Q3 2024 Patterson-UTI Energy Inc Earnings Call
Good morning. Thank you for standing by my name is pillar and I will be your conference operator today.
This time I would like to welcome everyone to the Patterson UTI third quarter 2024 earnings Conference call.
All lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there'll be a question and answer session.
If you would like to ask a question. During this time since you brought the star followed by the number one on your telephone keypad. If you would like to withdraw your question. Please press star one again. Thank you I would now like to turn the conference over to Michael Sabella, you may begin.
Michael Sabella: Thank you operator, good morning, and welcome to Patterson Utis earnings conference call to discuss our third quarter 2024 results.
Michael Sabella: With me today are Andy Hendricks, President and Chief Executive Officer, and Andy Smith, Chief Financial Officer.
Michael Sabella: As a reminder, statements that are made in this conference call that refer to the company's or management's plans intentions targets beliefs expectations or predictions for the future are considered forward looking statements.
Michael Sabella: These forward looking statements are subject to risks and uncertainties as disclosed in the company's SEC filings.
Michael Sabella: Which could cause the company's actual results to differ materially the company takes no obligation to publicly update or revise any forward looking statements.
Michael Sabella: Statements made in this conference call will include non-GAAP financial measures. The required reconciliation to GAAP financial measures are included on our website.
Speaker Change: Energy Dot com and in the company's press release issued prior to this conference call I will now turn the call over to Andy Hendricks Patterson Patterson Uti's Chief Executive Officer.
Andy Hendricks: Thanks, Mike welcome to our third quarter earnings Conference call.
Andy Hendricks: It's been one year since our first earnings call after acquiring altera and merging with next year and the year has been transformative for Patterson UTI.
Andy Hendricks: These strategic moves have solidified our position as a leading player in the oilfield services sector.
Andy Hendricks: Despite a challenging macro environment, including fluctuations in oil and natural gas prices and shifting industry activity across key basins. We have successfully integrated next year and altera.
Andy Hendricks: All of our segments are performing well given the backdrop and we have stayed focused on operational excellence for our customers and free cash flow for our investors.
Andy Hendricks: We believe that the progress we've made in just one year will create value over the long term for the company and for shareholders.
Andy Hendricks: I want to extend a sincere. Thank you to all of our employees, whose hard work and dedication have been crucial to the success of the integration.
Andy Hendricks: Could not have done it without you and we are grateful for your contributions in making this process smoother and more efficient.
Andy Hendricks: We believe we've only begun to unlock the true value of our company. There are many opportunities to further integrate our operations and we are just starting to realize the potential commercial synergies.
Our integrated approach across the entire drilling and completions process is strengthening relationships with a broader customer base and positioning us for long term success and strong financial returns.
Andy Hendricks: Even in a challenging market, we think there's still room for capital efficient profitable growth for Patterson UTI.
Andy Hendricks: In the first four quarters since the transaction closed we generated almost $570 million of free cash flow.
Andy Hendricks: We've used that free cash flow to make $346 million of share repurchases, while paying a steady dividend and reducing our net debt including leases.
Andy Hendricks: The total cash returned to shareholders through share repurchases and dividends amounts to 15% of our current market cap, while our net debt, including leases is down by 7%.
Andy Hendricks: This past year, a showcase Patterson uti's resilience and strength through different points in the cycle.
Andy Hendricks: We always recognize that there can be fluctuating demand for our services and our combined size scale and broad service offerings position us well to compete in any market.
Andy Hendricks: On our previous earnings call, we shared exciting news that we had entered into our first fully integrated drilling and completion arrangement under performance based agreement.
Andy Hendricks: This customer is using a broad suite of our products and services across an entire pad, marking a new chapter in how we deliver value as.
Andy Hendricks: Shale evolves, we believe companies with differentiated business models will be best positioned for premium returns.
Andy Hendricks: He was one of the largest drilling and completion companies in U S. Shale, we are confident in our ability over the long term to deliver best in class results to our customers, while driving accretive returns for our investors.
Andy Hendricks: The results have been very encouraging both our customer and Patterson UTI are benefiting from this integrated approach. We are on track to complete the pad ahead of schedule and expect accretive returns relative to our overall business.
Andy Hendricks: Our unique commercial strategy is being noticed by the market and there are several potential new customers that are paying close attention to the success of our integrated approach. We are in discussions with other potential customers for similar concept and we think this commercial strategy could have significant upside.
Andy Hendricks: The well side integration opportunities will be enabled by our cutting edge <unk> performance center, where our customers along with our teams will be able to digitally track their full pad from start to finish.
Andy Hendricks: This is truly shaking up shaping up to be a win win situation and we think this commercial strategy has the potential to bring significant value to our customers and our investors.
Andy Hendricks: Rather than reacting to the market, we are anticipating its direction and positioning our company to lead shale into its next phase.
Andy Hendricks: On the macro front in drilling we expect to see a relatively steady rig count for our tier one high spec drilling rigs through the rest of the year and into 2025 based on our contracts and also based on our large customer programs.
Andy Hendricks: However, at the same time, the overall industry rig count may fluctuate as older lower spec assets could see weaker demand from smaller e&ps.
Andy Hendricks: And completions, we expect customers will continue to flex activity to maintain spending within their budgets, which is likely to impact frac activity through year end before recovering in the first half of 2025.
Andy Hendricks: On the natural gas side, we've seen commodity prices somewhat stabilized recently reinforcing our optimism about the long term outlook for natural gas activity.
Andy Hendricks: While it will take some time for the natural gas market to fully rebalanced. We think the market is stabilizing and should have some upside at some point in 2025 as domestic demand rises in LNG takeaway begins to come online.
Andy Hendricks: On the oil front, we observed a slight softening of activity during the third quarter, primarily driven by customer specific M&A and ongoing natural gas takeaway constraints from the Permian basin.
Andy Hendricks: Going forward, we expect to all activity will remain steady into next year over.
Andy Hendricks: Over the past couple of years, our customers have been less responsive to fluctuations in oil prices, which has reduced the cyclicality of our business.
Andy Hendricks: When oil prices declined towards the end of the third quarter, we did not see any change in customer plans and we do not expect our customers to change their plans absent an extended move in the commodity relative to what we've seen recently.
Andy Hendricks: This stability has been an advantage as we make long term plans for our business and we have maintained a disciplined approach to capital deployment.
Andy Hendricks: Even in the challenging market, we have seen in the second half of this year, we are generating strong free cash flow. Looking ahead, we anticipate average activity in 2025 will be slightly below 2024, with a rig count essentially steady from current levels.
Andy Hendricks: There is some potential for modest improvements in natural gas markets later next year.
Andy Hendricks: Although we are not planning for it at this time based on industry LNG facility delays.
Andy Hendricks: We are working to ensure that the company has the appropriate cost structure for this environment. We think there is room for Patterson UTI to capitalize on future opportunities as the market evolves, while still generating strong free cash flow.
Andy Hendricks: We are committed to returning cash to shareholders.
Andy Hendricks: In our drilling services segment, we saw a slight reduction in our rig count early in the third quarter, mainly due to customer M&A and oil basins are natural gas drilling activity saw a slight increase as the quarter progressed.
Andy Hendricks: Once again, our adjusted Daily gross margin exceeded expectations revenue per day continues to remain stable. While we continue to focus on our cost structure, demonstrating our commitment to return on capital even in a challenging market.
Andy Hendricks: In the U S. We began in the fourth quarter operating 107 rigs and are currently operating 105 rigs. We believe our rig count is likely to remain steady through the rest of the year with steady activity in both oil and natural gas basins.
Andy Hendricks: For the industry, we see the potential for the overall rig count to move somewhat lower while at the same time the industry continues to move towards tier one rigs.
Andy Hendricks: This provides a steady level of activity for our company compared to the overall industry.
Andy Hendricks: We believe we operate one of the highest quality rig fleets in the U S.
Andy Hendricks: In completion services revenue was up slightly sequentially as we saw a mix shift towards more integrated services. Although we did see some unplanned gaps that impacted fixed cost leverage and causes segment adjusted gross profit to decline sequentially.
Andy Hendricks: Natural gas completion activity was up compared to the second quarter.
Andy Hendricks: We anticipate that completion activity will decline sequentially in the fourth quarter on a combination of the usual holiday seasonality and also slowing completion activity as customers look to maintain their budgets.
Andy Hendricks: We continue to see strong financial results from our electric fleets that had been fully deployed which are delivering higher than average returns compared to the completion services segment average.
Andy Hendricks: Should see the percentage of pump hours generated by our electric frac equipment to increase again in the fourth quarter.
Andy Hendricks: Even as we recently lowered our 2020 for Capex expectation, we increased our electric horsepower to 155000 in the fourth quarter as we continue to high grade our fleet.
Andy Hendricks: In the year since we merged the completion businesses of next year at Patterson UTI. We are pleased with our performance. During this time given the industry trends, we have maintained capital discipline relative to our peers. While also upgrading our fleet and this has contributed significantly to the strong free cash flow generation of the company.
Andy Hendricks: We believe our entire fleet of horsepower is one of the highest quality in the industry with approximately 80% being able to be powered by natural gas.
Andy Hendricks: Over the past year, we have made significant investments in our business to secure future work, while simultaneously delivering strong free cash flow for our investors.
Andy Hendricks: This dual focus on technology growth and financial discipline underscores our commitment to enhancing shareholder value and a competitive landscape.
Andy Hendricks: Results in our drilling products segment remained strong with revenue in the U S improved sequentially, even as the industry rig count declined.
Andy Hendricks: In addition, the team has done an excellent job outperforming the broader market through superior customer service.
Andy Hendricks: Over the past year, one of the most exciting developments has been the coordination between our drilling services teams and our drilling products team.
Andy Hendricks: Since we closed the Alterra transaction last year, the market share of our drill bits on our own rigs has increased by more than 10%, which shows a strong industrial logic to this M&A.
Andy Hendricks: We think there is still significant upside as we see the opportunity to deliver a unique product to our customers.
Andy Hendricks: On the International front. We are also excited to have signed the previously announced joint venture agreement in the UAE with subsidiaries of <unk> drilling and <unk>, we will hold a 15% interest in a newly created.
Andy Hendricks: Named turn well industries, which has been awarded a contract to drill and complete a 144 unconventional wells for AD hoc we will provide expertise as abnaki begins what we believe will be a groundbreaking project that could result in multiple years of unconventional drilling and completion activity and our participation allows us to gain a.
Andy Hendricks: <unk> presence in the region with a limited capital contribution.
I'll now turn it over to Andy Smith, who will review the financial results for the third quarter.
Thanks, Andy.
Andy Smith: Total reported revenue for the quarter was $1 $357 million.
Andy Smith: We reported a net loss attributable to common shareholders of $979 million or $2 50 per share in the third quarter.
Andy Smith: This included an $885 million impairment of goodwill of $114 million asset retirement charge and $7 million in merger and integration expenses.
Andy Smith: Excluding the goodwill impairment asset retirement charge and merger and integration expenses, our adjusted net income would have been $2 million.
Andy Smith: Adjusted EBITDA for the quarter totaled $275 million, which also excludes the previously mentioned special items.
Andy Smith: Our weighted average share count was 392 million shares during Q3, and we exited the quarter with 390 million shares outstanding.
Andy Smith: As previously noted during the third quarter, we reported an $885 million charge related to the impairment of goodwill that was recorded with the next tier merger.
Andy Smith: The merger was a stock for stock transaction that was negotiated at a zero premium to the market price of a share of next year at the time of the deal announcement on June 15 2023.
Andy Smith: We recorded equity consideration was based on Patterson Uti's share price at the time the transaction closed on September one 2023, which was 34% higher relative to the announcement date.
Andy Smith: This higher share price resulted in higher reported equity consideration leading to the recognition of goodwill from the transaction.
Andy Smith: The goodwill impairment related to our completion services reporting segment.
Andy Smith: On a periodic basis, we evaluate our fleet of drilling rigs for marketability based on the condition of inactive rigs expenditures that would be necessary to bring inactive rigs to working condition and the expected demand for drilling services by rig type.
Andy Smith: The components comprising rigs that will no longer be marketed are evaluated and those components with continuing utility to the to our other marketed rigs are transferred to other rigs or to our yards to be used as spare equipment.
Andy Smith: The remaining components of these rigs are retired.
Andy Smith: In the third quarter of 2024, we identified 42 legacy non tier one rigs and equipment to be retired.
Andy Smith: Given our updated view on the outlook for industry drilling activity in the U S. We believe these rigs have limited commercial opportunity and are unlikely to ever return to work without a significant capital investment.
Andy Smith: We recorded a $114 million charge related to this retirement in the third quarter of 2024.
Andy Smith: During the first nine months of the year, we generated $322 million of free cash flow with more than $100 million generated in the third quarter.
Andy Smith: During the third quarter, we returned $71 million to shareholders, including an <unk> <unk> per share dividends and $40 million used to repurchase more than 4 million shares.
Andy Smith: In the fourth full quarter since we closed the nextera merger and Altera acquisition, we've used $346 million to repurchase shares.
Andy Smith: This is in addition to reducing net debt, including leases and paying a steady dividend.
Our cash return to shareholders in the first full quarter since the next tier merger and the Altera acquisition close totaled 15% of the current market cap, while our net debt, including leases over that same time is down 7%.
Andy Smith: We have lowered our share count by 7% over that same time period.
Speaker Change: In our drilling services segment third quarter revenue was $422 million and adjusted gross profit totaled $171 million.
Speaker Change: In U S contract drilling we totaled $9 870 operating days.
Speaker Change: Average rig revenue per day was $36000 with average rig operating cost per day of $19900.
Speaker Change: The average adjusted rig gross profit per day was $16100.
Speaker Change: We continue to see a relatively steady revenue per day was mostly steady recent pricing for our top tier assets.
Speaker Change: We also saw sequential improvement in our cost per day during the quarter.
Speaker Change: On September 30, we had contracts for drilling rigs in the U S providing for approximately $401 million of future day rate drilling revenue.
Speaker Change: Based on contracts currently in place, we expect an average of 58 rigs operating under term contracts during the fourth quarter of 2024, and an average of 33 rigs operating under term contracts over the four quarters ending September 32025.
Speaker Change: And our other drilling services businesses. Besides U S contract drilling, which is mostly international contract drilling and directional drilling third quarter revenue was $66 million with an adjusted gross profit of $11 million.
Speaker Change: We saw an improvement in our directional drilling results compared to the second quarter, driven by market share gains and higher margins.
Speaker Change: For the fourth quarter U S contract drilling we expect to average 106 active rigs with adjusted gross profit per operating day of slightly less than $15000.
Speaker Change: The reduction in margins is a function of contract churn in the drilling business because our contract book continues to reset to the current market rate.
Speaker Change: However, we are encouraged by the resiliency of recent term contract rates.
Speaker Change: Side from U S contract drilling we expect other drilling services adjusted gross profit to be down slightly compared to the third quarter.
Speaker Change: Revenue for the third quarter in our completion services segment totaled $832 million with an adjusted gross profit of $128 million.
Speaker Change: Saw a slight increase in revenue on a shift towards more jobs with additional completion related integration services.
Speaker Change: However, several of our fleets experienced unplanned gaps, which impacted fixed cost leverage on those fleets compared to the second quarter.
Speaker Change: The higher revenue was mostly a function of an increase in activity in natural gas basins relative to the second quarter.
Speaker Change: During the fourth quarter, we expect to see lower pumping hours compared to the third quarter as our customers flex completion activity to maintain spending within their budgets. While there is also additional downtime associated with normal holiday seasonality.
Speaker Change: For the fourth quarter, we expect completion services adjusted gross profit to be approximately $85 million.
Speaker Change: We believe the completion services segment is likely to see higher adjusted gross profit in the first half of 2025 relative to our expectations for the second half of this year.
Speaker Change: Third quarter drilling products revenue totaled $89 million, which was a 4% increase sequentially.
Speaker Change: Adjusted gross profit was $42 million.
Speaker Change: The higher sequential improvement in revenue was mostly the result of the resumption of normal activity in Canada following normal spring breakup.
Speaker Change: In the U S. We saw higher revenue and margins even on a lower U S industry rig count as our U S operations continued to see strong share gains in margins.
Speaker Change: For the fourth quarter, we expect a slight sequential increase in drilling products revenue and adjusted gross profit compared to the third quarter driven by growth in our international business, while revenue in the U S business is expected to decline slightly on a lower industry rig count.
Speaker Change: Other revenue totaled $15 million for the quarter was $5 million and adjusted gross profit.
Speaker Change: We expect other fourth quarter revenue and adjusted gross profit to be flat with the third quarter.
Speaker Change: Reported selling general and administrative expenses in the third quarter were $65 million for.
Speaker Change: For Q4, we expect SG&A expenses of approximately $65 million.
Speaker Change: On a consolidated basis for the third quarter total depreciation depletion amortization and impairment expense, excluding the goodwill impairment totaled $375 million of which $114 million from the previously mentioned drilling rig asset retirement.
Speaker Change: For the fourth quarter, we expect total depreciation depletion amortization and impairment expense of approximately $255 million.
Speaker Change: During Q3, total capex was $181 million, including $69 million in drilling services $87 million in completion services.
Speaker Change: $16 million in drilling products and $8 million in other at corporate.
Speaker Change: For the fourth quarter, we expect total capex of roughly $150 million, which brings our full year capex expectation to around $690 million.
Speaker Change: We are proud of the way we have managed our capex in 2024, and our Capex. This year is expected to come in materially below our original budget.
Speaker Change: Yes, we are exiting the year with more next generation electric horsepower than what we expected in the original budget and one of the highest quality drilling rig fleets in the industry.
Speaker Change: We will continue to make targeted investments in next generation equipment across all our businesses.
Speaker Change: Also maintaining a strict focus on capital discipline.
Speaker Change: We closed Q3 with nothing drawn on our $615 million revolving credit facility.
Speaker Change: As well as a $115 million cash and cash on hand, we.
Speaker Change: We do not have any senior note maturities until 2028.
Speaker Change: All three rating agencies have recently affirmed our investment grade credit rating.
Speaker Change: <unk> grade rating allows us to maintain a lower cost of capital and we are focused on managing our capital structure in a way that protects our credit rating.
Speaker Change: We expect to generate another quarter of strong free cash flow in the fourth quarter.
We still expect approximately 40% of our adjusted EBITDA to convert to free cash flow in 2024, including customer prepayments. We received in 2023 for work performed in 2024.
Speaker Change: Our board has approved an <unk> <unk> per share dividend for Q4.
Speaker Change: Year to date through the third quarter, we have returned $366 million to shareholders, consisting of $270 million for share repurchases and $96 million for dividends.
After we pay our dividend in Q4, we will have reached our goal to return at least $400 million to our shareholders in 2024.
Speaker Change: We are continuing to explore all uses of cash including the option to further accelerate our share repurchases.
Speaker Change: I'll now turn it back over to Andy Hendricks for closing closing remarks.
Andy Hendricks: Thanks, Andy I want to close on a few key takeaways.
Andy Hendricks: First we're excited about the service and product capabilities that we now have at Patterson UTI and are proud of the teams for all they have accomplished over the last year to integrate the businesses and work together we.
Andy Hendricks: We have created an important company in the oilfield services market, which has an unparalleled offering and drilling and completions.
On the macro in Q4 and contract drilling I expect that the overall industry rig count we will see some declines in the fourth quarter is smaller E&P slow for year end before possibly increasing in the first half of 2025, while at the same time, our Patterson UTI tier one high spec rig count will be relatively steady.
Andy Hendricks: This is primarily due to the larger drilling programs that we're involved in and the continuing high grading of industry rigs to tier one high spec rigs.
Andy Hendricks: In our completions business, while the fourth quarter shows a seasonal slowdown we do not think this is an accurate representation of where the market will take shape throughout 2025.
Andy Hendricks: As we move through negotiations for work in 2025, there are many things that we believe we're working to our advantage. We think our top tier assets are positioned to remain well utilized even as the lower end of the industry fleet continues to fall off.
Andy Hendricks: Given the higher capital intensity on the average fleet there is likely to be very little spare capacity in the high end natural gas powered portion of our fleet.
Andy Hendricks: Simply the completions dynamic in Q4 is not indicative of the Frac demand set up for 2025 and demand for the high end of the Frac fleet could tighten as we move through 2025.
As I previously mentioned, even though we have not worked through a budget process for next year, we believe that the average activity levels in 2025 in the U S could be slightly lower than the activity in 2024 and with the rig count essentially stable from where we are de <unk>.
Andy Hendricks: Such we will ensure that the company is appropriately structured for the level of activity.
Andy Hendricks: I anticipate the total capex for 2025 will be lower than our 2020 for Capex and we will continue to invest in technologies, where we get higher returns.
Andy Hendricks: We are focused on cash conversions in each of our segments.
Andy Hendricks: We are rationalizing our asset base and are no longer investing in certain assets that we do not believe will be competitive going forward. We have retired 42 rigs that have been idle for more than three years.
Andy Hendricks: Additionally, we are retiring and decommissioning nearly 400000 horsepower of older tier two diesel frac equipment, this year and even with the Newbuild electric equipment, we will have reduced our completions fleet by about 10% to 3 million horsepower by year end.
Andy Hendricks: We do not see a path to making a return on investing in these uncompetitive assets for Patterson UTI or even for other players in the industry.
Andy Hendricks: Therefore, we are taking a leadership role to reduce the supply of equipment and what is currently an oversupplied market.
Andy Hendricks: At Patterson UTI that fit with Patterson UTI the benefits of size scale and integration are apparent in our ability to deliver best in class service to our customers.
Andy Hendricks: As our customers become more focused on data and make database decisions. We are increasingly optimistic that service quality and depth of offering will be a heavy driver of contractor selection, which should be a tailwind for our drilling and completions well site integration program.
Andy Hendricks: While the low hanging fruit for next year and Altera transaction has been realized there are still significant operational and commercial synergies remaining and we are just starting to realize the full benefit of our capabilities.
Andy Hendricks: We have a strong balance sheet and an investment grade capital structure, and we expect to continue to deliver strong free cash flow, while also advancing our technical capabilities we.
Andy Hendricks: We will continue to use our capital to look to drive incremental returns for our shareholders, which could potentially include accelerating our shareholder repurchases.
Andy Hendricks: With that we'd now like to open the lines for Q&A and I'll hand, it over to <unk>.
Speaker Change: Thank you we will now begin the question and answer session. If you would like to ask a question Keith you press. The star followed by the number one on your telephone keypad to Mr. Heng I'm trying to queue.
Speaker Change: You would like to because I got a question. Please press star one again, we ask that you limit yourself to one question and one follow up again, Please press star one to John's team.
Speaker Change: Your first question comes from the line of Scott Group room rates.
Speaker Change: Citigroup. Please go ahead.
Speaker Change: Yes, good morning.
Speaker Change: Hey, Scott good morning.
Scott Group: Hey, Andy.
Speaker Change: You mentioned higher gross profit in the first half of next year for completion.
Scott Group: Seems very reasonable given the.
Scott Group: Kind of exaggerated seasonality you have here in <unk> and certainly in line with you.
Scott Group: Drilling activity forecast.
Scott Group: Thinking about where the.
Scott Group: The run rate I'm kind of profit margins of the business lands. Early next year can you provide any color on where you think that lands I realize it was a lot of moving pieces today, so feel free to provide a range, but I'm curious whether you can get back to the <unk> level.
Scott Group: Profit next year after we work through the seasonality so kind of thinking about <unk> next year can you get back to where you guys. Just finished thank you.
Speaker Change: Yes. Thanks, so as we look at Q4, we certainly youre seeing a reduction in the activity, but as I mentioned, we don't think thats indicative of whats going to happen next year.
Speaker Change: We think that the start of the year brings a reset and I think youll see especially for our completions business.
Speaker Change: A lot of equipment go back to work I think the pace of that is still not clear, but we do think over the first half of the year, it's going to move back up to where we've had it kind of mid year. This year. So we think it's relatively steady.
Speaker Change: After that ramp up as well so in terms of.
Speaker Change: Margin and profitability, but we're certainly looking at the structure of the company as I mentioned, we believe that the overall setup for 2025 and activity is slightly lower than what we've seen in 2024 and we're looking at the structure of the company and we've already made some moves on that so we do think that.
Speaker Change: There's certainly lots of room to improve profitability over what we're going to see in Q4, because thats really an anomaly.
Speaker Change: With the customers that are slowing down for the quarter, so profitability and the margins will move up and we're certainly going to target.
Speaker Change: Margins that we had kind of mid level of this year.
Speaker Change: I appreciate that.
Speaker Change: I just wanted to turn to the treadmill needs and certainly very interesting development.
Speaker Change: And it sounds like your participation is going to be somewhat modest here near term, but can you provide some color on how youll be participating near term or is that just advisory I don't believe you're contributing rigs or pumps.
Speaker Change: But is there opportunity to pull through bid.
Speaker Change: And then longer term would you look to.
Speaker Change: You have your participation evolved.
Speaker Change: Would you aim to provide briggs longer term. So just some more color on that that'd be great.
Speaker Change: Yes, so we're really excited about the opportunities with this JV were excited to participate in this project which is move.
Speaker Change: Moving the needle for production for AD knock over time over the long term as they seek to develop their unconventional resources I'm pleased that they wanted to work with us as a partner in this process. So we're initially providing expertise, which we've already started to move some people over in that direction since signing the.
Speaker Change: The JV to plan to go forward and so for now it's going to be expertise and we will slowly add people into that system over there to help them with their program. There's already a number of rigs that add an oct drilling owns that are currently working on the project.
Speaker Change: They are in discussions to increase the rig count we may be a part of that but one of the one of the tenants of what we're doing in international markets is to be very careful with how we are deploying capital.
Capital that we spend for growth has to clear the hurdle of.
Speaker Change: Simple things like buying back our own shares and other opportunities we may have in the U S.
Speaker Change: So if we move rigs over there in that direction it will be because it makes sense from a capital deployment standpoint.
Speaker Change: And also.
Speaker Change: It.
Speaker Change: It doesn't impact our plans to return cash to shareholders, which is our primary focus so I would say that.
Speaker Change: There could be the potential for us to do that but we're still working through that at this time and our priorities are still returning cash to shareholders.
Speaker Change: Thanks, Andy I'll turn it back.
Speaker Change: Your next question comes from the line of Stephen <unk> with Stifel. Please go ahead.
Speaker Change: Thanks, Good morning, everybody.
Speaker Change: I think too for me, but maybe I'll start.
Speaker Change: You talked about retiring some some frac some older Frac horsepower.
Speaker Change: Well, we knew when you think about sort of the supply demand for pressure pumping and you mentioned, it's been oversupplied right now how do you think about like the medium term sort of $25 26 type of attrition that you.
Speaker Change: You expect to see and kind of where maybe older versus new equipment fits in and is there a week kind of how you gauge what industry attrition should look like to kind of get us back closer to balance.
Speaker Change: Yes, I think overall the industry is seeing attrition.
Speaker Change: We wanted to get out there and take a leadership role in.
Speaker Change: Making these announcements and saying that look we are taking out approximately 400000 horsepower of the older equipment at the same time, we've added at the high end of the spectrum with.
Speaker Change: Newer electric equipment, and so we think that.
Speaker Change: This is prudent for us it's prudent for the industry and we expect others to do similar.
Speaker Change: I think that it depends on where you are working in the type of work Youre doing but if youre doing spot work in the Midland Basin.
Speaker Change: Not probably making it F returns two to.
Speaker Change: To actually maintain your equipment, so you're naturally.
Speaker Change: Getting it attrition at the same time from that when you are like us youre working on some of the larger programs for some of the bigger customers.
Speaker Change: We are maintaining our equipment, but it's going to be in general higher end equipment. We have used some of that tier two equipment from time to time during the year, but we didn't reinvest in the maintenance and we just consumed it as we used it and so.
Speaker Change: That's how we see it I think we will.
Speaker Change: We're in a relatively flat market, which we believe we're going to see next year with a little bit overall activity down.
Speaker Change: We're still going to use a little bit of tier two here and there in the mix of our fleets.
Speaker Change: But we won't reinvest in it and we will continue to consume it next year and I think youre going to see the same from other companies as well so I think overall.
Speaker Change: What youre seeing in the industry is near zero investment in that equipment, because were certainly not investing in it and I think it's only the smaller players that own some that would continue to invest the other thing you're seeing is a continued trend to higher amounts of horsepower per fleet, we're doing more simulcast <unk>, we're doing the occasional trial.
Speaker Change: For AG and that's consuming horsepower as well.
Speaker Change: So.
When you look at the overall industry activity.
Speaker Change: Okay.
Speaker Change: These kind of activities or mass with more of the larger pressure pumping companies doing more subtle frac and occasional triangle fracs and so I do believe that in 2025, it is going to be a tight market.
Speaker Change: We're not going to invest in the older equipment. So it's not going to be available to help.
Speaker Change: Help fill in on some of the fleets when it might've been in the past and it's going to cause a tightness from that standpoint, you've got higher amounts of horsepower per fleet with the larger programs and the primary drivers natural gas people want to use natural gas and essentially everything that we have that can burn natural gas is working so that's.
Speaker Change: That's how we see it and I do think the market tightens as we work through 2025, even in a relatively flat market once we get going again in the new year.
Speaker Change: Yes.
Speaker Change: After that I would add a little bit to that.
Speaker Change: Again, I think Andy said it right.
Speaker Change: With higher with higher with more equipment on site again also higher utilization of that equipment. I mean, we're pumping now 21 plus hours a day, so youre really gotten very efficient onsite, but at the same time.
Speaker Change: That should or it stands to reason and I can't quantify this for you today, but it stands to reason that should increase attrition and we will see that attrition at the lower end of the market on the less economic equipment, which today is the tier two diesel stuff. So we think that across the industry, we will see more of that coming out.
Speaker Change: Over the near term.
Speaker Change: Okay. Thank you that's very helpful. And then the other question I had was.
Speaker Change: Back into an extra day as I know I know, Matt and the team are working hard on kind of the integration of services at the well site and adding kind of incremental profitability, there where does that stand right now kind of across the company wide fleet. That's one thing next year done a great job of with all the different service lines they've had so it wasn't.
Speaker Change: Hydraulic fracturing it was cased hole wireline next mile logistics power solutions and moving natural gas.
Speaker Change: Managing sand contracts et cetera et cetera.
Speaker Change: As we merge Patterson UTI next year together, we were missing those pieces on the legacy Patterson UTI fleet and there were some quick wins on that coming out of the gate post acquisition merger of the businesses and then as we work through the year, we've seen more of that Theres still some more upside.
Speaker Change: On that but it's been a steady increase.
Speaker Change: Various of the <unk>.
Speaker Change: Sub segments moving on to that fleet and further integrating over the last year.
Speaker Change: Great. Thank you for the details gentlemen.
Speaker Change: Thanks.
Speaker Change: Your next question comes from the line of Keith Mackey with RBC capital markets. Please go ahead.
Speaker Change: Hi, good morning.
Keith Mackey: Maybe just wanted to start out on the free cash flow returns certainly has been a priority for Patterson and Youre going to do in a $400 million of returns this year and I know, it's early to start talking about 2025.
Speaker Change: Certainly.
Keith Mackey: You had mentioned potentially accelerating free cash flow returns and buybacks on this call a couple of times. So maybe if you could just kind of frame out how we should be thinking about 2025 is it 50% of free cash flow return is it relative to that 400 million number.
Keith Mackey: And really just at this point what is on and what is off the table.
Keith Mackey: Free cash flow return or returns will be.
Keith Mackey: Will come from free cash flow or could you potentially use debt to fund the buyback just how should we be thinking about the overall framework for next year and I know it's early.
Andy Hendricks: Hey, Keith this is Andy.
Keith Mackey: <unk>.
Andy: It is early we are kind of on the front end of our budget cycle going into next year, and so I'm not going to commit.
Andy: Certainly anything more than what we have said is our long term commitment of 50% of free cash flow.
Andy: To shareholders I can say that just in general I don't.
Andy: Don't foresee us going out and financing some kind of a buyback doing any kind of leveraged recap.
Andy: Through the debt markets were pretty again as we said in the call. We're very comfortable with our investment grade credit rating and we don't want to do anything to jeopardize that and in a leveraged recap would necessarily be kind of.
Andy: Exactly the opposite of what you'd probably want to do is that should go. So I don't really see that as being something that's applicable to us, but we'll give better guidance next quarter around what our actual goals are for 2025 once we've gone through our budget process and conferred with our board.
Andy: One of the things we've talked about is even though we see a slightly lower overall activity next year.
Andy: That's also reduce capex, so we're still going to be producing strong free cash flow next year.
Speaker Change: Yeah understood understood and Andy just on the on the integrated job I know.
Speaker Change: Thats youre getting close to finishing up the pad can you just talk maybe about some of the early lessons learned operationally and commercially you've been very clear that this isn't bundling.
Speaker Change: Clear just just curious to see how the reception of that has been from from the customers do they see it that way as well.
What I'm hearing is that the customer is very pleased with what we've done in this whole process.
Speaker Change: As with all new things there is certainly some bumps as you get started but.
Speaker Change: We've beat the curve on every well we've drilled so far on the pad and things are going really well in the overall process as we move over to completions and so overall, it's going really well I think the most interesting thing about a project like this and I think as we get into discussion for more we'll really understand what their potential is.
Speaker Change: But we would not have necessarily run all of our services for this customer.
Speaker Change: As we are doing today, if we hadn't have presented this opportunity to them.
Speaker Change: To allow us to allow our businesses to work together.
Speaker Change: Integrate some workflows in some places and then try to exceed what their plans were and bring production forward and so the fact that we're running more services and selling more products from our businesses than we would have initially to me is probably the biggest win and then of course, we're going to get a bonus for outperforming at the same time.
Speaker Change: Excited about the potential it's still early days, we're in some discussions with some other e&ps, who see what we're doing on this project and again as I've said before if you're a multinational E&P. This is probably not for you you've probably got plenty of support in your offices, where.
Speaker Change: You may not need our help across the entire spectrum, but when you think about some of the mid tier e&ps in the U S that may not be staff the same as a multinational and we offer some opportunities to bring in some extra expertise in different areas to bolster what theyre doing and help them out and help bring production forward for them.
Speaker Change: Okay. Thanks very much.
Speaker Change: Your next question comes from the line of <unk> <unk> with Goldman Sachs. Please go ahead.
Speaker Change: Hi, good morning team so.
Speaker Change: As you talk about the budget for the next year in terms of Capex I'm. Just curious about your approach to that do you have a target return that you are focused on and then back into the capex needs are.
Speaker Change: Are there certain capex company that might be that it could be mortgages, given the focus on gas powered fleets.
Speaker Change: Yes, again, we're just starting the budget process im not going to get real specific about dollar values, but I will say in general.
Speaker Change: We're pretty comfortable with operating in an environment, where we're converting about 40% of our EBITDA to free cash flow.
Speaker Change: And so if you back into that based on whatever you sort of think about your projections for 2025, you can kind of come to a number.
Speaker Change: So that's really the framework that we're operating under today and that will continue likely continue to operate under.
Speaker Change: Got it and then you mentioned in the prepared comments that pumping hours on electric fleets, who are pretty good any color you can provide on maybe what that number was for the electric fleets are an average number it is across the fleet mix today, how does that compared to last year and expectations by <unk> <unk>.
Speaker Change: Worked through efficiency improvements.
Speaker Change: Okay.
Speaker Change: Good question I don't have all those numbers in front of me I will tell you that.
Speaker Change: As we gain more experience with the electric equipment, we've increased the amount of hours that we pumped.
Speaker Change: So they're very competitive with what we've done on tier four DGB plus you get the higher substitution rates.
Speaker Change: And in general, it's working well everything that we do is pumping $20 to 21 hours a day at a minimum and Thats, just really kind of the baseline expectation for all of our.
Speaker Change: The fleets that are out there working today.
Speaker Change: The electric or certainly in that and moving up a little bit higher at the same time.
Speaker Change: Awesome. Thank you.
Speaker Change: Your next question comes from the line of Arlinda, Adam with Jpmorgan. Please go ahead.
Speaker Change: Hey, Andy I wanted to start with completions.
Speaker Change: Looking at the numbers. It does appear that <unk> has lost a bit of share in completions.
Speaker Change: Over the past few quarters I was wondering if you could just comment on your thoughts on just share how important do you think it is for P tend to get to to get a chair back and perhaps just your overall strategy during the current RFP season.
Speaker Change: Yes, I don't think we really lost any share I think that some of its customer mix and what different customers are doing with their plans, but share is certainly not our primary focus our primary focus is cash it's dollars its margin that's where our focus is.
I think youll see things play out across 2025, it will be holding our own share I think in the fourth quarter Youre just seeing some specific customer cases that we have where we've got customers that are in some cases wanting to spend less than what they had budgeted but I think with the reset you will see in 'twenty five the increasing.
Speaker Change: Activity in the first half of 'twenty five we'll show that we still have roughly the same share.
Speaker Change: Got it got it and as we think about fourth quarter a bit of an anomaly here.
Speaker Change: But as we think about the first half of next year Andy.
Speaker Change: Help us think about how many incremental fleets you expect tip.
Speaker Change: To come back in to the active fleet count for you and just general thoughts on pricing conditions, perhaps at the premium end of the market.
Speaker Change: I think that you've seen this year I'll start with the pricing <unk> seen this year, where pricing has been under pressure.
Speaker Change: We're still going through a bit of an RFP season across the industry could be a little bit more pressure as we get into 'twenty five I think that pricing will really kind of stabilized as we start off 2025, and then that those events will be behind us.
Speaker Change: In terms of fleets I think what youll see from us in overall activity level in active horsepower.
Speaker Change: Yes.
Speaker Change: It may not get back to where it was at the end of the first quarter.
Speaker Change: By the end of the first half I think we will be back to where we were at a level that kind of reflects Q2 Q3 this year.
Speaker Change: Great. That's helpful. Thanks, a lot.
Speaker Change: Okay.
Speaker Change: Your next question comes from the line of Carl said with ATB. Please go ahead.
Speaker Change: Thank you for taking my question.
Speaker Change: Andy do you have plans for additional new building next year.
Andy: Hey regard so yes, we do have plans within the Capex budget to bring in new technology.
Speaker Change: We've already brought in for instance, our natural gas Recip pumps that were working in the field today, we may expand on that we may expand on what we're doing with electric but we will be.
Speaker Change: Bringing in high Tech.
Speaker Change: The higher end of the market that burns, a 100% natural gas I think.
Speaker Change: It's not a one size fits all it's not everybody that's using electric out there. There's other solutions that can borrow 100% natural gas. So I think it's a bit of a mix.
Speaker Change: But we will continue to invest at the higher end of the fleet within the overall Capex budget, which we've said it'll be a little bit lower next year than this year.
Speaker Change: Okay, and then the 155000 horsepower that you have of E fleets.
Speaker Change: Are you running all the fleets in like E C.
Speaker Change: Yeah.
Speaker Change: On their own fleets.
Speaker Change: We're taking some of the.
Speaker Change: Equipment and putting it in the traditional conventional equipment and so you have mixed type of fleet.
Speaker Change: We have a mix of multiple configurations. So we're running full E fleets on standards Zipper, we've got fully fleets on final Frac and we've also got.
Speaker Change: Tier four DGB, where we can supplement.
Speaker Change: And have.
Speaker Change: Maybe a couple of the pumps on location at the same time.
Speaker Change: Where we do that and in some cases, we'll start a tier four DGB with some electric as we transition a customer from tier four DGB to electric as well so sometimes it's a transition sometimes it's just that we add a couple of electric.
Speaker Change: Pumps to boost the overall displacement of natural gas. So we do think for a variety of reasons, depending on location in basin and customer.
Speaker Change: Okay, and what proportion of your fleet horsepower would you characterize as tier four DGB and E fleets.
Speaker Change: Basically what we've said is 80% of what we're running today Burns natural gas and there is even in that mix. There are some tier two dual fuel in that mix.
Speaker Change: There's there's still bringing value to customers, but we don't intend to continue to invest in.
Speaker Change: Tier two.
Speaker Change: That means that it's probably around 70% of what we run is a combination of both tier four DGB and electric or 100% natural gas resource.
Speaker Change: Okay, and then just final question.
Speaker Change: Ed.
Speaker Change: Bidding margin bottoming you have about 15000 dollar margins.
Speaker Change: Guidance for Q4 is that the bottom or do you see additional.
Speaker Change: Declines as we get into next year.
Speaker Change: I'm not sure we know yet.
Speaker Change: Haven't really worked on the full budget for next year I do think that activity is relatively steady or do you think that.
Speaker Change: Helps us where we continue to.
Speaker Change: Do some technical and technology add ons on some of the rigs that are out there.
Speaker Change: So.
Speaker Change: I'll defer on that but I would say overall things are relatively steady.
Speaker Change: Okay, great. Thank you very much best of luck.
Speaker Change: Your next question comes from the line of Conor Jansen with Raymond James. Please go ahead.
Conor Jansen: Hey, guys. Thanks for taking my call.
Conor Jansen: You noted some additional synergy opportunities still remaining with the integration of next year and Altera past, what you've done to this point wondering if you could give some examples of where you could see additional uplift or what there is left to do there.
Speaker Change: Yes, so I was talking about earlier, especially on the next year and then on the completion side.
Speaker Change: We've still got some frac fleets out there that arent fully integrated necessarily with our wireline or our next mile logistics and I think there is some still some more opportunities where we will see that improve.
Speaker Change: And one of the things that goes underappreciated, it's part of the completions business, but its cementing and submitting is actually more related to drilling and that business has been growing and while it's small relative to hydraulic fracturing, it's doing really well and we think we're now one of the bigger players in submitting in the U S. As well. So overall there is some real.
Speaker Change: Good things happening in there despite what we're seeing with some of our customers slowing down in Q4, we're still seeing some some good work by the teams and how they're running the businesses.
Providing very efficient services for the customers and we think that still bodes well for us in 2025.
Speaker Change: Got it that's good to hear it seems like all terrorists doing reasonably well also considering environments, maybe some additional color on what's driving the outperformance there and how much of that is is in the U S versus international yes. Thanks for that so as I mentioned earlier and I use this word specifically there.
Speaker Change: Excellent job I mean, if you think about the market we're in with the rig count in the U S.
Speaker Change: The overall U S rig count has come down, but yet at the same time.
Speaker Change: They continue to produce continue to.
Speaker Change: So strength in what they are doing across the U S.
Speaker Change: And outside the U S. I think there's there's still potential to grow. So I think we have been gaining some share in the U S. I think we're going to gain share definitely and in the international markets just because we have so.
Speaker Change: So much more room to go there and so they're just doing a fantastic job.
Speaker Change: Great. Thanks, guys.
Speaker Change: Your next question comes from the line of Suraj.
Bank of America. Please go ahead.
Suraj: Good morning, Andy and Andy Good morning, Rob.
Speaker Change: And if you don't mind I'd stay on the completion side and leave.
With respect to the future and so you can just look back and.
Speaker Change: Started the year with close to two.
Speaker Change: The $100 million in profitability, you guys ending at 85.
Speaker Change: Can you give us some color on how much of that decline as activity slash white space. So costa adult CDC was versus true pricing, because I'm thinking pricing if it stays flat at least the calendar youth ladies in late stage products that can come back and that would give us some flavor of what the big thing.
Speaker Change: No I think theres certainly been some pricing pressure this year.
Speaker Change: We have had activity come down we've had white space in the calendar without a mix of things going on but there has been some pricing pressure.
Speaker Change: As natural gas basins, and even a little bit in the Permian with some of the <unk>.
Speaker Change: RFP bids that people who've had to go through and processes like that I do think all of that sort of stabilizes as we get going again in the first half of next year and so even though overall activity might be down a little bit I do think pricing stabilizes.
Speaker Change: Q4 is really where we're having the most.
Speaker Change: Impact because of the slowdown by some of our customers.
Speaker Change: We're going to get into a reset early next year.
Speaker Change: Okay. Okay, I got it I got it so it sounds like pricing is stabilizing right Brad.
Speaker Change: Impact to nominate you get your profitability back I think we've seen the majority of the pricing pressure this year and it stabilizes early next year.
Speaker Change: Okay, perfect I got it and then Andy Andy Smith.
Speaker Change: <unk>.
Speaker Change: Capex that we didn't have to wait a little longer to get the detail, but as a premium rent. It makes sense. Andy can you just remind us the $690 million in capex for this year.
Speaker Change: Do we split that into the various buckets across main demands across our market.
Speaker Change: Upgrades at both <unk> and then for next year should be baking some capex for that film.
Speaker Change: Uhm.
Speaker Change: Yes.
Speaker Change: Maintenance is somewhat tricky.
Speaker Change: When you start thinking about it because.
Speaker Change: Again, as we retire tier two fleets and we replace those with electric fleets.
Speaker Change: And how is that.
Speaker Change: Characterized as that growth capex or maintenance capex. So as you think about it going forward I don't think we have anything in our in our mind that would be necessarily incremental supply to the market.
There will be some items that we have traditionally called growth at our high value return items I mean these are very.
Speaker Change: Very good returns and we spend probably in the neighborhood of $40 million to $60 million on those types of items every year and then the rest of it is really maintaining kind of our sort of fleet size.
As well as enhancing the capability of our of our assets at the same time, just doing the traditional maintenance, which is really kind of the R&M side. So it's very difficult to break it into maintenance.
Speaker Change: Mhm.
Speaker Change: Either this year and we are going forward.
Speaker Change: So what I would say is where.
Speaker Change: We're looking at a Capex number next year, just first passed that is again.
Speaker Change: Below kind of where we're looking at today.
Speaker Change: We will just get better guidance on that as we get forward next quarter.
Speaker Change: Okay. Okay.
Speaker Change: And then one very quick one at the end I know somebody asked on the integrated drilling and completion contract and what's the feedback from the customers and asked the same question, but I'll ask you what's the feedback from Patterson UTI within the organization Oh, what's the biggest at one <unk>.
Speaker Change: And execution from our planning supply chain technology standpoint, what's the biggest advantage do you.
Speaker Change: I see a lot of excitement in the people the people that I've talked to you on our teams that are overseeing this project.
Speaker Change: And managing the different aspects and coordinating.
Speaker Change: Across the different business lines I see a lot of excitement in the people and that excitement is contagious and that type of excitement leads to more work and so that's exciting I'm going to go with that.
Speaker Change: Okay Fantastic that's good to hear Okay. Andy. Thank you for the answer is I send it back.
Speaker Change: Thanks.
Speaker Change: Your next question comes from the line of Greg Hollywood B.
Speaker Change: Benchmark company. Please go ahead.
Speaker Change: Hey, good morning, everybody.
Speaker Change: Morning.
Speaker Change: Hey, Andy.
Speaker Change: And you just made.
Speaker Change: Maybe just to kind of beat the completion horse again here just in the context of Bob.
Speaker Change: The conviction in the recovery in activity that you expect I know you referenced a number of different times during the call.
Speaker Change: On specifics related customers that are going to be a drag for you here in the fourth quarter.
Speaker Change: So are those I'm, assuming but just wanted to be clear that those same customers are telling you.
Speaker Change: We're going to slow down here in the fourth quarter, but yeah, you better make sure you got your start up ready to go because we're going to be kicking it and starting starting January is that is that they.
Speaker Change: Underpinning.
Speaker Change: The conviction you have on on the recovery on Frac activity going into next year.
Speaker Change: We have very very strong conviction that these customers are going to restart early in 2025.
Speaker Change: Our biggest challenge right now is balancing carrying the cost through Q4, so that we can restart and so that's the challenge with what Youre seeing in the margins for completions in the fourth quarter, but we want to make sure that we can get off on the right foot when we do restart in the first quarter because service quality is.
Speaker Change: As always Paramount important along with safety everything else so.
Speaker Change: We are carrying some extra cost in the fourth quarter, because we had very strong convictions that they are going to restart.
Speaker Change: Got you Okay. That's great and then maybe just a follow up on the drilling product side, just maybe an update on what percent of that revenue.
Speaker Change: Through through the first nine months of the year have been international and then you've got the JV, which can help but what do you think.
Speaker Change: There are a lot of conversation about international activity kind of flattening out into next year, and especially in Saudi but given that backdrop anything you guys are gaining some market share. So can you give us an update on how you think the trillium product international business good to grow relative to the market. Yes, I don't have the exact numbers in front of me, it's in the range of 30% to 40%.
Speaker Change: <unk>.
Speaker Change: Really excited about the international potential for Altera, because just because there is still relatively new and a lot of markets over there.
Speaker Change: The JV in Abu Dhabi with AD hoc drilling is.
Speaker Change: May be a part of that but I would say, it's not really factoring into the plans.
Speaker Change: Audi, who still has potential for growth.
Speaker Change: Theres other other markets, even though Saudi rig counts coming down our percent of the share is smaller compared to others. We're.
We're moving from a remanufacturing facility to a full manufacturing facility in Saudi and so we anticipate share growth over there.
Speaker Change: Getting more traction in some of the offshore international markets as well.
Speaker Change: Where the company is only really started to play over the last couple of years.
Speaker Change: So excited about the potential yes, Curt I would add to that and again you know this but.
Speaker Change: Now relative to sort of our our larger service oriented businesses completions and drilling.
Speaker Change: Where if you think about putting an asset into those markets into those international markets, you really have to be kind of clear on the economics long term.
Speaker Change: It is a pretty big commitment.
Speaker Change: Alterra and drilling products, they're selling a product and so that can be much more nimble and can really I mean, they're all over the place around the world selling drill bits in it.
Speaker Change: It is a much more it's very efficient and it's again, it's a much easier operation to run.
Speaker Change: Making inroads into the international markets and say the heavy equipment service side would be so they continue to sort of expand there.
Speaker Change: International reach.
Speaker Change: We'll continue to do so.
Speaker Change: So pretty excited about that.
Speaker Change: Got it got it I always appreciate the color. Thank you.
Speaker Change: Thanks.
Speaker Change: Your final question comes from the line of Eddie Kim with Barclays. Please go ahead.
Speaker Change: Hi, good morning.
Speaker Change: Just one question from me.
Eddie Kim: So you and others have called out and guided to a fairly steep sequential decline in the completions business.
Speaker Change #101: In the four key you mentioned normal seasonal holidays and customers trying to spend within budgets, but is there anything outside of that that you think could be at play here are customers holding off on activity because the oil price volatility.
Speaker Change #101: And waiting to get more clarity on what OPEC is going just any other factors you're seeing them.
Speaker Change #101: Plenty of conversations that might be contributing.
Speaker Change #101: What's kind of slowing down here for Q, yes.
Speaker Change #102: Yes, that's a good question and welcome to our calls so.
Speaker Change #103: What we're seeing in completions over the last couple of years has been steady increasing efficiency.
Speaker Change #103: And I think that a number of our customers have.
Speaker Change #103: Not completely baked their plans around these increasing levels of efficiency and a lot of cases, we finished programs early and customers have elected not to.
Speaker Change #103: And early on next year's budget, yet until they get clarity on what that is going to look like I really don't think it has to do with volatility in commodities I think that our our customers have been more neutral to what's going on with commodities because they've been trading within a range.
Speaker Change #103: I don't hear from many customers that they are waiting on any signal from OPEC or any other changes in commodity I really think it's really more about planning and looking at their specific budgets and in our case, we had six customers that.
Speaker Change #103: Didn't want to.
Speaker Change #103: Overspend or dip into next year's budget in some cases wanted to reduce this year's budget.
Speaker Change #103: But I think as we get into 'twenty five we will see the e&ps working with our own teams to better prepare for what that pace looks like for the year and things could be more normalized next year than they were this year.
Speaker Change #104: Got it okay, great. Thanks for that color I'll turn it back thanks.
Speaker Change #105: Thank you and that is the end of bargaining session I would like to turn the conference back to Andy Hendricks for closing remarks.
Speaker Change #104: Yeah.
Andy Hendricks: So I just wanted to thank everybody for dialing into the call today and once again I'd like to thank all of our teams across Patterson UTI for all the great work that you do for our customers and for our shareholders. Thanks a lot.
Speaker Change #106: Thank you and this concludes today's conference call. Thank you all for participating you may now disconnect.
Speaker Change #106: Yeah.
Speaker Change #106: Okay.
Speaker Change #106:
Speaker Change #106: