Patterson-UTI Energy(PTEN) - 2019 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q4 2019, the company reported a net loss of $85.9 million or $0.44 per share on revenue of $492 million and adjusted EBITDA of $97.3 million [8][9] - The company generated strong cash flow in 2019, returning $283 million to shareholders through share repurchases and dividends, while net debt decreased by $79 million to $801 million at year-end [8][9][36] - Capital expenditures (CapEx) for 2019 were $348 million, a 46% reduction compared to 2018, with an expected CapEx of approximately $250 million for 2020 [10][36] Business Line Data and Key Metrics Changes Contract Drilling - The average rig count for Q4 fell to 123 rigs, with a net decrease of 10 rigs during the quarter [14][15] - Average rig revenue per operating day was $23,980, and average rig direct cost per operating day was $15,540, leading to lower than expected average rig margin per day [18] - The company expects the first quarter rig count to be similar to Q4, with average revenue per operating day projected between $23,200 and $23,500 [20] Pressure Pumping - Pressure pumping activity decreased throughout Q4, with a gross margin of $21.9 million, including a $10.8 million sales tax refund [24][25] - For Q1, pressure pumping revenues are expected to be approximately $130 million, with a gross margin of low 5% [31] - The company plans to average 10 active spreads for Q1, with no current plans to activate additional spreads due to market oversupply [51] Directional Drilling - Directional drilling revenues were $38.6 million with a gross margin of $3.8 million in Q4, negatively impacted by lower rig count [32] - For Q1, directional drilling revenues are expected to be $34 million with a gross profit margin of $2 million [33] Other Operations - Revenues from other operations, including rental, technology, and E&P businesses, were $21.5 million with a gross margin of $7.7 million in Q4 [34] Market Data and Key Metrics Changes - Geographically, the Permian Basin showed relative strength, partially offsetting weakness in other markets [17] - The company noted that super-spec utilization in the Permian is starting to tighten, with all APEX-XKs currently working [22] Company Strategy and Development Direction - The company is focusing on maintenance capital to maintain equipment quality and service levels, with strategic investments in automation and performance technologies planned for 2020 [10][36] - The company is positioned to benefit from the increasing demand for natural gas dual fuel capabilities and high line powered electric rigs [21][22][30] Management Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about both contract drilling and pressure pumping businesses through 2020, despite challenges in the operating environment [13][30] - The supply side of the market is improving, but demand remains challenged, with modest improvements in industry activity expected [30] Other Important Information - The company declared a quarterly cash dividend of $0.04 per share to be paid on March 19, 2020 [37] - The company successfully extended near-term debt maturities and issued $350 million of notes due in 2029 [9] Q&A Session Summary Question: What is a normal level for OpEx by the end of the year? - Management indicated that normalized OpEx should be closer to $14,000 to $14,500 per day as rig counts stabilize [42][43] Question: Is 10 spreads the right size for pressure pumping? - Management confirmed that 10 spreads is the current plan, with no immediate plans to activate more due to market conditions [51] Question: How much additional frac capacity needs to come out of the market for balance? - Management estimated that approximately 5 million horsepower needs to be retired from the market to achieve balance [106] Question: What is the profitability of performance-based contracts? - Performance components in contracts provide an additional uplift of $400 to $500 per day compared to traditional contracts [114] Question: What is the outlook for dual fuel and electric frac technologies? - Management noted increasing demand for dual fuel capabilities and is conducting studies on emissions for both drilling and pressure pumping operations [85][89]