology in directional drilling to improve wellbore quality and efficiency [9] Management's Comments on Operating Environment and Future Outlook - Management believes the industry is in a multi-year upcycle, with U.S. oilfield service companies showing financial discipline [18] - Anticipation of continued increases in rig activity and pricing, with constraints on rig supply positively impacting market pricing [25][27] Other Important Information - The company has approximately $440 million of future day rate drilling revenue under term contracts, up from $400 million at the end of Q1 [12] - The company expects to generate approximately $15.5 million of revenue in Colombia for Q3, with adjusted gross margin of approximately $4.8 million [14] Q&A Session Summary Question: Rig count and future activity - Management confirmed five additional rigs are committed to work in 2022, with continued increases expected despite some constraints on rig supply [25] Question: Contract coverage and day rates - Management indicated that day rates are increasing rapidly, and they expect to extend contract lengths as they negotiate for 2023 [27] Question: Pressure pumping capacity - Management stated that while they are currently focused on 12 spreads, they are open to adding more if market conditions warrant [36] Question: CapEx and supply chain - Management noted that lead times for equipment are around six months, prompting an increase in CapEx to secure necessary items for next year [43] Question: Labor issues - Management acknowledged ongoing challenges in recruiting but emphasized successful efforts to find and retain personnel [51] Question: Cash flow and working capital - Management expects working capital increases to be limited in the second half of the year, projecting positive cash flow for 2022 [56] Question: Colombia market conditions - Management reported that operations in Colombia remain stable, with no anticipated changes due to the political climate [57] Question: Utilization of less efficient rigs - Management believes there is a low probability of operators accepting less efficient rigs, as their customer base is focused on increasing activity with Tier 1 super spec rigs [60]