Patterson-UTI Energy(PTEN) - 2019 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a net loss of $28.6 million or $0.14 per share on revenues of $704 million for Q1 2019, with consolidated adjusted EBITDA of $191 million [10][12] - Cash capital expenditures for Q1 totaled $118 million, down from $161 million in Q4 2018, with a forecast for 2019 CapEx of $465 million [13][36] - The cash balance improved to $249 million at March 31, with a net-debt-to-capital ratio of 20.5% [12] Business Line Data and Key Metrics Changes - In contract drilling, the average rig count decreased to 175 rigs, with average rig revenue per day increasing to $23,590, resulting in an average rig margin per day of $9,700, the highest since early 2016 [18][19] - Pressure pumping revenues decreased to $248 million, but gross profit margin exceeded expectations at $44.9 million [24] - Directional drilling revenues were $53 million, with gross profit margin increasing to $7.4 million [27] Market Data and Key Metrics Changes - The rig count is expected to decline further, potentially bottoming in the mid-150s during Q2 2019, despite higher oil prices [21][42] - Super-spec rig utilization remains over 90%, indicating a tight market for high-spec rigs [54][96] Company Strategy and Development Direction - The company is focused on efficient capital allocation, with a 27% reduction in capital expenditures compared to 2018 levels, leading to increased cash flow generation [36] - The company aims to improve profitability through internal efficiencies and cost reductions, particularly in pressure pumping [26][78] - The company is exploring technology-driven capabilities, such as Superior QC, to enhance operational efficiency and capture value [72][90] Management's Comments on Operating Environment and Future Outlook - Management noted that the decrease in drilling and completion activity will be less severe than previously forecasted, with potential upside from private operators as oil prices rise [34][58] - There is cautious optimism regarding the rig count and market conditions, with expectations for a flat activity level in the near term [50][61] Other Important Information - The company returned over $80 million to shareholders through stock repurchases and dividends in Q1 2019 [36][37] - A quarterly cash dividend of $0.04 per share was declared, to be paid on June 20, 2019 [38] Q&A Session Summary Question: Visibility on rig count guidance - Management indicated that rig count is expected to bottom in Q2, with private operators potentially providing some upside [41][42] Question: Margin progression for the remainder of the year - Management expressed encouragement regarding current rig margins, which have reached a new high since 2016, but noted difficulty in predicting beyond Q2 [44] Question: Pressure pumping efficiencies - Management credited field teams for improving margins in a challenging market and emphasized ongoing efforts to reduce costs and improve uptime [46][47] Question: Reactivation of idle fleets - Management stated that reactivation decisions depend on internal hurdle rates and market conditions, with no immediate plans to increase activity [49][50] Question: Pricing pressure on super-spec rigs - Management reported that super-spec rig utilization remains high, with limited pricing pressure observed [54][96] Question: Customer inquiries and activity levels - Management noted that discussions with customers have not yet changed significantly, but there is potential for increased activity as oil prices rise [66][68] Question: Dayrate structure and margin expectations - Management anticipates maintaining margins above $11,000 per day based on current pricing trends [69] Question: Strategic view on pressure pumping - Management reaffirmed the importance of the pressure pumping business and its potential for margin improvement [78] Question: Technology adoption and revenue models - Management is focused on capturing value from technology investments without solely relying on dayrate increases [90][91]