Q2 2024 Helmerich & Payne Inc Earnings Call

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Operator: Please stand by. Your program is about to begin. If you need audio assistance during today's program, please press star zero. Good day, everyone, and welcome to Helmerich and Payne's fiscal second quarter earnings call.

Operator: At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question and answer session. You may register to ask a question at any time by pressing the star and one on your telephone keypad. You may withdraw yourself from the queue by pressing star and two. Please note, this call is being recorded. I will be standing by if you should need any assistance. It is now my pleasure to turn the conference over to Mr. Dave Wilson, Vice President of Investor Relations.

Dave Wilson: Thank you, Abby, and welcome everyone to Helmerich and Payne's conference call and webcast for the second quarter of fiscal year 2024. With us today are John Lindsay, President and CEO, and Mark Smith, Senior Vice President and CFO.

Dave Wilson: Both John and Mark will be sharing some comments with us, after which we'll open the call for questions. Before we begin our prepared remarks, I'll remind everyone that this call will include forward-looking statements as defined under the securities law. Such statements are based on current information and management expectations as of this date and are not guarantees of future performance. Such statements involve certain risks, uncertainties, and assumptions that are difficult to predict.

Thank you Giovanni.

Today's program.

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Speaker Change: Good day, everyone and welcome to Helmerich campaigns fiscal second quarter earnings call. At this time all participants are in a listen only mode. Later, you will have the opportunity to ask questions. During the question and answer session. You may registered to ask a question at any time by pressing the star and one on your telephone.

Dave Wilson: As such, our actual outcomes and results could differ materially. You can learn more about these risks in our annual report on Form 10-K, our quarterly reports on Form 10-Q, and our other FCC filings. You should not place undue reliance on forward-looking statements, and we undertake no obligation to publicly update these forward-looking statements. We also make reference to certain non-GAAP financial measures, such as segmented operating income, direct margin, and other operating statistics. You'll find the Gap Reconciliation comments and calculations in yesterday's press release. With that said, I'll now turn the call over to John.

Pat you may withdraw yourself from the queue by pressing star and two <unk>.

Please note. This call is being recorded I'll be standing by if you should need any assistance. It is now my pleasure to turn the conference over to Mr. Dave Wilson, Vice President of Investor Relations.

John W. Lindsay: Thank you, Dave. Good morning, everyone.

John W. Lindsay: In light of the choppy market conditions in the U.S., Helmerich and Payne is pleased with our second fiscal quarter results. Even with these shifting market conditions, our margins remain strong, reflecting our continued focus on maintaining commercial economics commensurate to the value we're delivering to customers. We're also encouraged to see evidence that there is an ongoing and necessary shift in the industry's fiscal behavior, which is moving it toward a more sustainable and investable future.

Dave Wilson: Thank you Eddie and welcome everyone to Howard campaigns conference call and webcast for the second quarter of fiscal year 2024.

Dave Wilson: With us today are John Lindsay, President and CEO, and Mark Smith, Senior Vice President and CFO.

Dave Wilson: John and Mark will be sharing some comments with us after which we'll open the call for questions.

Dave Wilson: Before we begin our prepared remarks, I'll remind everyone that this call will include forward looking statements as defined in the securities laws such statements are based on current information and management's expectations as of this date and are not guarantees of future performance forward looking statements involve certain risks uncertainties and assumptions that are difficult to predict.

John W. Lindsay: In the U.S. market, contractual churn is still prevalent, and while we achieved our average planned rig count for the second quarter, our exit rig count for the quarter was just below what was projected. Mark will give more rig count details during his remarks, but let me summarize by saying that part of this churn continues to be a product of the volatility created by a weaker natural gas market and is reminiscent of the volatility experienced this time last year. However, we believe the impact on our overall activity will be less this year and going forward.

Dave Wilson: As such our actual outcomes and results could differ materially.

Dave Wilson: You can learn more about these risks in our annual report on Form 10-K are calling ports on Form 10-Q, and SEC filings you should not place undue reliance on forward looking statements.

Dave Wilson: <unk> undertakes no obligation to publicly update these forward looking statements.

Dave Wilson: We also make reference to certain non-GAAP financial measures such as segment operating income direct margin and other operating statistics, you'll find the GAAP reconciliation comments and calculations in yesterday's press release.

John W. Lindsay: E&P consolidations and a variety of other factors have also contributed to churn, and while we expect many of these underlying factors will persist, we are also projecting a relatively stable outlook for our rig count through the third fiscal quarter. We expect our total projected North America solutions direct margin for the third fiscal quarter to be down slightly on a sequential basis due to a lower average rate cap. But it's important to note that we also expect resiliency in our per day direct margin. Our customers benefit from reliability, faster well cycles, and better well quality, all of which lowers their total well cost. Our ability to deliver consistently on these measures is what ultimately drives direct margins and market share.

Dave Wilson: I'll now turn the call over to John Lindsay.

Dave Wilson: Yeah.

John W. Lindsay: Thank you, Dave and good morning, everyone.

John W. Lindsay: In light of the choppy market conditions in the U S. Helmerich <unk> Payne is pleased with our second fiscal quarter results.

John W. Lindsay: Even with these shifting market conditions, our margins remained strong reflecting our continued focus on maintaining commercial economics commensurate to the value we're delivering to customers.

John W. Lindsay: We're also encouraged to see evidence that there's an ongoing and necessary shift in the industry's physical behavior, which is moving toward a more sustainable and invest in the future.

John W. Lindsay: In the U S market.

John W. Lindsay: <unk> churn is still prevalent and while we achieved our average planned rig count for the second quarter, our exit rig count for the quarter was just below what was projected.

John W. Lindsay: Oil prices remain attractive, and we see the customer outlook becoming more positive regarding medium and long-term energy funding. Based on that, we believe there will be growing demand for the top-performing super-spec rigs due to customers deploying well designs that require technologies to derive stronger economics from their acreage position. Intersecting with this is the major industry theme of service intensity, where daily rig costs are higher because laterals are longer and circulating pressures are higher to drill these wells.

John W. Lindsay: Mark will give more rig count details during his remarks, but let me summarize by saying that part of this churn continues to be a product.

John W. Lindsay: It was the volatility created by weaker natural gas market and is reminiscent of the volatility experienced this time last year.

John W. Lindsay: However, we believe the impact on our overall activity will be less this year going forward.

John W. Lindsay: E&P consolidations in a variety of other factors have also contributed to churn and while we expect many of these underlying factors will persist.

John W. Lindsay: All these elements coalesce to create the opportunity for technology and performance-based contracts that demonstrate the performance differentiation H&P brings to the table. Our operations and sales teams are working more closely than ever with the customer to deliver more collaborative solutions. Regarding our International Solutions segment, we are busy preparing for the unconventional project in Saudi Arabia that we announced last quarter and have finalized the contractual terms for the 7-Rig Tender Award. Our first rig, awarded by Saudi Aramco in August of 2023, is expected to arrive and commence operations later this summer.

John W. Lindsay: We are also projecting a relatively stable outlook for our rig count through the third fiscal quarter.

John W. Lindsay: We expect our total projected North American solutions direct margin for the third fiscal quarter to be down slightly on a sequential basis.

John W. Lindsay: Due to a lower average rig count, but it's important to note that we also expect resiliency in our per day direct margins.

John W. Lindsay: Our customers benefit from reliability faster, well cycles, and better well quality all of which lowers our total well costs are.

John W. Lindsay: Our ability to deliver consistently on these measures is what ultimately drives direct margins and market share.

John W. Lindsay: Oil prices remain attractive and we see the customer outlook, becoming more positive regarding medium and long term energy fundamentals.

John W. Lindsay: For the recent 7-Rig Tender Award in January, preparations are ongoing from both the rig and operational perspectives with expectations that a majority of these rigs will arrive in Saudi Arabia during the fourth calendar quarter of 2024 and commence operations shortly thereafter. During these preparations, we'll continue to spend our 2024 budgeted CapEx toward this project and incur startup operational expenses, which will disproportionately impact near-term international segment markets. We look forward to working with Saudi Aramco and believe this is the beginning of a long-term presence in the region with additional growth opportunities.

John W. Lindsay: Based on that we believe there will be growing demand for the top performing super spec rigs due to customers deploying well designs that require technologies.

John W. Lindsay: To drive stronger economics from their acreage positions.

John W. Lindsay: Intersecting with this is the major industry theme.

John W. Lindsay: Service intensity, where daily rig costs are higher because laterals are longer in circulating pressures are higher to drill these wells.

John W. Lindsay: All these elements coalesced to create the opportunity for technology and performance based contracts that demonstrate the performance differentiation A&P brings to the table.

John W. Lindsay: Our operations and sales teams are working more closely than ever with the customer to deliver more collaborative solutions.

John W. Lindsay: Regarding our international solutions segment, we are busy preparing for the unconventional project in Saudi Arabia that we announced last quarter and have finalized the contractual terms for the seven rig tender award.

John W. Lindsay: International operations in South America and Australia are expected to remain relatively stable over the next quarter, as well as our offshore Gulf of Mexico operations. In addition to our international growth strategy, our capital allocation strategy this fiscal year is structured with a base and supplemental dividend, as well as opportunistic share repurchases.

John W. Lindsay: Our first rig awarded by Saudi Aramco in August of 2023 is expected to arrive and commence operations later this summer.

John W. Lindsay: For the recent seven rig tender award in January or prep preparations are ongoing from both the rig and operational perspective.

John W. Lindsay: And Mark will provide more details in his remarks. I want to conclude my prepared remarks by stating again that we have remained firm on our contractual economics by working with and collaborating closely with customers on alternative contract models. Our primary commercial model today is using performance contracts combined with our technology solutions; having operational confidence and our ability to consistently execute with our technology solutions results in win-win economics for both the customer and H&P and provides our customers with safety, consistency, and reduced execution risk.

John W. Lindsay: With expectations that a majority of these rigs will arrive in Saudi Arabia during the fourth calendar quarter of 2024.

John W. Lindsay: And commence operations shortly thereafter.

John W. Lindsay: During these preparations we will continue to spend our 2024 budgeted capex towards this project and incur startup operational expenses.

John W. Lindsay: She will disproportionately impact near term international segment margins.

John W. Lindsay: We look forward to working with Saudi Aramco and believe this is the beginning of a long term presence in the region with additional growth opportunities.

John W. Lindsay: International operations in South America, and Australia are expected to remain relatively stable over the next quarter as well as our offshore Gulf of Mexico operations.

John W. Lindsay: All of these successes are possible because of the people at H&P. It's you that make our flex rigs and our technology solutions the best in the industry. Each of you plays a key role in our success and will continue to be drivers of that success in the future. Now, I'll turn the call over to Mark Smith to provide more details and a review of our financial...

John W. Lindsay: In addition to our international growth strategy, our capital allocation strategy. This fiscal year is structured with a base and supplemental dividend as well as opportunistic share repurchases.

John W. Lindsay: Mark will provide more details in his remarks.

Mark W. Smith: I want to conclude my prepared remarks by stating again, we remain firm on our contractual economics by working with and collaborating closely with customers on alternative contracting models.

Mark W. Smith: Thanks, John. Today I will review our fiscal second quarter 2024 operating results, provide guidance for the third quarter, update remaining full fiscal year 2024 guidance, as appropriate, and comment on our financial position. Let me start with highlights for the recently completed second fiscal quarter ended March 31, 2024. The company generated quarterly revenues of $688 million versus $677 million from the previous quarter. Revenues were up sequentially primarily due to an increase in average active rig activity in North America.

Mark W. Smith: Our primary commercial model today is using performance contracts combined with our technology solutions.

Mark W. Smith: Having the operational confidence and our ability to consistently execute with our technology solutions.

John W. Lindsay: Results in win when economics for both the customer and <unk> and provides our customers with safety consistency and reduced execution risk.

John W. Lindsay: All of these successes are possible because of the people at H P.

John W. Lindsay: It's you that make our flex rigs and our technology solutions the best in the industry.

John W. Lindsay: <unk> play a key role in our success and will continue to be drivers of that success in the future.

John W. Lindsay: And now I'll turn the call over to Mark Smith to provide more details in a review of our financials.

John W. Lindsay: Yes.

Mark W. Smith: Total direct operating costs were $403 million for the second quarter versus $404 million for the previous quarter. General and administrative expenses were approximately $62 million for the second quarter, which was higher than our expectations due to a few discrete items, including information technology costs, mark-to-market adjustments for director deferred compensation, and the incurrence of certain professional services and consulting fees. During the second quarter, we recognized gains of $3.7 million primarily related to the change in the fair market value of our equity investments, which is part of the gain on investment securities reported in our consolidated statement of operations. Our Q2 effective tax rate was approximately 27.5%, which was within our previously guided range for the quarter.

Mark W. Smith: Thanks, John Today, I will review our fiscal second quarter of 2024 operating results provide guidance for the third quarter update remaining full fiscal year 'twenty 'twenty four guidance as appropriate and comment on our financial position. Let me start with highlights for the recently completed second fiscal quarter ended March.

Mark W. Smith: <unk> 31 2024.

Mark W. Smith: The company generated quarterly revenues of $688 million versus 600 of the $77 million from the previous quarter revenues were up sequentially, primarily due to an increase in the average active rig activity.

Mark W. Smith: In North America.

Mark W. Smith: Total direct operating costs were $403 million for the second quarter versus 404 million for the previous quarter.

John W. Lindsay: General and administrative expenses were approximately $62 million for the second quarter, which was higher than our expectations due to a few discrete items.

John W. Lindsay: Including information technology costs, Mark to market adjustments for director deferred compensation and the incurrence of certain professional services and consulting fees.

Mark W. Smith: To summarize this quarter's results, H&B earned a profit of $0.84 per diluted share versus $0.94 in the previous quarter. As highlighted in our press release, second quarter select items had a neutral impact on diluted earnings per share. For comparison, diluted earnings per share of $0.84 in the second fiscal quarter versus $0.97 during the first fiscal quarter after adjusting Q1 for select.

John W. Lindsay: During the second quarter, we recognized gains of $3 $7 million primarily related.

John W. Lindsay: To the change in the fair market value of our equity investments, which is part of the gain on investment Securities reported in our consolidated statement of operations.

John W. Lindsay: Our Q2 effective tax rate was approximately 27, 5%, which was within our previously previously guided range for the quarter.

John W. Lindsay: To summarize this quarter's results HMP earned a profit of 84 cents per diluted share versus <unk> 94 in the previous quarter.

Mark W. Smith: Capital expenditures for the second quarter of fiscal 2024 were $118 million, and I will have some further comments when we come to our fiscal 2024 capital expenditure guide. Our Q2 cash flow from operations was $144 million, which was, as expected, a sequential decline in part due to most of our year-to-date cash tax payments falling into the second fiscal quarter. I will address the company's cash position later in my remarks. Turning to our three segments, beginning with the North America Solutions segment, we averaged 155 contracted rigs during the second quarter, up from 149 in the first fiscal quarter. The exit rig count was 152, which declined late in the quarter and was below our guided range of between 154 and 159 due to lower natural gas prices and miscellaneous individual customer factors.

John W. Lindsay: As highlighted in our press release second quarter select items had a neutral impact on diluted earnings per share.

John W. Lindsay: For comparison diluted earnings per share of 84 cents in the second fiscal quarter versus 97 cents during the first fiscal quarter. After adjusting Q1 for select items.

John W. Lindsay: Capital expenditures for the second quarter of fiscal 2024 were $118 million and I will have some further comments when we come to our fiscal 2024 capital expenditure guidance.

John W. Lindsay: Our Q2 cash flow from operations was 144 million, which was asics that cause a sequential decline in part due to most of our year to date cash tax payments falling into the second fiscal quarter I will address the company's cash position later in my remarks.

John W. Lindsay: Turning to our three segments, beginning with North America solutions segment, we averaged 155 contracted rigs during the second quarter up from 149 in the first fiscal quarter.

John W. Lindsay: The exit rig count was 152, which declined late in the quarter and was below our guided range of between $1 54, and $1 59, due to lower natural gas prices and miscellaneous individual customer factors.

Mark W. Smith: Revenues increased sequentially by $19 million, primarily due to the increase in average activity quarter to quarter, as well as the remaining legacy price rigs rolling to current market rates. Segment direct margin was $271 million, which was towards the high end of our guidance and sequentially higher than the previous quarter, which came in at $250,000. Federal segment expenses were down slightly to $19,000 per day in the second quarter compared to $19,600 per day in the previous year.

John W. Lindsay: Revenues increased sequentially by $19 million, primarily due to the increase in average activity quarter to quarter as well as the remaining legacy priced rigs rolling to current market rates.

John W. Lindsay: Segment direct margin was 270 or $271 million, which was towards the high end of our guidance and sequentially higher than the previous quarter, which came in at $256 million.

John W. Lindsay: Total segment expenses were down slightly to 19000 per day in the second quarter compared to 19600 per day in the previous Q.

Mark W. Smith: Looking ahead to the third quarter of fiscal 2024 for North America Solutions, as of today's call, we have 150 rigs contracted, and while activity through most of the second quarter was strong, the previously mentioned factors began to wear on the market, and today the rig count has reverted back to a similar level to January 1st. That said, we are seeing signs that the recount seems to be nearing a leveling off.

John W. Lindsay: Looking ahead to the third quarter of fiscal 'twenty 'twenty four for North America solutions segment.

John W. Lindsay: As of today's call, we have 150 rigs contracted and while activity through most of the second quarter was strong. The previously mentioned factors began to wear on the market and today the rig count has reverted back to a similar level to January 1st.

John W. Lindsay: That said, we are seeing signs that the rig count it seems to be nearing a leveling off point.

Mark W. Smith: And we expect to end our third fiscal quarter with between 145 and 151 working rigs. It is worth noting that among the various factors impacting the recount, pricing is not one of them, and to that end, as mentioned in the press release, we remain focused and steadfast on our commercial economics. Furthermore, despite a slight decrease in our recount heading into our third fiscal quarter, we have been able to maintain and even increase market share since our fiscal 2023 year-end U.S. land share of 25.5% to a 27.5% share today overall, while maintaining a 33% to 34% superspec market share.

John W. Lindsay: And we expect to end, our third fiscal quarter with between 145 and 151 working rigs.

John W. Lindsay: It is worth noting that among the various factors impacting the rig count and pricing is not one of them and to that end as mentioned in the press release, we remain focused and steadfast on our commercial economics.

John W. Lindsay: Furthermore, despite a slight decrease in our rig count heading into our third fiscal quarter.

John W. Lindsay: We have been able to maintain and even accrete market share since our fiscal 2023 year in U S land share of 25, 5% to 27, 5% is here to stay overall.

John W. Lindsay: While maintaining a 33% to 34% the super spec market share.

John W. Lindsay: Yeah.

Mark W. Smith: As we have commented before, market share is not our main goal, but rather providing value to customers and being commensurately compensated for our performance and value created. We believe our financial margins and market performance are representative of our efforts. We have a new backlog.

John W. Lindsay: As we have commented before our market share is not our main goal, but rather providing value to customers and being commensurately compensated for performance and value created we believe their financial margins in market performance are representative of our efforts.

John W. Lindsay: Revenue backlog.

Mark W. Smith: From our North America Solutions fleet, stands at roughly $1 billion for rigs under term contracts. As of today, about 57% of the U.S. active fleet is on a term contract. Average pricing and revenue per day should remain relatively flat.

John W. Lindsay: From our North America solutions fleet stands at roughly 1 billion for rigs under term contract.

John W. Lindsay: As of today about 57% of the U S. Active fleet is on a term contract average pricing in our revenue per day should remain relatively flat.

Mark W. Smith: In the North American Solutions segment, we expect drag margins in fiscal Q3 to range between $255 million and $275 million, and we expect costs in Q3 to remain relatively flat. Next, to our International Solutions segment. International Solutions activity ended the second fiscal quarter with 11 rigs on contract. International Solutions results were above our guidance range as the inflationary environment in Argentina was less detrimental than anticipated.

John W. Lindsay: The North American solutions segment, we expect dragging margins in fiscal Q3 to range between 255 to 275 million and.

John W. Lindsay: And we expect cost in Q3 to remain relatively flat.

John W. Lindsay: Next to our international solutions segment.

John W. Lindsay: International solutions activity ended the second fiscal quarter with 11 rigs on contract.

John W. Lindsay: International solutions results were above our guidance range at the inflationary environment in Argentina was less detrimental than anticipated.

Mark W. Smith: As we look toward the third quarter of fiscal 2024 for international, As mentioned in the press release, we expect all international activity to remain unchanged across the quarter. With regard to our Middle East growth, our Galena Park facility at the Port of Houston is using its capacity to convert and recommission rigs to meet Saudi Aramco and conventional specifications for the remainder of fiscal 2024. In addition to the capital investment outlined in our previous quarterly call, we are incurring recommissioning expenses.

John W. Lindsay: As we look toward the third quarter of fiscal 'twenty 'twenty four for international.

John W. Lindsay: As mentioned in the press release, we expect all of international activity to remain unchanged across the quarter.

John W. Lindsay: With regard to our middle East grows our Galena Park facility at the Port of Houston is using its capacity to convert and recommissioned rigs to meet Saudi Aramco unconventional specifications for the remainder of fiscal 'twenty 'twenty four.

John W. Lindsay: In addition to capital investment outlined in our previous quarterly call. We are incurring re commissioning expenses, we expect to incur $10 million to $12 million of operating expense consisting of $2 5 million of expense per rig for inspection and repair in fiscal Q3.

Mark W. Smith: We expect to incur $10 to $12 million of operating expenses, consisting of $2.5 million of expense per rig for inspection and repair in fiscal Q3, with final recommissioning expense expected in Q4 of approximately $5 million. Also included in the Q3 cost guidance is a local office set up in Saudi Arabia of approximately $2 million. In the third quarter, we expect an overall direct margin range of $2 million to a $2 million loss, aside from any foreign exchange impacts in the international sector.

John W. Lindsay: With final reconditioning expense expected in Q4 of approximately $5 million.

John W. Lindsay: Also included in the Q3 cost guidance as local office set up at the Saudi Arabia of approximately $2 million.

John W. Lindsay: In the third quarter, we expect an overall drag margin range of a $2 million earnings to a 2 million loss aside from any foreign exchange impacts in the international segment.

Mark W. Smith: Finally, in our offshore Gulf of Mexico segment, we have three of our seven offshore platform rigs contracted. We also have management contracts on three customer-owned rigs, one of which is on active rates. The offshore segment generated a direct margin of about $3 million during the quarter, which was below our guidance range as one rig was delayed and resuming full-rate operation.

John W. Lindsay: Finally to our golf offshore Gulf of Mexico segment, we have three of our seven offshore platform rigs contracted. It. We also have management contracts on three customer owned rigs one of which is an active rate.

John W. Lindsay: The offshore segment generated a direct margin of about $3 million during the quarter, which was below our guidance range as one rig was delayed and resuming full rate operations.

Mark W. Smith: As we look toward the third quarter of fiscal 24, for the offshore Gulf of Mexico segment, we expect... to return to previous run rate levels and generate between five to eight million dollars of direct market. Let me update full fiscal year 2024 guidance. Capital expenditures for the full 2024 year are now expected to be at the top end of our original 450 to 500 million range. During our November earnings call describing initial fiscal 2024 guidance, we stated that approximately 14 walking conversions would occur in Galena Park. Seven were completed and are in the U.S. fleet, with the remaining seven committed to the Saudi rig award.

John W. Lindsay: As we look toward the third quarter of fiscal 'twenty four for the offshore Gulf of Mexico segment, we expect to return to previous run rate levels and generate between $5 million to $8 million of direct margin.

John W. Lindsay: Yeah.

Speaker Change: Let me update full fiscal year 'twenty to 'twenty four guidance.

Speaker Change: Capital expenditures expenditures for the full 2024 year, they're now expected to be at the top end of our original $450 million to $500 million range.

Speaker Change: During our November earnings call, describing initial fiscal 'twenty 'twenty four guidance, we've stated that approximately 14 walking conversions would occur and Galena Park.

John W. Lindsay: Seven were completed and are in the U S fleet with the remaining seven committed to the Saudi rig award as further discussed on our last call in January International growth capital for the seven in Saudi.

Mark W. Smith: As further discussed on our last call in January, international growth capital for the seven Saudis, The 7-Rig Saudi Award also includes recertifying certain equipment to like-new, conducting required modifications, and purchasing specific equipment for Middle East contracts. What was previously estimated timing for maintenance capex across the U.S. fleet together with refined international growth capex is now pinpointed to the top end of the original range with more supply chain clarity with our placed order.

John W. Lindsay: Ward seven seven or eight Saudi award also includes a re certifying certain equipment to light new conducting required modifications in purchasing specific equipment for middle East contracts.

John W. Lindsay: What was previously estimated timing for maintenance capex across the U S fleet together with refined international growth Capex is now pinpointed into the top end of the original range with more supply chain clarity with our placed orders.

Mark W. Smith: It is worth repeating what we have said on prior calls, that we are marketing our SuperSpec FlexRig internationally for the work they were designed for and have excelled at in the U.S. and exporting these idle superspecs. ...flex rigs to international fit-for-purpose opportunities, increases our fleet-wide utilization, exposes HP to markets with longer-term contract profiles, and starts to reduce U.S. concentration while alleviating long-idled U.S. supply.

John W. Lindsay: It is worth repeating what we have said on prior calls that we are marketing our super spec flex rigs internationally for the work they were designed for and if they sell that in the U S and.

John W. Lindsay: And exporting these idle super spec.

John W. Lindsay: Flex rigs to international fit for purpose opportunities increases our fleet wide utilization that exposes HP the markets with longer term contract profiles and starts to reduce U S concentration.

John W. Lindsay: While alleviating long idled U S supply.

Mark W. Smith: Depreciation for fiscal 2024 is now revised up from three hundred and ninety million dollars to four hundred and five million for the full year due to the acceleration of depreciation related to excess capital spares created via the walking reconversion program. Our expectations for general and administrative expenses for the full fiscal year are revised up from original guidance of $230 million to $240 million. This increase is due to IT project costs as well as some other unrelated professional services and consulting.

John W. Lindsay: Depreciation for fiscal 'twenty 'twenty four is now revised up from $390 million to $405 million for the full year due to the acceleration of depreciation related to excess capital spares created via the walking rig conversion program.

John W. Lindsay: Our expectations for general and administrative expenses for the full fiscal year, our revised up from original guidance of 230 million to $240 million.

John W. Lindsay: This increase is due to <unk> <unk>.

John W. Lindsay: Project costs as well as another unrelated professional services and consulting fees.

Mark W. Smith: Research and development costs are revised up for fiscal 2024 from $30 million to $35 million due to one-time expenditures in Q2 to acquire certain intellectual property. We still estimate our annual effective tax rate to be in the range of 24-29%, with the variance above the U.S. statutory rate of 21% attributed to permanent book-to-tax differences and state and foreign income. We continue to project an FY24 cash tax range of $150 to $200 million.

John W. Lindsay: Research and development costs are revised up for fiscal 'twenty 'twenty four from 30 million to $35 million due to one time expenditures in Q2 to acquire certain intellectual property.

John W. Lindsay: We still estimate our annual effective tax rate to be in the range of 24% to 29% with a variance above the U S statutory rate of 21% attributed to permanent book to tax differences in state and foreign income taxes.

John W. Lindsay: We continue to project, an FY 'twenty for cash tax range of $150 million to $200 million.

Mark W. Smith: We had cash and short-term equivalence at HMP of approximately $277 million in March 31, versus an equivalent $298 million in December 31, 2023. The sequentially decreased cash balance is largely attributable to the previously mentioned cash tax timing.

John W. Lindsay: We had cash and short term equivalents at H M. D of approximately 277 million at March 31 versus an equivalent $298 million at December 31 in 2023.

John W. Lindsay: Sequentially decreased cash balance is largely attributable to the previously mentioned cash tax timing into Q2.

Mark W. Smith: There is, quote, noise, unquote, from quarter to quarter based on the timing of various payments, receipts, and receipts and Movement of Asset and Liability Balances. But overall, we are still aligned with what we projected for the full fiscal year and are still comfortable with our overall cash flow projections for fiscal 2024. That said, based on the quarter's results and our projections for the remainder of the fiscal year, we still forecast that we will be generating ample cash flow to cover our capital expenditures, the base dividend, and the fiscal 2024 supplemental dividend. That concludes our prepared comments for the second fiscal quarter. Let me now turn the call over to Abby for questions.

John W. Lindsay: There is quote noise unquote from quarter to quarter based on timing of various payments receipts in.

John W. Lindsay: And receipts and movement of asset and liability balances, but overall, we're still aligned with what we projected for the full fiscal year and are still comfortable with our overall cash flow projections for fiscal 'twenty 'twenty four.

John W. Lindsay: That said based on the quarter's results and our projections for the remainder of the fiscal year, we still forecast that we'll be generating ample cash flow to cover our capital expenditures the base dividend in the fiscal 'twenty 'twenty four is supplemental dividend plan.

John W. Lindsay: That concludes our prepared comments for the second fiscal quarter, Let me now turn the call over to Abby for questions.

Operator: At this time, if you would like to ask a question, please press the star and 1 on your telephone keypad. You may remove yourself from the queue at any time by pressing star and 2. Once again, that is star and 1 to ask a question. Our first question comes from the line of Doug Becker from Capital One. Please go ahead.

Abby: At this time, if you would like to ask a question. Please press star one on your telephone keypad.

Abby: You may remove yourself from the queue at any time by pressing star.

Abby: Once again that is star one to ask a question.

Abby: Our first question comes from the line of Doug Becker from capital One. Please go ahead.

Douglas Lee Becker: Thank you. John, if you allow me to dream a little bit, it does seem like the rig count is stabilizing, but was just hoping to get an update on how you see supply and demand for the super spec market in particular, and when conceptually we could see pricing power again, if the outlook for next year, higher oil prices, a little bit better natural gas price outlook, just want to get a sense for where the wave lands, went to a little bit of a bull case.

Douglas Lee Becker: Thank you.

Douglas Lee Becker: John If you allow me to dream, a little bit, but it does seem like the rig count is stabilizing but was just hoping to get an update on how you see supply and demand for the Super spec market in particular, and when conceptually we could see pricing power again, if the outlook for next year.

Douglas Lee Becker: Oil prices, a little bit better natural gas price outlook.

Douglas Lee Becker: Just wanted to get a sense for where the lay of the land is in.

Douglas Lee Becker: What a little bit of a bull cases.

John W. Lindsay: Sure Doug good morning.

John W. Lindsay: Sure, Doug. Good morning.

Speaker Change: You know I think if you just look at the activity.

John W. Lindsay: You know, I think if you just look at the activity... set over the last several years, the super spec segment of the market continues to grow on a percentage basis. Obviously, we've had a pullback in activity, both H&P and the general industry in general, primarily as a result of natural gas prices as we've talked about. But I think it's, you know, I think the outlook is very positive. I think the ability to continue to drive efficiencies and reliability, do it in a safe fashion, and leverage technology are really those key things that are going to be needed. That's what customers are looking for. So I feel good about the overall SuperSpec space in the U.S. In terms of trying to pick the timing, as you know, that's very challenging to do.

Doug: Set over the last several years.

Douglas Lee Becker: The Super spec sector segment of the market continues to grow on a per se on a percentage basis.

Doug: Obviously, we've.

Doug: We've had a pullback in activity, both HCP and the industry general industry and general Pri.

Doug: Primarily as a result of natural gas prices like like we've talked about but I think it's a you know I think the outlook is very positive I think the the ability to continue to drive efficiencies.

Doug: Efficiencies and reliability and do it in a safe fashion and leverage technologies.

Doug: Are are really those key things that are that are going to be needed. That's what that's what customers are looking for so I feel I feel good about our overall the super spec.

Doug: Space and in the U S. In terms of trying to pick the timing as you know that's very that's very challenging to do.

John W. Lindsay: But obviously, oil prices are strong. But the gas basins, we've had quite a bit of a pullback in activity. But again, I think, you know, that we'll see some improvements here in the future.

Doug: But obviously oil prices are strong.

Doug: But the gas basins, we've had quite a bit of a pullback in activity, but again I think we'll see some improvements here in the future.

Mark W. Smith: Now, fair enough. And Mark, I know you expressed comfort with the cash flow outlook, just wanted to try and reconcile a lot of the moving parts. My assumption would be that free cash flow would be below the, say, $235 million that previous guidance implied, just given, most notably, the higher capex. Is that fair, or am I missing a factor? That's it. That's it.

Speaker Change: No fair enough and Mark.

Doug: Mark I know you expressed comfort with the cash flow outlook.

Doug: Just wanted to try and.

Mark W. Smith: Reconcile a lot of the moving parts.

Mark W. Smith: My assumption would be that free cash flow would be below that say $235 million that previous guidance imply just given.

Doug: Most notably the higher Capex is that fair or.

Doug: Or am I missing a factor.

Speaker Change: It's it's in the ballpark.

Mark W. Smith: It's in the ballpark.

Speaker Change: Got it thank you very much.

Speaker Change: Thanks Jack.

Derek John Podhaizer: Our next question comes from the line of Derek Podhaizer from Barclays. Please go ahead.

Speaker Change: Our next question comes from the line of Derek parties here from Barclays. Please go ahead.

John W. Lindsay: Hey, good morning. Maybe just to continue the line of questioning. You talked about in your prepared remarks that you're seeing signs of leveling off in the recount. Can you maybe just expand on that? What you're seeing, is it customer conversations, is it duck counts? Just any way you can help us with the signs that you're seeing as far as leveling off in the recount.

Derek: Hey, good morning, maybe just to continue the line of questioning.

Derek: You talked about in your prepared remarks that you're seeing signs of leveling off and the rig count can you maybe just expand on that what you're seeing is it customer conversations as it got counts.

Derek: Just any way you can help us with the sign that youre seeing as far as the leveling off in the rig count.

John W. Lindsay: Well, Derek, it's really a function of the conversations that we have ongoing with, you know, customers. You know, there's obviously this continued churn that we've described. But there are examples where, you know, customers have, you know, rig opportunities where they're picking up. There's also some high grading that is ongoing, you know, really continually as we move forward. You know, if you just look at our count in general, the H&P count, we've been in a, you know, a 5-rig range since, you know, June of last year. And again, we all know what the challenges have been with natural gas.

Speaker Change: Well Derek it's it's really a function of conversations that we have ongoing with with customers.

Speaker Change: You know, there's there's obviously discontinued churn that we've that we've described.

Speaker Change: But there are examples where customers have.

Speaker Change: You know rigs rig opportunities, where they're picking up theres also some high grading that that is that is ongoing.

Derek: You know really continually as we move forward.

Derek: If you just look at our count in general the HMP count.

Derek: We've been in a you know a five.

Derek: Five rig range since what since June of last year.

Derek: And again, we all know what the challenges have been with natural gas. So I'm really are our outlook and our expectation is is really derived from conversations that we've had with customers and what their expect expectations are.

John W. Lindsay: So really, our outlook and our expectation is really derived from conversations that we've had with customers and what their expectations are. As I've said before, it's very hard to forecast out much past a quarter. There are a lot of things that can happen in a short period of time. But based on what we know right now, and the feedback we're getting, that's the estimate that we've put together.

Derek: You've heard me say before it's very hard to forecast out much past a quarter.

Derek: You know it.

Derek: There's a lot of things that can happen in a short period of time, but based on what we know right now the feedback we're getting that's the that's the estimate that we've that we've put together.

John W. Lindsay: Great, no, that's really helpful, Keller. I wanted to dig into the performance-based contract. So one of your customers announced their company record five-wheel pad, all four mile laterals, last night. Is this a good example of how you capture value in generating efficiencies for your customers? Maybe describe the mechanics of an example like that.

Speaker Change: Great that's really helpful color.

Speaker Change: I wanted to dig into the performance based contracts. So one of your customers announced a company record five well pad all four mile laterals last night is this a good read through of how you capture value and generating efficiencies from your customers maybe describe the mechanics.

Derek: I mean, an example like that.

John W. Lindsay: Well, that's definitely a great example. You know, at the end of the day, what we're doing is we're, you know, having conversations with customers. As we've talked about before, this is a partnership, and we work very closely to try to understand what their deliverables are, what makes them see what would be a positive outcome. And whatever that metric is, that's the focus that we have.

Speaker Change: Well, that's that's definitely are a great example.

Derek: You know at the end of the day, what we're what we're doing is we're having.

Derek: Having conversations with customers you know you've heard us talk about before this is a partnership.

Derek: And we work very closely and trying to understand what their deliverables are what what makes them.

Derek: For them.

Derek: And then looking at saying, what what would be a positive outcome and what whatever that metric is that's the focus that we have at the end of the day, we've got to deliver wells more efficiently. We've got to save days, we've got to improve.

John W. Lindsay: At the end of the day, we've got to deliver wells more efficiently, we've got to save days, we've got to improve well bore quality and consistency. The technology solutions that we have really help deliver that. So if you can put together a performance-based contract that really rewards the service provider, in this case, H&P, and aligns it with the outcomes that the customer is wanting, then that's a true win-win outcome. And you know, that's the best that you can hope for.

Derek: Wellbore quality consistency the technology solutions that we have really helped deliver that so if you can put together a perf.

Derek: Performance based contract construct that really rewards.

Derek: The service provider in this case H M P and aligned it with the outcomes that the customer is wanting and that's a true win win outcome and you know that's that's that's that's the best that you can if you can help core and.

John W. Lindsay: And, you know, as you've heard us say, at the end of the day, we're making big investments. This is a capital-intensive business, and we're making big investments. And those investments are designed to enhance quality and performance. But at the same time, we have to get returns above our cost of capital. Otherwise, it's very challenging for us to be investable today and into the future.

Derek: You've heard us say at the end of the day, we're making big investments. This is a capital intensive business and we're making big investments and those investments are designed to to enhance.

Derek: The quality and the performance at the same time, we have to get returns above our cost of capital otherwise.

Derek: It's very challenging for us to be investable.

Derek: Today and into the future.

John W. Lindsay: Great. Thanks for the call, John. I'll turn it back on. Thanks, Jerry.

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

Derek: Gary.

Saurabh Pant: Our next question comes from the line of Saurabh Pant from Bank of America. Please go ahead.

Derek: Our next question comes from the line of Rob <unk> from Bank of America. Please go ahead.

Saurabh Pant: Hi, thanks. Good morning, John and Mark. Good morning. Good morning, Saurabh.

Rob: Hi, Thanks, Good morning, John and Mark.

Derek: Morningstar.

Mark W. Smith: Mark, maybe I'll start with one clarification for you. You did give good color on CapEx, and you have a better line of sight from a supply chain perspective. But if I recall your messaging from last quarter, I think there was a part of $30, $35 million in additional CapEx related to the Saudi rates that was expected next year. So is there an element of that being pulled forward to your FY24 CapEx going from $450 to $500 to now $500, or is that still expected to be incurred in FY25?

Rob: Mark maybe you guys talked about the one clarification for you you did give a good color on the Capex I know you have better line of sight from a supply chain perspective.

Rob: If I recall your messaging from last quarter I think they always bought a put the $35 million you said, an additional capex related to the Saudi rigs that was expected next deal. So is there an element of that being pulled forward do you I asked my money for Capex going from 50 to 500 to 500 or is that still expected to be incurred.

Speaker Change: Thanks, Mike.

Mark W. Smith: Thanks for the questions, Saurabh. No, that's still anticipated to be incurred in 2025. I think I had said, or if I didn't, I'll say it now, we're approximately 27 million CapEx all in for each of these Saudi Arabia rigs, and that's no different than the number we were giving in building our models around this time last quarter. What I will say, though, is we always have a range, and it's really hard quarter-to-quarter, to know exactly how the timing is going to fall when you're working with a very wide supply chain and 150 active rigs in the U.S. and trying to catch up, as we've said on previous calls, for maintenance capex for componentry, even going back to the cannibalization we experienced in 2021 coming out of the pandemic.

Speaker Change: Thanks for the questions Rob no that's still anticipated to be incurred in 2025.

Mike: I think I had said or if I did not say it now were approximately 27 million capex all in for each of these Saudi Arabia rigs and that's no different than the number we were giving in building our models around this time last quarter.

Mike: What I will say, though is we always have a range.

Mike: And it's really hard quarter to quarter.

Mike: To know exactly how the timing is going to fall when you're working with a very wide supply chain and 150 active rigs in the U S and trying to catch up as we've said on previous calls for maintenance Capex for componentry, even going back to the cannibalization, we experienced in 2021 coming out of the pandemic.

Mark W. Smith: So as we're two quarters into a four-quarter year, we have a little more certainty around that maintenance capex timing, and that is really one of the largest components of driving up towards the top end of the range.

Mike: So as we're two quarters into a four quarter year, we have a little more certainty around that maintenance capex timing and that is really one of the largest components of driving up towards the top end of the range.

John W. Lindsay: Okay, now that's helpful, Mark. And then, John, maybe one for you, just the narrative over the past three months internationally, particularly in the Saudi market, seems to be that there's a lot more emphasis on gas, and clearly that's where you are going with your rigs. And just based on talking with market participants, it seems like there might be more tenders coming for more rigs in the Saudi market for unconventional gas. Is there something you can share with us, John, in terms of what you're seeing out there in terms of opportunity for growth and for the rig additions for Helmerich and Payne?

Mike: Okay. No. That's helpful and then John maybe one for you just oh, they're not anything over the past three months into nice to me, particularly maybe in the Saudi market, but he needs to be.

John W. Lindsay: There's a lot more emphasis on gas and maybe that's where you're going.

John W. Lindsay: With you at.

John W. Lindsay: Oh, Brian just based on discussing with market participants then it seems like there might be more attendance coming from more rigs in the Saudi market, but I'm convinced many gosh is there something you can share with us John in terms of what Youre seeing out there in terms of opportunity for growth and further rig additions.

Speaker Change: The complaint.

John W. Lindsay: Saurabh, it's a great question and really, I can't add anything more than what you've probably already read out there in the market. We've read the same thing and heard similar rumors about the potential for additional tenders for unconventional gas going forward. We're hopeful that that is in fact the case, but like you, we'll be standing by and waiting to see if that is in fact the case because we don't have any direct information on that.

Speaker Change: So Rob.

Speaker Change: That's a great question and really I can't add anything more than what you probably already read out there in the in the market.

Speaker Change: We've read the same thing in herd.

Rob: Similar rumors about the potential for additional tenders for unconventional gas going forward.

Rob: We're hopeful that that that is in fact the case.

Speaker Change: But like you will be you know.

Speaker Change: Standing by and waiting to see if that is in fact, the case because we don't have any direct information on that.

John W. Lindsay: Right, right. Okay, perfect. Okay, John, Mark, thank you. I'll turn it back.

Speaker Change: Right right, Okay, perfect, Okay, Joe and Mark Thank you I'll turn it back.

Speaker Change: Thank you.

Keith MacKey: Our next question comes from the line of Keith MacKey from RBC Capital Markets. Please go ahead.

Speaker Change: Our next question comes from the line of Keith Mackey from RBC capital markets. Please go ahead.

Keith MacKey: Hi, good morning. I would like to start with your comment there about increasing service intensity. Can you just expand a little bit on what that means for Helmer and Payne in terms of specific revenue or cost opportunities? And, secondarily, is it leading customers to want to use the performance-based model more or want to use the day rate model more, or are there just other factors in there that are driving whatever decision might happen?

Keith MacKey: Hi, Good morning, just like to start with your comment there about increasing service intensity.

Keith MacKey: Can you just expand a little bit on what that means for helmer campaign in terms of.

Keith MacKey: Specific revenue or cost opportunities and secondarily is it leading customers too.

Keith MacKey: I want to use the performance based model more or want to use the day rate model more or are there just other factors in there that are that are driving whatever decision might happen.

Keith MacKey: Okay.

John W. Lindsay: OK, Keith, I think, try to summarize when we think about service intensity. We talked about, I think, on our last call that laterals have more than doubled over the last five to seven years. And, you know, we're drilling those wells and, you know, far fewer days.

Speaker Change: Okay key I think.

Speaker Change: Try to summarize what when we think about service intensity, we talked about I think on our last call that.

Speaker Change: Laterals are are or have more than doubled over the last five to seven seven years.

Speaker Change: And we're drilling those wells and.

Speaker Change: Far fewer days.

John W. Lindsay: And of course, the end result is more exposure to the resource, better outcomes, and better returns for our customers. At the same time, our equipment continues to work harder. You just heard Mark talking about maintenance capital expenditure. And so maintenance capital expenditure continues to go up. And that's largely because a large part of that has to do with that service intensity. So what we're doing is, yes, performance-based contracts are important because they help you align with the outcomes that your customer is wanting to achieve, and you're creating a value proposition that you're getting paid for in the process.

Speaker Change: And of course, the end result is more exposure to the you know to the resource.

Speaker Change: Or outcomes better returns for for our customers.

Speaker Change: At the same time, our equipment continues to work harder you just heard mark talking about maintenance Capex and so maintenance Capex continues continues to go up.

Speaker Change: You don't want a per rig basis.

Speaker Change: And that's largely in a large part of that is has to do with that service intensity. So what we're doing is yes. The performance based contracts are important because it helps your line.

Speaker Change: With the outcomes that you're that.

Speaker Change: Your customer is wanting to achieve and you're creating a value proposition that you're getting paid for in the process. So without going into great detail that that's really the concept.

John W. Lindsay: So, you know, without going into great detail, that's really the concept behind it. And it's not just drilling rigs. I mean, it's pressure pumping. It's across the board. All of the equipment in OFS is really working harder in these, you know, more challenging well-designed, longer laterals, and much, much faster cycle.

Speaker Change: Behind it is and it's not just drilling rigs I mean, it's it's pressure pumping it's across the board all of the equipment and Oss is really working harder.

Speaker Change: And these are you know more more challenging.

Speaker Change: Well designs longer laterals and much much faster cycle times.

Mark W. Smith: Okay, that's helpful. Thank you. Can we just talk a little bit more about the Saudi rigs? It looks like there's a batching process for them being sent over. Once the the OpEx portion or the startup costs are spent as Mark outlined, do you expect there to be more costs, similar costs, in fiscal 2025? Or should that be it? And then the question is, roughly when do you think that these rigs will get up to their appropriate run rate for revenue and margin profiles?

Speaker Change: Okay. That's helpful. Thank you.

Speaker Change: Can we just talk a little bit more about the Saudi rigs.

Speaker Change: It looks like there was a batching process of them being sent over.

Speaker Change: Once the the Opex portion or the startup costs are spent that mark outlined.

Speaker Change: Do you expect there to be more cost similar costs in fiscal 2025 or should that be it and then.

Speaker Change: When roughly do you think that these rigs will get up to their.

Speaker Change: Sure.

Speaker Change: Appropriate run rate for revenue and margin profile.

Mark W. Smith: Well, thanks for the question, Keith, but, you know, most of the... This recommissioning expense will be largely incurred in the fiscal 24 that we're in. As I mentioned in the prepared remarks, you know, $10 to $12 million is expected in Fiscal Q3, and then another $5 million for that recommissioning in Fiscal Q4. And then they start being readied to put on boats and mobilize to the Middle East. And when that happens, there'll be a cash expenditure of $2 million for mobilization per rig, which will be deferred and recognized over the contract term together with the corresponding mobilization revenue once the operations commence.

Speaker Change: Well. Thanks, Thanks for the question, Keith, but you know most of our.

Speaker Change: This re commissioning extents will be large.

Speaker Change: Largely incurred in the fiscal 24 that were in.

Speaker Change: As I mentioned in the prepared remarks, you know 10 to 12 million is expected in fiscal Q3, and then another $5 million for that reconditioning in fiscal Q4.

Speaker Change: And then they start.

Speaker Change: Being readied to.

Speaker Change: To put on boats and mobilize too.

Speaker Change: To the middle East and when that happens there'll be a cash expenditure of $2 million for mobilization.

Speaker Change: Per rig, which will be deferred and recognized over the contract term together with the corresponding mobilization revenue once the operations commence so that stuff is largely a 2025 and then through the life of the contract is the recognition.

Mark W. Smith: So that stuff is largely for 2025 and then through the life of the contract is the recognition. We think that these rigs will, you know, mostly be exported through this calendar year and commence turning to the right and operations and putting in the beginning of calendar 25.

Speaker Change: We think that these rigs are all you know mostly be exported through this calendar year and commenced turning to the right.

Speaker Change: Operations is funding.

Speaker Change: In the beginning of calendar 'twenty five.

Keith MacKey: Perfect. Thanks very much.

Speaker Change: Yeah.

Speaker Change: Perfect. Thanks very much.

Speaker Change: Thank you.

Scott Gruber: Our next question comes from the line of Scott Gruber from Citigroup. Please go ahead.

Speaker Change: Next question comes from the line of Scott Gruber from Citigroup. Please go ahead.

Scott Gruber: Good morning. Good morning, Scott. Good morning.

Scott Gruber: Good morning, Good morning, Scott Good morning.

Scott Gruber: I want to stay on the Saudi rig topic. I want to ask about the cost structure in the country. How do you think about your ability to lessen that over time as you gain experience operating in the country?

Scott Gruber: Wanted to stay.

Scott Gruber: Stay on the Saudi rig topic.

Scott Gruber: I wanted to ask you about the cost structure.

Speaker Change: In country.

Speaker Change: Think about your ability to lessen that over time as you gain experience operating in the country.

Mark W. Smith: I'll take a stab at that, John, and then please add in several different things. You know, obviously, most of our daily costs are related to labor.

Speaker Change: I'll I'll take a stab at that John and then please add and there are several different things and obviously most of our daily costs are related to labor.

Mark W. Smith: We're certainly starting with what will be, we have some calls that we're incurring in the country now as we've set up an office and are beginning to hire people. And we'll be starting with a large complement from our North America Solutions segment so that we ensure Safe and Efficient and Effective Startups. But through time, we will begin to have local crews and transfer knowledge. You know, I think a prime example of how we can do that is Argentina.

Speaker Change: Whereas we're certainly starting with what will be where we have a we have some costs that we're incurring in country now as we've set up an office and are beginning to hire people.

Speaker Change: And that will be starting with a large complement from our North America solutions segments that we insure.

Speaker Change: Safe and efficient and effective startups.

Speaker Change: But through time, we will begin to have local crews and transfer knowledge. You know I think a prime example of demonstrates how we can do that is Argentina, you know today and for some time, there's not been a single U S. Expat in that country, lower operating eight or nine super spec rigs and have.

Mark W. Smith: You know, today and for some time, there's not been a single U.S. expat in that country, while we're operating eight or nine super spec rigs and have a similar market share position in Black and Morton to what we have in the U.S., albeit on a smaller scale. Um, you know, the, uh...

Speaker Change: Similar market share positions in the black and more tied to what we have in the U S obvious, albeit a smaller scale.

Speaker Change: You know the.

Mark W. Smith: There's also supply chain benefits through time that we'll get. We're obviously doing all this work and at our facility in Galena Park to do the equipment recertification, recommissioning, etc. But once we're in country, we'll have a couple of things that'll be helpful. One, because these rigs are quote-unquote like new in their five-year contract term, we expect minimal maintenance capex through the initial five years. Two, we'll be developing through that time our supply chain apparatus in the country as we look to have in-country, in-kingdom value spend, and that'll also make us more efficient, we believe, locally with not only maintenance capex but materials and supplies, and inventory consumption as well. So we're working on a lot of these efforts, and we're excited about the opportunity to put all these ideas to work.

Speaker Change: There's also supply chain benefits through time that won't yet we've obviously are doing all this work and at our facility in Galena Park too.

Speaker Change: Do the equipment recertification re commissioning et cetera.

Speaker Change: But once were in country, we will have a couple of things that'll be helpful. One because these rigs are quote unquote like new in their five year contract term, we expect minimal maintenance capex through the through the initial five years two will be developing through that time, our supply chain apparatus in the country as we look to have an in country.

Speaker Change: In kingdom value spend and that'll also make us more efficient.

Speaker Change: We believe locally with with not only maintenance capex, but materials and supplies inventory consumption as well. So we're working on a lot of these efforts and are in and we're excited about the opportunity to put all of these ideas to work.

Scott Gruber: Got it. Appreciate the color. And then turning back to the U.S., you know, the customer consolidation within the EMPs, you know, obviously should be beneficial for HP. You guys have highlighted that. I'm just wondering, now that we're starting to see some deals close, at least from the recent wave, are you having conversations that suggest some consolidation-driven share pickup is a distinct possibility for HP in the near future?

Speaker Change: Got it.

Speaker Change: I appreciate the color and then turning back to the U S.

Speaker Change: The customer consolidation.

Speaker Change: Yeah, obviously, it should be beneficial for you.

Speaker Change: You guys have highlighted that I'm, just wondering no matter, where we are.

Speaker Change: Hard to see some deals close at least one of the recent wave.

Speaker Change: Any conversations that would suggest.

Speaker Change: Some consolidation driven share pickup is a distinct possibility for HP in the near future.

Speaker Change: Scott.

John W. Lindsay: Scott. You know, I don't, I really don't want to get into those details. I mean, again, I think when you look at consolidation over time, you know, I think when I look back at H&P and, you know, we've been, you know, we've come out on the good end on many of the consolidations over the years. And, you know, our expectation is that we'll continue to do so. I mean, at the end of the day, it comes back to no surprise what we've said before.

Speaker Change: You know I don't I really don't want to get into those details.

Speaker Change: Details I mean again I think when you look at <unk>.

Speaker Change: Consolidation over time.

Speaker Change: I think when I look back at our at <unk> and we've been.

Speaker Change: We've come out on the good handle them on many of the of the.

Speaker Change: <unk> over the years.

Speaker Change: Our expectation is that will continue I mean at the end of the day. It comes back to no surprise, what we've said before.

John W. Lindsay: And that is, you know, the ability to deliver safe, efficient, and reliable performance. And I think as long as we can continue to do that and have strong partnerships with our customers, that will come out in a great, great place over time.

Speaker Change: And that is the ability to deliver safe.

Speaker Change: Safe efficient and reliable performance and I think as long as we can continue to do that and have strong partnerships with our customers that will come out in a great great place overtime.

Speaker Change: Got it.

Scott Gruber: Got it. I understand the sensitivity. I appreciate the color. Thank you.

Speaker Change: Sensitivity I appreciate the color. Thank you okay. Thank you Scott.

Marc Gregory Bianchi: Our next question comes from the line of Mark Bianchi from Tatawan. Please go ahead.

Speaker Change: Your next question comes from the line of Marc Bianchi from Cowen.

Marc Gregory Bianchi: These go ahead.

Marc Gregory Bianchi: Hi, thanks. Hey guys, I wanted to go back to the Saudi Arabian margin opportunity there because I think you previously outlined it as more than $25 million for the seven rigs, which would compute to something just below $10,000 a day. It sounds like there's a fair bit of overhead, but when I look back at the international business for H&P over time, the margins don't seem to really get up above $10,000 a day.

Marc Gregory Bianchi: Hi, Thanks.

Marc Gregory Bianchi: Hey, guys I wanted to go back to the Saudi.

Marc Gregory Bianchi: Margin opportunity there because I think you've previously outlined it is more than $25 million.

Marc Gregory Bianchi: For the seven rigs, which would compute to something just below $10000 a day.

Marc Gregory Bianchi: It sounds like there's a fair bit of overhead, but when I look back at the international.

Marc Gregory Bianchi: Business for HMP overtime.

Marc Gregory Bianchi: The margins don't seem to really get up above $10000 a day.

Marc Gregory Bianchi: And I know it's different geographies and such, but you made the comment about Argentina historically operating. So I'm just curious, where do you see the opportunity in the margin for Saudi? Should this ultimately look more like what we see in North America, or are there just factors that we've seen within our...

Speaker Change: No it's.

Marc Gregory Bianchi: Different geographies and such but you made the comment about historically, Argentina operating.

Marc Gregory Bianchi: So I'm just curious where do you see the opportunity in margin for Saudi should this ultimately look more like what we see in North America or are there just factors that we've seen with international historically that would keep this.

Mark W. Smith: Mark, thanks for the question, and let me just say on the one hand, no, the $10,000 a day that you're coming up with is not a marker for 2025 or thereafter. Having said that, there are certain details we're not going to get into for competitive reasons. Here, as was previously stated on this call, we do expect future tenders in a competitive bid tender environment. Point forward, we've done our internal modeling for returns that get us to our IRR hurdles on the $27 million investment per rig. That's one thing to note. Another thing to note is your reference to my comment on Argentina this morning.

Marc Gregory Bianchi: Closer to $10000 a day.

Marc Gregory Bianchi: Mark Thanks for the question and.

Speaker Change: Let me just say on one hand, no the $10000 a day that you are coming up with is not a is not a marker for 'twenty or 'twenty five or or thereafter.

Speaker Change: Having said that there are certain details, we're not going to get into for competitive reasons. Here is as previously stated on this call. We do expect future tenders. It in a competitive bid tender environment and a few points.

Speaker Change: Forward, where we've done our internal modeling for return as they get us to our IRR hurdles or the $27 million investment per rig because that's one thing to note. So another thing to note is that as you referenced in my comment on Argentina. This morning, we've only recently gotten to that no U S expat staff.

Mark W. Smith: We've only recently gotten to that no U.S. expat status with our focus on cost management in the last couple of years. And I will say, historically, in our business, not just H&P but the onshore drilling industry, for U.S. drillers moving internationally, we did not do a great job at scale. We would go into countries with one or two rigs, and we would set up an entire SG&A apparatus to support it. And we have said for a couple of years on these calls that is exactly the opposite of what we will do going forward.

Speaker Change: That's what they're focused on cost management for the last couple of years.

Speaker Change: And I will say historically in our business not just <unk>, but but the onshore drilling industry for U S. Drillers moving internationally, we did not do a great job of scale, we would go into countries with one or two rigs and we have set up an entire SG&A apparatus to support it.

Speaker Change: And we have said for a couple of years on these calls that is exactly the opposite of what we will do going forward.

Mark W. Smith: We started with one rig last August, and we've just added seven to get eight. We will begin to see benefits of scale as we get local content, both in terms of people and the supply chain, and we will continue to add to that scale. We will also be leveraging more of a supply chain back office support for the corporation and are excited about the things we can do for this that are very different from that historical experience you just outlined.

Speaker Change: We started with one rig last August we've just added seven to get eight we will begin to see benefits of scale as we get local content. Both in terms of people and supply chain and we will continue to add to that scale.

Speaker Change: We will also be leveraging more of a supply chain back office support for the Corporation and are excited about the things. We can do for this that are very different than that historical experience you just outlined.

John W. Lindsay: And this is John, and I think just to add to Mark's comment. You know, specifically in Saudi Arabia, it's obviously unconventional. We have a lot of experience with unconventional, you know, again, there was a question earlier about additional tenders. You know, my assumption is that over the next several years, there'll be more tenders, and our expectation is that we would be successful. And we would be successful because we're going to be providing and adding value for Aramco.

Speaker Change: And this and this this is John and I think just to add to Mark's comments.

Speaker Change:

Speaker Change: Specifically in Saudi it obviously, it's unconventional we have a lot of experience with unconventional again are there was a question earlier about additional tenders you know my assumption is over the next several years, though there'll be more tenders in and our expectation is that we would we would be successful in.

Speaker Change: We would be successful because we're gonna be providing and adding value.

Speaker Change: For for Aramco. So that's my that's my hope.

John W. Lindsay: So, you know, that's my hope. You know, the other factor that we haven't really talked much about is the technology aspect of our offering, and, you know, there's some opportunities there. Again, as you think back, as you think about what we're doing in the U.S. and the unconventional play, and how we've been doing this work in the U.S. all these years, and yet we continue to, that in a lot of cases is driven by technology. So that's the other upside component to this with H&P.

Speaker Change: The other factor that we haven't.

Speaker Change: Really talk much about is the technology aspect of our offering.

Speaker Change: And you know there is some opportunities there again as you think back as you think about what we're doing in the U S. In the unconventional play and how we've been doing this work in the U S. All these years and yet we continue to have year over year improvements.

Speaker Change: That and a lot of cases are driven by technology. So that's that's the other upside component.

Speaker Change: To this with AGP.

Marc Gregory Bianchi: That's a great color. Thanks, guys. Mark, I wanted to ask one more on kind of the maintenance CapEx. I think previously, you know, we went back, and it was like a million bucks a rig per year. That was increased to like a million, million three. And then the latest comment was that it was maybe between a million three and a million five, if I remember correctly. And now it sounds like maybe there's some upward bias to that. Can you talk about how much of that is sort of just this hangover from the cannibalization period versus what could be sustainably a higher run rate over time?

Speaker Change: That's great color thanks, guys.

Speaker Change: Mark I wanted to ask one more on kind of the maintenance Capex I think previously you were.

Speaker Change: We'll go back and it was like a million Bucks a rig per year that was increased til.

Speaker Change: Until like a million million three and then the latest comment was it was maybe between a million three and $1 five if I remember correctly and now it sounds like maybe there is some upward bias to that can you talk about how much of that is sort of just this.

Speaker Change: Hangover from the cannibalization period versus what could be sustainably a higher run rate overtime.

Mark W. Smith: Sure, Mark, there's, you know, if you think about fiscal 23. So go back a year and look at our maintenance, look at our CAPEX, maintenance CAPEX specific guidance for fiscal 23, at the beginning of the year. And when we ended fiscal 23, September 30, we did not spend that amount.

Speaker Change: Sure.

Speaker Change: Mark There's you know if you think about fiscal 'twenty three.

Speaker Change: So go back a year and look at our <unk>.

Speaker Change: Maintenance and look at our Capex maintenance Capex specific guidance for fiscal 'twenty three.

Speaker Change: At the beginning of the year and when we ended 23 at September 30, we did not spend that amount. So we had revisions downward.

Mark W. Smith: So we had revisions downward, and we had a lot of supply chain constraints. What we've seen this year is the supply chain finally responding with more throughput so that we can do this catch up we've been talking about for quite some time. So what you see is transitory amounts here as we've been able to nail down the supply chain. The componentry in question, you know, it's all sorts of stuff. It's a seven-year top drive. It's a five-year BOP. It's engine work. It's mud pump work. You know, it's et cetera, et cetera, et cetera. So it's across the full stack of components on the rig.

Speaker Change: And we had a lot of supply chain constraints.

Speaker Change: What we've seen this year is it supply chain and finally responding with more throughput. So that we can do this catch up we've been talking about for quite some time.

Speaker Change: So what you see as transitory amounts here as we've been able to nail down the supply chain.

Speaker Change: The componentry in question you know, it's all sorts of stuff, it's 70 or top drive it's a five year B O P. It's engine work as mud pump work, you know, it et cetera, et cetera et cetera.

Speaker Change: So it's across the full stack of componentry on the rig and and I would say as I look at the at the list of components and work with our U S operations and maintenance teams, we're starting to see where we're turning the corner on some of these components.

Mark W. Smith: And I would say, as I look at the list of components and work with our U.S. operations and maintenance teams, we're starting to see where we're turning the corner on some of these components. So the volume that we've had to get through should start to go down, I would hope, in 2025. And then, but I will say we do have some inflation that will be sticky. So will we ever get to under a million? I don't see that necessarily, but I think so.

Speaker Change: So the volume that we've had to get through should come start to tick down I would hope in 2020 five.

Speaker Change: And then but I will say, we do have some inflation that will be sticky so will we ever get to under a million I don't see that necessarily but I think.

Mark W. Smith: The 1.4 that we started this year with and one somewhere between those two and another year or two looks to be a good zip code.

Speaker Change: The 1.4 that we started this year with an one somewhere between those two in another year or two looks to be a good Zip code.

Marc Gregory Bianchi: Great. Thanks so much.

Speaker Change: Great. Thanks, so much.

Waqar Mustafa Syed: Our next question comes from the line of Waqar Syed from ATB Capital Markets. Please go ahead.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Waqar Sayed from ATB capital markets. Please go ahead.

Waqar Mustafa Syed: Good morning. A couple of questions here. First of all, John, with oil prices in the 80s and the Permian, you know, I know you mentioned you've seen kind of a flattish market, but do you see any hope of any pickup in activity in the Permian for H2 and perhaps for next year?

Waqar Mustafa Syed: Hi, good morning.

Waqar Mustafa Syed: So a couple of questions here.

Waqar Mustafa Syed: First of all John with you know on prices.

Waqar Mustafa Syed: The <unk> and the Permian documentary relatively no.

Waqar Mustafa Syed: You know I know you mentioned that you're seeing kind of a flattish market, but do you see any hope of.

Waqar Mustafa Syed: Any pickup in activity in the Permian for each two and perhaps for the next year.

John W. Lindsay: Well, we're always hopeful. And I did mention that, you know, the longer-term outlook, the fundamentals are strong, obviously, oil prices are strong. You know, the activity set that is experiencing this correction and activity as a function of natural gas, not oil. And so I do think the Permian has a lot of potential. Obviously, we're the largest driller, and we have the most rigs running in the Permian. And quite frankly, I think the rig count we have today is essentially the same as it was when we had close to 170, 180 rigs running.

John W. Lindsay: Good morning, where car.

John W. Lindsay: Well we're always.

Speaker Change: Hopeful and I did mention that you know.

John W. Lindsay: The longer term outlook. The fundamentals were strong obviously oil prices are strong.

John W. Lindsay: You know the the activity set.

John W. Lindsay: That we're experiencing this correction in activity as you know is a function of natural gas not oil and so I do think the Permian has a lot of potential.

John W. Lindsay: Obviously, we're the we're the largest driller has the most rigs running in the Permian and <unk>.

John W. Lindsay: And quite frankly, I think the rig count we have today is essentially the same as it was when we had.

John W. Lindsay: Close to 170 880 rigs running so we've been we've done very very well in terms of maintaining our market share actually growing at a little bit in that basin. So I think the outlook is good. The big question is we all say as well when is that when is that.

John W. Lindsay: So we've done very, very well in terms of maintaining, you know, our market share, actually growing it a little bit in that basin. So I think the outlook is good. The big question, as we all say, is, well, when is that? When is that opportunity to add back units? And, you know, again, our hope is that we'll start to see some improvement in the back half of this year, but again, at this stage, it's just hope because we don't really have any additional information than you or anybody else does.

John W. Lindsay: That opportunity to add back units and again, our hope is.

John W. Lindsay: We will start to see some improvement in the back half of this year, but again at this stage. It's just hope because we don't really have any additional information you or anybody else does.

John W. Lindsay: We do hear that but these are some of these big E&P consolidation savings.

Waqar Mustafa Syed: We do hear that with some of these big E&P consolidations, once they're consummated, you may see or are seeing some geoscientists come out from these consolidated companies or become redundant, and some private capitalists chasing them, and new companies are being formed. And that you may see private activity maybe pick up in the second half or maybe in 2025. Are you seeing any early signs of that? Are you having any conversations about that?

John W. Lindsay: Once they are consummated.

John W. Lindsay: We see are you seeing some geoscientist come out from this.

John W. Lindsay: Consolidated companies.

John W. Lindsay: And some private capital that's chasing them or new companies that are being formed.

John W. Lindsay: And that you may see private activity, maybe pick up in the second half or maybe in 2025 are you seeing any early signs of that are you having any conversations in that respect.

John W. Lindsay: Well, as you probably know, most of I think 80% of our active fleet today is with large, large public companies. However, we do have, you know, nice partnerships with private companies. And, and there are some examples where here recently, just recently in the past quarter, we put a rig to work for various small private companies. So I definitely think that that's an opportunity. Clearly, you know, the consolidation that we usually see in the first period of time, there's some slowdown in activity, but at the end of the day, they're going to want to keep their production levels up.

John W. Lindsay: Well.

John W. Lindsay: As you probably know most of I think 80% of our active fleet today is with a large a large public companies. However, we do have.

John W. Lindsay: Nice partnerships with the private.

John W. Lindsay: And and there are some examples where here recently just recently in the past quarter.

John W. Lindsay: We put a rig to work for various small private come.

John W. Lindsay: Company, So I definitely think that that's that's an opportunity.

John W. Lindsay: Clearly you know these.

John W. Lindsay: The consolidation that we see usually in the first period of time, there's some some slow a slow down in activity, but at the end of the day, they're going to want to keep their production levels oven.

John W. Lindsay: In many cases, that means keeping the same amount or even adding some rigs. So, and then the additional private companies. We could sure see that happening. It happened in the past, and maybe it will happen in the future. But hard to say much more about that, Waqar.

John W. Lindsay: In many cases that means keeping the same amount or even adding some rigs so.

John W. Lindsay: And then the additional private companies, we could sure see that happening it's happened in the past and maybe it will happen in the future, but hard to say much much more about that.

John W. Lindsay: That Oh car.

Waqar Mustafa Syed: And then just one final question, that as the service intensity continues to increase now, going to these four multi-colaterals, you know, some companies, are you seeing the SuperSpec rig specifications kind of change again or step out again? Is the, you know, the rig of choice, SuperSpec rig of choice for the last year or two years ago still pretty relevant?

Speaker Change: Okay and then just one final question that as the service intensity continues to increase now going to these full monotype lat-lons. Some companies are you seeing the the.

Speaker Change: Super spec rig specifications kind of change again, a step out to gain all the you know the rig to a super.

John W. Lindsay: Super spec rig of choice for the last year or two years ago, it's still pretty pretty relevant.

Speaker Change: Very relevant.

John W. Lindsay: very relevant. You know, we have been able to handle these three and four mile laterals with the kit that we have. There are times where you may need to increase the setback capacity or something like that. But in general, the flex rig is very well suited for the work that is required and ongoing. So we feel really good about where we are.

John W. Lindsay: You know we have been able to.

John W. Lindsay: Handle these three and four mile laterals with the the kit that we have there are you know.

John W. Lindsay: Times, where you may need to you know upside the setback capacity or something like that but in general.

John W. Lindsay: The flex rig is very well suited for the work that is a.

John W. Lindsay: That is required in an ongoing so we feel really good about where we are like I said earlier.

John W. Lindsay: Like I said earlier, we think there'll be more demand for super spec, not less. It's going to be harder and harder for the lower tier rigs to be competitive because of the length of the lateral and the performance that's required. And then just finally, on the technology side, it's very, very difficult for a human to keep up with what a computer or technology is going to do. So, you know, this is 24-7 work, and the ability to have apps and algorithms that are doing the work, making the decisions as opposed to it being done by a human 24-7 is a night and day difference. So, the technology opportunity set is huge, and whether that's a two-mile lateral or a four-mile lateral, we're going to see more and more of that adoption as we go forward.

John W. Lindsay: We think there'll be more demand for super spec not less is going to be harder and harder for the lower tier rigs to be competitive.

John W. Lindsay: Because of the length of the lateral and the performance that that's required.

John W. Lindsay: And then just finally on the technology side, it's very very difficult for a human to.

John W. Lindsay: To keep up with what a computer or the technology is going is going to do so this is 24 seven work.

John W. Lindsay: And the ability to have apps and algorithms that are doing the work are making the decisions as opposed to it being done by a human 24, seven it's night and day difference. So the technology opportunity said is huge and whether that's a two mile lateral or a four mile.

John W. Lindsay: Europe, we're gonna see more and more of that adoption I believe as we go forward.

Waqar Mustafa Syed: Well, thank you very much.

Speaker Change: Great well, thank you very much.

Kurt Kevin Hallead: Our next question comes from the line of Kurt Hallead from Benchmark. Please go ahead.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Kurt <unk> from benchmark. Please go ahead.

Kurt Kevin Hallead: Hey, good morning, everybody.

Kurt: Hey, good morning, everybody.

Kurt Kevin Hallead: Hi Kurt, morning.

Kurt: Hi, Kurt good morning.

John W. Lindsay: Morning. Hey, John. I'm curious, what your take might be on... You know, your conversations with your customer base, your customer base, looking out beyond 2024, a lot of, you know, hope and opportunity with respect to, you know, exporting gas for these LNG facilities that are scheduled to come online. And then on top of that, you know, a lot of discussion of late around data centers and AI and the need to power that dynamic, and that needing more grid capacity and that needing more natural gas.

Kurt: Good morning, Hey, John.

Kurt: John I'm I'm, I'm curious right, where we thought but what's your take might be on.

Kurt: Your conversations with your customer base your customer base looking out beyond 2024.

Kurt: A lot of hope.

Kurt: Our hope.

Kurt: And an opportunity with respect to <unk>.

Kurt: Sporting gas for these LNG facilities that are scheduled to come online and that on top of that you know a lot of discussion of late around the.

Kurt: It did.

Kurt: Data centers, and AI and the need to you know.

Kurt: Power.

Kurt: That dynamic in that meeting more great capacity and that made me even more natural gas.

John W. Lindsay: The long-winded way of asking the question is, you know, are any of these topics on the front of the mind of your customer base? And, you know, how do you think that's going to translate into incremental drilling activity. First for LNG going into next year and then potentially, you know, looking at the dynamics related to the data center.

Kurt: So long winded way of asking the question is are any of these topics on the front of mind of your customer base and.

Kurt: How do you think about.

Kurt: How that's going to translate into incremental drilling activity first for LNG going into next year, and then potentially you know looking at the dynamics related to the data center.

John W. Lindsay: Well, Kurt, it's a great question, and it's a question on everybody's mind. And, no doubt, there are a lot of opinions out there.

Speaker Change: Well, Kurt it's a it's a great question and answer the question on everybody's mind and no doubt, there's a lot of opinions out there and you know.

John W. Lindsay: And, you know, our opinion, our hope is that it's going to be sooner as opposed to later. I think, at some point in time, it's definitely going to happen on the gas side. That it's just, you know, that natural gas is just a great energy source for lots and lots of reasons, and there's a huge opportunity ahead. Obviously, unconventional gas, the opportunities that we see in the Middle East, so there's a market out there, and I think there's a huge opportunity ahead for us.

Kurt: Our our opinion and our hope is that it's going to be sooner as opposed to later I think.

Kurt: At some point in time, it's definitely going to happen on the gas side.

Kurt: It's just you know that our natural gas is just.

Kurt: A great energy source.

Kurt: There are lots and lots of reasons and there's a huge opportunity ahead, obviously the unconventional gas opportunities.

Kurt: Opportunities that we see in the middle East So theres a market out there and I think I.

Kurt: I think theres a huge opportunity ahead for us.

John W. Lindsay: It's just, as I said earlier, Kurt, it's hard to say when that's going to be. I think we're going to play a, you know, H&P will play a very large role in that when that recovery takes off, just like we were playing previously before the correction in the natural gas activity.

Kurt: As I said earlier kirt, it's hard to say when that's going to be I think we're gonna play <unk> will play a very large role in that when that recovery takes off just like we were playing previously before the correction in the natural gas.

Kurt Kevin Hallead: That's fair enough, thanks. And to follow up, I noticed here that, you know, you had very minimal share repurchase activity during the course of the March quarter relative to, you know, the December quarter. Just kind of curious as to what those dynamics were driven by and was it related to the Saudi contract or anything else? You know, they kind of, you guys had to put the policy on. Kurt, thanks for the feedback...

Kurt: Activity.

Speaker Change: That's fair enough thanks and.

Mark W. Smith: Kurt, thanks for the question. In our original capital allocation guidance in October for our supplemental plan, we outlined the fiscal 24 supplemental dividend, $68 million plus, quote, unallocated cash of $68 million. To date, in this fiscal year, we've repurchased 52 million shares, primarily in fiscal Q1. That said, we have further projected free cash flow as well as cash on hand in excess of our previously stated target of 200 million.

Mark W. Smith: We salute calendar Q1 repurchases as the recount looked to soften a bit and, as previously discussed this morning, and due to macro uncertainties in the market overall, we will continue to be opportunistic while maintaining our long-standing financial stewardship.

Kurt Kevin Hallead: That's great. Thanks. I appreciate the color. Thanks for... Our last question comes from the line of Jeffrey LeBlanc from TPH. Please go ahead.

Jeffrey Michael LeBlanc: Our last question, line by Jeffrey LeBlanc from TPH. Good morning, John and Mark. Thanks for taking the time.

John W. Lindsay: Uh, well, Jeff, uh... You know, I can really only speak to the H&P from the H&P perspective. You know, the rigs that we have idled over the last year. Our rigs, at least in my view, would be ready to go to work, would not require much startup expense. We're not cannibalizing our fleet, so we have available capacity. I can't tell you right now for sure what that would be, but I wouldn't expect that there would be a lot of startup capital that would be required. That's happening in a year time frame from being idle to going back to work a year, a year and a half.

Jeffrey Michael LeBlanc: I appreciate the color, and I'll turn it back to the operator. Thank you very much. All right, Jeff.

John W. Lindsay: That appears to be all the time we have for questions. I will now turn the program back over to Mr. John Lindsay for any additional or closing remarks.

John W. Lindsay: Thank you, Abby, and thanks to everyone for joining us today. We're very excited about the future and the opportunities ahead, and we'll now sign off. Thank you.

Operator: This does conclude today's program. Thank you for your participation. You may disconnect at any time.

Inaudible: [inaudible]