Q4 2023 Patterson-UTI Energy Inc Earnings Call

Operator: Thank you for standing by. At this time, I'd like to welcome you to the Patterson-UTI Energy fourth quarter 2023 earnings conference call. All lines have been placed on mute to prevent background noise.

Thank you for standing by at this time I would like to welcome you to the Patterson UTI energy fourth quarter 2023 earnings Conference call.

Lines have been placed on mute to prevent background noise. After the Speakers' remarks, there will be a question and answer session. If you'd like to ask a question. During this time plus star one on your telephone keypad, if you'd like to withdraw your question Press Star. One again. Thank you I'll now hand, the floor over to Mike Sabella VP of Investor Relations. Please go ahead.

Operator: After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, press star one on your telephone keypad. If you'd like to withdraw your question, just press star one again.

Michael James Sabella: Thank you. I'll now hand the floor over to Mike Sabella, VP of Investor Relations. Please go ahead.

Michael James Sabella: Thank you, Operator. Good morning, and welcome to Patterson-UTI's Earnings Conference Call to discuss our 4th Quarter 2023 Results. With me today are Andy Hendricks, President and Chief Executive Officer, and Andy Smith, Chief Financial Officer. As a reminder, statements that are made in this conference call that refer to the company's or management's intentions, targets, beliefs, expectations, or predictions for the future are considered forward-looking. 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 statements.

Mike Sabella: Thank you operator, good morning, and welcome to Patterson Utis earnings conference call to discuss our fourth quarter 2023 results.

Mike Sabella: With me today are Andy Hendricks, President and Chief Executive Officer, and Andy Smith, Chief Financial Officer. As a reminder, statements that are made in this conference call that refer to the companys or managements intentions targets beliefs expectations or predictions for the future are considered forward looking statements. These forward looking statements are subject to risks and uncertainties.

Mike Sabella: As disclosed in the company's SEC filings, which could cause the company's actual results to differ materially.

Andy Smith: Somebody takes no obligation to publicly update or revise any forward looking statements statements made in this conference call include non-GAAP financial measures. The required reconciliation to GAAP financial measures are included on our website at P. A T energy Dot com.

William Andrew Hendricks: Statements made in this conference call include non-GAAP financial measures. Requires Reconciliation, The GAAP financial measures are included on our website at PATEnergy.com and in the company's press release issued prior to this conference call. I will now turn the call over to Andy Hendricks, Patterson-UTI's Chief Executive Officer. Thank you, Mike, and welcome to Patterson-UTI's fourth quarter conference call. In the first full quarter following our combination with Nextier and Altera, we showcased the earnings power of the new company and delivered a quarter of strong results for our investors. Our leadership position in both U.S. onshore drilling and completions is allowing us to strengthen partnerships with the leading U.S. shale operators that place a high value on our technology and on our top-tier assets, which in turn is allowing us to outperform the We are very pleased with our results, and the fourth quarter profitability and free cash flow highlight the benefit of a combined company. As we reflect on this past year, we take great pride in our achievements.

Andy Smith: And in the company's press release issued prior to this conference call I will now turn the call over to Andy Hendricks, Patterson's, Chief Patterson UTI, Chief Executive Officer.

William A. Hendricks: Thank you, Mike and welcome to Patterson Utis fourth quarter Conference call.

William A. Hendricks: And the first full quarter falling our combination with next year and Altera, we showcase the earnings power of the New company and delivered a quarter of strong results for our investors.

William A. Hendricks: Our leadership position in both U S onshore drilling and completions is allowing us to strengthen partnerships with the leading U S shale operators that place a high value on our technology and our top tier assets, which in turn is allowing us to outperform the industry.

William A. Hendricks: We are very pleased with our results in the fourth quarter profitability and free cash flow highlights the benefit of the combined company.

William A. Hendricks: As we reflect on this past year, we take great pride in our achievements.

William Andrew Hendricks: In U.S. contract drilling, we outperformed our peer group both in activity and adjusted gross profit per operating day. In completions, we maintain a focus on returns while actively contributing to the advancement of lower cost and emission-reducing assets. We delivered extremely strong results while at the same time successfully closing and integrating two transactions. Our team performed at a very high level in what was a challenging year for the industry, which reflects our ability to successfully manage our business through the cycle and consistently create value for our shareholders. All that is to say, our business is performing very well, and we have high conviction that we have the right strategy in place. We anticipate 2024 will be another year of strong results and considerable free cash flow, and we remain committed to our policy of returning at least half of our free cash flow to our shareholders on an annual basis. As our customers look to maximize their own returns, they are consolidating their drilling and completions budgets to fewer, higher-quality service providers, and the divergence in financial results in our sector last year highlights the widening differential in service quality across the industry. This high-grading process positions Patterson-UTI favorably and aligns us with our customers as the industry transitions to manufacturing mode.

William A. Hendricks: And U S contract drilling we outperformed our peer group doesn't have activity and adjusted gross profit per operating day.

William A. Hendricks: And completions, we maintained our focus on returns while actively contributing to the advancement of lower cost and emission reducing assets.

William A. Hendricks: We delivered extremely strong results while at the same time successfully closing and integrating two transactions.

William A. Hendricks: Our team performed at a very high level and what was a challenging year for the industry, which reflects our ability to successfully manage our business through the cycle and consistently create value for our shareholders.

William A. Hendricks: All of that is to say our business is performing very well and we have high conviction that we have the right strategy in place. We anticipate 2024 will be another year of strong results and considerable free cash flow and we remain committed to our policy of returning at least half of our free cash flow to our shareholders on an.

William A. Hendricks: Basis.

William A. Hendricks: As our customers look to maximize their own returns they are consolidating their drilling and completions budgets to fewer higher quality service providers and the divergence in financial results in our sector last year's highlights the widening differential and service quality across the industry.

William A. Hendricks: This high grading process positions Patterson, UTI favorably and aligns us with our customers as the industry transitions to manufacturing mode.

William Andrew Hendricks: The acquisitions of NextGen and Altera will significantly strengthen Patterson-UTI's competitive position over the long term as we realize the benefits of our combined expertise and continue to advance our technology lead over much of the old. This should offer a tailwind for our company as the entire industry looks to grow returns in a capital-constrained environment. We've played a critical role in enhancing the efficiency of our customers. For Patterson-UTI, the benefit from these efficiency gains can largely be seen through our own improved capital efficiency.

William A. Hendricks: The acquisitions of Nextgen and Altera was significantly strengthened Patterson UTI is competitive position over the long term as we realize the benefits of our combined expertise.

And continue to advance our technology lead over much of the oilfield.

William A. Hendricks: This should offer a tailwind for our company as the entire industry looks to grow returns in a capital constrained environment.

William A. Hendricks: We played a critical role in enhancing the efficiency of our customers for Patterson UTI. The benefit from these efficiency gains can largely be seen through our own improved capital efficiency and we have worked to reduce our capital intensity, even as we have improved operationally.

William Andrew Hendricks: And we have worked to reduce our capital intensity, even as we have improved operations. We expect total capital expenditure for Patterson-UTI to decline in 2024 relative to what the combined company spent in 2023. This reflects our commitment to optimize long-term financial performance as we navigate the evolving energy sector landscape. In the near term, the outlook for U.S. shale activity continues to reflect the expected reduced cyclicality in our sector. The Steady Outlook presents us with opportunities to enhance our returns and grow our profits in the most capital efficient manner. However, we do not see a benefit to adding drilling or completion capacity to the U.S. shale market.

William A. Hendricks: We expect total Capex for Patterson UTI to decline in 2024 relative to what the combined company spent in 2023.

William A. Hendricks: This reflects our commitment to optimize long term financial performance as we navigate the evolving energy sector landscape.

William A. Hendricks: Over the near term the outlook for U S. Shale activity continues to reflect the expected reduced cyclicality in our sector.

William A. Hendricks: This steady outlook presents us with opportunities to enhance our returns and grow our profits in the most capital efficient manner.

William A. Hendricks: While we do not see a benefit to adding drilling or completion capacity into the U S. Shale market. We do have several levers we will focus on this year that should help us improve our returns as the year progresses.

William Andrew Hendricks: We do have several levers we will focus on this year that should help us improve our returns as the year progresses. Our rig technology offerings have momentum with growing demand for our process and equipment automation package. Alternative power solutions that use natural gas and high-line electricity to power our rigs and numerous other applications that improve efficiency, minimize the environmental footprint, and add value to the drilling process.

William A. Hendricks: Our rig technology offerings have momentum with growing demand for our process and equipment automation packages alternative power solutions that use natural gas and highlight electricity to power our rigs and numerous other applications that improve efficiencies minimize the environmental footprint and add value to the drilling process.

William Andrew Hendricks: Our customers value the uplift provided by these technology offerings, and given the value that can be unlocked, we expect our rig count will continue to outperform. In FRAC, we are investing to convert more of our fleet to electric and other natural gas-powered technologies at a measured pace over the next several years. These new technologies consistently earn a high return over the diesel equipment that they are replacing, which should allow us to grow profits even at a steady activity level. By mid-2024, we expect to be operating around 140,000 electric horsepower, with nearly 80% of our active fleets capable of using natural gas by then. We are making this transition to electric and other natural gas-powered assets, even as CapEx for the Combined Completions Company is expected to be down significantly from 2023. Also, on the FRAC side, we still have considerable upside relative to where we are today as we capture synergies from the next year's transaction. At the start of the year, we were roughly halfway to our $200 million annualized target.

William A. Hendricks: Our customers value the uplift provided by these technology offerings and given the value that can be unlocked, we expect our rig count will continue to outperform the industry.

William A. Hendricks: And Frac, we are investing to convert more of our fleet to electric and other natural gas power technologies at a measured pace over the next several years.

William A. Hendricks: These new technologies consistently earn a higher return over the diesel equipment that they are replacing which should allow us to grow profits even at a steady activity levels.

William A. Hendricks: By mid 2024, we expect to be operating around 140000 electric horsepower with nearly 80% of our active fleets capable of using natural gas by then.

William A. Hendricks: We are making this transition to electric and other natural gas powered assets, even as Capex for the combined completions company is expected to be down significantly from 2023.

William A. Hendricks: Also on the Frac side, we still have considerable upside relative to where we are today as we capture synergies from the next year transaction.

William A. Hendricks: At the start of the year, we were roughly halfway to our $200 million annualized target and we are confident we should be able to fully realize those synergies by the first quarter of 2025.

William Andrew Hendricks: We are confident we should be able to fully realize those synergies by the first quarter of 2025. Internationally, Altera offers long-term growth potential to expand our footprint. Altera is expected to grow revenue in EBITDA in 2024 compared to 2023, with potential for record free cash flow generation that surpasses any period in the company's history prior to our acquisition. Altera's drill bits were used to drill over 82 million feet in 2023 for more than 625 different operators across 25 countries.

Internationally Alterra offers long term growth potential to expand our footprint.

William A. Hendricks: Altera is expected to grow revenue and EBITDA in 2024 compared to 2023 with potential for record free cash flow generation that surpasses any period in the company's history prior to our acquisition.

William A. Hendricks: Altera is drill bits were used to drill over 82 million feet in 2023 for more than 625 different operators across 25 countries.

The presence in these global markets will be a long term opportunity for our company and should offer our investors growth for the next several years or more.

William Andrew Hendricks: The presence in these global markets will be a long-term opportunity for our company and should offer our investors growth for the next several years or more. Non-U.S. revenue has accounted for roughly 30% of Altair's revenue since we closed the acquisition in August, and for 2024. Altera's international revenue is expected to grow in the high teens percent year-over-year, highlighting strong prospects in various global markets across the world.

William A. Hendricks: Non U S revenue is accounted for roughly 30% of Alterra as revenues since we closed the acquisition in August and for 2020 for Altera.

William A. Hendricks: <unk> International revenue is expected to grow in the high teens percent year over year, highlighting strong prospects in various global markets across the world.

William A. Hendricks: By 2020 for Altera is revenue from the Middle East is likely to have doubled over the past three years with additional upside potential over the next several years.

William A. Hendricks: In addition to the international opportunities for Altera in the U S revenue per industry rig was up more than 5% sequentially a function of steady pricing and strong market share gains and reflecting our strong performance in the U S complementing the international opportunity.

William Andrew Hendricks: By 2024, Altera's revenue from the Middle East is likely to have doubled over the past three years, with additional upside potential over the next several years. In addition to the international opportunities for Altera, in the U.S., revenue per industry rig was up more than 5% sequentially, a function of steady pricing and strong market share gains and reflecting our strong performance in the U.S., complementing the international opportunities. Aside from these operational growth opportunities, our capital allocation strategy should offer our investors an added benefit in terms of earnings per share and return on capital. We are committed to returning at least 50% of our free cash flow to investors.

William A. Hendricks: Beside from these operational growth opportunities our capital allocation strategy should offer our investors an added benefit to earnings per share and return on capital.

William A. Hendricks: We are committed to returning at least 50% of our free cash flow to investors, including through stock buybacks, which should help grow earnings per share in the coming years as we reduced the share count.

William A. Hendricks: We are committed to return at least 50% of our free cash flow to shareholders on an annual basis and given our current share price we are likely to exceed that commitment in 2024, as we believe investing in our own shares at this price is one of the most attractive opportunities available.

William Andrew Hendricks: Including stock buybacks, which should help grow earnings per share in the coming years as we reduce the share count. We've committed to return at least 50% of our free cash flow to shareholders on an annual basis. And given our current share price, we are likely to exceed that commitment in 2024, as we believe investing in our own shares at this price is one of the most attractive opportunities available. We expect to return at least $400 million to shareholders in 2024 through the combination of dividends and share repurchase, which would considerably lower our share count by the end of the year. Our Board of Directors just increased our stock repurchase authorization to a total of $1 billion.

William A. Hendricks: We expect to return at least $400 million to shareholders in 2024 through the combination of dividends and share repurchases, which would considerably lower our share count by the end of the year.

William A. Hendricks: Our board of directors, just increased our stock repurchase authorization to a total of $1 billion.

William A. Hendricks: As we've said previously the macro outlook appears to be relatively stable through 2024.

William A. Hendricks: Current oil prices should support current oil basin activity, although we do see some potential downside in the natural gas basins.

William A. Hendricks: On the oil front according to various data sources, including the EIA U S. Shale oil production appears to have stabilized a function of the decline in activity over the past year we.

William A. Hendricks: We do not believe current commodity prices will prompt a reduction in activity to levels that result in production declines.

William Andrew Hendricks: As we said previously, the macro outlook appears to be relatively stable through 2024. (Inaudible) On the oil front, according to various data sources, including the EIA, U.S. shale oil production appears to have stabilized, a function of the decline in activity over the past year. We do not believe current commodity prices will prompt a reduction in activity to levels that result in production decline. Therefore, a steady activity outlook in the oil basins seems reasonable. Given that 80% of U.S. rigs are targeting oil, this should contribute to a relatively stable outlook for the entire industry in the coming year. In the near term, the outlook for natural gas is less certain, but we do not think the downside potential will have a material impact on our business over the long term.

William A. Hendricks: Therefore steady activity outlook in the oil basins seems reasonable.

William A. Hendricks: Given that 80% of the U S rigs are targeting oil this should contribute to a relatively stable outlook for the entire industry in the coming year.

William A. Hendricks: In the near term the outlook for natural gas is less certain but we do not think the downside potential will have a material impact on our business over the long term.

William A. Hendricks: We are working for some of the best and Steadiest operators in the natural gas basins, which should help limit the downside if activity slows.

William A. Hendricks: It is also worth noting that the Patterson UTI rig count in the northeast and the Haynesville combined is down just five rigs total over the past year, even as the industry has reduced activity in those basins by more than 30 rigs over that same time.

William A. Hendricks: Our resilience demonstrates our ability to navigate challenges in those basins, even in the face of declining industry activity.

William A. Hendricks: Further even as our natural gas customers are slightly reducing activity in the near term we are already having conversations with those same customers about the potential to add rigs, possibly waited later this year, but also into next year as LNG demand comes closer into focus.

William Andrew Hendricks: We are working for some of the best and steadiest operators in the natural gas basins, which should help limit the downside if activity slows. It is also worth noting that the Patterson-UTI rig count in the Northeast and Haynesville combined is down just 5 rigs total over the past year, even as the industry has reduced activity in those basins by more than 30 rigs over that same time.

William A. Hendricks: Over the long term, we do not anticipate a material impact to our business from the near term softness in natural gas prices.

William A. Hendricks: And drilling if natural gas activity does fall slightly we would anticipate only a slight decline to our own activity levels. While they were although we are halfway through this first quarter and we haven't seen much change from our customers.

William Andrew Hendricks: Our resilience demonstrates our ability to navigate challenges in those basins, even in the face of declining industry activity. Further, even as our natural gas customers are slightly reducing activity in the near term, we are already having conversations with those same customers about the potential to add rigs possibly later this year but also into next year as LNG demand comes closer to focus. Over the long term, we do not anticipate a material impact on our business from the near-term softness in natural gas prices. In drilling, if natural gas activity does fall slightly, we would anticipate only a slight decline in our own activity levels, although we are halfway through this first quarter, and we haven't seen much change from our customers. In the U.S., we started the year operating 121 rigs, and we are currently operating 122 rigs. In 2023, our rig count significantly outperformed the industry, and we achieved this while still improving our market. The industry recount exited 2023 over 20% lower than it started.

William A. Hendricks: In the U S. We started the year operating 121 rigs and we are currently operating 122 rigs.

In 2023, our rig count significantly outperformed the industry and we achieved this while still improving our margins.

William A. Hendricks: The industry rig count exited 2023 over 20% lower than it started but in contrast, Patterson UTI as rig count was down just 8%, while our average daily margins in the most recent quarter were up more than 20% compared to the fourth quarter last year.

William A. Hendricks: We are constantly aligning ourselves with partners that offer stable drilling programs and exhibit less sensitivity to commodity prices compared to smaller operators, our customers benefit greatly from our tier one drilling rigs, which can deliver 35% more lateral footage on average per year compared to a standard super spec rig.

William A. Hendricks: More than 90% of our active rigs are tier one with nearly 90% utilization for this category of rig.

William A. Hendricks: Given the high demand and the significant value that this class of rig and technology add ons create average pricing on recent term contracts has been steady at close to the mid $30000 per day, and we do not anticipate our rates changing in a flat activity market. We believe the trend towards tier one rigs should continue through 2020.

William Andrew Hendricks: But in contrast, Patterson-UTI's recount is down just 8%, while our average daily margins in the most recent quarter were up more than 20% compared to the fourth quarter last year. We are constantly aligning ourselves with partners that offer stable drilling programs and exhibit less sensitivity to commodity prices compared to smaller operators. Our customers benefit greatly from our Tier 1 drilling rigs, which can deliver 35% more lateral footage, on average, per year compared to a standard superspec rig.

William A. Hendricks: Four.

William A. Hendricks: On the completions front the business is performing well through the ongoing integration in the fourth quarter completion services revenues exceeded $1 billion and meaningfully outperformed the completions industry average we aligned.

William A. Hendricks: Sales with the right customers, which helped activity remained steady through the holidays and into the year end.

William A. Hendricks: Our natural gas dual fuel assets continue to have success in the market and we are confident that these assets will maintain competitiveness over the long term.

William Andrew Hendricks: More than 90% of our active rigs are Tier 1, with nearly 90% utilization for this category of rig. Given the high demand and the significant value that this class of rig and technology add-ons create, average pricing on recent term contracts has been steady at close to the mid $30,000 per day, and we do not anticipate our rates changing in a flat activity market. We believe the trend towards Tier 1 rigs should continue through 2025. On the completions front, the business is performing well through the ongoing integration. In the fourth quarter, completions services revenues exceeded $1 billion and meaningfully outperformed the completions industry average. We aligned ourselves with the right customers, which helped activity remain steady through the holidays and into the year.

William A. Hendricks: Even with the increasing market share of natural gas powered electric equipment.

William A. Hendricks: Notably on several recent occasions, we have displays to third party, 100% natural gas powered electric fleet with one of our natural gas dual fuel fleets. We believe there are multiple technology winners, including natural gas dual fuel as the completions industry transition.

William A. Hendricks: The market for horsepower remains relatively tight and any equipment that can be powered by natural gas is effectively sold out.

William A. Hendricks: This should help limit potential downside from current natural gas prices.

William A. Hendricks: We are confident in our ability to achieve our goals for 2024 with a significantly reduced capex budget, we expect total company capex of $740 million for 2024.

William A. Hendricks: This represents a significant reduction compared to the combined capex budgets of Patterson UTI next year and Altera that we all had in 2023.

William A. Hendricks: We believe we can achieve this while still maintaining our activity throughout 2024 and building on the strong technical logical advantage that we have over many other players in our industry.

William Andrew Hendricks: Our natural gas dual fuel assets continue to have success in the market, and we are confident that these assets will maintain competitiveness over the long term, even with the increasing market share of natural gas powered electric equipment. Notably, on several recent occasions, we have displaced a third-party 100% natural gas-powered electric fleet with one of our natural gas dual-fuel... We believe there are multiple technology winners, including natural gas dual fuel as the completions industry transitions. The market for horsepower remains relatively tight, and any equipment that can be powered by natural gas is effectively sold out.

William A. Hendricks: This positions us to generate strong free cash flow for the year and returned significant cash to shareholders, while still building on our competitive advantage over the longer term.

William A. Hendricks: I'll now turn it over to Andy Smith, who will review the financial results for the fourth quarter.

Andy Smith: Thanks, Andy.

Andy Smith: Total reported revenue for the quarter was $1 $584 million, we reported net income attributable to common shareholders of $62 million or <unk> 15 per share in the fourth quarter.

Andy Smith: This included $20 million in merger and integration expenses.

Andy Smith: Our adjusted net income attributable to common shareholders, excluding the merger and integration expenses was $78 million or <unk> 19 per share.

William Andrew Hendricks: This should help limit potential downside from current natural gas prices. We are confident in our ability to achieve our goals for 2024 with a significantly reduced CapEx budget. We expect total company CapEx of $740 million for 2024.

Andy Smith: This adjustment excludes the previously mentioned merger and integration expense and assumes a 21% federal statutory statutory tax rate on those charges.

Andy Smith: This represents a significant reduction compared to the combined CapEx budgets of Patterson-UTI next year and Altera that we all had in 2023. We believe we can achieve this while still maintaining our activity throughout 2024 and building on the strong technological advantage that we have over many other players in our industry. This positions us to generate strong free cash flow for the year and return significant cash to shareholders, while still building on our competitive advantage over the previous. I'll now turn it over to Andy Smith, who will review the financial results for the fourth quarter. Thanks, Andy. The total reported revenue for the quarter was $1,580,000.

Andy Smith: Adjusted EBITDA for the quarter totaled $409 million, which also excludes the previously mentioned merger and integration expenses.

Andy Smith: Our weighted average share count was 416 million shares during Q4, and we exited the quarter with 411 million shares outstanding.

Andy Smith: Our free cash flow for the fourth quarter was $247 million.

Andy Smith: During the fourth quarter, we returned $110 million to shareholders, including <unk> <unk> per share dividend and $76 million and repurchased 7 million shares.

Andy Smith: Fuel on to this shareholder return amounted to almost 10% of the market cap at the end of the fourth quarter.

Andy Smith: For the full year, we returned $301 million to shareholders, which was approximately 77% of our free cash flow.

Andy Smith: Our board has approved an eight seven per share dividend for Q1 and approved an increase in our stock repurchase authorization up to $1 billion.

Andy Smith: Unknown Executive, Saurabh Pant, Keith MacKey, Arun Jayaram, Atidrip Modak, James Holcomb, For more information, visit www. FEMA.gov. Our Adjusted Net Income Attributable to Common Shareholders, The Bulletproof Executive 2013, This adjustment excludes the previously mentioned merger and integration. For more information, visit www.fema.gov, and Justin Iveda for the quarter totaled $409 million, which also is... Our weighted average share count was 416 million shares. We exited the quarter with 411 million shares outstanding. Our free cash flow for the fourth quarter was $247 million.

Andy Smith: We expect to return over $100 million to shareholders again in the first quarter, including approximately $75 million to repurchase shares.

Andy Smith: For 2024, we expect to use at least $400 million pay dividends and repurchase shares which represents more than our commitment to return 50% of free cash flow to shareholders.

Andy Smith: In our drilling services segment fourth quarter revenue was $464 million.

Andy Smith: Willing services adjusted gross profit totaled $187 million during the quarter.

Andy Smith: And U S contract drilling operating days totaled $10 841 days.

Andy Smith: Average rig revenue per day was $36280.

Andy Smith: The sequential decline of one $830 per day was primarily attributable to the absence of the benefit of $2630 per day from the recognition of previously deferred revenue in the prior quarter.

Andy Smith: Excluding the impact of this previously deferred revenue last quarter average revenue per day would have increased $800 sequentially.

Andy Smith: Average rig operating cost per day were $19940, which increased $70 sequentially. Although the prior quarter included $790 per day, an insurance reserve adjustments and inventory write down.

Andy Smith: During the fourth quarter, we returned $110 million to shareholders, $76 million to repurchase seven, Annualized, this shareholder return amounted to almost 10% of the market cap. In the full year, we returned $301 million to shareholders. Our board has approved an 8 cent per share dividend for Q1.

Andy Smith: The average adjusted Marine gross profit per day was $16330 or $1910 per day decrease from the prior quarter.

Andy Smith: Excluding the previously mentioned revenue and costs in the prior quarter adjusted rig gross profit per day would have declined to $70 from the prior quarter.

Andy Smith: We expect to return over $100 million to shareholders again in the first quarter, and approximately $75 million to repurchase. For 2024, we expect to use at least $400 million dollars to pay dividends and buy back Shares, which represents more than our commitment to return. In our drilling services segment, fourth-quarter revenue was $464 million. Drilling Services Adjusted Gross Profit totaled $187 million. U.S. Contractor. Operating days totaled 10,84

Andy Smith: At December 31, we had term contracts for drilling rigs in the U S providing for approximately $700 million of future day rate drilling revenue.

Andy Smith: Based on contracts currently in place, we expect an average of 79 rigs operating under term contracts during the first quarter of 2024, and an average of 52 rigs operating under term contracts over the four quarters ending December 31 2024.

Andy Smith: And our other drilling services businesses. Besides U S contract drilling, which is mostly international contract drilling and directional drilling.

Fourth quarter revenue was $70 million with an adjusted gross profit of $10 million.

Andy Smith: For the first quarter in U S contract drilling we expect to average 120 active rigs compared to 118 active rigs in the fourth quarter.

Andy Smith: Average rig revenue per day was $36,280. The financial decline of $1,830 per day was primarily... $2,630 per day, for recognition for revenue. Please see the complete disclaimer at https://sites.google.com. Average rig operating costs per day were $19,940. $70.

Andy Smith: We expect drilling services adjusted gross profit to be relatively flat compared to the fourth quarter with relatively flat adjusted gross profit in the U S contract drilling.

Andy Smith: Reported revenue for the fourth quarter in our completion services segment totaled $1 million $14 million with an adjusted gross profit of $232 million.

Andy Smith: We saw improved returns in the quarter, even on slightly lower revenue a function of the ongoing merger synergies as well as strong operations.

Andy Smith: Segment revenue was just 2% lower than the pro forma results for the segment in the third quarter and noticeably outperformed the industry.

Andy Smith: Although the prior quarter included $790 per day in insurance reserve, http://TheBusinessProfessor.com The Average Adjusted Rig Gross Profit was $1,910 per day...... Thank you for watching.

Andy Smith: Completion activity was relatively steady throughout the fourth quarter with strong fundamentals for natural gas powered equipment as well as strong demand for our well site integration services with good customer alignment and kept us working through more of the holidays than we anticipated.

Andy Smith: On December 31st, we had term contracts for drilling rigs in the U.S. providing for approximately $700 million. Nature Dayray Drilling Revenue, Based on contracts currently in place. We expect an average of 79 rigs operating under term contracts and an average of 52 rigs operating under term contracts. Airporters, The, and our other drilling service. U.S. Mostly International Contract Drilling and Direction... Fourth quarter revenue was $70 million. Adjusted Gross Profit of $10 Million. For the first quarter, in U.S. contract drilling, we expect to average 120 accuracy. We expect drilling services in Justin Crow's province to be relatively flat.

Andy Smith: So far in the first quarter activity has been mostly steady although we are seeing some white space as we strategically repositioned our fleets in response to natural gas prices.

Andy Smith: After finishing our stronger than expected fourth quarter for the for the fourth for the first quarter. We expect completion services revenue of $940 to $950 million with an adjusted gross profit of $190 million to $200 million.

Andy Smith: Fourth quarter drilling products revenue totaled $88 million.

Andy Smith: It was up 1% compared to the third quarter for that business.

Andy Smith: Adjusted gross profit was $39 million in the U S drilling product revenue outperformed the rig count as the company continued to deliver strong results domestically.

Andy Smith: Internationally revenue was relatively steady sequentially.

Andy Smith: Direct operating cost included a noncash charge of $5 million associated with the step up in asset value of the drill bit.

Andy Smith: Were on the books at the time, the Altera Altera transaction close the.

Andy Smith: The same purchase price accounting adjustment increase reported segment depreciation and amortization by $10 million during the quarter.

Andy Smith: Relatively Flat Adjusted Gross Profit, Reported revenue for the fourth quarter in our completion services segment totaled $1,014,000,000.00. We saw improved returns in the quarter, even on slightly lower revenue. A Function of the Ongoing Merger, as well as strong Segment revenue was just 2% lower than the proforma results for the segment in the third, and Noticeably Output.

Andy Smith: We expect these noncash charges will continue through 2024.

Andy Smith: We continue to see growth potential for altera, even in a flattish U S onshore market with opportunities to expand internationally.

Andy Smith: For the first quarter, we expect drilling products revenue of $90 million with an adjusted gross profit of $40 million, we expect $5 million and noncash direct operating costs associated with the step up and drill that value at alterra without which the segment adjusted gross profit expectation would be 45 million.

Andy Smith: Completion activity was relatively steady throughout the fourth quarter, as well as strong demand for our well-site integration and Customer Alignment that kept us working through more of the holidays. So far in the first quarter, activity has been mostly steady, although we are seeing some white.

Andy Smith: Yeah.

Andy Smith: Other revenue totaled $18 million for the quarter with $8 million and adjusted gross profit.

Andy Smith: We expect other first quarter revenue and adjusted gross profit to be flat with the fourth quarter.

Andy Smith: Reported selling general and administrative expenses in the fourth quarter were $61 million for Q1, we expect SG&A expenses of $65 million.

Andy Smith: On a consolidated basis for the fourth quarter total depreciation depletion amortization and impairment expense totaled $279 million.

Andy Smith: We will reposition our fleets weekly in response to natural gas. After finishing a stronger-than-expected fourth quarter, we expect completion services revenue of 940 to 950 million dollars and just a gross profit of $190,000.

Andy Smith: For the first quarter, we expect total depreciation depletion amortization and impairment expense of approximately $280 million.

Andy Smith: Our 2024, we expect an effective tax rate of 24% with annual cash taxes expected to be 35% to $45 million after utilizing tax attributes to offset a portion of our taxable income.

Andy Smith: During Q4 total capex of $205 million.

Andy Smith: Including $74 million in drilling services.

Andy Smith: Fourth Quarter Drilling Products Revenue totaled $88 million, which was up 1% compared to the third quarter for that. U.S. drilling product revenue outperformed the rate; the company continues to deliver strong results. Internationally, revenue was relatively steady.

Andy Smith: $107 million in completion services $17 million in drilling products and $8 million in other and corporate.

Andy Smith: Our capex in 2024 is expected to be $740 million comprised of $285 million for drilling services $360 million for completion services.

Andy Smith: $5 million for drilling products and $40 million for other than corporate.

Andy Smith: On the drilling side, we expect to fund limited rig upgrade programs, which are for specific customers on the completion side, we will continue to invest in a measured pace to expand our fleet of electric and natural gas powered asset with fleet addition, serving as replacements for retiring diesel assets.

Andy Smith: Direct operating costs included a non-cash charge of $5 million associated with the step-up in asset value of the drill- that were on the books at the time, the Altera transaction. Same Purchase Price Accounting Adjustment, and Amortization by $10 million. We expect these non-cash charges will... We continue to see growth potential for Altera, even in a flattish U.S. onshore market with opportunities. First Quarter.

Andy Smith: Of the $360 million in completion services Capex, we expect capex of roughly $220 million in the first half of the year as we fund investments in next generation Frac equipment as well as growth in our power solutions natural gas fueling business.

Andy Smith: We expect completions Capex will largely focus on maintenance in the second half of the year.

Andy Smith: Yes.

Next year in our legacy Universal pressure pumping business have now been consolidated into one legal entity and are operating as one completion of the business, which is a big step as we continue to move through the integration process.

Andy Smith: We entered 2024, having achieved approximately half of the anticipated $200 million.

Andy Smith: We expect drilling products revenue of $90 million. We expect $5 million in non-cash direct operating costs associated with a step-up in drill bit value at a, without which the segment-adjusted gross profit, and Other revenue totaled $18 million for the quarter. [inaudible] We expect other first quarter revenue and adjusted gross profit to be flat. Transcribed by https://otter.ai, 1; we expect SG&A Transcription by Trans-Expert.com, on a consolidated basis for the fourth quarter. Total Depreciation, Depletion, Amortization, and Impairment

Andy Smith: In annualized synergies.

Andy Smith: We remain highly confident that we will achieve at least $200 million in synergies by the first quarter of 2025.

We closed Q4 with nothing drawn on our $600 million revolving credit facility as well as $193 million in cash on hand, we do not have any senior note maturities until 2028.

Andy Smith: We expect to generate another quarter of strong free cash flow in the first quarter, although not quite at the same level. We saw in the fourth quarter, mostly as we need to fund seasonal working capital adjustments and cash merger and integration costs.

Andy Smith: I'll now turn the call back to Andy Hendricks for closing remarks.

Andy: Thanks, Andy.

William A. Hendricks: I want to close the call by quickly reiterating how we see 2024 unfolding Matt.

William A. Hendricks: Macro conditions give us confidence for relatively stable near term industry activity, considering both the oil and natural gas markets.

William A. Hendricks: U S oil production is expected to have stabilized according to EIA and others, which should be a positive for global oil markets.

Andy Smith: $279,000,000. For the first quarter, we expect total depreciation, depletion, amortization, and impairment. In 2024, we expect an effective tax rate of During Q4, total CapEx was $205 million. $107,000,000 in completed, $17 million in drilling products. Our capex in 2024 is expected to be $740 million, a price of $285 million for drilling. $85 million for drilling products. $40,000,000 for other. On the drilling side, we expect to fund limited rig upgrade programs, Unknown Speaker, and our fleet of electric and natural gas powered assets. Unlimited Edition Serving,

William A. Hendricks: At current oil prices, we do not anticipate much change in the oil rig count with oil focused activity about 80% of the industry activity.

William A. Hendricks: On the natural gas side, yes, there could be some decline in industry activity in the near term, but we do not expect it will be material to our business over the long term.

The outlook for natural gas activity could improve later this year and into next year is LNG demand comes closer into focus.

William A. Hendricks: For Patterson UTI this relatively steady industry environment in 2024 should give us opportunities to focus on high return capital efficient ways to grow our profitability we.

William A. Hendricks: We expect to enhance our technology offerings in both drilling and completions, we still have runway to benefit from the synergies associated with the Nextera merger and Altera is long term growth prospects in the middle East are very promising.

William A. Hendricks: And our current expectation is that we will return at least $400 million to shareholders. This year through dividends and share repurchases, which should improve our earnings per share and return on capital through a steady reduction in share count.

Andy Smith: ...

Andy Smith: $360,000,000. We expect CapEx of roughly $220 million. Transcription by Trans-Expert at Fiverr.com. We expect completions CAPEX will largely focus on maintenance. Next, here in our legacy universal pressure pump, we have now been consolidated into one legal entity and are operating as one....... Entered 2024 having achieved approximately half, $200,000,000. We remain highly confident that we will achieve at least $200 million. We closed Q4 with nothing drawn on our $600 million revolving credit, as well as $193 million in cash, or having any senior notes matured.

William A. Hendricks: We believe these profitability growth initiatives are achievable, even in a steady rig count environment.

William A. Hendricks: We're excited about the year ahead and expect to deliver another year of strong results for our investors.

Before we go to Q&A I'd like to thank the women and men of Patterson UTI for all of your hard work and all of your accomplishments.

William A. Hendricks: <unk> had a record year of performance in 2023 <unk>.

William A. Hendricks: You transformed the company and you knocked it out of the park. So thank you.

William A. Hendricks: With that I'll turn it over to Adam for questions.

Andy Smith: We expect to generate another quarter of strong free cash, although not quite at the same level we saw in the past, mainly as we need to fund seasonal work and capital. [inaudible] I'll now turn the call back. Thanks, Andy.

Adam: Thank you at this time I would like to remind everyone to ask a question Press Star then the number one on your telephone keypad. Our first question comes from the line of Arun Jairam with Jpmorgan. Your line is open.

Arun Jayaram: Good morning, Andy I wanted to maybe focus on on the completion services segment.

William Andrew Hendricks: I want to close the call by quickly reiterating how we see 2024 unfolding. Macro conditions give us confidence for relatively stable near-term industry activity considering both the oil and natural gas market. U.S. oil production is expected to have stabilized according to EIA and others, which should be positive for global oil markets.

Arun Jayaram: Your outlook is for $195 million of gross profit.

Arun Jayaram: <unk> I was wondering as you think about the full year do you think that is a good baseline.

Arun Jayaram: For the as you think about the full year with.

Arun Jayaram: And youre, adding some E.

Arun Jayaram: Capacity by mid year, how should we think about kind of a baseline for that segment.

A relatively steady state.

William Andrew Hendricks: At the current oil prices, we do not anticipate much change in the oil rig count, with oil-focused activity accounting for about 80% of the industry activity. On the natural gas side, yes, there could be some decline in industry activity in the near term, but we do not expect it will be material to our business over the long term. The outlook for natural gas activity could improve later this year and into next year as LNG demand comes closer to focus.

Arun Jayaram: <unk> and U S shale.

Arun Jayaram: Yes, we're really excited about how the completions business has been performing I mean, you see it in the Q4 results. The teams who have had to integrate and come together are just doing a fantastic job and it is one company today. It is next year and Theyre just doing a great job I can't say enough for the teams.

William Andrew Hendricks: For Patterson-UTI, this relatively steady industry environment in 2024 should give us opportunities to focus on high-return, capital-efficient ways to grow our profitability. We expect to enhance our technology offerings in both drilling and completions. We still have runway to benefit from the synergies associated with the next-year merger, and Altera's long-term growth prospects in the Middle East are very promising. And our current expectation is that we will return at least $400 million to shareholders this year through dividends and share repurchase, which should improve our earnings per share and return on capital through a steady reduction in the share count.

Arun Jayaram: Good are performing every day when you look at Q1, we're projecting on Q1 in terms of revenue and profitability is relatively steady activity, but also some white space in there as we move some fleets around.

Arun Jayaram: So I think as I look out across 2024 for completions and it holds we're drilling as well, we're seeing relatively steady and I realized that natural gas is trading at a low level and there's probably some concerns over that market, but I think we've shown that last year, whether it's drilling or completions.

That were working for the right customers in these basins and that we can keep things relatively steady.

William Andrew Hendricks: We believe these profitability growth initiatives are achievable even in a steady recount environment. We're excited about the year ahead and expect to deliver another year of strong results for our investors. Before we go to Q&A, I'd like to thank the women and men of Patterson-UTI for all of your hard work and all of your accomplishments.

Arun Jayaram: So when it comes to.

Arun Jayaram: The profitability on completions.

Arun Jayaram: I think as we continue to roll out some new technology, even in steady activity. There is some potential to improve the profitability as we work towards the end of the year. So we've got as I mentioned earlier, we've got various levers that we can pull through both technologies through integration through performance.

William Andrew Hendricks: You had a record year of performance in 2023. You transformed the company, and you knocked it out of the park, so thank you. With that, I'll turn it over to Adam for questions. Thank you. At this time, I'd like to remind everyone to ask a question, press star, then the number one on your telephone keypad.

Arun Jayaram: And I still think that we can still work to some higher profitability even in a steady environment.

Speaker Change: Great. Andy My follow up is just kind of an industry question.

Operator: Our first question comes from the line of Arun Jayaram with J.P. Morgan. Your line is open. Good morning, Andy.

Speaker Change: One of your peers and earning season highlighted how they expect to get call. It 40% of their frac fleets to be E fleets by the end of this year.

William Andrew Hendricks: I wanted to maybe focus on the completion services segment. Your outlook is for $195 million of gross profit in one year. I was wondering, as you think about the full year, do you think that as a good baseline, you know, as you think about the full year with, And you're adding some e-capacity, you know, by mid-year. How should we think about a baseline for that segment in a relatively steady state and environment in U.S. shale? Yeah, we're really excited about how the completions business has been performing. I mean, you can see it in the Q4 results. The teams who have had to integrate and come together are just doing a fantastic job, and it is one company today, it is next year, and they're just doing a great job. I can't say enough about the teams that are performing every day.

Speaker Change: Other of your peers mentioned that call it 25% of their fleets would be next generation.

Speaker Change: E fleets and dual fueled by the end of the year.

Speaker Change: How does that influence your strategy and talk to US maybe about the types of returns on capital Youre seeing on some of the fleet horsepower youre expected deployed by mid year.

Speaker Change: Yes.

Speaker Change: So as we mentioned we are deploying the fleets this year.

Speaker Change: We're going to start to grow our presence in that but our strategy is more of a measured pace because our focus is return of cash to shareholders.

We do see the opportunity to improve the profitability in the completions business by rolling out the E fleets, but we also have other things we're doing in 'twenty four to improve profitability, including integrating some of the vertical services that next year has been offering for years onto some of the fleets that are currently operating those.

William Andrew Hendricks: When you look at Q1, you know, what we're projecting on Q1 in terms of revenue and profitability is relatively steady activity, but also some white space in there as we move some fleets, And so I think, you know, as I look out across 2024 for completion. And it holds for drilling as well. We're seeing relatively steady, and I realize that, you know, natural gas is trading at a low level, and, you know, there's probably some concerns over that market, but I think we've shown that last year, whether it's drilling or completions, that we're working for the right customers in these basins, and that we can keep things relatively steady. So when it comes to, you know, the profitability on completions, you know, I think as we continue to roll out some new technology, even in steady activity, you know, there's some potential to improve the profitability as we work towards the end of the year. So, you know, we've got, as I mentioned earlier, we've got various levers that we can pull through both technologies, through integration, through performance. I still think that we can still work to some higher profitability, even in a steady environment. Great.

Speaker Change: And when you look at specifically at the E fleets. There's also some other technologies that we're going to be looking at rolling out later this year too that are 100% natural gas and there is just going to be a variety of solutions. So it's not a one size fits all we don't think the entire industry converts over to electric we think theres still solid markets for.

Speaker Change: Our high performing dual fuel natural gas powered systems.

Speaker Change: We will continue to push technology, we will continue to invest in both electric and other new technologies, but for us it's going to be more of a measured pace as we focus on returns to shareholders.

Speaker Change: Great. Thanks, Andy.

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

Scott Gruber: Yes, good morning, good morning, Scott.

Scott Gruber: I wanted to come back to the depletion outlook.

Scott Gruber: You don't mind.

Speaker Change: This is the focal point today folks.

Scott Gruber: The white space does that start to emerge early in the first quarter or is that more of it.

Scott Gruber: Second half of the quarter impact and then as you reposition fleet yes.

Scott Gruber: It is getting picked up in the oil basins.

Scott Gruber: Im really trying to think about the trend into the second quarter, assuming gas activity stays weak.

William Andrew Hendricks: Andy, my follow-up is just kind of an industry question. One of your peers in earning season highlighted how they expect to get, call it, 40% of their frack fleets to be E-fleets by the end of this year. Another of your peers mentioned that, call it, 25% of their fleets would be next-generation E-fleets and dual-fuel by the end of this year. How does that influence your strategy?

Scott Gruber: Does the second quarter activity you end up.

Scott Gruber: Looking.

Scott Gruber: Better than the first quarter can we get some more oil activity or is it essentially down versus the first because gas stays weak and it is a full quarter impact.

Are you able to provide some more color there.

Speaker Change: I think there is.

Speaker Change: Given that natural gas has only recently dropped below two we don't know the full impact of that yet, but we are working for some good customers in these gas basins and we are repositioning some of our horsepower into more liquids more oil so.

William Andrew Hendricks: And talk to us maybe about the types of returns on capital you're seeing on some of the E-fleet horsepower you're expected to deploy by mid-year. So, you know, as we mentioned, we are deploying the E-fleets this year, and we're going to start to grow our presence in that, but our strategy is more of a measured pace because our focus is the return of cash to shareholders. We do see the opportunity to improve profitability in the completions business by rolling out the E-fleets, but we also have other things we're doing in 24 to improve profitability, including integrating some of the vertical services that Nextier has been offering for years onto some of the fleets that aren't currently operating. When you look specifically at the E-fleets, there are also some other technologies that we're going to be looking at So it's not a one-size-fits-all solution.

Speaker Change: We're going to have some exposure to gas, but we had exposure to gas last year and we still had strong performance. So we still think that.

We're going to have some relatively steady activity.

Speaker Change: Had to make a guess right now Q2, I'd say just consider it relatively steady to what we're seeing in Q1, including the wide space I think there's still some uncertainty out there, but also I think we have the potential to improve some profitability as we rollout some new technology and enhance some of the integration.

Speaker Change: That's great and just on that point.

Speaker Change: It's data points post deal was your ability to secure revenue synergies.

William Andrew Hendricks: We don't think the entire industry will convert over to electric. We think there are still solid markets for high-performing, dual-fuel, natural gas-powered systems, but we will continue to push technology. We will continue to invest in both electric and other new technologies, but for us, it's going to be more of a measured pace as we focus on returns to shareholders. Great. Thanks, Andy.

Speaker Change: So in the <unk>.

Speaker Change: Timely fashion can you just speak to what youre seeing on that front.

Speaker Change: Type of Rev.

Speaker Change: The revenue synergies you've already.

Speaker Change: <unk> already achieved and what do you think.

Speaker Change: Occurs in 'twenty four.

Speaker Change: Yes. So if you go back to pre closing, which go back to the summer of 2023.

Operator: Your next question comes from the line of Scott Gruber with Citigroup. Your line is open. Yes, good morning. Morning, Scott.

Patterson UTI, our Universal Division was operating 12, Frac fleets and those frac fleets were performing well, but the market softened but.

William Andrew Hendricks: I want to come back to the completion outlook, if you don't mind. It's just a focal point today for folks. The white space, did that start to emerge early in the first quarter, or is that more of a second half of the quarter impact? And then as you reposition fleets, you know, those getting picked up in the oil basins, I'm really trying to think about the trend into the second quarter. Assuming gas activity stays weak, you know, does the second quarter activity end up looking better than the first quarter? Can you get some more oil activity, or is it potentially down versus the first because gas stays weak and it's a full quarter impact? Are you able to provide some more color there?

Speaker Change: Look at what next year was doing with vertical integration and all the other services. They provide they provide the wireline services, they're providing they're providing power solutions CMG transport, creating <unk> transporting it to the well site blending it with.

Speaker Change: The natural gas that's available in the field gas and look at the trucking and logistics operation that next year has with well over 600 people in that business alone and so there's a lot of verticals that we didn't have a patterson UTI. So one of the first things that we did as part of this.

Speaker Change: Synergies will start to reach out to customers to say look we believe we can improve your service if we have.

William Andrew Hendricks: I think, you know, given that, you know, natural gas has only recently dropped below two dollars a gallon, we don't know the full impact of that yet. But we are working for some good customers in these gas basins, and we are repositioning, you know, some of our horsepower into more liquids, more oil. So yeah.

Control of some of these other services that are affecting logistics inefficiencies and performance at the well site and so we have added wireline we have added trucking and logistics. We have added some power solutions onto some of those fleets that didn't have that pre close and so that's been progressing and we had some quick early wins, but we think we.

William Andrew Hendricks: We're going to have some exposure to gas, but we had exposure to gas last year and we still had strong performance, so we still think that we're going to have some relatively steady activity. If I had to make a guess right now on Q2, I'd say just consider it relatively steady compared to what we're seeing with Q1, including the white space. I think there is still some uncertainty out there. But also, I think we have the potential to improve some profitability as we roll out some new technology and enhance some of the integration. That's great!

Speaker Change: Have continued wins on that from a revenue and profitability standpoint throughout 2024. So that's really how it's playing out and our teams are doing a great job working together to make this happen yeah. I would also point out on that one again that Andy mentioned and I would just highlight is it really the productivity gains that we're getting.

Speaker Change: Again kind of pushing the fully integrated well site offering on the legacy ETP fleets is really improvement as well and overall profitability.

I appreciate the color I'll turn it back thanks.

Speaker Change: Our next question comes from the line of Derek <unk> with Barclays. Your line is open.

Derek: Hey, good morning, guys.

Derek: Talk about the shareholder returns and maybe just how youre thinking about the remaining free cash flow over that 50% can you talk about maybe some of your M&A, whether it be tuck ins or bolt ons or what can we expect out of that debt.

William Andrew Hendricks: And just on that point, you know, one of the debating points post-deal was your ability to secure revenue synergies and do so in a timely fashion. Can you just speak to, you know, what you're seeing on that front? You know, what type of revenue synergies you've already achieved? And when do you think that occurs in 24?

Derek: I know the maturities are far out to 2028, but any servicing of debt that you are looking at and really just trying to get at what the upside to that return number could look like.

William Andrew Hendricks: Yeah, so if you go back to, you know, pre-closing, which you know, go back to the summer of 2023, Patterson-UTI, our universal division, was operating 12 frac fleets, and those frac fleets were performing well, but the market softened. But look at what NextGear was doing with vertical integration and all the other services they provided. You know, they provided the wireline services, they're providing, they're providing power solutions, CNG, you know, transport, creating CNG, transporting it to the well site, blending it with, you know, the natural gas that's available in the field gas, and, you know, look at the trucking and logistics operation that NextGear has And so, there are a lot of verticals that, you know, we didn't have at Patterson-UTI.

Derek: Yes.

Derek: Look on the return to the number that we've given the $400 million that we expect for the year, that's above our 50% commitment.

Derek: I would say that right now M&A is not a high priority again, it's hard to predict when it comes it will certainly we look at a lot of things, but it's not the highest priority for US right now neither is.

Derek: And this market just yet I think any kind of significant debt reduction from time to time, we may nimble and debt.

Derek: Theres, a goodbye to buy some back kind of on the other market, we will do that.

Derek: Dean.

Derek: Seeing anything right now that it warrants is making.

Derek: Kind of a large debt reduction.

Speaker Change: Got it okay. That's helpful switching over to the to the drilling side can you just walk us through the daily margin trajectory that youre thinking about her first quarter and for the rest of the year.

Speaker Change: Cost per day had a big step up there.

Speaker Change: Come back a little bit just curious what's going on there and then how should we think about the revenue per day as you have some contract churn and you just talked about leading price in that mid thirty's, but just a little help.

Speaker Change: Break apart those two with the revenue per day on the cost per day.

William Andrew Hendricks: So, one of the first things that we did as part of the synergies was start to reach out to customers to say, look, we believe we can improve your service, you know, if we have control of some of these other services that are affecting logistics and efficiencies and performance at the well site. And so, we have added wireline, we have added trucking and logistics, and we have added some power solutions to some of those fleets that didn't have that pre-closed. And so, that's how it's progressing. And we had some quick early wins, but we think we'll have continued wins on that from a revenue and profitability standpoint throughout 2024. So, you know, that's really how it's playing out, and our teams are doing a great job working together to make this happen. Yeah, I would also point out Integrated Well Site Authorization. I appreciate the color.

Speaker Change: So really pleased with this team on the drilling side you know what they did year over year 23 over 22 was huge in terms of improving.

Speaker Change: Improving our performance in the field to sustain the activity levels that we had and outperform the others, but also to raise the profitability per rig at the same time. So that was just amazing what that team accomplished as we work through this year there was some softening in leading edge in.

Speaker Change: Rigs.

Speaker Change: The end of last year in the second half and we acknowledged that on some previous calls. So we will have some leading edge come down, but we're still running around the mid <unk> for all of the performance in ancillary technology options that we're offering on the rigs so I think that.

William Andrew Hendricks: I'll turn it back. Our next question comes from the line of Derek Podhaizer with Barclays. Your line is open. Hey, good morning, guys.

Speaker Change: While the costs went up and costs I think youre going to be relatively steady.

Speaker Change: But I think margins will be relatively steady as well and so our teams have done a great job.

Operator: I want to talk about your shareholder returns and maybe just how you're thinking about the remaining free cash flow over that 50%. Can you talk about maybe some of your M&A, whether it be tuck-ins or bolt-ons, or what can we expect out of that? Debt, I know the maturities are far out to 2028, but any servicing of debt that you're looking at, and really just trying to get at what the upside to that return number could look like.

Speaker Change: I don't think were going to see this profitability increase that we saw 23 versus 22, but at the same time.

Speaker Change: I think it's steady and this business is going to throw off a lot of free cash, yes, I would.

Speaker Change: To reiterate that I would just say that from this point forward through the year as we view it today, we kind of look at.

Speaker Change: Both revenue and cost being relatively steady.

Speaker Change: Got it maybe just a quick follow up did the cost per day I mean, what was the lead driver of that step up.

Speaker Change: Yes, we have.

Speaker Change: A lot of things going on at the end of the year.

Speaker Change: Turning up some cost estimates and things like that.

William Andrew Hendricks: Yeah, so look, on the return to number that we've given, the $400 million that we expect for the year, that's above our... I would say that right now, M&A is not a high priority. Not the highest priority for us right now, neither is... the market just yet. Okay, that's helpful. Switching over to the drilling side.

Speaker Change: Nothing nothing in particular that was significant I mean again from quarter to quarter, you can have a bunch of things bumping around in there, whether it's working capital or insurance reserves and all of those types of things.

Speaker Change: Capital I'm, sorry on workers comp.

Speaker Change: So you've got those items that come through in the fourth quarter, sometimes it just causes a little bit of a change.

Speaker Change: I would say nothing that I would point to you that I would say is is.

Speaker Change: This usually significant.

Speaker Change: Great. Thanks for all the color I'll turn it back thanks.

Speaker Change: Yes.

Speaker Change: Your next question comes from the line of Jim Rollyson with Raymond James Your line is open.

William Andrew Hendricks: Can you just walk us through the daily margin trajectory that you're thinking about for the first quarter and for the rest of the year? The cost per day had a big step up there. Could that come back a little bit? Just curious what's going on there.

Jim Rollyson: Hey, good morning, guys and great job on the quarter and free cash flow and returning free cash flow.

Jim Rollyson: Andy just a couple of questions around the rig side.

Jim Rollyson: So you are at $1 22 in January are at 122 today, we are halfway through the quarter and obviously guidance is for 120, so implying things come down is that just kind of curious what youre seeing on the rig side around the gassy basins in.

William Andrew Hendricks: And then how should we think about the revenue per day? As you have some, you know, contract churn, and you talked about the leading price in the mid-30s, but just a little help to break apart those two, the revenue per day and the cost per day. Yeah, so really pleased with this team on the drilling side. What they did year over year, 23 over 22, was huge in terms of, you know, improving our performance in the field to sustain the activity levels that we had and outperform the others, but also to raise the profitability per rig at the same time. So that was just amazing what that team accomplished.

Jim Rollyson: Similar to what Youre doing on completions are you looking at moving any rigs around out of gassy basins into oily basins, just maybe a little color around that.

Sure I think for now our views that the oil basins are going to stay relatively steady and so the rigs that we have working in those basins.

Jim Rollyson: Which is really about.

Jim Rollyson: 70% of our rigs are in oil basins, but even though 30% of our rigs are operating and gas basins. Some of those rigs are on gas liquids and not dry gas. So it's not a it's not full 30% its probably closer to $20 to 25% are drilling dry gas.

William Andrew Hendricks: You know, as we work through this year, there was some softening in leading edge rigs, you know, towards the end of last year in the second half, and we acknowledged that on some previous calls. So we will have some leading edge come down, but, you know, we're still running around the mid-30s for, you know, all the performance and ancillary technology options that we're offering on the rigs. So I think that, you know, while the cost went up, [inaudible] Unknown Executive, Saurabh Pant, James Holcomb, Patterson-UTI Energy Inc. revenue and cost. Now just a quick follow-up, the cost per day, what was the lead driver of that step up? Yeah, we have had a lot of things going on at the end of the year, but nothing in particular that was significant.

Jim Rollyson: So I think youre going to see it relatively steady in those oil and gas liquids basins for us.

Jim Rollyson: In natural gas sure we're anticipating some softness.

Jim Rollyson: Could be down maybe three rigs over the next few months, maybe five rigs.

Jim Rollyson: Based on where natural gas is trading today, but again, that's off a base of 122 rigs and.

Jim Rollyson: Then you've got a longer term outlook as we get closer to LNG takeaway needs. So could there be some softening in natural gas sure is it going to be a big impact for the company know isn't going to change margin profitability no.

William Andrew Hendricks: Please see the complete disclaimer at https://sites.google.com. So, you've got those items that come through in the fourth quarter sometimes and just cause a little bit of a, I would say nothing, that I would point you to that I would. Great. Thanks for all the color.

Jim Rollyson: We're performing really well, we don't have a need to reduce rates.

Jim Rollyson: We're not likely to necessarily move those rigs out of the gas basins. Because if you look at the longer term, we're going to probably need them. There in 2025. So I think its still I still call that relatively steady even with some potential softening in the gas base.

William Andrew Hendricks: Turn it back. Your next question comes from the line of Jim Rollyson with Raymond James. Your line is open. Hey, good morning, guys, and great job on the quarter in terms of free cash flow and returning free cash flow. Andy, just a couple of questions on the rig side. So you're at 122 in January, you're at 122 today, and we're halfway through the quarter, and obviously guidance is for 120, so implying things come down. Is that just kind of curious what you're seeing on the rig side around the gassy basins and, you know, similar to what you're doing on completions, are you looking at moving any rigs around out of gassy basins into Sure.

Got it that's helpful and you mentioned rig upgrades.

Jim Rollyson: Normally when we're in a upward trajectory market you guys are reactivating rigs upgrading rigs and getting a lot of that covered or all of that covered on term contracts.

Jim Rollyson: Can you talk about what the specific rig upgrades youre doing for specific customers and kind of how you see capturing that.

Jim Rollyson: That capital back in the return on that capital in this kind of market where were more steady instead of upward moving yes, one of the upgrades I'm really excited about is some of the upgrades related to technology in terms of.

William Andrew Hendricks: I think for now, you know, our view is that the oil basins are going to stay relatively steady. So, you know, the rigs that we have working in those bays, which are really about 70% of our rigs are in oil bays. But even though 30% of our rigs are operating in gas basins, some of those rigs are on gas liquids and not dry gas. So it's not a, you know, it's not a full 30%.

Jim Rollyson: <unk> automation packages that we're putting on the rig this is really a capital light upgrades. It has to do with electrical systems and software and when we layer onto a rig we add automation capabilities to improve performance and consistency of the drilling operations and so we're going to go through a steady pace of doing rigs.

William Andrew Hendricks: It's probably closer to 20 to 25% are drilling dry gas. So I think, you know, you're going to see relatively steady growth in those oil and gas liquids basins for us. In natural gas, sure, you know, we're anticipating some softness. We could be down maybe three rigs over the next few months, maybe five rigs based on where natural gas is trading today, but again, that's off a base of 122 rigs. And then you've got a longer-term outlook as we get closer to LNG takeaway. So, could there be some softening in natural gas prices?

Jim Rollyson: And transforming that and our customers are excited about that they want. This this is something that they are asking for.

Jim Rollyson: In demand, but again, it's a capital light type of upgrade.

Speaker Change: Got it thanks, I'll turn it back.

Speaker Change: Our next question comes from the line of Stephen <unk> with Stifel. Your line is open.

Speaker Change:

Stephen: Thanks, Good morning, gentlemen.

Stephen: A couple of things from me.

Probably a long a long question so.

Stephen: I apologize, but when we think about the well site integration.

Stephen: On the Frac side, I have kind of like two or three questions around that one is.

William Andrew Hendricks: Sure. Is it going to have a big impact on the company? No. Is it going to change margin profitability? No. You know, we're performing really well. We don't have a need to reduce rates.

Stephen: Can you give us a sense for sort of the percentage of assets that are kind of at the high end of integrated services versus the low end.

William Andrew Hendricks: We're not likely to necessarily move those rigs out of the gas basins because, if you look at the longer term, we're probably going to probably need them there in 2025. So I think it's still, you know, I still call that relatively steady, even with some potential softening in the gas. Got it, that's helpful. And you mentioned rig upgrades. You know, normally when we're in an upward trajectory market, you guys are, you know, reactivating rigs, upgrading rigs, and getting a lot of that covered or all of that covered on term contracts. Can you talk about what specific rig upgrades you're doing for specific customers and kind of how you see capturing that capital back and the return on that capital in this kind of market where we're more steady instead of upward moving? Yeah, one of the upgrades I'm really excited about are some of the upgrades related to technology in terms of, you know, our process automation packages that we're putting on the rig. This is really a capital light upgrade that has to do with electrical systems and software.

Stephen: And I'm not sure if there's a way to kind of give us.

Any color around the profitability gap I know next year.

Stephen: Legacy next year I provided some color on that and then just the final part of that long question is any.

Stephen: <unk> on your ability to do that with the M&A of your customers are there are the larger customers more or less willing and how should we think about that yes.

Speaker Change: Yes, I'll answer the first part of that.

Speaker Change: Andy talked to the customers into harder to harder question.

Speaker Change: Yes, right now in terms of the integrated well side offering and sort of how that.

Speaker Change: Across our fleet, where you think of that.

Speaker Change: Sort of a heavy concentration versus less and it's about 50 50 on the fleet.

Speaker Change: We saw a lot of opportunity to push more.

Speaker Change: That integrated offering across across our work.

Speaker Change: In the pressure pumping space.

Speaker Change: Yes in terms of customers and M&A, we all can see that there's been huge wave of consolidation from the E&P customers.

Speaker Change: And when that happens.

Speaker Change: To get a pause in activity and for for some customers that were working for that might be a pause for us.

For some other customers that might be kind of a net neutral for us in the near term, but youre going to get a pause until they decide what resources. They want to use what they want to do going forward from an operation standpoint, but when they evaluate that I think we are well positioned with our ability to integrate the necessary services too.

William Andrew Hendricks: And when we layer on to a rig, we add automation capabilities to improve performance and drilling operations. And so we're going to go through a steady pace of building rigs. Transcription by https://otter.ai.

William Andrew Hendricks: Thanks. I'll turn it back. Our next question comes from the line of Stephen Gengaro with Stifle. Your line is open. Thanks. Good morning, gentlemen.

Speaker Change: Hence the performance on the completion side and even on the drilling side with the new technologies that we're rolling out. So I think we're in great shape for this wave of consolidation thats happening on the E&P side.

Operator: A couple of things for me, and it's probably a long question, so I apologize. But when we think about the well site integration on the FRAC side, I have kind of like two or three questions around that. And one is, can you give us a sense for sort of the percentage of assets that are kind of at the high end of integrated services versus the low end? And I'm not sure if there's a way to kind of give us any color around the profitability gap. I know Legacy next year had provided some color on that.

Speaker Change: Great. Thank you and then just a quick follow up to that when we think about.

Speaker Change: Underlying price not sort of a mix issue.

Speaker Change: Offerings, but underlying track prices are.

Speaker Change: If we modeled something that was kind of flattish from current levels for 'twenty four is that something you're comfortable with or how do you think about that.

Yes, we acknowledged that there was softening in completions pricing and rig pricing in <unk> of last year, but I think from where we are this year, it's going to be relatively steady for us and I want to qualify that for us because we are seeing some wide space as we discussed earlier and we are moving some assets.

William Andrew Hendricks: And then just the final part of that long question is, any impact on your ability to do that with the M&A of your customers? Are the larger customers more or less willing? And how should we think about that?

William Andrew Hendricks: Thank you so much for joining us today, and we'll see you next time to talk to the customers in the heart of the heart. Right now, in terms of the integrated well-site offering and sort of how that works across our..., of that integrated offering across our. Yeah, in terms of, you know, customers and M&A, you know, we all can see that there's been a huge wave of consolidation among E&P customers.

Speaker Change: Part of that is just because we don't feel like we want to take lower rates and so we're going to work to protect pricing in the market and the markets and protect our margins in the markets and so for US I think it's relatively steady.

Great I appreciate all the color. Thank you.

Speaker Change: Our next question comes from the line of Sara <unk> with Bank of America. Your line is open.

Sara: Hi, good morning, Andy and Andy.

William Andrew Hendricks: And when that happens, you're going to get a pause in activity. And for some customers that we're working for, that might be a pause for us. For some other customers, it might be kind of a net neutral for us in the near term. But you're going to get a pause until they decide what resources they want to use and what they want to do going forward from an operation.

Sara: You can spend a good night.

Sara: If we can spend on R&D, a little time on your E fleets diabetes I'm thinking from the perspective of leasing versus buying and then also from our perspective.

Sara: When you're buying something how important it is in your mind too on that technology was just buy it off the shelf from a window and then related to that.

William Andrew Hendricks: But when they evaluate that, I think we are well positioned, with our ability to integrate the necessary services to enhance performance on the completion side and even on the drilling side with the new technologies that we're rolling out. So I think we're in great shape for this wave of consolidation that's happening. Great, thank you. And just a quick follow-up to that when we think about underlying price, not sort of the next issue from increased offerings, but underlying track prices. If we modeled something that was kind of flattish from some current levels for 24, is that something you're comfortable with? Or how do you think about that?

How should we think about power solutions in the context of that 80% of your fleet is going to be natural gas fired by the middle of going forward. How much of that do think is being supported by our solutions at that point.

Speaker Change: So I'm going to I'm going to start and then I'll, let Andy Smith talk about this as well from a business growth profitability standpoint, but.

Speaker Change: When you when you think about the easily.

We we certainly realize there is customer demand out there we want to have those technology offerings as well there is improved profitability to be able to do that and so we are investing in E. But also some other technologies as well not just the <unk>.

William Andrew Hendricks: Yeah, we, you know, we acknowledge that there was a softening in completions pricing and rig pricing in H2 of last year. But I think from where we are this year, it's going to be relatively steady for us. And I want to qualify that for us because, you know, we are seeing some white space, as we discussed earlier, and we are moving some assets. But part of that is just because we don't feel like we want to take lower rates.

Speaker Change: And so.

Speaker Change: Yes, we are working with a couple of different.

Speaker Change: Suppliers of electric Frac equipment to look and see how the performance is on different types of equipment and we've tested other equipment in the past.

Speaker Change: We do request some changes when we get some of this equipment delivered so what we offer may be slightly different from others using similar equipment, but we have some experience in <unk>.

William Andrew Hendricks: And so, you know, we're going to work to protect pricing in the markets and protect our margins in the market. So for us, I think it's relatively... Great. I appreciate all the color.

Speaker Change: Cited about this offering.

Speaker Change: We'll continue to evaluate who are suppliers should be and who we want to work with going forward, but.

William Andrew Hendricks: Thank you. Our next question comes from the line of Saurabh Pant with Bank of America. Your line is open. Hi, good morning, Andy and Andy. I'd like to spend a good morning with you on your E-Fleet strategy. I'm thinking from the perspective of leasing versus buying and then also from the perspective of when you're buying something, how important it is in your mind to own that technology versus just buy it off the shelf from a window.

Speaker Change: I would say that we are moving in that direction.

Speaker Change: I'll add that we also have a drilling company that has a great history of operating over 1000 AC induction Motors. We also have an electrical engineering company that.

Speaker Change: His experience building high voltage control systems for AC induction electric motors, including for electric Frac, and so stay tuned and we'll keep you posted on how this is going to evolve from a technology standpoint, but we're in it that's for sure.

William Andrew Hendricks: And then related to that, how should we think about power solutions in the context of that? So I'm gonna start and then I'll let Andy Smith talk about this as well from the business growth and profitability perspective. But, uh, you know, when you think about the EAVS lead. We certainly realize there's customer demand out there, and we wanna have those technology offerings as well. There's improved profitability to be able to do that. And so, we are investing in E, but also some other technologies as well. And so, yes, we are working with a couple of different suppliers of electric frack equipment to look and see how the performance is on different types of equipment, and we've tested other equipment in the past.

Speaker Change: Yes, right now in terms of power solutions supporting our own work about 40% of our work out there things supported by power solutions and.

Speaker Change: And we've got opportunities to grow that.

Speaker Change: In the current year.

Speaker Change: Okay Fantastic know, Andy and thanks for teasing us on the technology side. So we'll stay tuned on that.

Speaker Change: And a quick unrelated follow up for me on the synergy side by the way of really good progress I don't know if its going to use on the call or not but a shout out to him definitely doing a fantastic job.

Speaker Change: Andy Andy Smith, I think you said on the call in your prepared remarks that you expect at least $200 million. So I just wanted to emphasize the lease and see now that it's been five months, so a little more than five months since you closed the module.

William Andrew Hendricks: We do request some changes when we get some of this equipment delivered, so what we offer may be slightly different from others using similar equipment, but we have some experience, and we're excited about this offering. And, you know, I'll add that we also have a drilling company that has a great history of operating over a thousand A.C. induction motors. We also have an electrical engineering company that has experience building high-voltage control systems for A.C. induction electric motors, including for electric frack. And so stay tuned, and we'll keep you posted on how this is going to evolve from a technology standpoint. But we're still in it.

Speaker Change: How do you look at any potential upside to that $200 million they'll maybe accelerating that from.

Speaker Change: 18 months to maybe you realize not sooner than he'd be months.

Speaker Change: Yes.

Speaker Change: We've got as you can imagine there is a whole range of items included in the bucket.

Speaker Change: In terms of synergies.

William Andrew Hendricks: Yeah, right now, in terms of power solutions supporting our own work, right, about 40% of our work out... We've got opportunities to grow that. How do you look at any potential upside to that $200 million or maybe accelerating that from 18 months to maybe realizing that sooner than 18 months? Yeah, um, look.

Speaker Change: And.

Speaker Change: You know as we've kind of gone through the market since we've closed and the market's been sideways.

Speaker Change: Actually down a little bit.

Speaker Change: Probably what we when we first started talking we said you know there's a lot of synergies that we're getting out of this business. Some of it can be a little obscured by the market and pricing.

Speaker Change: We are not thats not how were looking at it internally internally we are.

Speaker Change: There is a very.

Speaker Change: A lot of rigor around making sure that we prove out in each one of these is actually hitting our income statement.

Speaker Change: So we feel very good about that 200, I think in an improving market that number only goes up.

Speaker Change: I don't want to guide to a higher number than that right now, but I think as the market improves the benefit of those synergies only increases over and above that $200 million. Yeah. So Rob as you mentioned kidney and the team are doing a great job.

Speaker Change: A number of different teams that are looking at different aspects, we've talked about the different buckets in the past.

William Andrew Hendricks: We've got, as you can imagine, there's a whole range of items. All right. [inaudible] probably what we were when we first started talking. We are not, that's not how we're looking at it internally. Internally, we are.

Speaker Change: The increase.

Speaker Change: Increasing revenue supply chain or some cost savings and we still have levers to pull on all those and we will continue to work out.

Speaker Change: No that's fantastic, Okay, Andy and Andy. Thank you. Thanks for those answers I'd turn it back.

William Andrew Hendricks: A lot of rigor around making sure. We feel very good about that $200,000. In an improving market, that number only goes up. I don't want to guide you to a higher number than that right now.

Speaker Change: Your next question comes from the line of <unk> <unk> with Goldman Sachs. Your line is open.

Goldman Sachs: Hi, good morning, Dave.

William Andrew Hendricks: Yeah, Saurabh, as you mentioned, Kenny and the team are doing a great job. There are a number of different teams that are looking at different aspects. We've talked about the different buckets in the past, you know, whether Inc. Inc. Inc. We still have levers to pull on all those. No, that's fantastic.

<unk> <unk>: You mentioned steady outlook, but as we think about the cadence through the rest of the yard maybe sounds like fleet count is steady and <unk> TQ, but do you anticipate risk of larger white spaces on the calendar as customers manage activity, particularly around gas prices how.

Operator: Okay, Andy and Andy, thank you. Thanks for those answers. I'll turn it back. Your next question comes from the line of Ati Modak with Goldman Sachs. Your line is open. Hi, good morning, team. You mentioned a steady outlook, but as we think about the cadence through the rest of the year, maybe it sounds like the fleet count is steady in 2Q and 3Q. But do you anticipate the risk of larger white spaces on the calendar as customers manage activity, particularly around gas prices? How should we think about that? And do you have anything that would offset that?

<unk> <unk>: How should we think about that and do you have anything that would offset that.

<unk> <unk>: I think.

<unk> <unk>: As we mentioned before we're already transitioning some horsepower.

<unk> <unk>: Gas to liquids and so that's already in our Q1 projections maybe.

<unk> <unk>: Maybe we could see some more softness in Q2.

William Andrew Hendricks: I think, you know. As we mentioned before, we're already transitioning some horsepower from gas to liquids. And so that's already in our Q1 projection. [inaudible] You know, we've actually been in some discussions.

<unk> <unk>: If the commodity prices hang in there for longer I think we'll just have to wait and see how that plays out but then.

If you think about the end of this year and going into 'twenty five.

<unk> <unk>: It's we've actually been in some discussions with some operators about increasing activity at the end of this year and in 2025, So I would take a longer term view and I recognize there's going to be some softness, but it's relatively steady longer term.

William Andrew Hendricks: Operators are talking about increasing activity at the end of this year and in 2025. So, you know, I take a longer-term view, and I recognize there's going to be some softness, but it's relatively steady longer. Got it.

William Andrew Hendricks: I appreciate that. And then on the repurchases, how should we think about the cadence? Is this sounds like it's going to be a little bit more opportunistic, but any thoughts around that, whether it's opportunistic or steady and how should we think about that? Yeah, I mean, we've always kind of been opportunistic, and I don't want to.... Sounds good!

Speaker Change: Got it appreciate that and then on the repurchases how should we think about the cadence is.

Speaker Change: It sounds like it's going to be a little bit more opportunistic but.

Speaker Change: Any thoughts around that whether it's opportunistic are steady and how should we think about it yes, I mean, we've always kind of an opportunistic and I don't want to be too prescriptive about how we're going to be in the market.

Speaker Change: We're doing all of this.

Speaker Change: Market purchases.

Speaker Change: We're comfortable given that guidance for the full year, but I don't want to be too prescriptive about quarter to quarter.

William Andrew Hendricks: Thank you. Appreciate you taking the question. Thanks. Our next question comes from the line of Keith Mackey with RBC Capital Markets. Your line is open. Hi, good morning.

Speaker Change: Sounds good. Thank you I appreciate you taking the questions.

Speaker Change: Thanks.

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

Keith Mackey: Hi, Good morning, just wanted to start out on that 40% free cash flow conversion number that that we that we saw in the press release.

Operator: Just wanted to start out on that 40% free cash flow conversion number that we saw in the press release. Can you talk about maybe the main drivers behind impacting where you've sort of set that target, assuming EFREC build-out is certainly one of them? And then a follow-up to that would be, do you see 40-plus percent as a good, approximate, longer-term target for the business, or should we be thinking about that as a 35, 40, 45, or 50 kind of number? Yeah, look, I think 40 is a pretty good number.

Keith Mackey: Can you talk about maybe the main drivers.

Keith Mackey: Behind impacting where where you have sort of set that target assuming E. Frac Buildout is certainly one of them and then a follow up to that would be do you see the 40 plus percent as a good approximate longer term target for the business or or should we be thinking about that as a.

$35, $40, 45, or 50 kind of kind of number.

Yes look I think 40 is a pretty good target for the business.

Andy Smith: As we look, you know, as we set our cap... If we look at the opportunities set in front of us, we think about how we can balance all the competing priorities and competing calls on our Capitol. As you think about our CapEx number... What we would call either conversion capital, you know, likely not really. But that's kind of how we have.

Keith Mackey: And as we look as we set our capital budget.

Keith Mackey: We look at the opportunity set in front of US we think about how can we balance.

Keith Mackey: All of the competing priorities and competing calls on our capital and that includes returned to shareholders.

Keith Mackey: As you think about our Capex number.

Probably roughly two thirds or sales maintenance capital with some additional.

Keith Mackey: What we would call either conversion capital you know likely not really growth not really incremental horsepower coming into our fleet. It will displace older stuff.

Keith Mackey: But that's kind of how how we approach it.

And we kind of look at that 40% is a pretty good target at least in the in the intermediate term.

Andy Smith: You know, as our fleet changes shape over the next few years, I'd like to commend the team on the completion side for their efficient use of the cap. They've got a good plan in place this year to move us away from having to invest maintenance capex in diesel-only type engines and pumps as we transition into newer technologies, whether it's electric or other. And so, yes, we're investing in newer technologies, but we're also moving away from having to maintain the older technology at the same time. Got it, that's helpful.

Keith Mackey: As our fleet changes shape over the years will sort of looking at and reevaluate, but right now we feel pretty comfortable with that as a as a pretty good target going forward I'd like to commend the team on the completion side further efficient use of the capital.

Keith Mackey: They've got a good plan in place this year to move us away from having to invest maintenance capex in diesel only type of engines and pumps as we transition into newer technologies, whether it's electric or other.

Keith Mackey: So.

Keith Mackey: Yes, we are investing in the newer technologies. We're also moving away from having to maintain the older technology at the same time.

Speaker Change: Got it that's helpful and just an unrelated follow up.

Andy Smith: And just an unrelated follow-up, certainly there are quite a large number of rigs working in the U.S. now that are subject to E&P consolidation on one side or the other, and you mentioned you're fairly comfortable with your positioning given the specifications of your rigs, but can you talk about just generally how you see the market unfolding given the large amount of pending consolidation? Do you think there will be a significant number of rigs that get reduced as part of this, or do you see any notable potential impacts on pricing as potentially some of those displaced rigs have to have to re-compete for work? Or just any thoughts on how you see that unfolding would be helpful. Well, I'll start by saying there are a lot of different rigs in the market. And, you know, what we operate are tier one super spec rigs. The highest performing type rigs that are on the market. And you saw how we performed last year in a market where the overall Baker Hughes count went down. And yet, you know, while we went down as well, not nearly as much as the overall...

Speaker Change: Certainly there are quite a large number of rigs working in the U S. Now that are subject to E&P consolidation on one side or the other and you mentioned you're fairly comfortable with your positioning given the spec of your rigs, but can you talk about.

Speaker Change: Just generally how you see the market unfolding given the large amount of pending consolidation do you think there will be a significant number of rigs that that get reduced as part of this or do you think there do you see any notable potential impacts on pricing as potentially some of those displace rigs have.

Speaker Change: To have to re compete for work or just just any thoughts on how you see that unfolding would be helpful.

Speaker Change: Well I'll start by saying there is a lot of different rigs in the market.

Speaker Change: And what we operate are the tier one super spec rigs the highest performing type rigs that are on the market and you saw how we performed last year in a market where the overall bigger use count went down.

Speaker Change: Yet, while we went down as well not near as much as the overall Baker Hughes count because theres still a large number of ncr's mechanicals and that overall rig count.

William Andrew Hendricks: There's still a large number of SCRs and mechanicals in that overall. What I think you're going to see a similar trend this year is that we're going to have some softening in the overall market, and you're going to see the overall industry count go down. But I think you're going to see us and one or two other drilling contractors gain share because of the technologies that we offer. We're not immune to the softening, but at the same time, we're running the highest performing rates that are out there. So, you know, it's going to be more about overall supply and demand, but, you know, I think that, overall, you're going to see relatively steady activity from us. Downside Swing, Transcripts by Transcription Outsourcing, LLC. Okay, thanks very much. I appreciate it.

Speaker Change: I think youre going to see a similar trend. This year, we're going to have some softening in the overall market youre going to see the overall industry rig count go down, but I think youre going to see us in one or two other drilling contractors gained share because of the technologies that we operate we're not immune to the softening, but at the same time, we're running the highest performing rigs that are up.

Speaker Change: Out there.

So it is going to be more about overall supply and demand but.

Speaker Change: I think that overall youre going to see relatively steady active.

Speaker Change: Activity from us, even if the market softens and I do think youre going to see the overall rig count have some downside swings with either based on commodity prices or based on some of these mergers and acquisitions.

Speaker Change: And consolidation on the E&P side, but I think youre going to see high grading at the same time like we've seen over the last few years.

Speaker Change: Okay. Thanks very much appreciate it thank you.

William Andrew Hendricks: Your next question comes from the line of Waqar Syed with ATB Capital Markets. Your line is open. Thanks for taking my question. Andy, you mentioned the synergies, $100 million of synergies come from different buckets. I just want to drill a little deeper into that. Could you maybe quantify which of these buckets are contributing more or maybe just give some numbers on what has been achieved from the different buckets?

Speaker Change: Next question comes from the line of <unk>.

Speaker Change: Ed with ATB capital markets. Your line is open.

Thanks for taking my question.

Ed: Andy you mentioned.

The synergies of 100 million does the synergies come from different bucket. So just wanted to.

Ed: It's been a little deeper into that could you maybe quantify.

Ed: Each of these buckets are contributing more or maybe just give some numbers to what has been achieved from the different buckets.

William Andrew Hendricks: and what's still remaining. Yeah, since I called it out earlier, I'll answer the question. Hey, good morning, Waqar.

Ed: And what's still remaining.

Speaker Change: Yes, it's I called it out earlier I'll answer the question Hey, good morning Waqar.

William Andrew Hendricks: So, yeah, good morning. We talked about three different buckets, one being revenue, one being supply chain, and one being costs. I think that, you know, the ones that went the fastest were probably related to the supply chain and some savings that we picked up last year as the market softened as well. And we were able to accelerate some of those. You also had some quick wins on revenue, but the revenue one will still continue at kind of a steady pace over the next four quarters. We saw some cost improvements last year, but we'll see some further cost improvements. But the early one that moved probably the fastest was on supply chain. So hats off to the teams that pulled that off. Yeah, and I would even say on the G&A side. Unknown Speaker, The obvious.

Waqar: Good morning, we talked about three different buckets, one being revenue one being supply chain one being cost.

Waqar: I think that.

Waqar: The ones that went to SaaS is were probably related to supply chain and some savings that we picked up last year as the market softened as well and we were able to accelerate some of those you also had some quick wins on the revenue, but the revenue will still continue kind of a steady pace over the next four quarters.

Waqar: We saw some cost improvements last year, but we will see some further cost improvements this year, but the early one that probably the fastest was on supply chain. So hats off to the teams that pulled that off yes, and I would even say on the G&A side centers.

Waqar: In others.

William Andrew Hendricks: But then, as you go through, there's still a lot of... A lot of that, some of that's from third parties. Some of it is just a matter of time. Okay, great. And then just one unrelated follow-up, in terms of your pressure pumping fleet, you mentioned that it could be at 80% national gas powered or dual fuel. Could you maybe further break down like what proportion would be like Tier 4 DGB versus Tier 2 national gas or dual fuel? You know, because we're just now stepping into more electric than we've been running in the past. The Tier 4 dual fuel is still going to make up the majority of that, but we also do some things to enhance that, especially through our power systems, CNG systems, and being able to blend CNG and fuel gas that we can enhance that, but the largest portion is still going to be Tier 4 DGB this year. We'll see a continued transition as we move to more electric and other new 100% natural gas technology going forward. And from a Tier 4 DGP, what kind of fuel switching, and percentage switching are you seeing from diesel to natural gas and DGP engines? I'm sorry, what kind of what?

Waqar: The obvious things around again.

Waqar: To larger corporate companies come together.

Kind of a lot of savings in terms of an overall kind of top level management.

Waqar: Those have been achieved obviously, but then as you go through there is still a lot of consolidation savings Tom.

Waqar: A lot of that some of Thats from third party services, whether it's insurance.

Waqar: Outside.

Waqar: Advisers things like that.

Waqar: And then some of it is just over time as you continue to sort of rationalize.

Waqar: In our systems and processes and things like that you'll continue to achieve those savings.

Speaker Change: Okay, Great and then just one.

Speaker Change: And then follow up in terms of.

Speaker Change: Your pressure pumping fleet mentioned that could be at 80%.

Speaker Change: I.

Speaker Change: Yes, Bob I do feel good.

Could you maybe further breakdown like what proportion would be like tier four DGB versus tier two natural gas.

Speaker Change: <unk>.

Speaker Change: Yes.

Speaker Change: Because we're just now stepping into more electric.

Speaker Change: And then we've been running in the past.

The tier four dual fuel is still going to make up the majority of that.

Speaker Change: But we also do some things to enhance that especially through our power systems, where with our power systems, <unk> systems, and being able to Glen Glen CMG and fuel gas.

Speaker Change: We can enhance that with the largest portion is still going to be tier four DGB. This year, but you'll see a continued transition as we move to more electric and other new 100% natural gas technologies.

Speaker Change: Going forward after this year.

Speaker Change: And from a tier four DGB, what kind of fuel switching pushed the dates.

Speaker Change: Switching that youre seeing from diesel to natural gas and DGB engines.

Speaker Change: I'm, sorry, what kind of what fuels.

William Andrew Hendricks: The fuel switching percentage, are you closer to 60-65% or higher than that from switching from diesel to gas in the TF4-DGBs? Yeah, it depends, you know, what we can offer because we can offer the combination of CNG and fuel gas blending through our power solution business. We can get anywhere from 65, but all the way up to 80% displaced on Tier 4 Dual Fuel, and that's very popular. And so we also do some other things to enhance that, which I think we'll explain at future dates. But, you know, as I mentioned earlier today, we have also replaced 100% natural gas electric offerings with Tier 4 dual fuel. You know, there are just some places that, you know, an operator can't operate 100% natural gas. It doesn't, it's not the right fit.

Speaker Change: The fuel switching person data closer to 60% to 65% or higher than that some switching from diesel to gas in the tier four DGB that depends what we can offer because we can offer the combination of CMG and fuel gas blending through our power solutions business, we can get.

Speaker Change: Anywhere from 65, but all the way up to 80% displacement.

Speaker Change: Tier four dual fuel and Thats very popular solution and so we also do some other things to enhance that that I think will explain at future dates but.

Speaker Change: As I mentioned earlier today, we've also replaced 100% natural gas electric offerings with tier four dual fuel because.

Speaker Change: There are just some places that offer.

Speaker Change: Operator can operate 100% natural gas it doesn't it's not the right fit so tier four DGB will still be a large portion of the market.

William Andrew Hendricks: So Tier 4 DGB will still be a large portion of the market, but we are moving towards more electric and more new technology at a measured pace. Thank you. Your next question comes from the line of Doug Beckle with Capital One. Your line is open.

Speaker Change: But we are moving towards more electric and more new technology at a measured pace.

Speaker Change: Thank you very much.

Speaker Change: Your next question comes from the line of Doug Becker with capital One your line is open.

William Andrew Hendricks: Thank you. Just wanted to quickly circle back on completion services. Is the repositioning expected to be fully completed during the first quarter? Or is there a chance it spills into the second quarter?

Doug Becker: Thank you just wanted to quickly circle back on completion services.

Doug Becker: Repositioning are expected to be fully completed during the first quarter or is there a chance that spills into the second quarter and then what's allowing you whether it's the market or the technology that you bring to the table to really move this equipment without conceding price.

William Andrew Hendricks: And then what's allowing you, whether it's the market or the technology that you bring to the table, to really move this equipment without conceiving a price in an uncertain market? Well, first off, the oil markets are still relatively steady. Second, it gets into performance.

Speaker Change: Uncertain market.

Speaker Change: Well first off the oil markets are still relatively steady segment gets into performance.

William Andrew Hendricks: And, you know, how we operate with not just providing pressure pumping but also wireline, trucking, and logistics, moving sand, power solutions with, you know, natural gas for the customers that are, you know, wanting dual fuel or full electric. And so, when we offer all those together, we can enhance the performance of the operation. And so that provides efficiency and savings. We also have very strong customer relationships at Patterson-UTI. We've talked about that for years. It does matter.

Speaker Change: And how.

Speaker Change: How we operate with not just providing pressure pumping, but also wireline trucking and logistics moving sand power solutions with natural gas for the customers that are wanting dual fuel or full electric and so when we offer all of those together we can enhance the performance of the.

Speaker Change: The operation and so that provides efficiency and savings at the end.

Speaker Change: We also have very strong customer relationships at Patterson UTI, we have talked about that for years. It does matter and we worked to protect those relationships too, but we're real excited about how well. This completions team has performed especially coming together through a merger and you saw that in the Q4 numbers.

William Andrew Hendricks: And we work to protect those relationships too. But we're real excited about how well it has performed, especially coming together through a merger. We saw that in the Q4 notes. We do recognize that with natural gas, things are a little bit softer, but we expect the transition of the horsepower to really just happen in Q1, so those numbers are in our Q1 projections. Performance is definitely there, and the oil basins are steady. Fair point. And then just quickly, all the commentary suggests that shareholder purchases are going to be the primary, maybe more explicitly, a dividend bump this year doesn't seem likely based on all the commentary you said. Is that fair?

Speaker Change: We do revenue.

Speaker Change: With the natural gas that things are a little bit softer, but we expect the transition to the horsepower really just to happen in Q1. So those those numbers are in our Q1 projections, but.

Speaker Change: Performance is definitely there and the oil basins are steady.

Speaker Change: Okay Fair point.

Speaker Change: Just quickly.

Speaker Change: All the commentary suggests that.

Speaker Change: Share repurchases are going to be the primary.

Speaker Change: Be more explicitly dividend bump this year doesn't seem likely based on the commentary you said is that.

Speaker Change: Yes, I think Thats fair as we stand today.

William Andrew Hendricks: Yeah, I think that's fair. Thank you very much. Your next question comes from the line of Don Chris with Johnson Rice. Your line is open. Morning, gentlemen. We've covered a lot of ground here today. But I just wanted to ask one about the international markets. You know, Altera gives you an entry point into the Middle East, in particular. Do you have aspirations to move either rigs or pressure pumping or other service lines into the area? And what kind of opportunities are there for y'all?

Speaker Change: Thank you very much.

Speaker Change: Your next question comes from the line of Don Crist with Johnson Rice. Your line is open.

Don Crist: Good morning, gentlemen.

Don Crist: A lot of ground here today, but I just wanted to ask one about the international markets. Alterra gives you an entry point into the middle East in particular.

Don Crist: Do you have aspirations to move either rigs <unk> pressure pumping our other service lines into the area and what kind of opportunities are there.

William Andrew Hendricks: First, we're really excited about Altera and their ability to grow internationally. You know, it's got the potential for double-digit growth in these markets, not just with the activity level in these markets but an increasing share in these markets. And so that is our focus on international markets. When you ask about moving rigs from the U.S. to other markets, typically, it takes a fairly significant capital upgrade to move a rig to a different market outside of the U.S. because we've become very specific about what we do here in the U.S., and right now, our focus is on returning cash to shareholders.

Don Crist: Yeah.

We're really excited about altera and their ability to grow internationally.

Don Crist: It's got the potential for double digit growth.

In these markets not just with the activity level in these markets, but increasing share in these markets and so that is our focus on the international I mean, you asked about moving rigs from the U S to other market.

Don Crist: Typically it takes a.

Don Crist: Fairly significant capital upgrade to move a rig to a different market outside of the U S. Because we've become very specific about what we do here in the U S and right now our focus is on returning cash to shareholders. So on the our international focus is growing altera and then.

William Andrew Hendricks: So our international focus is growing Altera. And then overall, that's part of what we're trying to do to return cash to share. So, you know, there could be an opportunity longer term, but this year, our focus is returning cash. Just to follow up on that, is there a pressure pumping opportunity over there?

Don Crist: Overall thats part of what we're trying to do to return cash to shareholders. So.

Don Crist: There could be an opportunity longer term, but this year, our focus is returning cash to shareholders.

Don Crist: Just a follow up to that is there a pressure pumping opportunity over there are no Nasser does a little bit but is there an opportunity given the gas shale drilling that they are commencing upon I would say that market is still very competitive you've still got the big guys do in pressure pumping over in those markets, even the ones that no longer do it here in North America.

William Andrew Hendricks: I know Nessar does a little bit, but is there an opportunity given the gas shale drilling that they're commencing on? I would say that the market's still very competitive. You've still got the big guys doing pressure pumping over in those markets, even the ones that no longer do it here in North America.

William Andrew Hendricks: So, you know, we're only going to move large assets. I got it. I appreciate all the color.

Don Crist: So we're always going to move large assets to markets like that if we think it makes sense for us and we think it's positive for shareholders, but again right now our focus is on returning cash to shareholders.

William Andrew Hendricks: Good quarter, guys. Our next question comes from the line of Kurt Hallead with Benchmark Company. Your line is open. Hey, good morning, everybody.

Speaker Change: Got it I appreciate all the color and good quarter guys. Thanks.

Our next question comes from the line of Kurt <unk> with Benchmark Company. Your line is open.

Speaker Change: Hey, good morning, everybody good morning, Kurt.

William Andrew Hendricks: Hey, thanks for sliding me in here. So Andy Hendricks, you definitely have me intrigued in the context of what's going on with the evolution of the land drilling fleet. And it seems like there's a new category, super duper spec rigs versus just plain super spec rigs. So just kind of curious as to what the what the dynamics here are differentiating, you know, even the higher end assets, technologies, you talk about automation, but kind of curious, like, what makes up this new class of rig that everybody wants versus what they thought they wanted a year ago. You know, I don't know how much time we have on this call, but it's not just one single thing.

Kurt: Thanks for thanks for slipping me in here.

Kurt: Sorry, Andy Hendricks, you have me definitely intrigued on the context of what's going on with the evolution of the land drilling fleet and it seems like there is a it seems like there's a new category Super Duper spec rigs versus just buying super spec rigs.

Kurt: Curious as to what the what the dynamics here are differentiating.

Kurt: No.

Kurt: Even the higher end.

Kurt: Assets.

Kurt: Technologies, when you're talking about automation, but kind of curious why what makes up this new class of rig that everybody wants versus what they do.

Kurt: Thought they wanted a year ago.

Speaker Change: You know I don't know how much time, we have on this call, but it's not one single thing you know theres a number of different things that are happening in initiatives that our teams have been working on to improve overall performance.

William Andrew Hendricks: You know, there are a number of different things that are happening and initiatives that our teams have been working on to improve overall performance. You know, there are various components that we upgrade on rigs, whether it's adding a pump for better hydraulics for longer laterals, which also includes adding a genset, which is something that we manufacture, something that we charge, and or, you know, producing transformer stations for high-line power, you know, on the energy side. For more information, visit www.

Speaker Change: There are various components that we upgrade on rigs whether it's.

Speaker Change: Adding a pump for better hydraulics for longer laterals, which also includes adding a gen set transitioning too.

Lithium battery hybrids for more fuel efficiency and savings on the rigs, which is something that we manufacturer and something that we charge for.

Speaker Change: Or producing transformer stations for Highline power along the energy side on performance side, It's how we run our real time data centers and how we share data.

William Andrew Hendricks: FEMA.gov, Following up with the rigs to make sure that we're maximizing that. Or, you know, new software and automation technology that we're layering in where we're going to upgrade some of the electrics on some of these rigs and, you know, in an asset-type, light-type upgrade and add new software for automation. And we're doing it on a number of rigs today, but we're going to work at a steady pace. Please see the complete disclaimer at https://sites.google.com or at www.google.com. Operations Engineering Technology, Real-Time Performance Data Analytics, etc., you just go down the list.

Speaker Change: Across the rigs and throughout the field and the teams that we have that are looking at data analytics and performance and following up with the rigs to make sure that we're maximizing that performance or new software and automation technology that we're layering in where we're going to upgrade some of the electrics on some of these rigs.

Speaker Change: And in an asset type light type of upgrade and add new software for automation.

Speaker Change: We're doing it on a number of rigs today, but we're going to work at a steady pace to continue to roll that out and it's got great traction in the market and really excited about how that's performing as well. So it is certainly not any one thing that you can point to our teams do a fantastic job, whether it's operations engineering technology.

Speaker Change: Real time performance data analytics used to go down the list.

William Andrew Hendricks: That's what's, you know, showing up in our number. Thank you. Our next question comes from the line of Dan Kutz with Morgan Stanley. Your line is open. Hey, thanks. Good morning.

Speaker Change: <unk>.

Speaker Change: That's what's showing up in our numbers.

Speaker Change: Thank you.

Thanks.

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

Dan Kutz: Hey, Thanks, Good morning, Thanks for squeezing me in.

William Andrew Hendricks: Thanks for squeezing me in. So I just wanted to ask one more question on the international space. I think you guys mentioned that the Altera Outlook is for high team growth this year. That kind of compares to what seems like the industry bogeyman for international growth being kind of high single digits, low double digits. I assume there's market share gains in pricing factored into your Outlook, but I wanted to know whether Patterson or the Altera team would be more or less constructive on the total addressable market growth in the international space versus that 10% growth consensus view. Thanks.

Dan Kutz: So I just wanted to ask one more on the international space.

Dan Kutz: You guys have mentioned that.

Dan Kutz: <unk> outlook is for high teens growth this year.

Dan Kutz: That kind of compares to.

Dan Kutz: It seems like the industry bogey for international growth being kind of high single digits low double digits I assume there is there is market share gains and pricing factored into your outlook, but I wanted to ask whether kind of patterson or the altera team would be more or less constructive on the total addressable market growth.

Dan Kutz: The international space versus debt.

Dan Kutz: 10% growth consensus view.

William Andrew Hendricks: Well, you know, we're excited about the double-digit growth we're going to see. I think that, you know, there are some projections for double-digit growth in the internationals, and we'll see how that plays out in terms of activity. But I think whatever that is on activity will outperform that in terms of growth on the Altera side in terms of products. We've got a big focus on the Middle East right now. We're still working on transitioning from just doing drill bit remanufacturing in Saudi Arabia to full manufacturing in Saudi, and that's going to increase our ability not only to support Aramco in Saudi Arabia but also to export from Saudi Arabia to some of the GCC countries nearby. So, you know, we're excited about that, but what drives this growth relative to others is performance. And we've talked about this before. Altera has a unique ability and the...

Well.

Speaker Change: We're excited about the double digit growth, we're going to see I think that.

Speaker Change: There are some.

Speaker Change: <unk> is on double digit growth in the internationals, we'll see how that plays out in terms of activity, but I think whenever that is an activity we will outperform that in terms of.

Speaker Change: Growth on the Alterra side in terms of product sales.

Speaker Change: We've got a big focus on the Middle East right now.

Speaker Change: Still working on transitioning from just doing drill bit remanufacturing in Saudi to full manufacturing in Saudi and that's going to increase our ability not only to support aramco in Saudi Arabia, but also be able to export from Saudi into some of the GCC countries nearby.

Speaker Change: So.

Speaker Change: We're excited about that but what drives this growth relative to others is performance.

And we've talked about this before.

Speaker Change: Terra has a unique ability in the industry to turnaround designs and make the improvements that the operators ask for.

William Andrew Hendricks: Turn around designs and make the improvements that the operators ask for, you know, based on the type of formation and rock that they're drilling into. And that team does a great job at that. And so as we start to do more and more work, you know, in countries outside of North America, then, you know, those countries are going to experience those performance improvements as well. And so that's why we're really confident about our ability to grow. Great, thank you. And then just a quick one on the completion of services, upgrades, and investments. Are there any Tier 2 to Tier 4 upgrades contemplated, or is it mainly just the dual fuel upgrades and the electric track investments? Thanks. Yeah, so we're not doing any Tier 2 to Tier 4 upgrades. Tier 2 is going to fade away.

Speaker Change: Based on the type of formation and rock that they're drilling.

Speaker Change: That team does a great job at that and so as we start to do more and more work.

Speaker Change: In countries outside of North America than those countries are going to experience those performance improvements as well and so that's why we're really positive about our ability to grow.

Speaker Change: Great. Thank you and then just a quick one on the completion services.

Speaker Change: Upgrades and investments are there any gear to the tier four upgrades contemplated or where it's mainly just kind of.

Speaker Change: Got.

Speaker Change: The dual fuel upgrades in the electric Frac investments. Thanks.

Speaker Change: We're not doing any tier two to tier four upgrades tier two is going to fade away.

William Andrew Hendricks: You know, we're going to. We still think there's a very strong market, and that's going to go for years in Tier 4 DGB. But as some of the older technology rolls out, we're going to see more electric cars, but also other types of new technology come in that burn 100% natural gas. So, you know, that's how we're making that transition. We're doing it at a measured pace that we think fits the capital allocation and Unknown Speaker 1 the needs of our shareholders who are looking for returns right now. But we're still excited about these investments in technology. Great Thanks a lot.

Speaker Change: We're going to.

Speaker Change: Start to wind down maintenance investment on those older assets.

Speaker Change: We've got tier four DGB in place.

Speaker Change: We still think there is a very strong market and thats going to go for years and tier four DGB, but if some of the older technology rolls out.

Speaker Change: Gonna see more electric but also other types of new technology coming in that burn on a percent of natural gas and so that's how we're making that transition we're doing it at a measured pace that we think fits the capital allocation and meets the needs of our shareholders who are looking for returns right now, but we're still excited about these investments.

Speaker Change: Technologies that we're making.

Speaker Change: Great. Thanks, a lot.

William Andrew Hendricks: I'll turn it back. Our next question comes from the line of Sean Mitchell with Daniel Energy Partners. Your line is open.

Speaker Change: Okay.

Speaker Change: Our next question comes from the line of Sean Mitchell with Daniel Energy Partners. Your line is open.

Operator: Thanks, guys, for squeezing me in. Andy, just one question on the electric equipment, the 140,000 horsepower by mid-year, is that going to come in the form of a couple of spreads, full spreads, or will that be power that gets sprinkled in across your other fleets? Some of it's already out there working in the...

Sean Mitchell: Thanks, guys for squeezing me and Andy just one question on the electric equipment of 140000 horsepower by mid year is that going to come in the form of numerous couple of spreads full spreads or will that be horsepower. They get sprinkled across your other fleets. So some of it is.

Sean Mitchell: <unk> out there working in the field and has been for a while and this is just a continued addition to what we have out there and.

William Andrew Hendricks: It has been for a while, and this is just a continued addition to what we have out there. You're going to see more of it come in really kind of Q2, Q3, and so that's where, you know, we'll get some improved profitability from that horsepower that's working in the field, second, third quarters, and fourth. And so it's going to add roughly a couple more fleets to what we're already working on. Okay, that's helpful. And then Andy Smith, maybe, I know you gave a lot of color around CapEx, $740 million in 24. Can you remind us what the combined company CapEx was for all the companies in 23, just the total number? No, we can do it offline. Yeah, no, I think we've got those numbers. Yeah, no, I know your number's lower. You mentioned that. I was just trying to get the magnitude, but we can... No worries.

Sean Mitchell: Youre going to see more of it come in really kind of Q2 Q3, and so that's where we.

Sean Mitchell: We will get some improved profitability from from that horsepower, that's working in the field second and third quarters and forward.

Sean Mitchell: And so it really going to it's going to add roughly a couple more fleets to what we're already working in the field today.

Sean Mitchell: Okay.

Sean Mitchell: Helpful. And then Andy Smith, maybe I know you gave a lot of color around capex $740 million and 24 can you remind us what the combined company Capex was for all the companies in 23, just a total number.

Andy Smith: And it's funny I can't.

Andy Smith: Now, where we can do it offline yes.

Andy Smith: I think we've got those numbers, we can give them to you.

Andy Smith: I believe it was in excess of $900 million of that.

Speaker Change: Yes, no I know, it's your numbers lower you mentioned that I was just trying to get magnitude, but we can.

Andy Smith: Mike.

Mike Sabella: No worries.

William Andrew Hendricks: All right, guys. Thanks. Great quarter. I will now turn the call back over to Andy Hendricks for closing remarks. Listen, I want to thank everybody for dialing in today for the call. 23 was a great year for us. I want to thank our team at Patterson-UTI for everything they did in 23. It was a great year, and we're looking forward to another good year in 24, especially free cash flow and returning cash to shareholders.

Speaker Change: Alright, guys. Thanks, great quarter. Thanks. Thanks.

Speaker Change: I will now turn the call back over to Andy Hendricks for closing remarks.

William A. Hendricks: Listen I want to thank everybody for dialing in today for the call 23 was a great year for us I want to thank our team at Patterson UTI for everything they did in 'twenty three it was a great year and we're looking forward to another good year, 'twenty, four, especially free cash flow and returning cash to shareholders. So thanks for that.

Speaker Change: Ladies and gentlemen that concludes today's call. Thank you all for joining you may now disconnect.

William Andrew Hendricks: So thanks for that. Ladies and gentlemen, that concludes today's call. Thank you all for joining us. You may now disconnect. Thank you for watching!

Speaker Change: [music].