Q4 2021 Patterson-UTI Energy Inc Earnings Call

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Speaker 1: Ladies and gentlemen, thank you for standing by. My name is Brent and I will be your conference operator today. At this time, I would like to welcome everyone to the Paterson UTI Energy fourth quarter 2021 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session.

Ladies and gentlemen, thank you for standing by my name is Brent and I will be your conference operator today.

At this time I would like to welcome everyone to the Patterson UTI energy fourth quarter 2021 earnings conference call.

All lines have been placed on mute to prevent any background noise.

After the Speakers' remarks, there will be a question and answer session.

Speaker 1: If you would like to ask a question at that time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star one. Thank you. It is now my pleasure to turn today's call over to Mr. Mike Druckmer, Vice President of Investor Relations. Please go ahead, sir.

If you would like to ask a question I've got time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question again press Star one. Thank you. It is now my pleasure to turn today's call over to Mr. Mike <unk> Vice President.

<unk> of Investor Relations. Please go ahead Sir.

Speaker 2: Thank you, Brent. Good morning. And on behalf of Patterson UTI Energy, I'd like to welcome you to today's conference call to discuss the results for three months and year-end of December 31st.

Thank you, Brian good morning, and on behalf of Patterson UTI energy I'd like to welcome you to todays conference call to discuss the results for three months and year ended December 31.

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Speaker 2: Participating in today's call will be Andy Hendricks, Chief Executive Officer, and Andy Smith, Chief Financial Officer. A quick reminder that statements made in this conference call that states' companies or management's plans, intentions, beliefs, expectations, or predictions for the future are forward-looking statements.

Participating in today's call will be Andy Hendricks, Chief Executive Officer, and Andy Smith, Chief Financial Officer.

A quick reminder, that statements made on this conference call that state based or management's plans intentions beliefs expectations or predictions for future are forward looking statements.

Speaker 2: These forward-looking statements are subject to risk and uncertainties as disclosed in the company's SEC filings, which could cause the company's actual results to differ materially. The company undertakes no obligation to publicly update or revise any forward-looking statement.

These forward looking statements are subject to risks and uncertainties as disclosed in the company's SEC filings, which could cause the company's actual results to differ materially the company undertakes no obligation to publicly update or revise any forward looking statement.

Speaker 2: Statements made in this conference call include non-GAAP financial measures. The required reconciliations to GAAP financial measures are included on our website, patenergy.com, and the company's press release issued prior to this conference call. And now, it's my pleasure to turn the call over to Andy Hendricks for some opening remarks. Andy? Thanks, Mike. Good morning and welcome to Patterson UTI's fourth quarter conference call. Thanks for joining us today.

Statements made in this conference call include non-GAAP financial measures. The required reconciliation to GAAP financial measures are included on our website, Pat energy Dot Com and the company's press release issued prior to this conference call.

And now it's my pleasure to turn the call over to Andy Hendricks for some opening remarks, Andy Thanks, Mike Good morning, and welcome to Patterson Utis fourth quarter conference call. Thanks for joining us today.

Speaker 2: This is an exciting time for Patterson UTI and the industry in general. We expect increasing margins throughout the year due to strong pricing momentum as the availability of premium equipment has become tight.

This is an exciting time for Patterson UTI in the industry in general we expect increasing margins throughout the year due to strong pricing momentum as the availability of premium equipment has become tight.

Speaker 2: I believe it is fair to say that it's been a long time since the outlook for oil field service pricing was this strong.

I believe it is fair to say that it's been a long time since the outlook for oilfield service pricing was this strong.

Speaker 2: Leading edge day rates for our tier one drilling rigs are increasing. For the base rig, we are now in the mid-20s for day rates, and that is where the discussions begin.

Leading edge day rates for our tier one drilling rigs are increasing for the base rig. We are now in the mid twenties for day rates and that is where the discussions begin.

Speaker 2: And further to that, in some cases, our total revenue per day is at or above $30,000 a day when you include the revenue from technologies and ancillary services in our contract drilling business.

And further to that in some cases, our total revenue per day is at or above $30000. A day. When you include the revenue from technologies and ancillary services in our contract drilling business.

In pressure pumping, we see further pricing improvement for both dual fuel and conventional spreads due to the lack of readily available premium equipment in the market.

Speaker 2: In pressure pumping, we see further pricing improvement for both dual fuel and conventional spreads due to the lack of readily available premium equipment in the market.

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Speaker 2: With increasing activity and pricing, we expect to generate more than $450 million of adjusted EBITDA in 2022, which exceeds our CAPEX forecast by more than $100 million.

With increasing activity and pricing, we expect to generate more than $450 million of adjusted EBITDA in 'twenty, 'twenty, two which exceeds our capex forecast by more than $100 million.

Speaker 2: The majority of this capex is for activity related to maintenance and reactivation capex, with growth capex focused on high return, quick payback opportunities that we expect to be margin accretive. www.mooji.org

The majority of this capex is for activity related to maintenance and reactivation capex with growth Capex focused on high return quick payback opportunities that we expect to be margin accretive Andy.

Speaker 2: Andy Smith will provide more detail on our CAPEX forecast.

Andy Smith will provide more detail on our capex forecast.

Speaker 2: With the improved outlook for cash flow, I am pleased to announce that we are increasing our quarterly dividend to four cents per share.

With the improved outlook for cash flow I am pleased to announce that we are increasing our quarterly dividend to four cents per share.

Turning now to my review of operations.

Speaker 2: First, I'm proud of the way each of our businesses were able to achieve higher activity levels in the fourth quarter, despite a tight labor market that was exacerbated by the recent surge in cases and continue providing a high level of service quality for our customers.

First I'm proud of the way each of our businesses were able to achieve higher activity levels in the fourth quarter. Despite a tight labor market that was exacerbated by the recent surge in Covid cases, and continue providing a high level of service quality for our customers.

Speaker 2: In contract drilling, our U.S. rig count in the fourth quarter increased by 26 rigs quarter on quarter, including 13 rigs that were part of the Pioneer acquisition.

In contract drilling our U S rig count in the fourth quarter increased by 26 rigs quarter on quarter, including 13 rigs they were part of the pioneer acquisition.

Speaker 2: For perspective, the 13 rig organic growth in our rig count was more than the prior two quarters combined.

For perspective, the 13 rig organic growth in our rig count was more than the prior two quarters combined.

Speaker 2: This organic growth and our rig count was achieved despite a tight labor market and while integrating the acquisition of Pioneer.

This organic growth in our rig count was achieved despite a tight labor market and while integrating the acquisition of pioneer.

Speaker 2: With the growth in activity across the industry, the market for Tier 1 drilling rigs is tight and premium rigs are receiving a higher day rate. The market is much tighter than what is apparent by just looking at the market for super spec Watkins.

With the growth in activity across the industry the market for tier one drilling rigs is tight and premium rigs are receiving a higher day rate. The market is much tighter than what is apparent but just looking at the market for super spec rigs.

Speaker 2: Operators' preferences have continued to evolve while the definition of a super spec rig hasn't changed since 2016.

Operators preferences have continued to evolve what the definition of a super spec rig hasn't changed since 2016.

Speaker 2: We see more operators increasing their requirements to include more clearance underneath the rig floor and a third mud pump for additional hydraulic horsepower and redundancy.

We see more operators increasing their requirements include more clearance underneath the rig floor and a third a third mud pump for additional hydraulic horsepower and redundancy.

Speaker 2: The extra room underneath the rig floor allows the rig to walk over well heads and around existing production equipment on the pad, and the older style rigs that have limited clearance under the rig floor because the draw works are on the ground are generally less desirable to operate.

The extra room underneath the rig floor allows a rig to walk over wellheads and around existing production equipment on the pad and the older style rigs that have limited clearance under the rig floor because the draw works or on the ground are generally less desirable to operators.

Speaker 2: Across the industry, we believe there are less than 400 rigs in the U.S. that meet the capabilities of what we are referring to as a Tier 1 super spec rig.

Across the industry. We believe there are less than 400 rigs in the U S that meet the capabilities of what we're referring to as a tier one super spec rig.

Speaker 2: Within our rig fleet, we have 107 of these rigs in the U.S., of which 102 are currently contracted for 95% utilization.

Within our rig fleet, we have 107 of these rigs in the U S of which 102 are currently contracted for 95% utilization.

Speaker 2: Furthermore, all of our Tier 1 Superspec rigs in the Permian Basin are currently contracted.

Furthermore, all of our tier one super spec rigs in the Permian Basin are currently contracted.

Speaker 2: We believe that in the industry, approximately 300 rigs in the U.S. can be upgraded to Tier 1 Superspec. However, over half of these rigs are of an older style where the draw works is located on the ground, limiting the clearance under the rig.

We believe that in the industry approximately 300 rigs in the U S can be upgraded to tier one super spec.

However over half of these rigs are of an older style, where the draw works is located on the ground limiting the clearance under the rig floor.

Speaker 3: We believe the extensive upgrades these rigs will require to become Tier 1 rigs is economically prohibitive in the current market, and higher day rates will be needed to justify these upgrades.

We believe the extensive upgrades these rigs will require to become tier one rigs, whose economically prohibitive in the current market and higher day rates will be needed to justify these upgrades.

Speaker 3: With our rig fleet, we believe we have a clear operational and financial advantage when it comes to potential upgrades to Tier 1 Superspec, as we already have a large number of rig structures with the DrawWorks Up design and walking system.

With our rig fleet, we believe we have a clear operational and financial advantage when it comes to potential upgrades to tier one super spec as we already have a large number of rigs structures with the draw works up design and walking systems for.

Speaker 3: For example, we have 34 rigs within our fleet that can be upgraded to Tier 1 super spec capabilities for approximately $2 million each.

For example, we have 34 rigs within our fleet that can be upgraded tier one super spec capabilities for approximately $2 million each.

Speaker 3: In addition to the Tier 1 capabilities of our fleet, we expect our ESG and sustainability capabilities also help differentiate our rigged fleet.

In addition to the tier one capabilities of our fleet, we expect our ESG and sustainability capabilities also help differentiate our rig fleet.

Speaker 3: Within our fleet, we have more than 70 rigs that are today equipped to operate with alternative power sources such as high-line power from the electric grid, dual-fuel or natural gas powered engines, or our proprietary EcoCell lithium battery hybrid energy management system.

Within our fleet, we have more than 70 rigs that are today equipped to operate well the alternative power sources, such as high line power from the electric grid dual fuel or natural gas powered engines or our proprietary eco cell lithium battery hybrid energy management system.

Speaker 3: Ecocell, which uses stored energy to provide power to the rig when needed, has demonstrated the capability to reduce fuel consumption by more than 20 percent, thereby reducing both fuel costs and emissions.

He can sell which uses stored energy to provide power to the rig when needed has demonstrated the capability to reduce fuel consumption by more than 20%, thereby reducing both fuel costs and emissions.

Speaker 3: We continue to see strong demand from customers who are willing to pay a higher day rate for environmentally friendly sustainability solutions that help to reduce fuel costs and emissions, and we plan to continue investing in our fleet during 2022 to increase our sustainability solutions.

We continue to see strong demand from customers, who are willing to pay a higher day rate for environmentally friendly sustainability solutions that help to reduce fuel costs and emissions and we plan to continue investing in our fleet during 2022 to increase our sustainability solutions. For instance, we ended 2021 was six eco sell units deployed.

Speaker 3: For instance, we ended 2021 with six Ecocell units deployed and driven by strong customer demand, we plan to continue adding Ecocell units in our fleet throughout 2022.

And driven by strong customer demand, we plan to continue adding he could sell units in our fleet throughout 2022.

Speaker 3: In pressure pumping, our spread count recovered to pre-pandemic levels during the fourth quarter, while overall industry activity levels have not yet fully recovered.

In pressure pumping are spread count recovered to pre pandemic levels during the fourth quarter, while overall industry activity levels have not yet fully recover.

Speaker 3: More importantly, due to increased efficiency and the streamlining of our operations, our pressure pumping profitability has significantly improved.

More importantly, due to increased efficiency and the streamlining of our operations our pressure pumping profitability has significantly improved.

Speaker 3: During the fourth quarter, we reactivated our 11th spread, a dual fuel spread, and we expect to reactivate our 12th spread, a tier four dual fuel spread, late in the first quarter.

During the fourth quarter, we reactivated our 11th spread a dual fuel spread and we expect to reactivate our 12 spread a tier four dual fuel spreads late in the first quarter.

Speaker 3: When we reactivate this spread, seven of our 12 active spreads will be dual fuel capable, which is important as customers are willing to pay up for sustainability solutions that reduce fuel costs and emissions.

When we reactivate this spread seven of our 12 active spreads will be dual fuel capable which is important as customers are willing to pay up for sustainability solutions that reduce fuel costs and emissions.

Speaker 3: Pressure pumping pricing has improved at the leading edge, and in 2022, we are focused on maximizing overall profitability of our 12 spreads. We do not have any plans to activate additional spreads after the 12th spread.

Pressure pumping pricing has improved at the leading edge and in 2022, we are focused on maximizing overall profitability of our 12 spreads we do not have any plans to activate additional spreads after the 12 spread.

Speaker 3: Moving to new technology, during the first quarter we expect to complete field trials and start commercialization of our new engine idle management system, EcoStart.

Moving to new technology during the first quarter, we expect to complete field trials and start commercialization of our new engine idle management system Eco start.

Speaker 3: ECOSTAR differs from other systems because it is integrated into our pump control systems, which allows it to monitor our pumping operations and start and stop engines in between stages, eliminating approximately 70% of the engine idle time of conventional operations, resulting in reduced fuel consumption and emissions.

Echostar differs from other systems, because it is integrated into our pump control systems, which allows it to monitor our pumping operations and start and stop engines in between stages, eliminating approximately 70% of the engine idle time of conventional operations, resulting in reduced fuel consumption and emissions.

Speaker 3: In directional drilling, during the fourth quarter, we benefited from increased activity and higher pricing. In 2021, we continued with the rollout of our new impact mud motors and Empower MWD systems, which helped to increase service quality, resulting also in better market share.

In directional drilling during the fourth quarter, we benefited from increased activity and higher pricing.

In 2021, we continued with the rollout of our new impact mud motors and empower them WD systems, which helped to increase service quality, resulting also in better market share.

Speaker 3: With that, I will now turn the call over to Andy Smith, who will review the financial results for the third quarter.

With that I will now turn the call over to Andy Smith, who will review the financial results for the third quarter.

Speaker 4: for the fourth quarter. Thanks, Andy. For the fourth quarter, we reported a net loss of $362 million, or $1.68 per share, which includes pre-tax charges totaling $286 million.

For the fourth quarter.

Thanks, Andy for the.

The fourth quarter, we reported a net loss of $362 million or $1 68 per share, which includes pre tax charges totaling $286 million. These.

Speaker 4: These charges include $267 million of non-cash impairment charges.

These charges include $267 million of noncash impairment charges $10 million of acquisition related expenses of $4 $6 million loss on the sale of assets and a $4 million noncash write off of directional drilling inventory.

Speaker 4: $10 million of acquisition-related expenses, a $4.6 million loss on the sale of assets, and a $4 million non-cash write-off of directional drilling inventory.

Speaker 4: The $267 million of non-cash charges includes $220 million for the retirement of drilling rigs and other drilling equipment, $32.2 million for the retirement of approximately 200,000 frack horsepower, $13.9 million for the retirement of directional drilling assets, and $1.3 million of impairments in our E&P business.

The $267 million of noncash charges includes $220 million for the retirement of drilling rigs and other drilling equipment $32 $2 million for the retirement of approximately 200000 Frac horsepower.

$13 $9 million for the retirement of directional drilling assets and $1 $3 million million of impairments in our E&P business.

Speaker 4: The rig retirements included all of our SCR powered rigs in the U.S., leaving us with 184 AC powered rigs in our U.S. rig fleet.

The rig retirements included all of our SCR powered raising in the U S, leaving us with 184 AC powered rigs in our U S rig fleet.

Speaker 4: All of our rigs in the U.S. are now Apex-class rigs, including 171 SuperSpec rigs, of which 107 are Tier 1 SuperSpec rigs, having added clearance under the rig floor and a third mud pit.

All of our rigs in the U S are now apex class rigs, including 171 Super spec rigs of which 107, our tier one super spec rigs, having added clearance under the rig floor and a third mud pump.

Speaker 4: In pressure pumping, our fleet now consists of approximately 1.1 million frack horsepower.

In pressure pumping our fleet now consists of approximately $1 1 million Frac horsepower.

Speaker 4: As Andy mentioned, we are encouraged by our outlook for drilling and completion activity and pricing and expect total adjusted EBITDA for 2022 of more than $450 million to exceed our CapEx forecast of approximately $350 million by more than $100 million.

As Andy mentioned, we are encouraged by our outlook for drilling and completion activity and pricing and expect total adjusted EBITDA for 2022 of more than $450 million to exceed our capex forecast of approximately $350 million by more than $100 million.

Speaker 4: I will provide more detail on our CapEx forecast as I go through each of our segments.

I'll provide more detail on our capex forecast as I go through each of our segments.

Speaker 4: In contract drilling, higher activity, better pricing, and the contribution from Pioneer Energy resulted in a 46% increase in total contract drilling revenue and a 26% increase in adjusted gross margin.

In contract drilling higher activity better pricing and the contribution from pioneer energy resulted in a 46% increase in total contract drilling revenue and a 26% increase in adjusted gross margin.

Speaker 4: In the U.S., on a per-day basis, the average rig margin per day during the fourth quarter decreased, as we expected, to $5,450 per day due primarily to an increase in labor and rig reactivation costs.

In the U S on a per day basis, the average rig margin per day during the fourth quarter decreased as we expected to 5000 and $450 per day due primarily to an increase in labor and rig reactivation costs.

Speaker 4: At December 31st, 2021, Patterson had term contracts for drilling rigs in the U.S. providing for approximately $325 million of future day rate drilling revenue.

At December 31, 2021, Patterson had term contracts for drilling rigs in the U S providing for approximately $325 million of future day rate drilling revenue.

Speaker 4: Based on contracts currently in place in the U.S., we expect an average of 51 rigs operating under term contracts during the first quarter and an average of 39 rigs operating under term contracts during 2022.

Based on contracts currently in place in the U S. We expect an average of 51 rigs operating under term contracts during the first quarter at an average of 39 rigs operating under term contracts during 2022.

Speaker 4: For the first quarter in the US, we expect another strong quarter of activity growth, with our average rig count increasing by 10 rigs to 116 rigs.

For the first quarter in the U S. We expect another strong quarter of activity growth with our average rig count increasing by 10 rigs to 116 rigs.

Speaker 4: Average rig revenue per day in the U.S. is expected to increase by approximately $800 in the first quarter. And average rig cost per day is expected to decrease approximately $200 per day, leading to a $1,000 increase in average rig margin per day.

Average rig revenue per day in the U S is expected to increase by approximately $800 in the first quarter and average rig cost per day is expected to decrease approximately $200 per day, leading to a $1000 increase in average rig margin per day.

Speaker 4: In Colombia, we expect to generate approximately $16 million of revenue in the first quarter with approximately $3.5 million of adjusted gross margin.

In Colombia, we expect to generate approximately $16 million of revenue in the first quarter with approximately $3 $5 million of adjusted gross margin.

Speaker 4: In contract drilling, we expect approximately $215 million of CapEx spend in 2022.

In contract drilling, we expect approximately $215 million of Capex spend in 2020 to the.

Speaker 4: The majority of this capex is directly tied to activity levels with maintenance and reactivation capex expected to collectively total $120 million.

The majority of this capex is directly tied to activity levels with maintenance and reactivation capex expected to collectively totaled $120 million.

Speaker 4: The remaining $95 million of CapEx is for items that increase incremental revenue opportunities from our existing rig fleet.

The remaining $95 million of Capex is for items that increase incremental revenue opportunities from our existing rig fleet.

Speaker 4: This amount includes approximately $55 million for market upgrades.

This amount includes approximately $55 million for market upgrades.

Speaker 4: $25 million for high-demand sustainability solutions, such as EcoSow and natural gas engines, and $15 million for the purchase of specialty drill pipe that we rent for an additional charge to our customers.

$25 million for high demand sustainability solutions, such as eco cell and natural gas engines and $15 million for the purchase of specialty drill pipe that we rent for an additional charge to our customers.

Speaker 4: We evaluate each of our upgrade opportunities for appropriate contract terms and economics.

We evaluate each of our upgrade opportunities for appropriate contract terms and economics the.

Speaker 4: The majority of the CapEx for market upgrades is intended to meet strong customer demand for Tier 1 SuperSpec rigs.

The majority of the Capex for market upgrades is intended to meet strong customer demand for tier one super spec rigs.

Speaker 4: We expect to upgrade approximately 20 rigs to Tier 1 status.

We expect to upgrade approximately 20 rigs to tier one status this year.

Speaker 4: Premium rigs are receiving higher day rates, and so we expect all of these upgrades to be margin accretive with quick payback.

Premium rigs are receiving higher day rates and so we expect all of these upgrades to be margin accretive with quick paybacks.

Speaker 4: CAPEX to be spent on our sustainability solutions includes 12 ecocell units and additional dual fuel and natural gas engines.

Capex to be spent on our sustainability solutions includes 12 eco sell units and additional dual fuel and natural gas engines.

Speaker 4: With strong demand from customers who are willing to pay a higher day rate for eco-friendly, cost-saving alternatives, we expect these upgrades will be margin accreted with paybacks ranging from one to three years.

With strong demand from customers, who are willing to pay a higher day rate for eco friendly cost saving alternatives. We expect these upgrades will be margin accretive with paybacks ranging from one to three years.

Speaker 4: In pressure pumping during the fourth quarter, we effectively managed third-party delivery challenges and maintained a high level of efficiency while achieving better price.

In pressure pumping during the fourth quarter, we effectively managed third party delivery challenges and maintained a high level of efficiency, while achieving better pricing.

Speaker 4: Pressure-pumping financial results for the fourth quarter exceeded our expectations as adjusted gross margin improved by $3 million quarter-on-quarter to $20.9 million on $183 million of revenue.

Pressure pumping financial results for the fourth quarter exceeded our expectations as adjusted gross margin improved by $3 million quarter on quarter to $29 million on $183 million of revenues.

Speaker 4: For the first quarter, we have already experienced some of the weather related delays that are typical for the first quarter.

For the first quarter, we have already experienced some of the weather related delays that are typical for the first quarter.

Speaker 4: Even when considering these delays, due to better pricing and the full quarter impact of the spread activated in the fourth quarter, we expect first quarter pressure pumping revenue to increase to approximately $200 million with an adjusted gross margin of approximately $27 million.

Even when considering these delays due to better pricing and the full quarter impact of the spread activated in the fourth quarter. We expect first quarter pressure pumping revenue to increase to approximately $200 million with an adjusted gross margin of approximately $27 million.

Speaker 4: Pressure pumping CAPEX is expected to be approximately $100 million for 2022, of which more than three quarters is directly tied to activity levels for maintenance and reactivation CAPEX.

Pressure pumping capex is expected to be approximately $100 million for 2022 of which more than three quarters is directly tied to activity levels for maintenance and reactivation capex.

Speaker 4: We do not expect any additional reactivation cap ex beyond that necessary for the 12th for the 12th spread. We are reactivating in the first quarter.

We do not expect any additional reactivation capex beyond that necessary for the <unk> for the 12 spread we're reactivating in the first quarter.

Speaker 4: The remaining CAPEX is sustainability related and includes some Tier 4 dual fuel upgrades to the engines for our 12th spread, as well as some additional engine upgrades to dual fuel to supplement our existing dual fuel.

The remaining Capex is sustainability related include some tier four dual fuel upgrades to the engines for our 12 spread as well as some additional engine upgrades to dual fuel to supplement our existing dual fuel spreads dual.

Speaker 4: Dual fuel equipment continues to garner higher pricing in the current market.

Youll feel equivalent continues to garner higher pricing in the current market.

Turning now to directional drilling adjusted gross margin for the fourth quarter of $1 million included a $4 million noncash write off of inventory.

Speaker 4: Turning now to directional drilling, adjusted gross margin for the fourth quarter of one million dollars included a four million dollar non-cash write-off of inventory.

Speaker 4: This inventory is no longer useful as we transition to our next generation of in-house engineered MWD tools.

This inventory is no longer useful as we transition to our next generation of in house engineered and WD tools.

Speaker 4: These tools improve the quality of subsurface data acquisition and the overall reliability of our tools.

These tools improve the quality of subsurface data acquisition and the overall reliability of our tools. Excluding this write off fourth quarter adjusted gross margin exceeded our expectation.

Speaker 4: Excluding this write-off, fourth quarter adjusted gross margin exceeded our expectation.

Speaker 4: For the first quarter, we expect revenues to increase to approximately $39 million with an adjusted gross margin of approximately $5.5 million.

For the first quarter, we expect revenues to increase to approximately $39 million with an adjusted gross margin of approximately $5 $5 million.

Speaker 4: In 2022, we expect to invest approximately $15 million of CapEx in directional drilling, the majority of which is for the retooling of our fleet to next-generation mud motors and MWD systems.

For 2022, we expect to invest approximately $15 million of Capex in directional drilling the majority of which is for the retooling of our fleet to next generation mud Motors and <unk> systems.

Turning now to our other operations, which includes our rental technology and E&P businesses.

Speaker 4: Turning now to our other operations, which includes our rental, technology, and E&P business.

Speaker 4: Revenues for the fourth quarter improved to $17.1 million and adjusted gross margin improved to $7.3 million.

Revenues for the fourth quarter improved to $17 $1 million and adjusted gross margin improved to $7 $3 million.

Speaker 4: For the first quarter, we expect both revenues and adjusted gross margin to be similar to fourth quarter levels.

For the first quarter, we expect both revenues and adjusted gross margin to be similar to fourth quarter levels.

Speaker 4: During 2022, we expect to invest approximately $17.5 million in our other operations segment, which is primarily related to maintenance.

2022, we expect to invest approximately $17 $5 million and our other operations segment, which is primarily primarily related to maintenance capex.

Speaker 4: On a consolidated basis, we expect total depreciation, depletion, amortization, and impairment expense of approximately $121 million for the first quarter.

On a consolidated basis, we expect total depreciation depletion amortization and impairment expense of approximately $121 million for the first quarter.

Speaker 4: Selling general and administrative expenses is expected to be approximately $24.5 million for the first year.

Selling general and administrative expense is expected to be approximately $24 $5 million for the first quarter.

Speaker 4: We expect both our effective tax rate and cash tax rate to be close to zero for 2022.

We expect both our effective tax rate and cash tax rate to be close to zero for 2022.

Turning now to our balance sheet during the fourth quarter, we repaid the $50 million balance on our term loan, leaving leaving us with approximately $741 million of net debt outstanding at December 31.

Speaker 4: Turning now to our balance sheet, during the fourth quarter we repaid the $50 million balance on our term loan, leaving us with approximately $741 million of net debt outstanding at December 31st, with no principal payments due until 2028.

With no principal payments due until 2028.

Speaker 4: With our expectation that 2022 adjusted EBITDA will exceed $450 million, we expect to be at approximately one and a half times net debt to trailing EBITDA by the end of 2022. With that, I'll

With our expectation that 2022, adjusted EBITDA will exceed $450 million, we expect to be at approximately one five times net debt to trailing EBITDA by the end of 2022.

With that I'll now turn the call back to Andy Hendricks.

Speaker 3: Thanks, Sandy. First, I would like to thank our team at Patterson UTI and all the parties involved for the highly efficient work that was done to acquire Pioneer Energy Services.

Thanks, Andy first I would like to thank our team at Patterson UTI and all the parties involved for the highly efficient work that was done to acquire pioneer energy services divest the production business and effectively integrate the drilling business. This was a huge amount of work and it was all successfully accomplished within the fourth quarter.

Speaker 3: divest the production business and effectively integrate the drilling business. This was a huge amount of work and was all successfully accomplished within the fourth quarter.

Speaker 3: A couple of weeks ago, I had the honor of being one of the keynote speakers at the World Oil 2022 forecast breakfast, where I gave some of my thoughts on the industry's macro environment outlook.

A couple of weeks ago, I had the honor of being one of the keynote speakers at the world of oil 2022 forecast breakfasts, where I gave some of my thoughts on the industry's macro environment outlook.

Speaker 3: If you thought I was upbeat on the third quarter call, I'm even more upbeat now. It's been a long time since, as an industry, we've had the alignment of various economic factors that have the potential to lead to a multi-year scenario of stability.

If you thought I was upbeat on the third quarter call I'm, even more upbeat now it's been a long time since as an industry. We've had the alignment of various economic factors that have the potential to lead to a multi year scenario stability.

Speaker 3: On the demand side, global oil demand is projected to surpass pre-pandemic levels this year, and it will become increasingly difficult for either OPEC plus or the U.S. to easily fill the gap.

On the demand side global oil demand is projected to surpass pre pandemic levels. This year and it will become increasingly difficult for either OPEC plus or the U S to easily fill the gap.

Speaker 3: And with U.S. EMPs now focused on returning cash to shareholders and less free cash going towards production growth, all this leads to an interesting situation where OPEC plus may now have more control over global oil supply and pricing than they've had over the last decade, which could lead to more pricing stability over the next few years, geopolitical risks aside.

And with U S. E&ps now focused on returning cash to shareholders and less free cash going towards protection growth. All of this leads to an interesting situation, where OPEC plus may now have more control over global oil supply and pricing than they've had over the last decade, which could lead to more pricing stability over the next few years geopolitical risk.

<unk> aside.

Speaker 3: For those of us in the contract drilling and oil field services sectors, where premium equipment is tight, this potential commodity price stability has the making of a multi-year up-cycle with higher activity for a longer period than we have seen over the last decade.

For those of us in the contract drilling and oilfield services sectors, where premium equipment is tight this potential commodity price stability has the making of a multiyear up cycle with higher activity for a longer period than we've seen over the last decade.

Speaker 3: As a result, at Patterson UTI, we are projecting strong EBITDA growth year-on-year, and with a higher activity, we will increase maintenance and reactivation CAPEX, which is the majority of our CAPEX spend, but in addition, we are planning some CAPEX in the areas of technology to improve our position and earnings in the market, but we are careful to ensure that CAPEX investments have a quick payback and a high return.

As a result of Patterson UTI, we are projecting strong EBIT growth year on year.

And with the higher activity, we will increase maintenance and reactivation Capex, which is the majority of our Capex spend but in addition, we are planning some capex in the areas of technology to improve our position in earnings in the market, but we are careful to ensure that capex investments have a quick payback and high return.

Speaker 3: Overall, with our higher levels of activity, improved pricing, and stronger free cash flow, I am very upbeat for the prospects of Patterson ETI to be able to provide stronger returns to shareholders as we progress through what looks like a multi-year upcycle.

Overall with our higher levels of activity improved pricing and stronger free cash flow I am very upbeat for the prospects of Patterson UTI to be able to provide stronger returns to shareholders as we progress through what looks like a multiyear up cycle.

Speaker 3: We have a long history of returning cash to shareholders, over a billion dollars over the past decade. We are pleased to be able to raise the dividends at this time, and as cash flow continues to improve, we will evaluate all reasonable options to improve our cash returns and provide further value to shareholders.

We have a long history of returning cash to shareholders over $1 billion over the past decade.

We are pleased to be able to raise the dividend at this time and as cash flow continues to improve we will evaluate all reasonable options to improve our cash returns and provide further value to shareholders.

Speaker 3: Again, it's an exciting time for Patterson UTI and we are looking forward to the continuing financial growth.

Again, it's an exciting time for Patterson UTI and we're looking forward to the continuing financial growth.

Speaker 3: With that, we'd like to thank all of our employees for their hard work, efforts, and successes to drill and complete wells better each day. Brent, we'd now like to

With that we'd like to thank all of our employees for their hard work efforts and successes to drill and complete wells better each day.

Brent we'd now like to open the call for questions.

Speaker 1: At this time, I would like to remind everyone, in order to ask a question, press star, followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star one. Your first question comes from the line of Chase Mulvihill with Bank of America. Your line is open. Hey, good morning.

At this time I would like to remind everyone in order to ask a question press star followed by the number one on your telephone keypad. If you would like to withdraw your question again press Star one.

First question comes from the line of Chase Mulvehill with Bank of America. Your line is open.

Yeah.

Hey, good morning.

Everybody is doing well today.

Good morning.

Speaker 4: Andy, Andy. So, I guess first question is really around the guidance for 2022. You gave some really strong EBITDA guidance. You said, you know, greater than 450 million. So, if I could kind of peel back the onion a little bit and ask you kind of some macro assumptions, you know, to get to that guidance of greater than 450 million,

Sandy Sandy.

So I guess first question is really around the guidance for 2022, you gave some really show EBITDA guidance, you said greater than 450.

So if I could kind of peel back the onion, a little bit and ask you kind of some macro assumptions.

Get that to get to that guidance of greater than $450 million, where does the rig count needs to go to this year basically where does the horizontal rig count our total rig count where do we need to exit the year to be able to hit that 450 Mark.

Speaker 4: Where does the rig count need to go to this year? Basically, where does the horizontal rig count or total rig count, where do we need to exit the year to be able to hit that 400?

Speaker 3: Yeah, I'll start with that. So, you know, we said at the last earnings call that we think the rig count in 2022 goes somewhere between 650 to 700 for the industry. And we haven't really changed that in our thesis and the way we look at our budget. But we do see that, you know, pricing is improving. And, you know, we've continued to become more profitable in each of the businesses throughout the year. Andy.

Yeah, I'll start with that so yeah, we said at the last earnings call that we think the rig count.

In 2020 to go somewhere between $6 50 to 700 for the industry and we haven't really changed that in our thesis in the way we look at our budget, but we do see that.

Pricing is improving and we've continued to become more profitable in each of the businesses throughout the year Andy.

Speaker 4: Yeah, you know, I don't have a lot to add to that. I would say that, you know, as we look across our rig fleet, even with what we've given you in terms of...

Yeah.

I don't have a lot to add to that I would say that.

As we look across our rig fleet, even with what we've given you in terms of.

Speaker 4: that EBIDTA projection, you know, we're going to be pretty...

That EBITDA projection.

Sure.

Going to be pretty.

Speaker 4: I think we'll be pretty constructive as we look to put new rigs to work, and it won't be that we'll just, you know, our projection isn't really based on a ton of rigs going back to work. We are showing an increase, but we're not really showing an increase that gets anywhere near the rigs that we would have available. Yeah, and this is, you know, when we're giving you this EBITDA, it's really based on our view that profitability continues to improve each quarter.

I think we'll be pretty constructive as we look to put new rigs to work.

It won't be that.

That will just you know what.

Our projection isn't isn't really based on a ton of rigs going back to work and we are showing an increase but we're not really showing an increase that gets anywhere near the rigs that we would have available yeah and this is when we're giving you. This EBITDA, it's really based on our view that profitability continues to improve each quarter.

Speaker 5: Okay. All right. And would you care to, you know, give us some color on kind of where you think, you know, daily gross margins can go to throughout the year? You know, are we going to, you know, be, you know, how much higher can we be than the five and a half thousand a day that you reported in the fourth quarter?

Okay Alright.

And would you care to.

Give us some color on kind of where are you seeing daily gross margins can go to.

Throughout the year.

Are we going to be.

How much higher can we be in the five.

Five and a half.

1000, a day that you reported in the fourth quarter.

Speaker 3: At the leading edge, as I mentioned earlier, we've got some rigs that are earning in terms of revenue per day with technology and ancillary equipment.

At the leading edge as I mentioned earlier, we've got some rigs that are earning in terms of revenue per day with <unk>.

Technology and ancillary equipment that at 30000 or over 30000, a day and my expectation is that.

Speaker 3: at $30,000 or over $30,000 a day. And my expectation is that some of our lesser earning rigs that were contracted last year sometime start to move up closer to that level.

Some of our lesser earning rigs that were contracted last year, some time start to move up closer to that level.

Speaker 3: So, you know, that's why we see, you know, margin improvement and expansion quarter on quarter. Yeah, I mean, you know, we've held off.

So that's why we see margin improvement and expansion quarter on quarter, Yes, I mean.

We've held off and you've seen it in our term contract backlog, but we've held off sort of in this.

Speaker 4: And you've seen it in our term contract backlog, but we've held off.

Speaker 4: in this period of lower pricing, signing a lot of longer term deals. And so now that pricing has come back and it's come back pretty rapidly, you'll start to see our portfolio re-rate at those higher levels. You know, we said the leading edge base day rate on the previous earnings call for the third quarter was in the low 20s. And now here we are in February of 2022 and we're telling you the base rig rate is in the mid 20s.

In this period of lower pricing signing a lot of longer term deals and so now that pricing has come back and it's come back pretty rapidly.

Youll start to see our portfolio re rate at those higher levels, we said, leading edge base day rate.

On the previous earnings call for the third quarter was.

The low Twenty's and now here we are in February of 2022, and we're telling you the base rig rate is in the mid Twenty's and so its moved up quick I don't think theres been an appreciation for how tight the market is for the type of rigs that people want.

Speaker 3: And so it's moved up quick. I don't think there's been an appreciation for how tight the market is for the type of rigs that people want.

Speaker 5: Okay, perfect. So, unrelated follow-up, and I know Mike's there, and I don't know if Mike wants to comment on this, or if y'all want to comment on it, but I know he's probably done the work. But y'all noted that there was 300 Tier 1 Superspec rigs, and if I recall, I think, you know, you guys have talked about 700 total Superspec rigs out there, so that's obviously Tier 1 and what I'll call Tier 2.

Okay perfect.

So unrelated follow up.

I know Mike's there and I don't know if Mike wants to comment on this or a gallon estimate on it and I know he has helped them to work with you. All noted that 300 tier one super spec rigs and if I recall I think you guys had talked about 700 total super spec rigs out there. So that's obviously tier one and what I'll call tier two.

Speaker 5: So, that means that you've got 400 that can be upgraded. I mean, we just heard that 20 of yours would be upgraded to Tier 1. It caught, you know, just less than 3 million a rig.

So that means that you've got 400 that can be upgraded and then we just heard that 28 years will be upgraded to tier one and call. It just less than $3 million of rig.

Speaker 5: When we think about that 400 that could be upgraded from Tier 2 to Tier 1 superspec rigs.

We think about that 400 that could be upgraded from tier two to tier one super spec rigs.

Speaker 5: What do you think those costs will be? I mean, obviously, it's, you know, about $3 million for you guys, but when we look out there across the industry, you talked about it being, you know, expensive and not making a ton of sense for most people at today's day rates, but what's the cost structure look like to upgrade those 400 rigs?

What do you think those costs will be I mean, obviously, it's about $3 million for you guys, but when we look out there across the industry. What are you you talked about it being.

Expenses.

Making a ton of sense for most people in today's day rates.

But what's the cost structure look like to upgrade those 400 rigs.

Speaker 3: So we think it's about 300 rigs in the U.S. that can be upgraded to Tier 1 Super Spec.

So we think it's about 300 rigs in the U S that can be upgraded to tier one super spec.

Speaker 3: You've got a large number of rigs out there, you know, maybe over half that have a draw work down design. And so that's a significant capital.

<unk> got a large number of rigs out there you know maybe over half have a draw works down design and so that's a significant capital spend to be able to make that conversion to get the draw works up and in our particular case, we've got 34 rigs that don't require that conversion and so it's about $2 million each.

Speaker 3: spend to be able to make that conversion to get the drawworks up. In our particular case, you know, we've got 34 rigs that don't require that conversion, and so it's about $2 million each for those 34 to bring that up to Tier 1 Superspec. So we find ourselves in an interesting situation where we think we have an operational and financial advantage in that area to get to Tier 1 Superspec these days because we've been building that drawworks up design since 2012.

For those 34 to bring that up to tier one super spec. So we just we find ourselves in an interesting situation, where we think we have an operational and financial advantage in that area to get to tier one super spec. These days because we've been building that draw works up design since 2012.

Speaker 5: Yep, it makes sense. I know one of your competitors is having to spend six and a half, seven and a half million to get to Tier 1, so nice to see that you can do that at half the price. With that, I'll turn it over. Thanks, Andy.

It makes sense and then one of your competitors, having to spin 657 5 million to get to tier ones. So.

Nice to see that you can do that at half the price.

With that I'll turn it over thanks Andy.

Thanks.

Speaker 1: Your next question comes from the line of Ian McPherson with Piper Sandler. Your line is open.

Your next question comes from the line of Ian Macpherson with Piper Sandler Your line is open.

Thanks, Good morning, gentlemen.

Good morning.

Speaker 6: I was curious, are the term contract

I was curious.

Are the term contracts.

Speaker 6: quarter into the second quarter. I know they're way below leading edge, but are they neutral or creative or dilutive to your expected realized

This quarter into the second quarter.

They're way below leading edge, but are they.

Neutral or accretive or dilutive to your expected realized.

Speaker 6: Day rates and margins in the first quarter. I'm just trying to think about what contract role means for you this year as you as you reprice.

Day rates and margins in the first quarter I am just trying to think about what contract roll means for you. This year as you as.

As you reprice.

Speaker 4: Yeah, everything's rolling up, so nothing's dilutive. Yeah, if I understand your question right, certainly pricing within the term contract backlog has gone up.

Yeah, Everything's rolling up so nothing's nothing's dilutive yeah, if I understand your question right certainly pricing within the within the term contract backlog has gone up.

Okay.

Speaker 6: But this in Q1, are the rigs that are under term contract going to earn a higher rate or above or below average rate, you know, relative to year-to-date?

This in Q1 or the other.

Rigs that are under term contract going to earn a higher rate.

Sure.

Or above or below average rate.

Relative to your total fee guidance.

That's the question.

Speaker 3: We don't have a lot of those older legacy contracts that would be rolling down.

We don't have a lot of those older legacy contracts that we'd be rolling down.

Speaker 3: You know, the majority of everything we have is going to continue to push up. Right. Okay.

Majority of everything we have is going to continue to push out right.

Okay. Okay.

Okay got it and then.

Speaker 6: I'm working backwards from the paybacks that you described on your $2 million upgrade.

If I'm working backwards from the paybacks that you described on your.

$2 million upgrade to tier one super specs.

Speaker 6: Would I be right in deriving about a, you know, 2 or maybe a 2,500, $2,000 to $2,500 day rate premium that you would expect between. A tier 1 super spec and a tier 2 super spec based on today's market pricing. Is that about right? I think it might be even.

It'd be right and deriving about it two or maybe 2500 2000 to $2500 a day rate premium that you would expect between.

Tier one super spec into tier two super spec based on today's market pricing is that about right.

I think it might be even a little higher than that.

Okay. Okay.

Okay.

Speaker 6: Really, I mean, I think just on up on Chase's question, we want to understand we don't want to take your your best data point with, you know. 30,000 are all in revenue per day is your, you know, your highest point. And.

Really I mean, I think just following up on Chase's question, we want to understand we don't want to take your your best data point with you now.

30000 are all in revenue per day is your highest point.

And.

Speaker 6: extrapolate that too quickly and too broadly. But if you're repricing almost your entire fleet within the next 12 months, and you're upgrading most of your fleet to be a tier one super spec next year.

Extrapolate that too quickly into broadly, but if you repriced or are most of your entire fleet within the next 12 months and you're upgrading most of your fleet to be at tier one Super spec next year.

Speaker 6: It's not a crazy extrapolation that the market doesn't change for today's spot rates to be reflective of next year's average rates.

It's not a crazy extrapolation, if the market doesn't change for today's spot rates to be reflective of next year's average rates is it.

Speaker 3: You could certainly get there, but that's why we wanted to call out what we think the EBITDA is going to be this year and help clarify that so that, you know, your extrapolation could fall in line with what we think we're going to do. You know, we don't normally call out EBITDA, but this has been such a big ramp in pricing in all our businesses, not just drilling, that we thought, you know, it was material and important to explain what we think is going to happen in 2022.

You could certainly get there, but that's why we wanted to call out what we think the EBITDA is going to be this year and help clarify that so that you know.

Youre extrapolation could fall in line with what we think we're going to do we don't normally call out EBITDA, but this has been such a big ramp in pricing in all our business is not just drilling that we thought it was material and important to explain what we think is going to happen in 2022.

Okay.

Speaker 6: Thanks, any the last 1 for me, if there's another higher windfall revision. Would we expect that to be just methodically allocated towards another dividend bumper? How are you thinking about. Incremental free cash flow, you know, from here forward.

Alright, Thanks, and then last one for me.

Theres another higher windfall revision.

Would we expect that to be just methodically allocated towards another dividend Bob how are you thinking about.

Incremental free cash flow.

From here forward.

Speaker 3: I'm not sure I. Oh, yeah. In terms of free cash flow, could it be a dividend bump is the question? Oh, so I think we're going to look at all options. Yeah, you know.

I'm not sure.

In terms of free cash flow could it be a dividend bump is the question.

So I think we're going to look at all options.

No.

Speaker 3: There could be some upside, you know, on what we're talking about in 2022, just because of, you know, when we went through our budget process, but.

There could be some upside.

On what we're talking about in 2022, just because of.

When we went through our budget process, but.

Uh huh.

Speaker 3: You know, getting back to what we're going to do with free cash and the use of free cash, you know, we're raising the dividend as of yesterday's board meeting. And we're going to look at all options going forward, whether that's, you know, further increase of the dividend, potential special dividend, share buybacks, anything's on the table, we're highly focused on returning cash to shareholders as we continue to produce free cash flow.

Getting back to what we're going to do with free cash and the use of free cash we are raising the dividend as of yesterday's Board meeting.

And we're going to look at all options going forward, whether that's further increase of the dividend potential special dividend share buybacks anything's on the table. We're highly focused on returning cash to shareholders as we continue to produce free cash flow.

Understood. Thank you Andy.

Thanks.

Your next question comes from the line of Scott Gruber with Citigroup. Your line is open.

Speaker 1: Your next question comes from the line of Scott Gruber with Citigroup.

Speaker 5: Yes. Good morning. Good morning. Morning, morning. I want to turn to pumping, kind of similar line of question. You guys forecast about 13.5% gross margin in one queue. Where do you think that trends over the course of the year? It seems like you're likely embedding high teams in the second half. Is that fair? Yeah.

Yes, good morning.

Thanks, Scott good morning.

Good morning morning.

Let's turn to pumping kind of similar line of question.

You guys forecasts about 13, 5% gross margin Q1 and where do you where do you think that trends over the course of the year.

Like you're likely embedding kind of all the high teens.

Second half is that fair.

Okay.

Yes.

I think Thats I think Thats fair.

Speaker 3: Yeah, so we see a continued progression in gross margin in that business throughout the year quarter on quarter up into the high.

So we see a.

A continued progression in gross margin in that business throughout the year quarter on quarter up into the high teens.

Speaker 5: Gotcha. And then, you know, as you think about, you obviously said no incremental reactivations planned from here.

Got you.

And then as you think about.

You, obviously said no incremental reactivation plan from here.

Speaker 5: But, you know, if there were another reactivation, what level of profitability, you know, would you need to see on that incremental spread? And what type of spare capacity do you have in the business today? You know, do you have the dual fuel on the sideline?

Hi.

Sure.

If there were another reactivation what level of profitability would you would you need to see on that incremental spread.

And what type of spare capacity do you have in the business today.

Do you have.

Yeah, the dual fuel on the sideline.

Speaker 5: or would you likely have to upgrade equipment to bring it back into the market?

Or would you likely have to upgrade equipment to bring it back into.

Into the end of the market.

Yeah, So right now when we activate spread 12, that's it in our plan. We don't have any plan to spin the reactivation capex to activate another spread and our focus is going to be on improving profitability throughout the year and pushing the pricing where we can on some of the spreads that we have agreed.

Speaker 3: Right now, when we activate spread 12, that's it in our plan. You know, we don't have any plan to spin the reactivation capex to activate another spread. And our focus is going to be on improving profitability throughout the year and, you know, pushing the pricing where we can on some of the spreads that we have agreements on that were signed, you know, maybe six months or nine months ago. And so that's really going to be our focus and our team's focus in the pressure pumping business is just improving the profitability.

That's on that were signed maybe six months or nine months ago, and so that's really going to be our focus and our teams focus in the pressure pumping business is just improving the profitability.

Speaker 3: When you look at our CapEx spend, you know, roughly three-quarters of that is, you know, maintenance, and then a quarter has to do with the growth to add the dual fuel. And, you know, that's really all I'm interested in doing this year in terms of pressure pumping.

When you look at our Capex spend.

Roughly three quarters of that is.

Maintenance and in a quarter has to do with the growth to add to dual fuel.

And.

That's really all I'm interested in doing this year in terms of pressure pumping.

Speaker 3: The team has done a fantastic job improving the profitability of this business, becoming more efficient, not just at the well site, but in the actual operation of this business, repairing maintenance costs, et cetera. They're doing a great job. And I think this is a year of just continued improvement of profitability. We don't need to increase market share. We're not chasing market share. We're really trying to improve the margin of profitability and cash flow for the company

The team has done a fantastic job improving the profitability of this business, becoming more efficient not just at the well side, but in the actual operation of this business repair and maintenance costs et cetera. They are doing a great job and I think this is a year of just continued improvement of profitability, we don't need to increase market share, we're not chasing market share we're.

Really trying to improve the margin and profitability and cash flow for the company in that business.

Speaker 3: In terms of excess capacity, we still have around five spreads we could activate. I say around five spreads because it depends, you know, are they going to deep high pressure or are they going to simulfract, but it's around five spreads.

In terms of got it excess in terms of excess capacity.

We still have around five spreads we could activate I'd say around five spreads because it depends you know are they going to deep high pressure or are they going to simulcast but it's around five spreads that.

Speaker 3: That we could continue to activate but right now. We just don't have plans to do so You know based on what we think pricing is going to do for the rest of the year I'm happy where we're at and we'll just continue to move pricing on some of the spreads that we signed agreements on last

That we could continue to activate but right now we just don't have plans to do so based on what we think pricing is going to do for the rest of the year I'm happy where we're at and we'll just continue to move pricing on some of the spreads that we have signed agreements on last year.

Speaker 5: And embedded in the, you know, expectations that the margins go from low teens to high teens, is there, does that reflect incremental pricing from here or just, you know, repricing that's already been secured and getting the dual fuel kind of upgrades appropriately priced in the marketplace?

And embedded in the expectations that margins go from low teens to high teens.

Is there.

Does that reflect.

Incremental pricing from here or just.

Repricing, it's already been secured and getting the.

The dual fuel kind of upgrades appropriately priced.

In the marketplace.

Speaker 3: I think the market's tight, I think the market's short of high quality equipment that's easily available and easily, you know, activated, and I think that leading edge pushes up from here still some throughout the rest of the year, but there's also a lot of repricing that we can do with, like I said, agreements signed six months, nine months ago.

I think the market is tight I think the market's short of high quality equipment, that's easily available and easily.

Activated.

And I think that leading edge pushes up from here still some throughout the rest of the year.

But theres also a lot of repricing that we can do with like I said agreement signed six months nine months ago.

Speaker 5: Understood appreciate the color Andy. I'll turn it back. Thank you

Understood I appreciate the color Randy I'll turn it off.

Thank you thanks.

Okay.

Speaker 1: Your next question comes from the line of Taylor Zurcher with Tudor Pickering Holt. Your line is open.

Your next question comes from the line of Taylor Zurcher with Tudor Pickering Holt Your line is open.

Speaker 7: Andy and Andy, thanks for taking my question. I just wanted to circle back on the topic.

Hey, Andy and Andy Thanks for taking my question I, just wanted to circle back on the topic of.

Tier one super spec rig.

You talked about.

Speaker 7: You kind of called out the differentiating capital equipment items on the rigs. I guess I'm just curious, are there well designs or pad designs that are making these rigs available? I guess I'm just curious, are there well designs or pad designs that are making these rigs

You kind of called out the differentiating capital equipment items on the rigs and I guess I'm. Just curious I mean are there well designs or pad designs that are there.

That are making these rigs are more in Vogue and.

Speaker 7: such that the demand for these rigs is more basin-specific, or are you seeing broad-based sort of premium demand for this sort of equipment?

Such that the demand for these rigs as more basin specific or are you seeing broad based sort of premium demand for this sort of equipment across the various basins and plays in the U S.

Speaker 3: What we're seeing is that the operators enjoy the flexibility of being able to lay out their pads and production equipment however, they want and have a rig that's capable of maneuvering around all that equipment with the drawer tucked.

What we're seeing is that the operators enjoy the flexibility of being able to lay out their pads and production equipment.

However, they want and have a rig that's capable of maneuvering around all of that equipment with the draw works up and certainly you can engineer a pad with the draw works down and you can dig the seller's deeper and reset the wellheads and things like that but then you're designing the pad around the rig and the industry has moved on and.

Speaker 3: And, you know, certainly you can engineer a pad with the drawworks down and, you know, you can dig the cellars deeper and recess the well heads and things like that, but then you're designing the pad around the rig. And, you know, the industry's moved on and, you know, operators enjoy the flexibility of just having a rig that can move around their design versus designing a pad around a rig.

Operators enjoy the flexibility of just having a rig that can move around their design versus designing a pad around a rig.

Speaker 7: Got it. A follow-up on labor, it seems like you're going to have more success passing through some of the labor inflationary costs as we get into Q1 and Q2.

Got it a follow up on labor.

You're going to have more success in passing through some of the labor inflationary costs as we get into Q1 and Q2.

So labor.

Speaker 7: an issue. I imagine staff and equipment's not the easiest thing in the world to do today, and so just curious if you could give us an update on all things labor.

An issue I imagine staffing equipment is not the easiest thing in the world to do today and so I'm just curious if you could give us an update on all things labor how specific the contract drilling given that's where you are likely the most of your reactivation who will be in 2022.

Speaker 3: Yeah, labor is definitely tight. It means we have to work harder to recruit new people into the industry as we continue to grow.

Yes labor is definitely tight.

It means we have to work harder to recruit new people into the industry as we continue to grow.

Speaker 3: But we did some significant compensation increases in the field last year. And so that was already baked into the Q4 numbers, into the results.

But we did have some significant compensation increases in the field last year and so that was already baked into the Q4 numbers into the results and in 2022, we're still going to increase activity, but.

Speaker 3: And in 2022, you know, we're still going to increase activity.

Speaker 3: But looking forward right now, I don't think we have any kind of compensation challenges in the field that we need to address. I think we've already taken care of that. There may be some small things here and there, but nothing major in terms.

Looking forward right now.

I don't think we have any kind of compensation challenges in the field that we need to address I think we've already taken care of that there may be some small things here and there, but nothing major in terms of the compensation for the individuals in the field I think we did a good job addressing that last year.

Speaker 3: compensation for the individuals in the field, I think we did a good job addressing that last year. You know, there are going to be some inflation items in there, consumables, various materials overall, but we've got that, you know, what we consider to be baked

There are going to be some inflation items in their consumables various materials overall.

Overall, but we've got that.

What we consider to be baked into the numbers.

Speaker 7: I'll squeeze one last one in, directional drilling, smaller segment for you guys, but the growth in 2021 has been super impressive. So I know you've got some newer higher end tools and products that you're rolling out and just curious if you could frame for us the different dynamics that play in that business for 2021.

Understood.

Squeeze one last one in directional drilling smaller segment for you guys, but the growth in 2021 has been super impressive. So I know you've got some some newer higher end tools and products that you're rolling out and I'm. Just curious if you could frame for us the different dynamics that play in that business for 2022, as we think about that.

Top line growth and margin trajectory in that business. Thank you.

Speaker 3: Yeah, the team over there at MS Directional has done a fantastic job over the last few years. Can't say enough good things about them. You know, it was a few years ago that we launched some technology efforts to improve some things in our, in the tools that we run in the wells to navigate and steer. And so we've improved reliability, improved service quality, you know, over the last year and a half. And you saw that in all the numbers, you know, in each quarter for 2021.

Yeah. The team over there at Emmis directional has done a fantastic job over the last few years can't say enough good things about them.

It was a few years ago that we launched some technology efforts to improve some things in our and the tools that we run in the wells to navigate and steer and so we've improved reliability improved service quality you know over the last year and a half and you saw that in all the numbers that you know in each quarter for 2021.

Speaker 3: And our market share has increased to the point where, depending on which report you look at, we're probably number three in directional drilling in the US onshore these days. And so we have a very strong position.

And our market share has increased to the point, where depending on which report you look at we're probably number three in directional drilling in the U S. Onshore these days and so we have a very strong position.

Speaker 3: We're not looking to increase market share at this point, and so our directional business will track with overall U.S. rig activity, but we do think there's some opportunities to improve profitability, and we'll be rolling out some more technology this year as well. So really excited about how that business is doing.

We're not looking to increase market share at this point and so our directional business will track with overall U S rig activity, but we do think there's some opportunities to improve profitability and we will be rolling out some more technology. This year as well so really excited about how that business is doing.

Got it thanks a lot.

Speaker 1: Your next question comes from the line of Keith Smackey with RBC Capital Markets. Your line is open.

Your next question comes from the line of Keith Mackey with RBC capital markets. Your line is open.

Speaker 8: Hi, good morning, and thanks for taking my questions. Just wanted to start off.

Hi, good morning, and thanks for taking my questions.

Just wanted to start off maybe in pressure pumping and certainly appreciate your focus on growing the margins and profitability in that business in and sticky.

Speaker 8: pressure pumping and certainly appreciate your focus on growing the margins and profitability in that business and sticking with the 12 fleets. But the question is to add an incremental fleet beyond that 12, what would you need to see in terms of EBITDA per fleet kind of profitability to get another spread back into the field?

Sticking with the 12 fleets, but the question is to add an incremental fleet beyond that 12, what would you need to see in terms of EBITDA per fleet profitability to get another spread back into the field.

Speaker 3: Yeah, I just don't even want to get into that discussion. It's just not in our plan. It's not on our radar. Like I said, we have the potential to activate another five spreads. But I just don't think that we need to do it. I don't think the market needs it. I think the market's tight. And I think we need to get back profitability in this sector, not just us, but everybody. And so we're happy to work on profitability in 22 and pressure pumping and not try to bring more equipment into the market.

Yeah, I just I, just don't even want to get into that discussion. It's just not in our plan, it's not on our radar.

Like I said, we have the potential to activate another five spreads, but I just don't think that we need to do it I don't think the market needs. It I think the market is tight and I think we need to.

Get back profitability in this sector, not just us but everybody in so we're happy to work on profitability in 'twenty, two and pressure pumping and not try to bring more equipment into the market.

Yes fair enough got it okay.

Speaker 8: Yeah, fair enough, got it. Okay, and just on the rig side now, so certainly Tier 1 super spec capacity getting tight, and regular super spec capacity, or Tier 2 super spec capacity also generally tight, and we're certainly seeing the pricing come as part of that. So.

Just on the.

On the rig side now so.

Certainly tier one super spec capacity.

Getting tight.

And regular Super spec capacity.

<unk> to Super spec capacity also generally tight.

Certainly seeing the pricing come.

As part of that so.

Speaker 8: When at all, if at all, do you think the conversation starts to happen on new build? Or are we still not even close to that?

When when it all if at all do you think the conversation starts to happen.

New builds or are we still not not not even close to that.

Speaker 3: That's not even a discussion, not even on the table. There's rigs that are out there and I don't think the overall rig count is going to require new builds.

That's not even a discussion about even on the table. There is theres rigs that are out there and I don't think the overall rig count.

Is going to require new builds.

Speaker 3: I just don't see that happening, don't have any visibility on that at all. We're happy with where we're at, we've got a number of rigs that we can continue to upgrade over 30 that don't cost us very much. And so we're in a good position and I don't think you're going to see new builds, that's just not in the works, not in the discussion.

I just don't see that happening don't have any visibility on that at all.

Happy with where we're at we've got a number of rigs that we can continue to upgrade over 30 that don't cost us very much and so we're in a good position in.

I don't think youre going to see Newbuild Thats, just not not in the in the works not in the discussion.

Speaker 8: Got it. That's very good. And just finally, on the pad design requiring higher rig clearance, are there any particular customers or trends in customer groups where this tends to happen, or is it just more specific or one-off?

Got it very good.

Just finally on the on the pad design, requiring higher rig rig Clarence any particular customers or trends in customer groups, whether it tends to happen or is it or is it just more more specific or one off.

Speaker 3: It's across the board. I mean, you've seen public, you've seen private.

It's across the board I mean, you've seen public you've seen private.

Speaker 3: change the layout of their pads, and you just see less operators that want to engineer the pad for the rig, and more that want the flexibility of having a rig that can maneuver around all the equipment. So, it's across the board.

Change the layout of their pads and.

You just see less operators that want to engineer the pad for the rig and more they want the flexibility of having a rig that can maneuver around all the equipments. So it's across the board.

Alright, thanks, so much.

Thanks.

Speaker 1: Your next question is from the line of Require SEAD with ATB Capital. Your line is open. Thank you for taking my question. Andy, how many rigs were active in Columbia in Q4 and what's the prospects for this year?

Your next question is from the line of require <unk> with <unk> capital. Your line is open.

Thank you for taking my question.

Andy how many.

Rigs were active in Colombia in Q4, and what what's the prospects for this year.

Speaker 3: Yeah, so we had five rigs working in Q4. We expect five, likely the majority of this year, maybe going to six. So it's basically steady from a rig count standpoint. And then the rigs work at varying number of days per month, depending on the programs they're on.

Yeah. So we had five rigs working in Q4, we expect.

Likely the majority of this year, maybe going to six.

So it's basically steady from a rig count standpoint, and then the rigs work it.

Bearing.

Number of days per month, depending on the programs are on.

Speaker 9: Are there any prospects of price increases in the Colombian market as well?

Are there any prospects.

Price increases in the Colombian market is wrong.

Speaker 3: Um, you know, we're looking at it. We're still new to that market, still new to getting to know these customers. So I think for us, that's still a wait and see. But we're very happy with the profitability that we're doing in Columbia and the programs that were on with the customers were on right now.

Hum.

We're looking at it we're still new to that market is still new to getting to know these customers. So I think for us that is still a wait and see but we're very happy with.

The profitability that we're doing in Colombia, and the programs that we're on with the customers. We're on right now.

Speaker 9: And then you talked about the rig clearance, that being an issue, what is the optimal rig clearance? What height do you need for these Tier 1 rigs?

Okay.

And then you talked about the rig.

<unk>.

That being an issue what is the optimal rig plans what do you need for these tier one rigs.

Speaker 3: It's when you put the drawworks up on the rig floor and it's, you know, 21 to 23 feet up. So that's the optimum rig design and we've been building that design since 2012.

It's when you put the draw works up on the rig floor and its 21 to 23 feet up. So that's that's the optimum rig design and we've been building that design since 2012.

Okay.

Speaker 9: And then this last question, you mentioned that there are about 39 on every 39 rig contracts for 2022. What's the number for 2023?

And then just last question you mentioned that there are about 39 whenever you take nine rig contracts.

For 2022, what's the number for 2023.

Yes.

I don't have that handy.

Okay.

Speaker 9: No worries. That's all I have. Thank you very much, sir.

<unk>.

That's all I have thank you very much sir.

Thanks.

Speaker 1: Your next question is from the line of VEBS VASNAV with Coker Palmer. Your line is open. Hey, good morning, and thank you for taking my questions.

Your next question is from the line of <unk>.

<unk> with Coker Palmer your line is open.

Hey, good morning, and thank you for taking my questions.

Good morning, I guess first touching on the land drilling side.

<unk> talked about 30000 of revenues My day, and 25 25000 Geek.

Maybe like that 5000 services.

Is there any way you can see on how many rigs.

You ran you actually you provide those services.

Speaker 3: So we provide, you know, rental drill pipe and solary services and, you know, different levels of technology on a large number of the rigs. And it just so happens is, you know, we're looking

So we provide rental drill pipe ancillary services and different.

Levels of technology on a large number of the rigs.

So happens as we were looking back.

Speaker 3: uh... at what we're doing in the fourth quarter that we've gotten you know a number of rigs that when you add everything up revenue per day total you know that are about thirty thousand and so uh... real pleased with how that's going but you know we're we're very large supplier of rental pipe in the market for premium connections as well

What we were doing in the fourth quarter that we've got in a number of rigs that when you add everything up revenue per day in total.

At or above 30000 so.

Real pleased with how that's going but we're a very large supplier of rental pipe in the market for premium connections as well.

Got it and maybe switching to daily operating cost.

You can help us think about what how do you guys think about nomination.

Any cost.

Excluding line clean blistering disease.

Speaker 3: Yeah, I mean, it's that gets back to what we were saying we're going to do, you know, in general, or about 16 to 16 and a half in cost per day. And maybe.

Yeah, I mean that gets back to what we were saying we're going to do in general or about 16% to 16 and a half.

And.

Cost per day.

Got it okay, and maybe just last one on pressure pumping if I can squeeze himself.

Plus I guess, Nick at least back backend delay do you think that an $8 million EBITDA per fleet.

You want to get too high teens, assuming that 12 fleets.

Probably we're talking low.

Mid teens EBITDA.

John .

If you can help us understand like.

How much of that is already in there.

Books.

Yes, I'll, let Derrick Li to enroll up to that how much more needs to be acquired to get to those levels.

In terms of pricing.

Yeah.

So.

Speaker 3: Just looking at some numbers. So we're already, in terms of gross profit percent, we're already near the mid-teens in what we think we're going to do in the first quarter. And we see that steadily progress into the upper teens towards the end of the year. So I haven't backed into what adjusted EBITDA per spread is. But gross margin.

I'm just looking at some numbers. So we're already in terms of gross profit percent, we're already near the mid teens and and what we think we're going to do in the first quarter and we see that steadily progress into the upper teens.

Towards the end of the year, so I havent backed into what adjusted EBITDA per spread is.

<unk>.

Gross margin continues to improve.

Alright, thank you so much.

Speaker 1: Your next question is from the line of Dan Kutz with Morgan Stanley . Your line is open.

Your next question is from the line of Dan Kurtz with Morgan Stanley . Your line is open.

Hey, Thanks, good morning.

Good morning.

Speaker 8: So, I just wanted to ask, with the retirements that you did from the rigs and the pressure pumping horse power, I appreciate that you guys have kind of given us a lot of detail on maintenance capex. So, we could probably kind of back into an estimate here, but I'm just wondering if there would be any opportunity.

So I just wanted to ask with the.

With the retirements that you did from.

The rigs in the pressure pumping horsepower.

I appreciate that you guys have kind of given us a lot of detail on maintenance Capex. So we could probably back into an estimate here, but I'm just wondering if.

There would be any opportunities to kind of.

Speaker 1: pull some parts off of that equipment to reduce your maintenance costs for your active capacity in those segments.

Wholesome parts off of that equipment.

To reduce your maintenance costs.

Active capacity in those segments.

Speaker 4: Yeah, so when we talk about retiring a rig as an example,

Yeah. So so when we when we talk about retiring.

Our rig as an example.

The way that those assets get carried are we sort of carry them as components. So not necessarily every component on that rig was retired but the majority of that rig was retired and it's no longer a marketable piece of kit that doesn't mean that every component that would have been on that rig is necessarily not useful.

But those werent included in necessarily the charge right. So those assets are still on our books and there'll be useful going forward.

Speaker 10: Got it. That's helpful. And I just wanted to ask.

Got it that's helpful.

And I just wanted to ask it.

I wanted to ask about.

Speaker 10: You guys did the service rig and wireline, the best you could from the Pioneer assets. I wanted to ask, kind of, A, is there anything else that you guys might be looking to the best or any other opportunities to bring some cash in there? And then, I guess, on the other side of the coin.

You guys did.

This service Megan wireline and.

Sure.

I wanted to ask kind of a is there anything else that you guys might be looking.

Or any other opportunities to bring some cash in there and then I guess on the other side of the coin.

Speaker 10: Would you guys be open to any kind of bolt-on acquisitions or anything maybe from a technology perspective or sustainability? Just wondering if you guys would be open to opportunities there.

Would you guys be open to any kind of bolt on acquisitions or anything maybe for you know from a technology perspective or sustainability just wondering.

If you guys would be open to opportunities.

Speaker 4: Yeah, I'll take the first part on Pioneer. You know, after the sale of the production services business, what we're left with is what we wanted when we acquired Pioneer. So there's nothing left that we would want to get rid of. On the bolt-on acquisition side, I'll let Andy address that. Yeah, in terms of acquisition for any improved sustainability, right now, we're really happy with our organic engineering.

Yes, I'll take the first part on pioneer.

After the sale of the production services business, what we're left with is what we wanted when we when we acquired pioneer. So there's nothing left that we would want to get rid of.

On the bolt on acquisition side I'll, let Andy address that yes in terms of acquisition for any improved sustainability right now, we're really happy with our organic engineering.

Speaker 3: projects and products and services that are coming out. We continue to do things on software for engine management control. We've refined the output of the Ecocell and the lithium battery loads and the way that power management works to be able to maximize fuel savings and reduce emissions.

Projects and products and services that are coming out we continue to do things on software for engine management control.

Refined the output of the eco cell in the lithium battery loads.

And the way that power management works to be able to maximize fuel savings and reduce emissions.

Speaker 3: So I'd say, you know, right now we're just focused on our processes and that's going real well.

So I'd say right now, we're just focused on our processes.

That's going real well.

Great. Thanks, a lot guys I appreciate it.

Thanks.

Speaker 1: Again, if you would like to ask a question, press star followed by the number one on your telephone keypad. Your next question comes from the line of John Daniel with Daniel Energy Partners. Your line is open.

Again, if you would like to ask a question press star followed by the number one on your telephone keypad. Your next question comes from the line of John Daniel with Daniel Energy Partners. Your line is open.

Hey, guys good morning.

Speaker 10: I know you don't want to bring more of the frack capacity back this year, but I'm curious

And I know you don't want to bring more of the Frac capacity back this year.

But I'm curious.

Speaker 10: hypothetical scenario, a customer comes to you and says, hey Andy, we really want you to evaluate providing us an electric solution.

Hypothetical scenario a customer comes to you and says Hey, Andy we really want you to evaluate.

Providing us an electric solution.

What do you do.

Speaker 3: I am not interested in electric solutions. I just don't think it...

I am not interested in electric solutions.

Don't think it.

Speaker 3: So you want me to, everybody says electric. It's natural gas. Let's just call it what it is. And you've got to have a natural gas source. You've got to have some kind of turbine generator or recip engine producing electricity. You've got to have VFD housing, you've got to have cables, you've got to have wiring.

So you want me to everybody says electric it's natural gas, let's just call. It what it is and you've got to have natural gas.

Source, you've got to have some kind of are.

The turbine generator or Recip engine, producing electricity you Gotta V F D hasn't yet F cables, yet at wiring.

Speaker 3: That's not something that I want to do. And trust me, we know how to do it. We have an electrical engineering division. We own thousands of electric motors in our rig business with VFD controls. So we're very familiar, but I don't see the return on electric.

Something that I want to do and Trust me, we know how to do it we haven't electrical engineering division we own.

The electric motors, and our rig business with VF decontrol, So we're very familiar but I don't see the return on electric.

Speaker 10: Fair enough, let me try this, let's assume you want to do more tier 4 dual fuel upgrades, are you better off...

Fair enough, let me put it tried to.

Let's assume you want to do more tier four dual fuel upgrades are you better off just buying brand new trailers from the the packager or do you take one of those five fleets that's parked against the fence.

Speaker 10: packager or do you take you know one of those five fleets that's parked against the fence like what's the advantage of doing one?

Like what's the advantage of doing one versus the other and retrofitting it.

Speaker 3: You know, we've just done a write-down on equipment, and we're really happy with the high quality of the equipment that we have in the fleet as of today. In a hypothetical, it would make more sense for us to do a core swap and just do new engines coming out with a dual-fuel package.

We've just done a write down of equipment and we're really happy with the high quality of the equipment that we have in the fleet as of today.

In a hypothetical it would make more sense for us to do a core swap.

Just do you know new engines coming out with a dual fuel package on it.

Speaker 3: If we were going to go down that path, but I'll go back to what I said earlier, which is we're at number 12 coming up and that's it. No, I'm not. I get that. I'm just trying to understand a couple.

If we were going to go down that path, but I'll go back to what I said earlier, which is we're at number 12 coming up and that's it.

No no I guess I'm, just trying to understand coupled with several things.

But economically for us.

Speaker 3: Everybody's different, but economically for us, it would make more sense to do a core swap and just put a new engine on an existing trailer.

Everybody is different but economically for us.

Would make more sense to do a core swap and just put a new engine on an existing trailer.

Okay and I'm curious if you can answer this as you look I know you mentioned youre going to do some.

Speaker 10: And I'm curious if you can answer this, as you looked, I know you mentioned you're going to do some sort of engine swaps, if you will, this year, and it's in the budget. What is what is the lead time today on that?

Sort of engine swaps, if you will this year and it's in the budget.

What is the lead time today on that.

Speaker 11: Tier 4 engine if you called up one of the major OEMs right now.

Tier four engine.

You called up one of the major Oems right now.

Speaker 3: I think, so some of the things we're going to do is just do more dual fuel kits on not a full engine swap, and we are going to do some engine swaps to round out the spread number 12 that's going out, but I would think, you know, on all that equipment, you're in the range of six to nine months is, I think, where we're at.

I think so some of the things we're going to do is just do more dual fuel kits on.

Not in full engine swap and we are going to do some engine swaps.

To round out the spread number 12, thats going out, but I would think.

And all of that equipment, you're in the range of six to nine months.

I think where we're at.

Alright, and then.

I'll ask one more dominance in central at the end of the call here that you guys sell that.

Speaker 11: I'm going to ask one more dumb one since I'm towards the end of the call here. The EcoCell, that concept, what's the application to the FRAG business?

That concept.

Whats the application to the Frac business if any at this point.

Speaker 3: So, you know, the only application that that I would see is if we took the blenders and turn them to electric and then you could, you know, minimize power.

So the only application that that I would see as if we took the blenders and turn them to electric and then you could.

Minimized power requirements by helping with the eco sell there, but it would take just because of the the horsepower difference in a frac spread fracs.

Speaker 3: Requirements by helping with the ecocell there, but it would take you know Just because of the the horsepower difference and a frac spread you know a frac spread is You know the equivalent of five to six drilling rigs in terms of total horsepower and power consumption

Frac spread is the equivalent of five to six drilling rigs in terms of total horsepower and power consumption and so you would be talking about a large number of <unk> cells in a very large number of lithium batteries.

Speaker 3: And so you would be talking about a large number of ecocells and a very large number of lithium batteries to do that on some kind of an electric system.

To do that on some kind of an electric system.

Okay.

Fair enough well I appreciate the time as always.

Thanks.

Speaker 1: There are no further questions at this time. I will now turn the call back over to Mr. Andy.

There are no further questions at this time I will now turn the call back over to Mr. Andy Hendricks.

Speaker 3: I'd just like to thank everybody once again for dialing in today and thank our team at Patterson UTI.

I would just like to thank everybody once again for dialing in today and.

Thank our team at Patterson UTI.

Appreciate it.

Ladies and gentlemen, and thank you for your participation. This concludes today's conference call you may now disconnect.

Speaker 12: Ladies and gentlemen, thank you for your participation. This concludes today's conference call. You may now disconnect.

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Sure.

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Yeah.

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