Patterson-UTI Energy(PTEN) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total reported revenue for Q4 2024 was $1.162 billion, with a net loss attributable to common shareholders of $52 million or $0.13 per share [37] - Adjusted EBITDA for the quarter totaled $225 million, and the company generated $523 million of adjusted free cash flow during 2024 [37][38] - The company returned $52 million to shareholders in Q4, including a $0.08 per share dividend and $20 million used for share repurchases [38] - Net debt, including leases, was reduced by nearly $100 million during the year [38] Business Line Data and Key Metrics Changes - In the drilling services segment, Q4 revenue was $408 million with an adjusted gross profit of $163 million [39] - The US contract drilling segment had 9,617 operating days, with average rig revenue per day at $35,300 and average rig operating cost per day at $19,600 [39] - Completion services segment revenue totaled $651 million with an adjusted gross profit of $95 million, showing a slowdown in completion activities [42] - Drilling products revenue for Q4 was $87 million with an adjusted gross profit of $37 million, outperforming the overall rig count [46] Market Data and Key Metrics Changes - The company operated 107 rigs in the US, with activity expected to remain steady across oil and natural gas basins [24] - The drilling product segment saw revenue improve year-over-year in international markets, despite a decline in the US industry rig count [31] - The company expects natural gas activity to potentially increase late this year and into 2026 due to growing demand [20] Company Strategy and Development Direction - The company aims to differentiate itself by providing value-accretive solutions rather than just competing on price [10] - The long-term strategy focuses on three pillars: monetizing value-based solutions, managing cost structures, and capital allocation [12] - The company is transitioning to more integrated and performance-based agreements to enhance margins [18] - The strategy includes expanding the Emerald line of natural gas-powered equipment and investing in next-generation upgrades [51][57] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to deliver industry-leading performance and improving returns for shareholders, even with steady US onshore activity [10] - The macro environment is expected to remain supportive, with steady drilling activity anticipated through most of 2025 [18] - There is a bullish outlook on natural gas production growth, with estimates suggesting a need for an increase of 28 Bcf per day by 2030 [72] Other Important Information - The company closed Q4 with $241 million in cash and has no senior note maturities until 2028 [52] - Capital expenditures for 2025 are expected to be approximately $600 million, lower than 2024 [51] - The company is exploring opportunities in the off-grid power market, particularly in the Permian [68] Q&A Session Summary Question: Can you provide insight on performance-based contracts and their financial benefits? - Management noted that performance-based contracts have been gaining traction and could represent 10-20% of operations in the coming years, with potential for improved profitability and service pull-through [111] Question: What is the outlook for natural gas activity and customer engagement? - Management indicated that while 2025 is expected to be steady, there is potential for upside in natural gas demand driven by LNG and midstream companies [90] Question: How will capital expenditures be allocated across business lines in 2025? - Approximately 35% of CapEx is expected to go to drilling, 50% to completions, with the remainder allocated to products and other areas [94] Question: What are the expectations for pricing in the completions business? - Pricing is currently under pressure, but with equipment sold out in the second and third quarters, any uptick in activity could lead to improved pricing later in the year [128] Question: What is the company's approach to the mobile power market? - The company is taking a cautious approach to capital deployment in the power market, focusing on returns and exploring organic investments rather than acquisitions [130]