Patterson-UTI Energy(US:PTEN)2022-04-28 18:30Financial Data and Key Metrics Changes - The company reported a significant increase in average adjusted margin in the U.S., which rose by $1,720 per day in Q1 2022, with expectations for further growth of $1,100 per day in Q2 2022 [5][8] - Total adjusted EBITDA for 2022 is now expected to exceed $500 million, reflecting strong pricing momentum for services [8] - The rig count in the U.S. increased by nine rigs sequentially to 115 rigs in Q1 2022 [8] Business Line Data and Key Metrics Changes - In contract drilling, revenues and margins increased significantly due to higher activity and day rates, with average adjusted margin per rig day reaching $7,170 [9] - Pressure pumping revenues improved to $190 million in Q1 2022, with adjusted gross margin rising to $32.1 million, aided by a sales and use tax refund [12] - Directional drilling revenues increased by 23% to $43.3 million in Q1 2022, with expectations for revenues to reach approximately $50 million in Q2 2022 [16] Market Data and Key Metrics Changes - The leading edge day rates for Tier 1 rigs are now in the upper $20,000 range, with total day rates exceeding $30,000 including ancillary equipment [6] - In Colombia, contract drilling revenues increased to $17 million in Q1 2022, up from $15.8 million in the previous quarter [9] Company Strategy and Development Direction - The company is focused on increasing contract backlog and securing longer-term contracts due to rising demand and limited supply of rigs [6][10] - Management anticipates continued pricing increases in the market for equipment and services, indicating a strong pricing environment not seen in a decade [27] Management's Comments on Operating Environment and Future Outlook - Management noted that the increase in oil and gas demand is primarily driven by the reopening of world economies rather than geopolitical events [22] - The company expects the market for its services to remain tight, with operators needing to commit to higher prices to secure equipment and crews [26] - There is an expectation of a step-up in rig count in 2023 as larger public operators begin to increase their programs [67] Other Important Information - The company is maintaining its 2022 capital expenditure forecast at approximately $350 million, with a focus on the first half of the year to mitigate supply chain issues [19] - Increased working capital was a drag on cash flow in Q1 2022, but management expects this to moderate and cash balances to increase over the year [20] Q&A Session Summary Question: Pricing and Rig Revenue Expectations - Management indicated that there is significant upside potential for average rig revenue and margins, with expectations for continued upward movement in pricing [32][34] Question: Rig Count Projections - Management revised their year-end rig count projection to above 700 rigs, citing strong market conditions [39] Question: Contract Duration and Pricing - The majority of contracts are expected to roll to higher prices, with a shift towards longer contract durations due to market tightness [41] Question: Supply Chain and Labor Issues - Management acknowledged challenges in hiring and retaining labor but does not foresee a strong need for significant wage increases at this time [35] Question: Future Rig Demand and Upgrades - Management confirmed that there are sufficient existing rigs that can be upgraded to meet demand, with no plans for new builds [51]