PATTERSON UTI ENERGY INC Q3 FY2024 earnings call

• Strategic integration of NexTier and Ulterra has solidified Patterson-UTI's position in the oilfield services sector. Over the past year, generated almost $570 million of free cash flow, used for share repurchases, dividends, and reducing net debt.
• Successful integrated drilling and completion arrangement with a customer, showing potential for premium returns. In discussions with other potential customers for similar concepts.
• Retired 42 legacy non-Tier 1 rigs and nearly 400,000 horsepower of older Tier-2 diesel frac equipment, focusing on high-quality, natural gas-burning fleets.
• International JV in UAE with ADNOC Drilling and SLB, holding 15% interest in Turnwell Industries, providing expertise for unconventional well drilling and completion projects.
• Drilling Products segment saw strong revenue growth in U.S., with market share of drill bits on own rigs increasing by over 10% since Ulterra acquisition.

Drilling Services

• Third quarter revenue: $422 million, adjusted gross profit $171 million. U.S. Contract Drilling had 9,870 operating days, average rig revenue per day $36,000, operating cost per day $19,900, adjusted rig gross profit per day $16,100. Other Drilling Services (International Contract Drilling and Directional Drilling) had revenue $66 million, adjusted gross profit $11 million. For Q4, U.S. Contract Drilling expects average 106 active rigs with adjusted gross profit per operating day slightly less than $15,000; other Drilling Services adjusted gross profit expected slightly down from Q3.

Completion Services

• Third quarter revenue: $832 million, adjusted gross profit $128 million. Saw a shift to more integration services but had unplanned gaps. Q4 expects lower pumping hours and adjusted gross profit ~$85 million; higher profitability expected in first half of 2025.

Drilling Products

• Third quarter revenue: $89 million, 4% sequential increase, adjusted gross profit $42 million. International JV with ADNOC Drilling and SLB in UAE, holding 15% interest in Turnwell Industries, which has a contract to drill and complete 144 unconventional wells for ADNOC

• Anticipate average activity in 2025 will be slightly below 2024, with rig count essentially steady from current levels.
• Total CapEx for 2025 expected to be lower than 2024, with continued investment in high-return technologies.
• Completions profitability expected to improve in first half of 2025 after seasonal slowdown in Q4.
• Continued focus on returning cash to shareholders, with plans to potentially accelerate share repurchases.

• Macro environment fluctuations in oil and natural gas prices and shifting industry activity across key basins.
• Potential impact of unplanned gaps in fleets affecting fixed cost leverage in Completion Services.
• Competition in the oilfield services sector, which could impact market share and profitability.

Q: Scott Gruber asked about Completion margins and the Turnwell JV.

A: Andy Hendricks responded that Completion profitability will move up from Q4 anomaly, and the Turnwell JV initially provides expertise with potential for future capital deployment but priorities remain returning cash to shareholders.

Q: Stephen Gengaro asked about frac horsepower attrition and wellsite integration.

A: Andy Hendricks and Andy Smith discussed attrition due to oversupply and older equipment, and progress in wellsite integration with NexTier's legacy services being integrated into Patterson-UTI's fleet.

Q: Keith MacKey asked about free cash flow returns and integrated jobs.

A: Andy Smith and Andy Hendricks discussed 2025 free cash flow return framework and the integrated job's positive reception from customers, with potential for more E&P interest.

Q: Ati Modak asked about CapEx and electric fleet performance.

A: Andy Smith discussed CapEx budget process and Andy Hendricks noted electric fleets are competitive with high utilization, pumping 20-21 hours a day.

Q: Arun Jayaram asked about Completion share and RFP season.

A: Andy Hendricks stated share is not the primary focus, with stability expected in 2025 as activity resets.

Q: Waqar Syed asked about drilling margins and fleet composition.

A: Andy Hendricks deferred on drilling margin outlook and discussed fleet mix with 80% of horsepower burning natural gas, including Tier 4 DGB and electric fleets.

Q: Connor Jensen asked about integration synergy opportunities.

A: Andy Hendricks discussed remaining integration opportunities in Completions, including NexMile Logistics and submitting services, and growth in Drilling Products international market share.

Q: Saurabh Pant asked about Completion pricing and CapEx.

A: Andy Hendricks and Andy Smith discussed pricing stabilization in early 2025 and challenges in breaking down CapEx into maintenance vs. growth categories.

Q: Kurt Hallead asked about Completion activity and Drilling Products international growth.

A: Andy Hendricks discussed strong conviction in Completion restart in 2025 and Drilling Products international potential, including JV in UAE and Saudi expansion.

Q: Eddie Kim asked about Completion slowdown factors.

A: Andy Hendricks stated slowdown is due to customer planning and budget considerations, not commodity volatility or OPEC signals