Patterson-UTI Energy(PTEN) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total reported revenue for Q1 2025 was $1,281 million, with a net income attributable to common shareholders of $1 million and adjusted EBITDA of $251 million [24][25]. - The company generated $51 million of adjusted free cash flow during the quarter [24]. - The working capital headwind was approximately $37 million, typical for the first half of the year [25]. Business Line Data and Key Metrics Changes - In the Drilling Services segment, Q1 revenue was $413 million with an adjusted gross profit of $165 million [26]. - The U.S. contract drilling business had 9,573 operating days, with average rig revenue per day at $35,700 and average rig operating cost per day at $19,600 [27]. - The Completion Services segment reported revenue of $766 million and adjusted gross profit of $108 million, with strong demand and high utilization in both oil and natural gas basins [30]. - The Drilling Products segment generated $86 million in revenue with an adjusted gross profit of $39 million, showing steady performance across major regions [32]. Market Data and Key Metrics Changes - The company noted a strong recovery in completions activity and steady drilling activity across U.S. shale, with positive momentum in natural gas basins [6][15]. - The Haynesville region saw significant demand growth, benefiting from the company's solid footprint in key natural gas plays [19]. - The company has an outsized exposure to the industry's largest and most stable operators, which are less reactive to short-term commodity price fluctuations [11]. Company Strategy and Development Direction - The company's strategy focuses on optimizing core operations and disciplined capital allocation, leveraging integrated agreements in drilling and completion businesses [8][10]. - The company aims to enhance efficiency and unlock value for customers through a comprehensive suite of services and products [8][9]. - The company plans to continue growing integrated work as a proportion of its overall business, emphasizing value-accretive services over the lowest price [10]. Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the natural gas market, anticipating increased drilling and completion activity to meet growing demand [15][43]. - The outlook for oil remains uncertain, with potential softening if prices remain low, but operations are currently stable [14][68]. - The company is prepared to adapt its strategy across various commodity price environments, maintaining a strong balance sheet and liquidity [12][41]. Other Important Information - The company closed the quarter with $225 million in cash and an undrawn $500 million revolving credit facility, maintaining low leverage and an investment-grade credit rating [12][38]. - The full-year 2025 net capital budget is set at approximately $600 million, with flexibility to adjust based on market conditions [37]. Q&A Session Summary Question: Discussion on the evolution of the commercial model and integrated services - Management highlighted the unmatched breadth of offerings in U.S. shale, including drilling rigs, cementing services, and logistics, which enhance efficiency for E&Ps [49][50]. Question: Thoughts on replacement CapEx and impacts of tariffs - Management indicated a measured approach to replacement CapEx, focusing on Emerald 100% natural gas systems, while monitoring potential tariff impacts [51][55]. Question: Clarification on completion guidance and expected activity levels - Management acknowledged a strong ramp-up in Q1 but expressed caution regarding potential white space in the second quarter due to oil price fluctuations [61][64]. Question: Insights on potential activity declines in the second half of the year - Management noted that if oil prices remain low, some activity softening could occur, particularly among lower-spec rigs, but higher-spec rigs would likely remain stable [100][102]. Question: Performance-based contracts and their adoption - Management reported that about 10% of operations now involve integrated performance-based contracts, with expectations for continued growth in this area [114].