Patterson-UTI Energy(PTEN) - 2018 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a net loss of $201 million or $0.93 per share on revenues of $796 million for Q4 2018. Excluding a noncash pre-tax goodwill impairment charge of $211 million, the net loss would have been $9 million or $0.04 per share [10][12]. - Consolidated adjusted EBITDA for Q4 was $213 million, bringing the total for 2018 to $806 million, an increase of $315 million or 64% over the prior year [12]. - The company repurchased 3.8 million shares for $50 million in Q4, totaling $150 million for the year, representing 4.2% of outstanding shares at the beginning of 2018 [13][14]. Business Line Data and Key Metrics Changes - In contract drilling, the average rig count for Q4 was 183 rigs, up five from Q3, with an average rig margin per day increasing by $920 to $9,390 [21]. - Pressure pumping generated a gross profit of $62.2 million on revenues of $320 million in Q4, down from a gross profit of $79.1 million on revenues of $422 million in Q3, primarily due to lower activity levels [32][33]. - Directional drilling achieved adjusted EBITDA of $4.1 million on revenues of $56.4 million, an increase from $3.3 million on revenues of $51.6 million in the previous quarter [37]. Market Data and Key Metrics Changes - The company noted a significant drop in oil prices in December, with WTI decreasing by almost $34 or 44% over 82 days [42]. - Following the drop, oil prices rebounded by approximately 26%, improving operator sentiment and discussions about putting rigs back to work [44][45]. - The current available supply of super-spec rigs in the U.S. is estimated at approximately 650 rigs, with industry utilization for super-spec rigs in the mid-90% range [25]. Company Strategy and Development Direction - The company aims to maintain its position as a leading super-spec driller and will continue to focus on operational excellence and efficient service delivery [25][46]. - The company plans to return cash to shareholders through share repurchases and dividends while keeping a fortress-like balance sheet with low debt levels [47][48]. - The company is investing in technology advancements, including the development of proprietary operating systems to enhance drilling performance [28][121]. Management Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the future, noting that while Q1 may see softness in drilling activity and pressure pumping, high utilization rates for super-spec rigs are expected to continue [45][46]. - The company anticipates that the first quarter of 2019 could be the low point for activity, with potential improvements as oil prices stabilize [66][78]. - Management highlighted the importance of maintaining flexibility to scale operations based on market conditions and customer demand [48][90]. Other Important Information - The company declared a quarterly cash dividend of $0.04 per share to be paid on March 21, 2019 [50]. - The company has approximately $150 million remaining under its share repurchase authorization, which was increased to $250 million [15]. Q&A Session Summary Question: Average rig count and customer feedback - Management indicated that the average rig count could drop to the upper 160s based on customer notifications, but this is still fluid as operators finalize their plans [56][57]. Question: Pressure pumping market conditions - Management noted that the Mid-Con region is experiencing the softest market conditions, with competitive pricing and an oversupplied market [64][65]. Question: Equipment attrition and market consolidation - Management believes that while there is oversupply in the market, equipment attrition will eventually lead to consolidation as demand increases [72][91]. Question: Pressure pumping pricing expectations - Management stated that pricing improvements are contingent on WTI prices rising and overall activity levels increasing [78][80]. Question: Interest in additional upgrades - Discussions regarding term contracts for upgrades have cooled due to commodity price fluctuations, but management remains optimistic about future opportunities [113][114].