Q2 2023 Patterson-UTI Energy Inc Earnings Call
Ladies and gentlemen dishes. The operator today's call will begin momentarily. Thank you for your patience.
[music].
Thank you for standing by at this time I would like to welcome everyone to the Patterson U T. I energy second quarter 20, twenty-three earnings conference call. All lines had been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question.
During this time simply press star followed by the number one on your telephone keypad.
You would like to withdraw your question again press Star one. Thank you Mike <unk> Vice President of events to relations you may begin your conference.
Good morning.
Oh, Gee I energy I'd like to welcome you today's conference call to go through results for three months ended June 30th 2023.
Colby <unk>, Chief Executive Officer, any Smith, Chief Financial Officer, and my hold on the Chief operating Officer.
A quick reminder, that statements made in this conference call that state the company from management plans and intentions.
<unk> expectations are predictions for the future of forward looking statements. These.
These forward looking statements are subject to risks and uncertainties as disclosed in the company's SEC filings, which would cause the company's actual results to differ materially the.
The company undertakes no obligation to publicly update or revising any forward looking statements.
Statements made this conference call include non-GAAP financial measures required reconciliation is to get financial measures are included on our website at <unk> Dot Com and then.
The company's press release issued prior to this conference call and.
And now it's my pleasure to turn the call over to Andy Edric for some opening remarks sandy thanks, Mike.
Good morning, and welcome to Paterson U T a second quarter conference call.
[noise] drilling visits performed very well with sequential increases in both revenues and margins.
Contract renewals favorably impacted our average revenue and adjusted margin on a per day basis all.
Setting the slight decline in our retail.
The improvement in contract drilling revenues and margin during the second quarter met our expectation in our rig count outperform the broader industry decrease.
The decline in industry activity had a more significant impact on our pressure pumping business with volatility in white space impacting results.
The commodity price volatility in June led to some customers deciding to reduce drilling Andover completion activity.
For us the decrease in Frack activity occurred much faster than the decrease in a rig count and as such we believe our pressure pumping activity has already reached the trough here in July while we expect additional rig releases over the next few weeks.
With the recent strength in oil prices, along with natural gas futures in contango, we believe the industry rig count as near bottom and both rig count <unk> activity will improve later in the year end in 2024.
And contract drilling we ended the second quarter with 127 accurate rigs and expect a reduction of approximately 10 rigs during the third quarter.
Which six have already been released in two more expected to occur within the next week.
These releases are the result of notifications received primarily in late June .
Flowing these near term rig releases, we expect our rig count to stabilize and are optimistic that the recent strength in oil prices may positively impact future drilling activity.
Despite recent rig releases day rates remained strong with recent contract renewals for Superspec rigs in the low to mid thirties, including ancillary revenue.
As previously discussed we continued to prioritize margins over activity.
And pressure pumping we believe the declining activity is already behind us and we have additional work scheduled to begin later this quarter.
Based on current activity levels, we stack the tier two diesel spread in order to accelerate its conversion to a tier for dual fuel.
When this conversion is complete 10 of our 12 spreads will be doing is capable including four spreads it will be tier for dual fuel, which better positioned positions us to take advantage of what we expect to be increasing completion activity later in the year and in 2024.
Pressure pumping pricing has been challenged recently given the decrease in activity, but the market pricing for dedicated work is held up better than spot work.
With that I'll turn the call over to Andy Smith will review the financial results for the second quarter. Thanks Sandy.
Net income for the second quarter was $84.6 million or 40 cents per share, which included seven $9 million of merger of integration expense and $3.8 million of impairment expense in our E&P business.
During the second quarter, we repurchased 1.8 million shares which brings the total repurchases under our share repurchase program through the first half of the year to seven 4 million shares or approximately 3.5% of the shares that were outstanding at the beginning of the year.
Including $33.5 million dividends flare returned approximately $126 million of cash to our shareholders for the first six months of 2023.
At June 30th $281 million remained under our share repurchase authorization how.
However, our ability to repurchase shares during the third quarter may be limited due to the pending merger with next year.
Remain committed to targeting a return of 50 per cent of the free cash flow to shareholders through a combination of dividends and buybacks.
Through the first half of 2023 were well ahead of this target as we opportunistically repurchase shares during the first quarter.
Based on our outlet for the second half of the year, we're lowering our 2023 capex forecast at $485 million.
This forecast is comprised of approximately $280 million of Capex for contract drilling $140 million for pressure pumping $20 million for directional drilling and $45 million for our other businesses and general corporate purposes.
And contract drilling average adjusted rig margin per day in the U S increased $1030 sequentially to $16910 driven by a $1190 increase in average rig revenue per day to $35940.
At June 30th 2023, we.
We add term contracts for drilling rigs in the U S providing for approximately $760 million a future de ray drilling revenue based.
Based on contracts currently in place in the U S. We expect an average of 71 rigs operating under term contracts during the third quarter of 2023, and an average of 44 rigs operating under term contracts over the four quarters ending June 30th 2024.
And Columbia second quarter contract drilling revenues were $12.9 million with an adjusted gross margin of $3.7 million.
For the third quarter in the U S. We expect our average rig count will be 119 Riggs.
Average revenue per day is expected to be approximately $35500. An average rig operating cost per day is expected to be $19400, which reflects a slight increase in operating costs associated with the number of rigs being stack of this quarter.
And Columbia, we expect to generate approximately $8 $4 million a contract drilling revenue during the third quarter with adjusted gross margin of approximately $2 million.
And pressure pumping during the second quarter increased wide space in the calendar year in the calendar and lower pricing on primarily spot market work contributed to a sequential decrease in revenues and margins <unk>.
Second quarter pressure pumping revenues were $250 million with an adjusted gross margin of $53.8 million.
For the third quarter, we planned to operate 11th spreads we have had substantial wife space in July , but we expect improving utilization through the remainder of the quarter.
Maintaining enough crews for the increasing work will negatively impact margins in the third quarter. Accordingly for the third quarter pressure pumping revenues are expected to be approximately $230 million with an adjusted gross margin of $37 million.
And our directional drilling segment, we experienced a decline in revenue in margin during the second quarter due primarily to reduced activity levels.
Directional drilling revenues were $55.1 million in the second quarter with an adjusted gross margin of $7.8 million for.
For the third quarter, we expect directional drilling revenues to decrease to $52 million. Although expected adjusted gross margin is expected to be approximately flat with the second quarter.
And our other operations, which includes our rental technology and E&P businesses revenues for the second quarter were $21.1 million with an adjusted gross margin of $8.3 million.
For the third quarter, we expect revenues and adjusted gross margin to be similar to the second quarter.
On a consolidated basis in the second quarter of the total depreciation depletion amortization, an impairment expense amounted to $127 million, including $3.8 million of impairment charges that are E&P business for.
For the third quarter, we expect total depreciation depletion amortization an impairment expense.
Of approximately $122 million.
Selling general and administrative expense for the third quarter is expected to be approximately $31 million.
Are effective tax rate for 2023 is expected to be approximately 17%, although we do not expect to pay any significant U S. Federal cash taxes with that I'll now turn the call back to Andy hindrance.
Thanks Sandy.
<unk>, we are constructive on the overall U S onshore market.
With W. T I trading above $75 and natural gas futures about $3.50 and four months.
E&P, operator should see significant improvement in there well economics.
We expected some operators will increase your activity and drooling incompletions by year end and into 2024.
It's 2025 is planned to be a big year for LNG export, we expect to see activity and gas basins recover in 2024 to previous levels or higher.
With the increasing activity in the gas markets, we expect overall utilization in pricing to improve in the next year across the U S. A.
U S onshore market is poised remained steady and strong for the foreseeable future.
Also we are very excited about the recent announced transactions to strengthen our position as a leading provider of drilling and completion services in the United States.
The merger with next year will bring together to top tier and technology, driven drilling and well completions businesses, creating a leading platform at the forefront of innovation.
Similarly, altera is leading position in the PDC drill bit business will expand our operational in technology platform expand our data portfolio and broaden our geographic footprint through strong relationships with key international customers, especially in the middle East.
We continue to work toward closing these transactions and look forward to welcoming employees from both next to your annual Tara Patterson UTI team.
With that we'd like to thank all of our employees for their hard work efforts and successes to help provide the world with oil and gas for the products that make people's lives better.
Cheryl would now like to open the call to questions.
She'll ask a question please press star one.
On your telephone keypad.
Next question is from Canada.
Cameroonian J P. Morgan, perhaps your line is open.
Good morning Indian team and do you guys have been able to kind of hold.
Leading a day rates at attractive levels, you mentioned low to mid thirties, you know as we think about you know 2024, you know what's your confidence in being able to hold those types of of day rates as we started thinking about kind of fine tuning our model.
You know for next year.
As we mentioned before and good morning, Arun as we mentioned before we're really focused on trying to maintain.
Hey rates and margins not focused on the market share things have gotten a little bit more competitive recently when you're not on term contract and we decided we don't want to fight all these and our rig count is gonna go down a little bit but this is more of a softness that we see improving later in the year and certainly going into next year.
But you know, it's our objective to try to maintain pricing, where we can and when you look at the leading edge you know down into maybe low thirties to mid thirties, and that's including everything it really hasn't come down that much. So let me end it over to my colleague from he'll have some more comments on that too I think that's the thing that I would add is I mean for us leading.
Hedge this quarter is meant renewals.
And customers and clients.
There's there's probably some work out in the market.
A bit more competitive than that but if you think about it looking forward.
Commodity prices stay in the more recent range going forward and we're very confident that pricing is going to be stable with some upside as we move into the next year.
I think I think there it really depends on you know where your city, but.
We really do not new spot work in the drilling business. If we're not working with programmed renters, we don't chase that work.
And I think that's worked well for us.
You're seeing relatives discipline across large public contract drillers, so we're still competitive but there is relative discipline there as well.
Great.
Andy follow up on on Altera, you know I I think he announced us along with the net.
The next transaction, but wanted to get your thoughts on.
On what the potential earnings power.
Of that entity will be I think he paid about 370 million cash about 35 million shares, but how should we think about kind of an EBITDA type of run rate and it made me update the thoughts on when you expect that deal to close.
Yeah, we laugh said that you know, we expect twenty-three EBITDA for them to be $160 million to $180 million.
We think this has upside next year for a variety of reasons you know sent me some in the U S and definitely international and some offshore as well. So we have decided exactly how are we going to be reporting. This in the filings going forward, but we do see upside to the 160 to 180 this year.
Super helpful. Thanks.
Your next question is from Scott Krueger at the City. Please go ahead. Your line is open.
Yeah good morning.
Good morning, good morning.
So just curious on how things develop as the the rig count starts to improve here essentially and four Q.
24, so your conversations mmm, the customers that could be putting incremental riggs to work are they demanding concessions to the current spot or are they comfortable with the current spot.
And if they are gonna be any concessions would you reserve your spirit, making capacity.
Until the market tightens further.
So you know I don't think we would give any concessions from where we are now you know I think it was the rig count starts to move up later this year and into next year and I think primarily driven by natural gas basins. You know I think that you know leading edge actually has the potential to move up because you know we're still relatively high utilization.
<unk> and that's gonna push higher in the next year, Mike any comments on that I think you've covered is.
Again, I go back to the commodity prices when we're in this range. It takes a lot of pressure off.
You were.
Three or four weeks ago.
Maybe you are getting to a different answer, but I think a lot of it depends on where we're at.
Perfect commodity standpoint.
Yeah I gotcha.
Certainly helps.
And just thinking about the potential magnitude of the recovery.
You know we're in line with with your view that will get a full recovery on the gas side, how should we think about the oil side.
80, 80 dollar T I S.
Price.
Can hold and there are some costs relief, particularly.
The table is coming down.
How many how many where where do you think we could we could.
We could recover next year [laughter] and I don't think I want I don't think I know exactly what the number is going to go to next year, but you know you look at where the bedroom use rig count is now where it was earlier in the year you get recovery and gas you know you're probably pushing over 700 rigs in the first quarter next year, but I you know I think.
It just adds upside from where we are.
Okay, and that was and stuff like that I was curious what your thoughts. Thanks. Thanks Mandy.
Your next question is from <unk> benchmark. Please go ahead.
Good morning, good morning.
I appreciate the the color commentary that way and the perspectives on the outlook. So.
And in the context of.
The land drilling market you know it appears to me that you know.
The the pricing dynamic have stabilized and yet thank you reference kind of low thirties to mid thirties.
But it is there any incremental company.
Couple of your peers are talked about maybe some incremental slippage in cash margin is some kind of <unk> that might've been price at a higher level kind of coming back into the the current market elements. Yeah. What do you think about your <unk> is everything that you get a book out for the rest of this year got it solidly in that 30.
Two to 35 ranch or D. C C. Some slippage cashed margin going into the fourth quarter.
You know I think right now, it's it's gonna be pretty steady I think we'll have to wait and see how fourth quarter plays out and what the rig count does towards the end of the fourth quarter.
Okay and then.
A follow up in in the context of the of the Frack market as you added you're Gonna go from 11 cruise to 12 <unk> here in the fourth quarter.
It is you know run the marathon the revenue per crew that you're expecting the third quarter extrapolate that into the fourth it looks like.
Fourth quarter revenue could approach second quarter levels, but logically to me that doesn't seem to make sense given the market dynamics. So.
How how should we think about you know the the frac revenue progression going out again into fourth quarter.
You know I think let me, let me just kind of explain what happened and Q2 and what we're seeing from so far in Q3, and it's really about towards the end of Q2, we had an acceleration in white space and we're starting off in July with a lot of white space in the calendar and pressure pumping and it it only warrants us working.
<unk> spreads in the quarter, but we're seeing more data more dedicated work layering in at the end of the third quarter and so it's makes sense to you know have that 12 spread working in the forest. So we're carrying some extra cost and the third within the schedule stars surround out a lot more towards the end of the third quarter and going into the fourth quarter with them.
Much less white space.
So you know a lot of what's happening right now both you know for our drilling rigs and for pressure pumping as a result of where commodities were a couple of months ago, well commodities or a different space right now and so if you look forward a couple of months if it stays at this level then you know our schedules for the for the Frack looks a lot better.
Yeah, That's fair that's fair appreciate that color. Thanks. Thanks.
Your next question is from gang Ponce, sorry Barclays. Please go ahead with your line is open.
Hey, good morning, guys I I know you talked about having some confidence at the rate Count's gonna bottom he'd already talked to they said 10 rags and six came off in tomorrow, and we'll get to more after that.
Are you just having conversations around starting rigs up in the fourth quarter ended the third quarter are you signing rigs yet just a little more color around your confidence that we'll see break break start being added as we get towards the end of the year.
I think it's really just for US right now it's based on where the commodities are trading our customers are going to start their budget cycles here pretty soon and we feel like you know when commodities are at this level and this has happened historically that soon soon after their budget cycle or even sometimes in the middle we start to get phone calls.
To accelerate things, if if commodity stage, where they are.
You know these levels I don't think you'll see the traditional Q for that gets a little bit soft at the end I think you'll see a fairly stable Q for going into the end of the year.
Got it that's helpful switching over to pressure Pummelling, obviously wife stays days is putting downward pressure on your profitability can you just talk about when you merge with next year and you fall into the next year integration strategy, how how should how should we think about those synergies that you put on lock.
What are what are you missing today that next year provides and where where do you expect profitability to go as you continue to upgrade these acids to next Gen and you fall into the wells and integration strategy. The next year brings to the table.
If you look at.
Fleet of 12 spreads their their.
Their performance for the customers are working for is very strong, they're very competitive and we're going to have 10 dual fuel spreads. So it's very marketable 12 spreads that we have as we roll it into next year, what we really gonna gain is the integration of all the other ancillary services that we can layer on there whether it's wireline.
On logistics, San handling things like that you know the.
The power fuel systems that they have for natural gas bleeding at the well site. So we'll be able to later that over time on our 12 spreads and that's where you get a lot of upside on the 12 spreads that we're running today.
Great I appreciate it I'll turn it back.
Your next question is Keith.
B C capital markets. Please go ahead to your line is open.
Hi, Good morning, just wanted to start out on the pricing and the drilling market in what you are seeing in that low to mid thirties stay right can you just talk maybe about some of the regional dynamics, we heard earlier in the year of course that gas gas basins, particularly a haynesville were softening.
More than than oil basins, but with some of those rigs moving over to oil basins, maybe the pricing. There has taken a hit so can you just kind of run us through what you're seeing in the various basins for pricing and how you think that will play out as as we go through this modest recovery and rig counts.
Yeah. If you look through the year you know it really kind of started with the haynesville getting soft and then other basins and feed into Henry hub like South, Texas Midcon, you know those various basins. It produced gas and so that freed up rigs some of those rigs left gas basins and pushed into oil basins, we didn't actually move any riggs from gas.
[noise] into oil.
We're leaving our rigs where they are and we think you know there's upside there.
The northeast gas held pretty steady through most of the year up until recently, but I think they are feeling a little bit more stress in the northeast. So I think it's a little bit of slowdown up there not to the extent that we're seeing.
And the Haynesville and in other areas tied into Henry hub, but a little bit of stress up in the northeast and I think that's going to affect things for a little bit but Ah again, you know just looking at the Ford strip at that holds in all this stress gets relief for our E&P customers and their economic start to improve my joint add anything on yeah, I I think your your concepts.
Probably right. If you look at a at a hotter base and lockout pardon me.
If there are some new activity.
It's going to be competitive.
We really haven't participated in that.
Lawson bands out there Buddha price.
You know I think for us, it's been pretty stable across the markets.
Because we're not.
You know, we're not gonna Chase that work if it's not in the range that we're looking for.
We're near a large drilling contractor and you work a large number riggs when you lose a few like we've had and we're only down about 12% since the beginning of the year on our projections.
You know that's not a huge move for us for your smaller drilling contractor and you lose the same number of rigs that's a big hit and you've got to work hard to keep rigs working at that point, we get that there's you know <unk>.
Competitive bids out there for rigs, but we don't change that.
Got it makes sense and just to follow up on the pressure pumping side can you talk a little bit about the timing you expect for the the the.
Tier for dual fuel conversion, taking b in the field like should we be thinking about Q4 is a full quarter of 12 spreads or will that be partially through the through the quarter would you say.
I would think about it is Q4.
You know, it's it does take a little bit of time.
And you know, sometimes we mobilize one of those we may still be adding some more of the tier for dual fuel trailers, while we started to work, but I still think about it is Q4.
Got it thanks very much.
Your next question is.
<unk> Bank of America. Please go ahead your line is open.
Hi, Good morning, 90 and 90.
Good morning morning.
Hi, I guess I I guess I'll start with maybe a follow up on your expectation perfect, calling because it seemed to make that a stomach M. As in that the industry might be adding links towards the <unk> you have to get some some clarity on a clarification on that it sounds like that.
<unk> on the on the side and the gas site of activity rebounded multiple 2024 things or anything I just wanted to find out if that's correct and then what is driving back is it <unk> how should we think about who was driving that I'll take <unk>.
I'm actually upbeat on both oil and gas when you look at Q4, and you look at where the forward strip as you know, we do actually have some gas customers that.
That will probably drill into where that forward strip as we got gas customers today that are already layering and hedges.
For next year it over $4. So.
While oil is certainly in a good spot right now and I'm upbeat on that I'm upbeat on on both.
Yeah, I think we've had conversations and some of the gas stations for queue for start ups.
They are there for next year's programs, but but they'll get started a little bit early.
So I think we're seeing it on.
On the question on the public's and privates I would just say the way to think about that as the privates typically react a little quicker either direction.
So I wouldn't be surprised.
Maybe Q4, they may outpaced the public's, but there's gotta be.
A smaller switch so it's you know I don't I'm.
I'm not sure we can really call it.
But I think just generally privacy react a little quicker.
Right right. Okay. Okay no perfect. That's very helpful. And then maybe a quick follow up on the on the bench pumping how're you doing commentator on activity Elevens Canadian bitcoin going back and swelling the fourth Cornell.
How can we think about that trouble entering 20th 20th <unk> you had contemplated putting the 13th but I don't think the market I know the <unk>. The the next few days I was standing so that might change the dynamics right, but how should we think about <unk> would you be adding that <unk>.
That's it I appreciate that question, but it's tough to talk about 2000 2004, yet.
Address out on the next call when we're looking at a much larger fleet of over 40 Frack spreads.
Okay, No I guess I got a mini carried away with all that outstanding Bill [laughter]. Okay. Thank you I've done it back thanks.
Your next question is from Jim <unk>.
And James. Please go ahead your line is open.
Hey, good morning, guys.
On the Capex front, Andy the remaining 485 that relatively spread out over the back half.
Or is it kind of distributed differently than evenly no it's pretty spread out over the back half.
And as you pointed out again a lot of that is you know as we've come back into some activities fallen off we've seen some maintenance cats come back.
Some of the growth items that we had in there we're sort of committed and that will push a few out a little bit, but it should be pretty spread over the back half of the year.
And I know this will be a tough question, but as you think about where you're looking at activity based on the kind of optimistic view heading into next year. If if you were talking apples and apples do you think your Capex next year would be.
<unk> from from this year down just because you're not gonna be reactivating a number of rigs like you did in 2023.
I realized all that old.
It depends on you know.
Maintenance Capex will be what it is right I mean, it's obviously linear with with activity on the growth side again, as we put riggs back to work.
You know it depends on your point of view as to where you think the rig count as going ultimately in 2024 as to whether or not we would need any kind of significant upgrade to remember that a lot of the upgrades that we were doing this year were paid for by our customers in advance last year.
And now we don't get to show that amount net we show that a mountain grows in terms of our capex. So.
[noise] again, depending upon your point of view going forward you know you can.
Probably see it you know being something less on the growth side and then once you would typically see or what you have seen in the typical last few years, yeah, and especially considering you know some of these writers worked recently, there's not as much capex unnecessarily put them back to work. So I think you know considering considering an inverse.
Curve on activity moving up and.
And 24 versus what we had softening and 23 then.
I think capex would be level to maybe even a little bit lower so I think we can be really efficient next year apples yep.
Makes sense and then last thing just kind of following up on pressure pumping obviously you talked about.
Like in general and carrying some extra courses you drop a fleet, which is obviously impacted profitability has there been any meat.
Material change like what have you seen from a pricing and kind of commercial terms dynamic in this kind of air pocket of activity here recently.
We've seen the dedicated pricing hold up relatively well you know maybe some small adjustments for some customers, but not a lot.
But it's really the spot market, that's come down maybe 30% or so but that's you know it's the spot it's temporary activities increasing like we thank him later in the year and into next year that.
To reverse as well.
Perfect. Thank you guys. Thanks, thanks to them.
Your next question is from John Jack Daniel Daniel <unk>. Please go ahead with your line is open.
Hi, guys. Thanks for having me just.
Just one question for you today and when.
When you think of all of it E&P M&A that we've seen.
Where buyers rationalize activity.
It would seem getting back to the activity highs. If you will like 22 might be tough to do in 24.
Just curious if you are seeing anything that would.
Dispute that.
Theory.
You know we are seeing some mergers on the EMP side, but at the same time, we're seeing some emp's sell off some of their properties too and some smaller companies come into play where they've gotta prove up that acreage and so I do think the rig count has a chance to get back to the highs of this year.
You know the rig count never moves up at the same rate it comes down but that doesn't mean it came right back to where it was I think there's enough people with interest to drill out there even with the mergers to get back to where we were.
Okay.
Got it and I'm gonna try to phrase his favorite let's like E. M. P. A biased company D and they drag and drop a bunch of rigs are you seeing that E. N T. A person coming back and wanting to add back any of those things that they say that they were going to drop you.
Followed that.
Example, I don't know if I have a good example of that for us.
Okay, and that's all thanks for including me. Thanks, Thanks Joan.
Your next question is from Dan cones of Morgan Stanley . Please go ahead take your line is open.
<unk> good morning, maybe.
Maybe I'll just follow up on on Jon's first question, there thinking about 2024 activity and whether or not to get to the highest this year.
Would you kind of frame gas that can be as having a better chance of getting back to this year's levels with with all of the.
Angie liquefaction capacity coming online or or I guess.
Oh, how would you frame whether gas or oil or both have have a better chance of getting back to this year's highs.
Oh, well you know the gas it had the bigger downside earlier in the year and I think it's gas. It has the upside I think you know I'm not discounting oil oil can still move up from where it is in terms of activity, but I think there's more upside on the gas. If you look at some of the you know the EMP transactions, let's say South Texas.
You've had properties change hands. Some of these emp's that have acquired some of these properties are now making plans to drill them and we're part of those plans so I.
I still see some upside and gas you know.
Don't think of it just has changed though I think of it as the broader.
Patients that are connected to Henry hub from South, Texas, all the way in the mid <expletive> and so I still think there's more upside on the gas side.
Got it understood and then just on the on the 50% total shareholder return target Ah apologies. If you guys have already made this clear but.
I understand that once that deals close that that you guys and next year have endorsed that target moving forward, but are we to understand that.
Yeah Patterson is still maintaining that target kind of in the second half of this year as as as the two deals are slotted to close or or could M&A interrupt at 50 per cent target and the second half of this year.
Well, what we said all along as you know our intent is returned 50 per cent of the free cash flow to the shareholders and we don't we think of it more on an annualized basis and whether you would take that as the starting point from when we first started in October last year, you take it from the start of this year, where we're ahead of schedule independent doesn't matter, where you take your starting point.
So we've already given back more than 50% of the cost of the shareholders on an annualized basis and so we're ahead of that but I wouldn't worry about the M&A disrupting that and certainly going forward with the combination of next year, we still intend to return 50% of the free cash flow to shareholders.
Great. That's really helpful. I will turn it back thanks guys.
There are no further questions at this time I will now turn the call over to any Hendrix for closing remarks.
Great I want to thank everybody for you dialed into the Patterson UTI call. This morning.
Excited about great things are happening in the future and our call is going to look very different next time, but thanks again for dialing in.
This concludes today's conference call. Thank you for your participation you may now disconnect.
[music].
Mmm.
Uh-huh.
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