Patterson-UTI Energy(US:PTEN)2025-10-23 15:02Financial Data and Key Metrics Changes - Total reported revenue for Q3 2025 was $1.176 billion, with a net loss attributable to common shareholders of $36 million or $0.10 per share, and an adjusted net loss of $21 million [22] - Adjusted EBITDA for the quarter totaled $219 million, with total CapEx of $144 million [22][27] - The company generated $146 million of adjusted free cash flow in the first three quarters of the year, with expectations for strong free cash flow in Q4 [22][29] Business Line Data and Key Metrics Changes - Drilling services segment revenue was $380 million with an adjusted gross profit of $134 million, while completion services segment revenue totaled $705 million with an adjusted gross profit of $111 million [23][24] - The drilling products segment reported revenue of $86 million with an adjusted gross profit of $36 million, impacted by higher bit repair expenses [25][26] - The company expects adjusted gross profit in drilling services to decline approximately 5% in Q4 compared to Q3 [24] Market Data and Key Metrics Changes - U.S. contract drilling saw an average operating rig count of 95 rigs, with activity stabilizing as the company exited Q3 [23][11] - In Canada, revenue showed strong recovery post-spring breakup, while international revenue declined mainly in Saudi Arabia [18] - The company noted that the completions market remains competitive, but operational quality is proving to be a major differentiator [14] Company Strategy and Development Direction - The company is focused on enhancing commercial strategies through service and product line integration, while lowering cost structures [5][6] - Investments in technology are prioritized, with expectations for lower capital expenditures in 2026 compared to 2025 [9][10] - The company aims to return at least 50% of annual free cash flow to shareholders through dividends and share repurchases [10][23] Management's Comments on Operating Environment and Future Outlook - Management highlighted resilience in the business despite challenges, with a constructive outlook for U.S. shale activity [5][6] - The company anticipates that any further activity reductions could negatively impact future U.S. output, affecting global oil supply in 2026 [7] - Management expressed confidence in maintaining strong free cash flow and a solid balance sheet, with expectations for continued capital flexibility [10][33] Other Important Information - The company has repurchased 44 million shares since the NextTier merger and Altera acquisition, reducing share count by 9% [23] - The company closed Q3 with $187 million in cash and an undrawn $500 million revolver, with no senior note maturities until 2028 [28] Q&A Session Summary Question: Completion services pricing trends - Management noted that their teams are executing high-end work, which has allowed them to maintain pricing without significant pressure to reduce it [36] Question: Fleet renewal programs for 2026 - Management discussed the excitement around 100% natural gas direct-drive systems and the strategy of investing at the high end while allowing lower-tier equipment to attrition [37][38] Question: Power market opportunities - Management acknowledged their expertise in power generation but indicated that entering larger power markets would require careful consideration of capital returns [44][46] Question: Macro uncertainty and customer behavior - Management observed that customers are seeking to maintain production levels despite a softer commodity environment, leading to requests for more technology [56] Question: Pricing expectations for completion market - Management indicated that while there may be some movement in pricing, they do not foresee significant headwinds due to steady demand for natural gas-powered equipment [73] Question: Capital allocation strategy - Management emphasized the importance of maintaining a strong balance sheet while committing to returning capital to shareholders, with a focus on performance-driven pricing [75][79]