Patterson-UTI Energy(PTEN) - 2019 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a net loss of $49.4 million, or $0.24 per share, for Q2 2019, which included charges totaling $16.3 million pre-tax [7] - Excluding these charges, the adjusted net loss would have been $35.9 million, or $0.17 per share [7] - Adjusted EBITDA for the second quarter would have been $177 million, with $150 million of stock repurchased in the first half of 2019, representing 5.5% of shares outstanding at the beginning of the year [9][10] - Cash capital expenditures for Q2 totaled $96.9 million, down from $118 million in Q1, with a revised forecast of $400 million for 2019 [11] Business Line Data and Key Metrics Changes Contract Drilling - Average rig count during Q2 was 158 rigs, down from 175 in Q1, with average rig revenue per day increasing to $24,200 [16] - Average rig margin per day increased to $10,170, including $280 per day from early termination revenue [16] - Expected average rig count for Q3 is 142 rigs, with average rig revenue per operating day projected at approximately $23,700 [17] Pressure Pumping - Pressure pumping gross margin remained unchanged at $44.9 million, while revenues increased to $251 million from $248 million in Q1 [18] - EBITDA per spread increased by 18% over Q1, with expectations of Q3 pressure pumping revenues at $225 million and gross margin of approximately $35 million [20] Directional Drilling - Gross margin for Q2 improved to $8.1 million from $7.4 million, with expected revenues of $49 million for Q3 [21] Other Operations - Revenues in other operations decreased to $26.4 million from $31.2 million in Q1, with gross margin percentage increasing to 33% [21] Market Data and Key Metrics Changes - Oil prices began Q2 in the mid $60 range but fell to the low $50 range due to concerns about trade and inventory levels [14] - E&P companies are being more disciplined with budgets, leading to a slowdown in drilling and completion activity [15] Company Strategy and Development Direction - The company is focused on cash flow generation, having generated adjusted EBITDA of $368 million in the first half of 2019, exceeding CapEx by $153 million [24] - Plans to use cash flow for stock buybacks and debt repayment, with a cash balance of $256 million at the end of Q2 [28] - The company aims to maintain operational efficiency while restraining spending and generating cash [27] Management Comments on Operating Environment and Future Outlook - Management noted that E&P companies are slowing spending earlier in the year to avoid budget exhaustion, which may lead to lower drilling activity in Q3 [15] - The company expects a mix shift to more single well pads in pressure pumping, impacting overall activity and efficiency [20] - There is uncertainty regarding Q4 activity levels, but management believes rig count may not drop as much as previously anticipated [47] Other Important Information - The company declared a quarterly cash dividend of $0.04 per share to be paid on September 19, 2019 [29] - The board of directors increased the share repurchase authorization to $250 million [9] Q&A Session Summary Question: Can you provide insights on Q3 rig count guidance and customer indications for 2020? - Management noted that major international oil companies are holding steady, while public independents are managing budgets more tightly, leading to a downward shift in rig count [35][36] Question: What are your views on dayrates for super-spec rigs? - Management indicated that while there is pressure on pricing due to rig count declines, utilization for super-spec rigs remains relatively high [38] Question: How do you see the rig count and frac activity evolving in Q4? - Management expressed uncertainty but noted that E&P companies are managing budgets earlier, which may stabilize rig counts [47] Question: What is the competitive landscape for pressure pumping? - Management stated that most frac spreads work under dedicated agreements, and while there is pressure on pricing, operational efficiencies are being improved [80][81] Question: Are there any plans for dual fuel tier four fleets? - Management confirmed they have dual fuel capabilities and are adding tier four engines as needed, but do not see immediate economic sense in expanding electric frac capacity [118][119]