Patterson-UTI Energy Q4 2025 Patterson-UTI Energy Inc Earnings Call | AllMind AI Earnings | AllMind AI
Q4 2025 Patterson-UTI Energy Inc Earnings Call
Speaker #1: Thank
Speaker #1: may begin.
Michael Sabella: Thank you, operator. Good morning, and welcome to Patterson UTI's Q4 2025 Earnings Conference Call to discuss our Q4 2025 results. With me today are Andy Hendricks, President and Chief Executive Officer, and Andy Smith, Chief Financial Officer. As a reminder, statements that are made in this conference call that refer to the company's or management's plans, intentions, targets, beliefs, expectations, or predictions for the future are considered forward-looking statements. These forward-looking statements are subject to risks and uncertainties as disclosed in the company's SEC filings, which could cause the company's actual results to differ materially. The company takes no obligation to publicly update or revise any forward-looking statements. Statements made in this conference call include non-GAAP financial measures. The required reconciliation to GAAP financial measures are included on our website at patenergy.com and in the company's press release issued prior to this conference call.
Mike Sabella: Thank you, operator. Good morning, and welcome to Patterson UTI's Q4 2025 Earnings Conference Call to discuss our Q4 2025 results. With me today are Andy Hendricks, President and Chief Executive Officer, and Andy Smith, Chief Financial Officer. As a reminder, statements that are made in this conference call that refer to the company's or management's plans, intentions, targets, beliefs, expectations, or predictions for the future are considered forward-looking statements. These forward-looking statements are subject to risks and uncertainties as disclosed in the company's SEC filings, which could cause the company's actual results to differ materially. The company takes no obligation to publicly update or revise any forward-looking statements. Statements made in this conference call include non-GAAP financial measures. The required reconciliation to GAAP financial measures are included on our website at patenergy.com and in the company's press release issued prior to this conference call.I will now turn the call over to Andy Hendricks, Patterson-UTI's Chief Executive Officer.
Speaker #2: Good morning and welcome to Officer. As a reminder, statements that are made in this conference call that refer to the intentions, targets, beliefs, company's or management's plans, expectations, or predictions for the future are considered forward-looking statements.
Speaker #2: Patterson-UTI's earnings conference call to discuss our Q4 2025 results. With me today are Andy Hendricks, President and Chief Executive Officer, and Andy Smith, Chief Financial Officer.
Speaker #2: These forward-looking statements are call include non-GAAP financial measures. The required reconciliations to GAAP financial measures are included on our website at patenergy.com and in the company's press release issued prior to this conference call.
Speaker #2: I will now turn the call over to Andy Hendricks, Patterson-UTI's Chief Executive Officer.
Michael Sabella: I will now turn the call over to Andy Hendricks, Patterson-UTI's Chief Executive Officer.
Speaker #3: Thank you. And welcome to call. We closed 2025 with a strong Q4, delivering steady results through what is typically a seasonally soft our Q4 earnings conference period.
William Hendricks: Thank you, and welcome to our Q4 2025 Earnings Conference Call. We closed 2025 with a strong Q4, delivering steady results through what is typically a seasonally soft period. Our teams remained highly disciplined, with strong operational execution in the field and a focus on cost controls. We are pleased with the performance across all our businesses during 2025, particularly given the challenging commodity environment we faced throughout the year. Patterson-UTI once again demonstrated its ability to generate strong free cash flow, delivering $416 million in adjusted free cash flow in 2025. Notably, the Q4 marked our highest adjusted free cash flow quarter since we completed our strategic transformation in 2023. This achievement highlights our ability to adapt to changing market conditions and underscores the effectiveness of our teams in maximizing our potential throughout all phases in the cycle.
Andy Hendricks: Thank you, and welcome to our Q4 2025 Earnings Conference Call. We closed 2025 with a strong Q4, delivering steady results through what is typically a seasonally soft period. Our teams remained highly disciplined, with strong operational execution in the field and a focus on cost controls. We are pleased with the performance across all our businesses during 2025, particularly given the challenging commodity environment we faced throughout the year. Patterson-UTI once again demonstrated its ability to generate strong free cash flow, delivering $416 million in adjusted free cash flow in 2025. Notably, the Q4 marked our highest adjusted free cash flow quarter since we completed our strategic transformation in 2023. This achievement highlights our ability to adapt to changing market conditions and underscores the effectiveness of our teams in maximizing our potential throughout all phases in the cycle.
Speaker #3: disciplined. With strong Our teams remained highly operational execution in the field and a focus we are pleased with the performance across all our on cost controls, businesses during 2025, particularly given the challenging commodity environment we faced throughout the year.
Speaker #3: Patterson-UTI once again demonstrated its ability to generate strong free cash flow delivering $416 million in adjusted free cash flow in 2025. Notably, the Q4 marked our highest adjusted free cash flow quarter since we completed our strategic transformation in 2023.
Speaker #3: This achievement highlights our ability to adapt to changing market conditions, and underscores the effectiveness of our teams in maximizing our potential throughout We are showing greater resilience to market all phases in the cycle.
William Hendricks: We are showing greater resilience to market fluctuations as we use our technology edge to deliver operational excellence. I'd like to extend my sincere appreciation to all our employees for their hard work and dedication throughout 2025. Your efforts were instrumental in our success, and we look forward to moving Patterson-UTI forward again in 2026. The industry overcame numerous challenges in 2025, including an increase in OPEC Plus supply and ongoing macroeconomic uncertainties. Despite these pressures, the oil market has remained resilient, with crude prices today at a similar, similar level to those on our last quarterly earnings call. Although commodity prices remain unpredictable, in any scenario, at Patterson-UTI, we will remain committed to our core principles, delivering safe and efficient execution for our customers, investing capital responsibly in differentiated technologies, and maximizing returns while generating substantial adjusted free cash flow for our investors.
Andy Hendricks: We are showing greater resilience to market fluctuations as we use our technology edge to deliver operational excellence. I'd like to extend my sincere appreciation to all our employees for their hard work and dedication throughout 2025. Your efforts were instrumental in our success, and we look forward to moving Patterson-UTI forward again in 2026. The industry overcame numerous challenges in 2025, including an increase in OPEC Plus supply and ongoing macroeconomic uncertainties. Despite these pressures, the oil market has remained resilient, with crude prices today at a similar, similar level to those on our last quarterly earnings call. Although commodity prices remain unpredictable, in any scenario, at Patterson-UTI, we will remain committed to our core principles, delivering safe and efficient execution for our customers, investing capital responsibly in differentiated technologies, and maximizing returns while generating substantial adjusted free cash flow for our investors.
Speaker #3: fluctuations as we use our technology edge to deliver operational excellence. I'd like to extend my sincere appreciation to all our employees for their hard work and dedication throughout 2025.
Speaker #3: Your efforts were instrumental in our success, and we look forward to moving Patterson-UTI forward again in 2026. The industry overcame numerous challenges in 2025, including an increase in OPEC+ supply and ongoing macroeconomic uncertainties.
Speaker #3: Despite these resilient, with crude prices today at pressures, the oil market has remained a similar level to those on our last quarterly earnings call.
Speaker #3: Although commodity prices remain unpredictable, in any scenario, at Patterson-UTI, we will remain committed to our core principles: delivering safe and efficient execution for our customers, investing capital responsibly in differentiated technologies, and maximizing returns while generating substantial adjusted free cash flow for our investors.
Speaker #3: Our free cash flow profile continues to be robust, which gives us confidence to increase our quarterly dividend by 25% to $0.10 per share in the first quarter.
William Hendricks: Our free cash flow profile continues to be robust, which gives us confidence to increase our quarterly dividend by 25% to $0.10 per share in Q1. We are confident that our free cash flow will exceed our dividend commitments, providing the opportunity for additional share repurchases or other investments aimed at creating further shareholder value. From a macro perspective, uncertainties remain regarding the sustainability of US oil production at the current pace of activity. Recent data suggests that reduced drilling and completion programs in 2025 are beginning to impact production figures. The industry is likely approaching a point where it will need to decide between declining production volumes or increased drilling activity to maintain production trends.
Andy Hendricks: Our free cash flow profile continues to be robust, which gives us confidence to increase our quarterly dividend by 25% to $0.10 per share in Q1. We are confident that our free cash flow will exceed our dividend commitments, providing the opportunity for additional share repurchases or other investments aimed at creating further shareholder value. From a macro perspective, uncertainties remain regarding the sustainability of US oil production at the current pace of activity. Recent data suggests that reduced drilling and completion programs in 2025 are beginning to impact production figures. The industry is likely approaching a point where it will need to decide between declining production volumes or increased drilling activity to maintain production trends.
Speaker #3: We are confident that our free cash flow will exceed our dividend commitments, providing the opportunity for additional share repurchases or other investments aimed at creating further shareholder value.
Speaker #3: From a macro perspective, uncertainties remain regarding the sustainability of US oil production at the current pace of activity. Recent data suggest that reduced drilling and completion programs in 2025 are beginning to impact production figures.
Speaker #3: The industry is likely approaching a point where it will production volumes or increased drilling activity to maintain production may be a moderate decrease in US oil activity in the near term, we do not believe that the industry can continue operating at lower drilling levels without causing a more significant impact to production than what has been seen so far.
William Hendricks: Although there may be a moderate decrease in US oil activity in the near term, we do not believe that the industry can continue operating at lower drilling levels without causing a more significant impact to production than what has been seen so far. We remain optimistic about the long-term prospects for natural gas, and we anticipate that a multiyear increase in drilling and completion activity will be needed to meet future demand. While there have been some incremental increases in natural gas-focused activity, and natural gas prices have rebounded sharply due to winter weather demand, we expect most large customers will wait for clear commodity price signals after peak winter demand before making changes to their plans. As physical demand for natural gas for both LNG and power generation grows, we expect to see additional demand for our services in the second half of 2026.
Andy Hendricks: Although there may be a moderate decrease in US oil activity in the near term, we do not believe that the industry can continue operating at lower drilling levels without causing a more significant impact to production than what has been seen so far. We remain optimistic about the long-term prospects for natural gas, and we anticipate that a multiyear increase in drilling and completion activity will be needed to meet future demand. While there have been some incremental increases in natural gas-focused activity, and natural gas prices have rebounded sharply due to winter weather demand, we expect most large customers will wait for clear commodity price signals after peak winter demand before making changes to their plans. As physical demand for natural gas for both LNG and power generation grows, we expect to see additional demand for our services in the second half of 2026.
Speaker #3: We remain optimistic about the long-term prospects for natural gas. And we anticipate that a multi-year increase in drilling and completion activity will be needed to meet there have been some incremental increases in natural gas-focused activity, and natural gas prices have rebounded sharply due to winter weather future demand.
Speaker #3: will wait for clear commodity price signals after peak winter demand before making changes to their plans. As physical demand for natural gas for both LNG and power generation grows, we expect to see additional demand for our services in the second half of 2026.
Speaker #3: In response to the macro environment, we have reduced our gross CapEx budget by around 15% to roughly $500 million in 2026. After accounting for the expected proceeds from a typical cadence of asset sales during 2026, we continue to expect that our CapEx net of asset sales will be below $500 million this year.
William Hendricks: In response to the macro environment, we have reduced our gross CapEx budget by around 15% to roughly $500 million in 2026. After accounting for the expected proceeds from a typical cadence of asset sales during 2026, we continue to expect that our CapEx, net of asset sales, will be below $500 million this year. We have made significant progress in lowering our unit-level maintenance CapEx requirements. We continue to successfully implement new digital processes that improve preventive maintenance, migrate our asset base with new technologies, and consolidate facilities as we move further through the integration process of our businesses. Importantly, our 2026 CapEx budget reflects funding for high-return projects that will further enhance the quality of our operations and ensure we are well-positioned with new technology that supports the next leg of customer demand.
Andy Hendricks: In response to the macro environment, we have reduced our gross CapEx budget by around 15% to roughly $500 million in 2026. After accounting for the expected proceeds from a typical cadence of asset sales during 2026, we continue to expect that our CapEx, net of asset sales, will be below $500 million this year. We have made significant progress in lowering our unit-level maintenance CapEx requirements. We continue to successfully implement new digital processes that improve preventive maintenance, migrate our asset base with new technologies, and consolidate facilities as we move further through the integration process of our businesses. Importantly, our 2026 CapEx budget reflects funding for high-return projects that will further enhance the quality of our operations and ensure we are well-positioned with new technology that supports the next leg of customer demand.
Speaker #3: We have made significant progress in lowering our unit-level maintenance CapEx requirements. We continue to successfully implement new digital processes that improve preventive with new technologies, and maintenance, hydrate our asset base consolidate facilities as we move further through the integration process of our businesses.
Speaker #3: Importantly, our 2026 CapEx budget reflects funding for high-return projects that will further enhance the quality of our operations and ensure we are well positioned with new technology that supports the next leg of customer demand.
Speaker #3: While we are substantially reducing our overall CapEx budget, we fully expect to exit 2026 with a more advanced and higher-quality asset year. During Q4, our U.S. contract drilling business saw relatively steady activity and pricing compared to late Q3 levels, and the stability continued into 2026.
William Hendricks: While we are substantially reducing our overall CapEx budget, we fully expect to exit 2026 with a more advanced and higher-quality asset base than at the start of the year. During Q4, our US contract drilling business saw relatively steady activity and pricing compared to late Q3 levels, and this stability continued into 2026. Our focus remains on identifying, investing in assets, and technologies that bifurcate drilling performance and create unique value for both our customers and investors. Of note, we have seen increasing acceptance of performance-based commercial agreements, and this shift reflects growing customer interest in partnering with service providers who can enhance operational efficiency. Our ability to deploy advanced Apex rig technology that enables faster drilling of more complicated wells is resonating with our customers. We are also seeing strong results from the broader adoption of our drilling automation packages.
Andy Hendricks: While we are substantially reducing our overall CapEx budget, we fully expect to exit 2026 with a more advanced and higher-quality asset base than at the start of the year. During Q4, our US contract drilling business saw relatively steady activity and pricing compared to late Q3 levels, and this stability continued into 2026. Our focus remains on identifying, investing in assets, and technologies that bifurcate drilling performance and create unique value for both our customers and investors. Of note, we have seen increasing acceptance of performance-based commercial agreements, and this shift reflects growing customer interest in partnering with service providers who can enhance operational efficiency. Our ability to deploy advanced Apex rig technology that enables faster drilling of more complicated wells is resonating with our customers. We are also seeing strong results from the broader adoption of our drilling automation packages.
Speaker #3: Our focus remains on identifying investing in assets and technologies that bifurcate drilling performance and create unique value for both our customers and investors. Of note, we have seen increasing acceptance of performance-based commercial agreements.
Speaker #3: growing customer interest in partnering And this shift reflects with service providers who can enhance operational efficiency. Our ability to deploy advanced APEX rig technology that enables faster drilling of more complicated wells is resonating with our customers.
Speaker #3: We are also seeing strong results from the broader adoption of our drilling automation packages. Nearly all of our rigs are now equipped with our proprietary Cortex automation applications, and demand remains high as we continue to develop new software applications to further improve drilling operations.
William Hendricks: Nearly all of our rigs are now equipped with our proprietary Cortex automation applications, and demand remains high as we continue to develop new software applications to further improve drilling operations, with many of these in partnership with our customers. Looking ahead, the evolving shale landscape is characterized by more complex well designs, requiring rigs with increased load capacity that can drill deeper geological formations, as well as longer and more complex laterals into higher pressure zones. Future demand will increasingly favor differentiated rig technology, positioning Patterson-UTI and our fleet of advanced assets and technology with a distinct advantage over much of the competition. The benefit of this differentiation has already been reflected in our ability to sustain margins at higher levels than we have seen during periods of activity moderation in prior cycles.
Andy Hendricks: Nearly all of our rigs are now equipped with our proprietary Cortex automation applications, and demand remains high as we continue to develop new software applications to further improve drilling operations, with many of these in partnership with our customers. Looking ahead, the evolving shale landscape is characterized by more complex well designs, requiring rigs with increased load capacity that can drill deeper geological formations, as well as longer and more complex laterals into higher pressure zones. Future demand will increasingly favor differentiated rig technology, positioning Patterson-UTI and our fleet of advanced assets and technology with a distinct advantage over much of the competition. The benefit of this differentiation has already been reflected in our ability to sustain margins at higher levels than we have seen during periods of activity moderation in prior cycles.
Speaker #3: With many of these in partnership with our customers. shale landscape is characterized by more Looking ahead, the evolving complex well designs, requiring rigs with increased load capacity that control deeper geological formations.
Speaker #3: As well as longer and more complex laterals into higher-pressure zones. Future demand will increasingly favor differentiated rig technology, positioning Patterson-UTI and our fleet of advanced assets and technology with a distinct advantage over much of the competition.
Speaker #3: The benefit of this is differentiation has already been reflected in our ability to sustain margins at higher levels than we have seen during periods of activity moderation in prior cycles.
William Hendricks: As the market continues to favor high-quality drilling solutions, we anticipate that our advanced technology will further strengthen our position as we aim to sustain pricing and margins, as customers seek out the best available drilling contractor to meet their increasingly complex needs. In Argentina, we are excited with our recent agreement to lease 2 high-spec rigs for work in the Vaca Muerta field. The multiyear agreement is a capital efficient way for us to put idle assets in the US to work internationally. The opportunity in Argentina is one of the most promising that we see to put our idle assets to work globally, and our fleet of rigs in the US are well suited to meet the region's growing demand for unconventional drilling over the next few years. The expansion also complements our established position in drilling products, including Ulterra drill bits in Argentina.
Andy Hendricks: As the market continues to favor high-quality drilling solutions, we anticipate that our advanced technology will further strengthen our position as we aim to sustain pricing and margins, as customers seek out the best available drilling contractor to meet their increasingly complex needs. In Argentina, we are excited with our recent agreement to lease 2 high-spec rigs for work in the Vaca Muerta field. The multiyear agreement is a capital efficient way for us to put idle assets in the US to work internationally. The opportunity in Argentina is one of the most promising that we see to put our idle assets to work globally, and our fleet of rigs in the US are well suited to meet the region's growing demand for unconventional drilling over the next few years. The expansion also complements our established position in drilling products, including Ulterra drill bits in Argentina.
Speaker #3: market continues to favor high-quality As the drilling solutions, we anticipate that our advanced technology will further strengthen our sustain pricing and margins as customers position as we aim to seek out the best available drilling contract to meet their increasingly complex needs.
Speaker #3: High-spec rigs for work in the Vaca Muerta field. The multi-year agreement is a capital-efficient way for us to put idle assets in the US to work internationally. In Argentina, we are excited with this opportunity.
Speaker #3: The opportunity in Argentina is one of the most promising that we see to put our idle assets to work globally, and meet the region's growing demand for our fleet of rigs in the US are well-suited to unconventional drilling over the next few complements our established position in drilling products, including Altera drill bits in Argentina.
Speaker #3: We believe that further planned increases in drilling activity in Argentina will reduce the available supply in the US. Our completion years: Q4. Segment adjusted EBITDA for the second half of the year was higher than the first half, reflecting the quality of our operations and the steps we have taken over the past year to add new technology to our portfolio.
William Hendricks: We believe that further planned increases in drilling activity in Argentina will reduce the available supply in the US. Our Completion Services segment delivered strong results in the fourth quarter. Segment Adjusted EBITDA for the second half of the year was higher than the first half, reflecting the quality of our operations and the steps we have taken over the past year to add new technology to our portfolio, streamline operations through our digital platform, and improve our cost structure. Our team effectively managed holiday downtime across several of our larger fleets, successfully securing work to maintain high utilization. Pricing and activity remained steady compared to the third quarter. Our frac assets remained highly utilized in the first quarter, with almost 2.5 million horsepower either deployed in the field or in normal maintenance cycles.
Andy Hendricks: We believe that further planned increases in drilling activity in Argentina will reduce the available supply in the US. Our Completion Services segment delivered strong results in the fourth quarter. Segment Adjusted EBITDA for the second half of the year was higher than the first half, reflecting the quality of our operations and the steps we have taken over the past year to add new technology to our portfolio, streamline operations through our digital platform, and improve our cost structure. Our team effectively managed holiday downtime across several of our larger fleets, successfully securing work to maintain high utilization. Pricing and activity remained steady compared to the third quarter. Our frac assets remained highly utilized in the first quarter, with almost 2.5 million horsepower either deployed in the field or in normal maintenance cycles.
Speaker #3: Streamline operations through our digital platform and improve our cost structure. Our team effectively managed holiday downtime across several of our larger fleets, successfully securing work to maintain high utilization.
Speaker #3: Pricing and activity remain steady compared to the third quarter. Our FRAC assets remain highly utilized in the first quarter, with almost $2.5 million horsepower either deployed in the field or in normal maintenance cycles.
Speaker #3: We have very little spare capacity, and our idle horsepower consists entirely of older diesel equipment that is not part of our long-term strategy. As we direct our capital towards high-grading our asset base with additional Emerald 100% natural gas equipment, we are likely to continue to idle lower-quality diesel assets and focus on the premium market.
William Hendricks: We have very little spare capacity, and our idle horsepower consists entirely of older diesel equipment that is not part of our long-term strategy. As we direct our capital towards high-grading our asset base with additional Emerald, 100% natural gas equipment, we are likely to have fewer fleets in operation as we continue to idle lower quality diesel assets and focus on the premium market. Our equipment that can utilize natural gas as a fuel is fully utilized. Our asset base will continue to reflect this high-grading strategy. Our nameplate horsepower totaled 2.7 million at the close of 2025, which is down more than 600,000 horsepower from 2 years, and we are likely to see a further reduction this year.
Andy Hendricks: We have very little spare capacity, and our idle horsepower consists entirely of older diesel equipment that is not part of our long-term strategy. As we direct our capital towards high-grading our asset base with additional Emerald, 100% natural gas equipment, we are likely to have fewer fleets in operation as we continue to idle lower quality diesel assets and focus on the premium market. Our equipment that can utilize natural gas as a fuel is fully utilized. Our asset base will continue to reflect this high-grading strategy. Our nameplate horsepower totaled 2.7 million at the close of 2025, which is down more than 600,000 horsepower from 2 years, and we are likely to see a further reduction this year.
Speaker #3: Our equipment that can utilize natural gas as a fuel is fully utilized. Our asset base will continue to reflect this high-grading strategy. Our nameplate horsepower 2025, which is down more totaled $2.7 million at the close of years.
Speaker #3: And we are likely to see a further reduction this year. Within our completion services segment, we continue to see growth opportunities in high-end natural gas-powered FRAC equipment, and our industry-leading and proprietary digital completions platform, which we call EOS.
William Hendricks: Within our Completion Services segment, we continue to see growth opportunities in high-end natural gas-powered frac equipment and our industry-leading and proprietary digital completions platform, which we call EOS. Our Emerald 100% natural gas-powered footprint will grow again in 2026, and by the end of the year, we expect that more than 85% of our assets will be capable of using natural gas as a fuel in some capacity. We believe our asset quality is among the best in the industry, and the strong demand and returns for our high-end equipment position us to maintain resilient margins across our higher technology assets. We will reduce capacity of our older assets, and we believe the industry is also doing the same. Although public estimates of US industry fleet count show the decline, the total horsepower deployed has not declined and has remained roughly consistent.
Andy Hendricks: Within our Completion Services segment, we continue to see growth opportunities in high-end natural gas-powered frac equipment and our industry-leading and proprietary digital completions platform, which we call EOS. Our Emerald 100% natural gas-powered footprint will grow again in 2026, and by the end of the year, we expect that more than 85% of our assets will be capable of using natural gas as a fuel in some capacity. We believe our asset quality is among the best in the industry, and the strong demand and returns for our high-end equipment position us to maintain resilient margins across our higher technology assets. We will reduce capacity of our older assets, and we believe the industry is also doing the same. Although public estimates of US industry fleet count show the decline, the total horsepower deployed has not declined and has remained roughly consistent.
Speaker #3: Our Emerald 100% natural gas-powered footprint will grow again in 2026, and by the end of the year, we expect that more than 85% of our assets will be capable of using natural gas as a fuel in some capacity.
Speaker #3: We believe our asset quality is among the best in the industry, and the strong demand and returns for our high-end equipment position us to maintain resilient margins across our higher technology assets.
Speaker #3: We will reduce capacity of our older assets, and we believe the industry is also doing the same. Although public estimates of U.S. industry fleet count show a decline, the total horsepower deployed has not declined, and has remained roughly consistent.
Speaker #3: The FRAC industry is well site. A trend that we believe is industry data on the number of active fleets, resulting in the FRAC fleet count becoming less of a reliable metric to determine industry completion activity.
William Hendricks: The frac industry is evolving towards larger fleets at the well site, a trend that we believe is being overlooked by public industry data on the number of active fleets, resulting in the frac fleet count becoming less of a reliable metric to determine industry completion activity. At the same time, the significant increase in pumping hours per day over the past several years has likely run its course. Some providers are encountering technical limitations on most of their fleets, with our average frac fleet now pumping over 22 hours per day. With continuous pumping, our team has been leaders in executing on the growing trend to achieve 24-hour operations. But continuous pumping fleets require significantly more equipment on location relative to a more normal operation, which increases the cost of continuous pumping and further restricts supply.
Andy Hendricks: The frac industry is evolving towards larger fleets at the well site, a trend that we believe is being overlooked by public industry data on the number of active fleets, resulting in the frac fleet count becoming less of a reliable metric to determine industry completion activity. At the same time, the significant increase in pumping hours per day over the past several years has likely run its course. Some providers are encountering technical limitations on most of their fleets, with our average frac fleet now pumping over 22 hours per day. With continuous pumping, our team has been leaders in executing on the growing trend to achieve 24-hour operations. But continuous pumping fleets require significantly more equipment on location relative to a more normal operation, which increases the cost of continuous pumping and further restricts supply.
Speaker #3: At the same time, the significant increase in years has likely run its course. Some providers are encountering technical limitations on most of their fleets, with our average FRAC fleet now pumping over 22 hours per day.
Speaker #3: With continuous pumping, our team has been leaders in executing on the growing trend to achieve 24-hour operations. But continuous pumping fleets require significantly more equipment on location relative to a more normal operation.
Speaker #3: Which increases the cost of continuous pumping and further restricts supply. We have successfully executed several continuous pumping jobs to date, as customers are currently evaluating whether the incremental increase in uptime justifies the additional cost.
William Hendricks: We have successfully executed several continuous pumping jobs to date, as customers are currently evaluating whether the incremental increase in uptime justifies the additional cost. During Q4, we launched our proprietary EOS Completions digital platform. EOS connects our customers directly with their live field data, allowing the customer, and our completions teams to improve real-time decision making on the same platform. Our customers can eliminate the need for multiple third-party software platforms in their data flow and improve their overall data quality with a direct link to our digital performance center. The EOS platform is hardware agnostic, allowing our completions data, and also third-party data sets to be delivered to customers on the same platform with no delays. The EOS platform includes our advanced Vertex automated frac controls, which to date have been deployed across most of our active fleets and regardless of frac power type.
Andy Hendricks: We have successfully executed several continuous pumping jobs to date, as customers are currently evaluating whether the incremental increase in uptime justifies the additional cost. During Q4, we launched our proprietary EOS Completions digital platform. EOS connects our customers directly with their live field data, allowing the customer, and our completions teams to improve real-time decision making on the same platform. Our customers can eliminate the need for multiple third-party software platforms in their data flow and improve their overall data quality with a direct link to our digital performance center. The EOS platform is hardware agnostic, allowing our completions data, and also third-party data sets to be delivered to customers on the same platform with no delays. The EOS platform includes our advanced Vertex automated frac controls, which to date have been deployed across most of our active fleets and regardless of frac power type.
Speaker #3: During the fourth quarter, we launched our proprietary EOS completions digital platform. EOS connects our customers directly with their live field data, allowing the customer and our completions teams to improve real-time decision-making on the same platform.
Speaker #3: Our customers can eliminate the need for multiple third-party software platforms in their data flow and improve their overall data quality with a direct link to our digital performance center.
Speaker #3: The EOS platform is hardware-agnostic, allowing our completions data and also third-party data sets to be delivered to customers on the same platform with no delays.
Speaker #3: The EOS platform includes our advanced Vertex automated FRAC controls, which to date have been deployed across most of our active fleets, and regardless of FRAC power type.
Speaker #3: EOS also supports our other services such as wireline, pump down, natural gas delivery, and profit logistics. This takes our completions segment to the ultimate goal of push-button FRAC and soon with closed-loop decision-making, which will deliver more consistent completions to our customers.
William Hendricks: EOS also supports our other services, such as wireline, pump down, natural gas delivery, and proppant logistics. This takes our completion segment to the ultimate goal of push button frac, and soon with closed loop decision making, which will deliver more consistent completions to our customers… and over time and lower our operating and equipment maintenance costs. We have revenue-generating agreements in place now and are seeing increased customer interest for deploying this platform. Our drilling product segment delivered another strong quarter in North America. Revenue per industry rig remained close to company record levels in both the US and Canada, underscoring our robust market position in drill bits. Additionally, we are having continued success with new downhole tool product innovations, helping us to maintain relative strength in these markets. Internationally, revenue experienced a slight decline from Q3, primarily on lower than expected revenue in the Middle East.
Andy Hendricks: EOS also supports our other services, such as wireline, pump down, natural gas delivery, and proppant logistics. This takes our completion segment to the ultimate goal of push button frac, and soon with closed loop decision making, which will deliver more consistent completions to our customers… and over time and lower our operating and equipment maintenance costs. We have revenue-generating agreements in place now and are seeing increased customer interest for deploying this platform. Our drilling product segment delivered another strong quarter in North America. Revenue per industry rig remained close to company record levels in both the US and Canada, underscoring our robust market position in drill bits. Additionally, we are having continued success with new downhole tool product innovations, helping us to maintain relative strength in these markets. Internationally, revenue experienced a slight decline from Q3, primarily on lower than expected revenue in the Middle East.
Speaker #3: And operating and equipment maintenance costs. We have revenue-generating agreements in place now and are seeing increased customer interest for deploying this platform. Our drilling product segment over time, and lower our delivered another strong quarter in North America.
Speaker #3: Revenue per industry rig remained close to company record levels in both the US and Canada. Underscoring our robust market position in drill bits. with new downhole tool product Additionally, we are having continued success innovations helping us to markets.
Speaker #3: Internationally, revenue experienced a slight decline from the third quarter, primarily on lower-than-expected revenue in the Middle East. However, maintaining relative strength, we achieved revenue growth in several important regions, including Latin America and Asia Pacific.
William Hendricks: However, we achieved revenue growth in several important regions, including Latin America, and Asia Pacific. Looking ahead, we remain optimistic that the international outlook for our drilling products segment will improve as we progress through 2026. We have opened a new manufacturing facility in Saudi Arabia and are now manufacturing drill bits in country, which should give us an advantage as growth resumes in the Middle East. Patterson-UTI continues to look to extend our leadership position while the US shale industry undergoes significant changes. The company's operational excellence within both the drilling and completion segments has provided a competitive advantage, enabling effective navigation through the current commodity environment. Target investments across businesses will remain a central focus. These strategic efforts are evident in the company's ability to generate robust free cash flow and maintain relatively resilient margins, even through periods of activity moderation.
Andy Hendricks: However, we achieved revenue growth in several important regions, including Latin America, and Asia Pacific. Looking ahead, we remain optimistic that the international outlook for our drilling products segment will improve as we progress through 2026. We have opened a new manufacturing facility in Saudi Arabia and are now manufacturing drill bits in country, which should give us an advantage as growth resumes in the Middle East. Patterson-UTI continues to look to extend our leadership position while the US shale industry undergoes significant changes. The company's operational excellence within both the drilling and completion segments has provided a competitive advantage, enabling effective navigation through the current commodity environment. Target investments across businesses will remain a central focus. These strategic efforts are evident in the company's ability to generate robust free cash flow and maintain relatively resilient margins, even through periods of activity moderation.
Speaker #3: Looking ahead, we remain optimistic that the international outlook for our drilling product segment will improve as we progress through 2026. manufacturing facility in Saudi We have opened a new Arabia and are now manufacturing drill bits in-country, which should give us an advantage as East.
Speaker #3: leadership position while the US shale industry undergoes significant growth resumes in the Middle changes. The company's operational excellence within both the drilling and completions segments has provided a competitive advantage.
Speaker #3: Enabling effective navigation through the current commodity environment. Target investments across businesses will remain a central focus. These strategic efforts are evident in the company's ability to generate robust free cash flow and maintain relatively resilient margins.
Speaker #3: Even through periods of activity moderation. Even with ongoing commodity volatility, we are well-positioned to deploy capital in ways that add value for shareholders, including through additional shareholder returns.
William Hendricks: Even with ongoing commodity volatility, we are well positioned to deploy capital in ways that add value for shareholders, including through additional shareholder returns. We will continue to be flexible with capital deployment and evaluate a mix of dividends, buybacks, and other potential growth opportunities. I'll now turn it over to Andy Smith, who will review the financial results for the quarter.
Andy Hendricks: Even with ongoing commodity volatility, we are well positioned to deploy capital in ways that add value for shareholders, including through additional shareholder returns. We will continue to be flexible with capital deployment and evaluate a mix of dividends, buybacks, and other potential growth opportunities. I'll now turn it over to Andy Smith, who will review the financial results for the quarter.
Speaker #3: We will continue to be flexible with capital deployment and evaluate a mix of dividends, buybacks, and other potential growth opportunities. I'll now turn it over to Andy Smith, who will review the financial results for the quarter.
Speaker #2: Thanks, Andy. Total reported revenue for the quarter was $1,151,000,000. We reported a net loss attributable to common shareholders of $9,000,000 or 2 cents per share.
Andrew Smith: Thanks, Andy. Total reported revenue for the quarter was $1,151 million. We reported a net loss attributable to common shareholders of $9 million or $0.02 per share. Adjusted EBITDA for the quarter totaled $221 million. Our weighted average share count was 379 million shares during Q4. During 2025, we once again showed the cash generation potential of our company, with adjusted free cash flow totaling $416 million for the year. As expected, the fourth quarter was the strongest cash-generating quarter of the year by a wide margin.
Andy Smith: Thanks, Andy. Total reported revenue for the quarter was $1,151 million. We reported a net loss attributable to common shareholders of $9 million or $0.02 per share. Adjusted EBITDA for the quarter totaled $221 million. Our weighted average share count was 379 million shares during Q4. During 2025, we once again showed the cash generation potential of our company, with adjusted free cash flow totaling $416 million for the year. As expected, the fourth quarter was the strongest cash-generating quarter of the year by a wide margin.
Speaker #2: Adjusted EBITDA for the quarter totaled $221 million. Our weighted average share count was 379 million shares during Q4. During cash generation potential of our company, with adjusted free cash flow totaling $416 million for 2025, we once again showed the year.
Speaker #2: As expected, the fourth quarter was the strongest cash-generating quarter of the year by a wide margin. It is important to remember that given the timing of some working significant customer prepayments that we capitalized items, including typically receive in the fourth quarter for work to be performed during the first half of the following year, it is far more meaningful to analyze our free cash flow on a full year basis as the quarterly results can show greater variability.
Andrew Smith: It is important to remember that given the timing of some working capital items, including significant customer prepayments that we typically receive in Q4 for work to be performed during the first half of the following year, it is far more meaningful to analyze our free cash flow on a full year basis, as the quarterly results can show greater variability. For year-over-year comparisons, the customer prepayments we received in Q4 of 2025 were roughly $15 million higher than those we received in Q4 of 2024. Before we get into the segment discussion and the outlook, I want to give an update regarding the impact from severe winter weather that has already occurred during Q1.
Andy Smith: It is important to remember that given the timing of some working capital items, including significant customer prepayments that we typically receive in Q4 for work to be performed during the first half of the following year, it is far more meaningful to analyze our free cash flow on a full year basis, as the quarterly results can show greater variability. For year-over-year comparisons, the customer prepayments we received in Q4 of 2025 were roughly $15 million higher than those we received in Q4 of 2024. Before we get into the segment discussion and the outlook, I want to give an update regarding the impact from severe winter weather that has already occurred during Q1.
Speaker #2: For year-over-year comparisons, the company customer prepayments we received in the fourth quarter of 2025 were roughly $15,000,000 higher than those we received in the fourth quarter of 2024.
Speaker #2: Before we get into the segment discussion and the outlook, I want to give winter weather that has already occurred during the first quarter. The an update regarding the impact from severe January 2026 winter storm disrupted large portions of our operations for several days.
Andrew Smith: The January 2026 winter storm disrupted large portions of our operations for several days, and we believe the full impact of the disruption will have a negative impact on our Q1 adjusted gross profit, particularly in our completion services segment. The estimated impact of this event is included in the quarterly guidance numbers we will discuss. In our drilling services segment, Q4 revenue was $361 million, and adjusted gross profit totaled $132 million. In US contract drilling, we totaled 8,596 operating days for an average operating rig count of 93 rigs. Our successful cost reduction measures mostly offset the revenue decrease during the quarter. For Q1 in drilling services, we expect our average rig count to be in the low to mid-90s.
Andy Smith: The January 2026 winter storm disrupted large portions of our operations for several days, and we believe the full impact of the disruption will have a negative impact on our Q1 adjusted gross profit, particularly in our completion services segment. The estimated impact of this event is included in the quarterly guidance numbers we will discuss. In our drilling services segment, Q4 revenue was $361 million, and adjusted gross profit totaled $132 million. In US contract drilling, we totaled 8,596 operating days for an average operating rig count of 93 rigs. Our successful cost reduction measures mostly offset the revenue decrease during the quarter. For Q1 in drilling services, we expect our average rig count to be in the low to mid-90s.
Speaker #2: And we believe the full impact of the disruption will have a negative impact on our first quarter adjusted gross profit, particularly in our completion services segment.
Speaker #2: The estimated impact of this event is included in the quarterly guidance numbers we will discuss. In our drilling services segment, the fourth quarter revenue was $361,000,000 and adjusted gross profit totaled drilling, we totaled $8,596 operating days for an average operating rig count of 93 rigs.
Speaker #2: Our successful cost reduction measures mostly offset the revenue decrease during the quarter. For the first quarter, in drilling services, we expect our average rig count to be in the low to mid-90s.
Speaker #2: We expect adjusted gross profit within the drilling services from the fourth segment will decline by less than 5% quarter. Revenue for the fourth quarter in our completion services segment totaled $702,000,000 when adjusted gross profit of $111,000,000.
Andrew Smith: We expect Adjusted Gross Profit within the Drilling Services segment will decline by less than 5% from Q4. Revenue for Q4 in our Completion Services segment totaled $702 million, with an Adjusted Gross Profit of $111 million. Activity and pricing were mostly steady compared to Q3, with minimal seasonal downtime. For Q1, we expect Completion Services Adjusted Gross Profit to be approximately $95 million, with slightly lower activity given the impact of the Q1 winter weather. Q4 Drilling Products revenue totaled $84 million, with an Adjusted Gross Profit of $34 million. Revenue per industry rig in the US remained near company record levels.
Andy Smith: We expect Adjusted Gross Profit within the Drilling Services segment will decline by less than 5% from Q4. Revenue for Q4 in our Completion Services segment totaled $702 million, with an Adjusted Gross Profit of $111 million. Activity and pricing were mostly steady compared to Q3, with minimal seasonal downtime. For Q1, we expect Completion Services Adjusted Gross Profit to be approximately $95 million, with slightly lower activity given the impact of the Q1 winter weather. Q4 Drilling Products revenue totaled $84 million, with an Adjusted Gross Profit of $34 million. Revenue per industry rig in the US remained near company record levels.
Speaker #2: Activity and pricing were mostly steady compared to the third downtime. For the first quarter, we expect completion services adjusted gross profit to be approximately $95,000,000.
Speaker #2: With slightly lower activity given the impact of the first quarter winter weather. Fourth quarter drilling products revenue totaled $84,000,000 when adjusted gross profit of $34,000,000.
Speaker #2: Revenue per industry rig in the US remained near company record levels. We saw a decrease in revenue from our international operations mostly from lower-than-expected sales in the Middle East, although we did see revenue growth in several Pacific.
Andrew Smith: We saw a decrease in revenue from our international operations, mostly from lower than expected sales in the Middle East, although we did see revenue growth in several markets, including Latin America and Asia Pacific. For Q1, we expect drilling products Adjusted Gross Profit to improve slightly, with slightly lower revenue in the US, offset by an increase in activity and revenue from our international business. As we move through 2026, we expect to see an improvement in international revenue in the drilling products segment as activity improves, primarily in Saudi Arabia. We also expect to see growth in downhole tools and new product development. Other revenue totaled $5 million for the quarter, with $1 million in Adjusted Gross Profit. We expect other Adjusted Gross Profit in Q1 to be steady compared to Q4....
Andy Smith: We saw a decrease in revenue from our international operations, mostly from lower than expected sales in the Middle East, although we did see revenue growth in several markets, including Latin America and Asia Pacific. For Q1, we expect drilling products Adjusted Gross Profit to improve slightly, with slightly lower revenue in the US, offset by an increase in activity and revenue from our international business. As we move through 2026, we expect to see an improvement in international revenue in the drilling products segment as activity improves, primarily in Saudi Arabia. We also expect to see growth in downhole tools and new product development. Other revenue totaled $5 million for the quarter, with $1 million in Adjusted Gross Profit. We expect other Adjusted Gross Profit in Q1 to be steady compared to Q4....
Speaker #2: For the first quarter, we expect drilling products adjusted gross profit to improve slightly, with slightly lower revenue in the US offset by an increase in activity and revenue from our international business.
Speaker #2: As we move into 2026, we expect to see an improvement in international revenue in the drilling products segment as activity improves. Primarily, we expect to see growth in downhole tools and new product development.
Speaker #2: Other revenue totaled $5,000,000 for the quarter with $1,000,000 in adjusted gross profit. We expect other adjusted gross profit in the first quarter to be steady compared to the fourth quarter.
Speaker #2: Selling, general and administrative expenses in the fourth quarter were $62 million. For Q1, we expect SG&A expenses will be approximately $65 million. On a consolidated basis for the fourth quarter, depreciation, depletion, amortization and impairment expense totaled $221 million.
Andrew Smith: Selling, general, and administrative expenses in the fourth quarter were $62 million. For Q1, we expect SG&A expenses will be approximately $65 million. On a consolidated basis for the fourth quarter, depreciation, depletion, amortization, and impairment expense totaled $221 million, and for the first quarter, we expect it will be approximately $225 million. During Q4, total CapEx was $139 million, including $61 million in drilling services, $59 million in completion services, $15 million in drilling products, and $4 million in other and corporate. For 2026, we expect gross CapEx to approximate $500 million and to be below $500 million net of asset sales.
Andy Smith: Selling, general, and administrative expenses in the fourth quarter were $62 million. For Q1, we expect SG&A expenses will be approximately $65 million. On a consolidated basis for the fourth quarter, depreciation, depletion, amortization, and impairment expense totaled $221 million, and for the first quarter, we expect it will be approximately $225 million. During Q4, total CapEx was $139 million, including $61 million in drilling services, $59 million in completion services, $15 million in drilling products, and $4 million in other and corporate. For 2026, we expect gross CapEx to approximate $500 million and to be below $500 million net of asset sales.
Speaker #2: And for the first quarter, we expect it will be approximately $225,000,000. During Q4, total CapEx was $139,000,000, including $61,000,000 in drilling services, $59,000,000 in completion services, $15,000,000 in drilling products, and $4,000,000 in other incorporate.
Speaker #2: For 2026, we expect gross CapEx to approximate $500,000,000 and to be below $500,000,000 net of asset sales. We expect CapEx will be weighted towards the first half of the year as we bring in new technologies into both the drilling and completion services businesses.
Andrew Smith: We expect CapEx will be weighted towards the first half of the year as we bring in new technologies into both the drilling and completion services businesses. We closed Q4 with $421 million in cash on hand, and we did not have anything drawn on our $500 million revolving credit facility. We do not have any senior note maturities until 2028. During 2025, we returned $192 million to shareholders through dividends and share repurchases. Since the start of 2024, we have returned roughly 2/3 of our adjusted free cash flow to shareholders for dividends and buybacks, and we remain committed to returning at least 50% of our adjusted free cash flow to shareholders.
Andy Smith: We expect CapEx will be weighted towards the first half of the year as we bring in new technologies into both the drilling and completion services businesses. We closed Q4 with $421 million in cash on hand, and we did not have anything drawn on our $500 million revolving credit facility. We do not have any senior note maturities until 2028. During 2025, we returned $192 million to shareholders through dividends and share repurchases. Since the start of 2024, we have returned roughly 2/3 of our adjusted free cash flow to shareholders for dividends and buybacks, and we remain committed to returning at least 50% of our adjusted free cash flow to shareholders.
Speaker #2: We closed Q4 with $421,000,000 in cash on hand, and we did not have anything drawn on our $500,000,000 revolving credit facility. We do not have any senior note maturities until 2028.
Speaker #2: During 2025, we returned $192,000,000 to shareholders through dividends and share repurchases. Since the start of 2024, we have returned roughly two-thirds of our adjusted free cash flow to shareholders through dividends and buybacks, and we remain committed to returning at least 50% of our adjusted free cash flow to shareholders.
Andrew Smith: Our board has approved a 25% increase in our quarterly dividend to $0.10 per share, payable on 16 March to holders of record as of 2 March. I'll now turn it back to Andy Hendricks for closing remarks.
Andy Smith: Our board has approved a 25% increase in our quarterly dividend to $0.10 per share, payable on 16 March to holders of record as of 2 March. I'll now turn it back to Andy Hendricks for closing remarks.
Speaker #2: has approved a $25% increase in Our board our quarterly dividend to $0.10 per share payable on March 16 to holders of record as of March 2.
Speaker #2: I'll now turn it back to Andy Hendricks for closing remarks. Thanks, Andy. I want to close the call with some comments on our company and the industry.
William Hendricks: Thanks, Andy. I want to close the call with some comments on our company and the industry. I'm very pleased with how our segments performed in Q4, where we were able to show improvements in controlling costs and keeping them in line with the activity changes. This is a testament to focusing on what we do best, providing products and services to efficiently drill and complete wells. The result is that we were able to generate strong free cash flow to close out 2025. As well, I'm pleased to see this stable activity continue into Q1 2026. The outlook for 2026 has the challenge of some commodity uncertainty. With oil prices trading near $60 per barrel, my expectation is that activity in oil basins remains relatively steady from where we are today.
Andy Hendricks: Thanks, Andy. I want to close the call with some comments on our company and the industry. I'm very pleased with how our segments performed in Q4, where we were able to show improvements in controlling costs and keeping them in line with the activity changes. This is a testament to focusing on what we do best, providing products and services to efficiently drill and complete wells. The result is that we were able to generate strong free cash flow to close out 2025. As well, I'm pleased to see this stable activity continue into Q1 2026. The outlook for 2026 has the challenge of some commodity uncertainty. With oil prices trading near $60 per barrel, my expectation is that activity in oil basins remains relatively steady from where we are today.
Speaker #2: how our segments performed in the fourth quarter, I'm very pleased with where we were able to show improvements in controlling costs and keeping them in line with the activity changes.
Speaker #2: This is a testament to focusing on what we do best: providing products and services to efficiently drill and complete wells. The result is that we were able to generate strong free cash flow to close out 2025.
Speaker #2: As well, I'm pleased to see the stable activity continue into the first quarter of 2026. The outlook for 2026 has the challenge of uncertainty. With oil prices trading near the commodity $60 per barrel, my expectation is that activity in oil basins remains relatively steady from where we are today.
Speaker #2: Oil markets have remained resilient, looking ahead to continuing economic growth along with some geopolitical unrest. Gas markets remain steady and have the potential for some activity upside later in the year.
William Hendricks: Oil markets have remained resilient, looking ahead to continuing economic growth along with some geopolitical unrest. Gas markets remain steady and have the potential for some activity upside later in the year. It's early to predict how 2026 will play out, but I'm encouraged by our current activity levels so far in Q1. We continue to invest in new technology in both drilling and completions, where we are seeing strong returns on our capital investments. In drilling services, we are being asked for new Cortex automation applications by our customers, along with upgrades to our Apex rig structures to drill deeper geological horizons and longer laterals. In completion services, we will continue to add new Emerald 100 percent natural gas fuel technology to our fleets and continue the rollout of the EOS platform, which includes the Vertex automated frac system.
Andy Hendricks: Oil markets have remained resilient, looking ahead to continuing economic growth along with some geopolitical unrest. Gas markets remain steady and have the potential for some activity upside later in the year. It's early to predict how 2026 will play out, but I'm encouraged by our current activity levels so far in Q1. We continue to invest in new technology in both drilling and completions, where we are seeing strong returns on our capital investments. In drilling services, we are being asked for new Cortex automation applications by our customers, along with upgrades to our Apex rig structures to drill deeper geological horizons and longer laterals. In completion services, we will continue to add new Emerald 100 percent natural gas fuel technology to our fleets and continue the rollout of the EOS platform, which includes the Vertex automated frac system.
Speaker #2: It's early to predict how 2026 will play out, but I'm encouraged by our current activity levels so far in the first quarter. We continue to invest in new technology in both drilling and completions, where we are seeing strong returns on our capital investments.
Speaker #2: In drilling services, we are being asked for new cortex automation applications by our customers, along with upgrades to our APEX rig structures to drill deeper geological horizons and longer laterals.
Speaker #2: In completion services, we will continue to fleets and continue the rollout of the EOS platform, which includes the Vertex automated frac gas fuel technology to our system.
Speaker #2: In Saudi Arabia, Altera manufactured their first drill bit in-country in December, and this new manufacturing capacity combined with our strong performance in the region and the planned increase in drilling in Saudi Arabia gives our drill bit business some international upside this year.
William Hendricks: In Saudi Arabia, Ulterra manufactured their first drill bit in country in December, and this new manufacturing capacity, combined with our strong performance in the region and the planned increase in drilling in Saudi Arabia, gives our drill bit business some international upside this year. These technology and manufacturing investments allow us to continue to differentiate ourselves versus our competitors and maximize the margins we are able to earn. We're doing all this while reducing our overall capital expenditures in 2026. We remain focused on generating strong free cash flow for our shareholders, and over the last year, we have a higher level of cash than what is currently required to sustain our business. Given our cash generation potential, I am pleased that our board has approved a 25% increase in our quarterly dividend as part of our overall commitment to return cash to shareholders.
Andy Hendricks: In Saudi Arabia, Ulterra manufactured their first drill bit in country in December, and this new manufacturing capacity, combined with our strong performance in the region and the planned increase in drilling in Saudi Arabia, gives our drill bit business some international upside this year. These technology and manufacturing investments allow us to continue to differentiate ourselves versus our competitors and maximize the margins we are able to earn. We're doing all this while reducing our overall capital expenditures in 2026. We remain focused on generating strong free cash flow for our shareholders, and over the last year, we have a higher level of cash than what is currently required to sustain our business. Given our cash generation potential, I am pleased that our board has approved a 25% increase in our quarterly dividend as part of our overall commitment to return cash to shareholders.
Speaker #2: These technology and manufacturing differentiate ourselves versus our competitors and maximize the margins we were able to earn. And we're doing all this while reducing our overall capital expenditures in 2026.
Speaker #2: We remain focused on generating strong free cash flow for our shareholders, and over the last year, we have a higher level of cash than what is currently required to sustain our business.
Speaker #2: Given our cash generation potential, I am pleased that our board has approved a 25% increase in our quarterly dividend as part of our overall commitment to return cash to shareholders.
Speaker #2: With our current cash position and repurchase shares in the market where it makes after capital expenditures, we will continue to sense and also continue to look for growth opportunities.
William Hendricks: With our current cash position and after capital expenditures, we will continue to repurchase shares in the market where it makes sense and also continue to look for growth opportunities. Once again, I'd like to thank the men and women, men and women of Patterson-UTI Energy for their outstanding performance in 2025 and for helping to responsibly provide energy to the world. Thank you for joining us today for our Q4 2025 earnings call. We'd now like to open the lines for Q&A.
Andy Hendricks: With our current cash position and after capital expenditures, we will continue to repurchase shares in the market where it makes sense and also continue to look for growth opportunities. Once again, I'd like to thank the men and women, men and women of Patterson-UTI Energy for their outstanding performance in 2025 and for helping to responsibly provide energy to the world. Thank you for joining us today for our Q4 2025 earnings call. We'd now like to open the lines for Q&A.
Speaker #2: Once again, I'd like to thank the men and women of Patterson-UTI Energy for their outstanding performance in 2025 and for helping to responsibly provide energy to the world.
Speaker #2: Thank you for joining us today for our Q4 2025 earnings call. We'd now like to open the lines for questions.
Speaker #2: Q&A. Thank
Operator: Thank you. We will now begin the question-and-answer session. If you have dialed in and would like to ask a question, simply press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. As a reminder, please limit yourself to one question and one follow-up. Your first question comes from the line of Scott Gruber with Citi. Please go ahead.
Operator: Thank you. We will now begin the question-and-answer session. If you have dialed in and would like to ask a question, simply press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. As a reminder, please limit yourself to one question and one follow-up. Your first question comes from the line of Scott Gruber with Citi. Please go ahead.
Speaker #3: you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, simply press the your hand and join the queue.
Speaker #3: If you would like to withdraw your question, simply press the star 1 again. And as a reminder, please limit yourself to one question and one follow-up.
Speaker #3: If you would like to withdraw your question, simply press the star 1 again. And as a reminder, please star 1 on your telephone keypad to raise from the line of Scott Gruber with Citi.
Speaker #3: Please go
Andrew Smith: Yes, good morning.
Scott Gruber: Yes, good morning.
Speaker #2: Good Yes, good morning.
William Hendricks: Morning, Scott.
Andy Hendricks: Morning, Scott.
Speaker #2: morning, Scott.
Andrew Smith: Morning, Andy. Appreciate all the color on the dynamics at play in the frac market today. How do you see the US, you know, frac supply-demand balance today, you know, given the enlargement of the average fleet? It's grown a long way here the last couple of years. And do you have a sense of, you know, roughly, fleet utilization for the market? And can attrition alone drive us back to a relatively tight market balance in the not-too-distant future?
Speaker #4: Good morning. Andy, I appreciate all the color on the dynamics at play in the frac market today. Ahead, how do you see the US frac supply-demand balance today given the enlargement of it? It's grown a long way here in the last couple of years.
Scott Gruber: Morning, Andy. Appreciate all the color on the dynamics at play in the frac market today. How do you see the US, you know, frac supply-demand balance today, you know, given the enlargement of the average fleet? It's grown a long way here the last couple of years. And do you have a sense of, you know, roughly, fleet utilization for the market? And can attrition alone drive us back to a relatively tight market balance in the not-too-distant future?
Speaker #4: And do you have a sense of roughly kind of fleet utilization for the market? And can attrition alone drive us back to a relatively tight market balance in the not-too-distant future?
Speaker #2: Yeah. In terms of fleet activity, it's really an interesting situation. We've been you're getting from various public the dynamics in the data that sources.
Speaker #2: Yeah. In terms of fleet activity, it's really an interesting situation. We've been you're getting from various public the dynamics in the data that trying to explain for a while now If you look at what we did across 2025 last year, public data is showing a reduction in our fleet count, but at the same time, the size of our fleets, the amount of horsepower on location, is just been continuing to doing more triumphal frac.
Speaker #2: Yeah. In terms of fleet activity, it's really an interesting situation. We've been you're getting from various public the dynamics in the data that trying to explain for a while now If you look at what we did across 2025 last year, public data is showing a reduction in our fleet count, but at the same time, the size of our fleets, the amount of horsepower on location, is just been continuing to doing more triumphal frac. grow.
William Hendricks: Yeah, you know, in terms of fleet activity, it's really an interesting situation. We've been trying to explain, you know, for a while now, the dynamics in the data that you're getting from various public sources. You know, if you look at what we did across 2025 last year... You know, public data is showing a reduction in our fleet count, but at the same time, the size of our fleets, the amount of horsepower on location, has just been continuing to grow. You know, we're doing more simul-frac, we're doing more trimul-frac, and even on the same simul-frac, we're getting requests for higher rates and higher pressures. So that's causing us to put more equipment on location. When we do put more equipment on location, we certainly factor that into the pricing for the job.
Andy Hendricks: Yeah, you know, in terms of fleet activity, it's really an interesting situation. We've been trying to explain, you know, for a while now, the dynamics in the data that you're getting from various public sources. You know, if you look at what we did across 2025 last year... You know, public data is showing a reduction in our fleet count, but at the same time, the size of our fleets, the amount of horsepower on location, has just been continuing to grow. You know, we're doing more simul-frac, we're doing more trimul-frac, and even on the same simul-frac, we're getting requests for higher rates and higher pressures. So that's causing us to put more equipment on location. When we do put more equipment on location, we certainly factor that into the pricing for the job.
Speaker #2: And even on the same simul frac, we're getting requests for higher rates and higher pressures. So that's causing us to put We're doing more simul frac.
Speaker #2: more equipment on location. When we We're location, we certainly factor that into the pricing for the job. I mean, we're committing more assets, so it costs the operator more, but they're getting a economic evaluation on what it takes to maximize production out of their whalebore, and that's what they've determined.
William Hendricks: I mean, we're, you know, we're committing more assets, so, you know, it costs the operator more, but they're getting a cost benefit. You know, they've done their economic evaluation on, you know, what it takes to maximize production out of their wellbore, and that's what they've determined. So, you know, in some ways, it's been a win-win. But, you know, the challenge, you know, for people trying to understand the business is that while the fleet count looks like it's going down, we've actually remained really relatively steady in the amount of horsepower that's been deployed. So we've been, you know, we've been moving, you know, horsepower around to different places and growing the amount that we have on the well site. And, you know, I see that trend continuing, you know, at maybe a measured pace in 2026, but you see that trend continuing.
Andy Hendricks: I mean, we're, you know, we're committing more assets, so, you know, it costs the operator more, but they're getting a cost benefit. You know, they've done their economic evaluation on, you know, what it takes to maximize production out of their wellbore, and that's what they've determined. So, you know, in some ways, it's been a win-win. But, you know, the challenge, you know, for people trying to understand the business is that while the fleet count looks like it's going down, we've actually remained really relatively steady in the amount of horsepower that's been deployed. So we've been, you know, we've been moving, you know, horsepower around to different places and growing the amount that we have on the well site. And, you know, I see that trend continuing, you know, at maybe a measured pace in 2026, but you see that trend continuing.
Speaker #2: cost-benefit. They've done their But the challenge for people trying to understand the business is that while the down, we've actually remained really relatively steady in the amount of horsepower that's been deployed.
Speaker #2: So we've—fleet count looks like it's going—been moving horsepower around to different places and growing the amount that we have on the well site.
Speaker #2: And I see that trend continuing. Maybe a measured pace in 2026, but you see that trend continuing. And what that means is it continues to reduce overall supply in the frac market.
William Hendricks: And what that means is, it continues to reduce overall supply in the frac markets. And, you know, all the equipment that we have that can burn natural gas is certainly out working, and that has a cost benefit to operators when they can burn natural gas. So that market still remains very tight because of the amount of horsepower growth on a per fleet basis.
Andy Hendricks: And what that means is, it continues to reduce overall supply in the frac markets. And, you know, all the equipment that we have that can burn natural gas is certainly out working, and that has a cost benefit to operators when they can burn natural gas. So that market still remains very tight because of the amount of horsepower growth on a per fleet basis.
Speaker #2: And all the equipment that we have that can burn natural gas is certainly out working, and that has a cost-benefit to operators when they can burn natural remains very tight because of the gas. basis.
Scott Gruber: I appreciate all that. And then I think your Current Power business is looking at some opportunities to supply energy storage systems at data centers and, you know, other applications outside of oil and gas. Can you provide some color on that initiative?
Scott Gruber: I appreciate all that. And then I think your Current Power business is looking at some opportunities to supply energy storage systems at data centers and, you know, other applications outside of oil and gas. Can you provide some color on that initiative?
Speaker #4: then I think your current power business is looking at some
Speaker #4: Opportunities to supply energy storage systems at data centers and other applications outside of oil and gas—can you provide some color on that initiative?
Speaker #2: Yeah. We do have an electrical engineering division that's called they've built and engineered very specific microgrids, and they do battery storage for mainly our drilling rigs.
William Hendricks: Yeah, you know, we do have an electrical engineering division, that's called Current Power, and, they've, you know, build and engineer very specific microgrids, and they do battery storage for, you know, mainly our drilling rigs. You know, there may be an opportunity in the future for them to, do some, you know, measured, type of storage for data centers, but, you know, that would be a pretty large-scale project, even for us. There's some technology there that could be interesting, but, I'd say it's very early to see if, if that pans out to anything.
Andy Hendricks: Yeah, you know, we do have an electrical engineering division, that's called Current Power, and, they've, you know, build and engineer very specific microgrids, and they do battery storage for, you know, mainly our drilling rigs. You know, there may be an opportunity in the future for them to, do some, you know, measured, type of storage for data centers, but, you know, that would be a pretty large-scale project, even for us. There's some technology there that could be interesting, but, I'd say it's very early to see if, if that pans out to anything.
Speaker #2: There may be an opportunity in the future do some amount of horsepower growth on a per-fleet measured type of storage for data centers, for them to project even for us.
Speaker #2: There's some technology there that could be interesting, but I'd say it's very early to see if that pans out to anything.
Speaker #4: Okay. Well, we'll watch. Appreciate the color.
Scott Gruber: Okay. We'll watch. Appreciate the color.
Scott Gruber: Okay. We'll watch. Appreciate the color.
William Hendricks: Thanks.
Andy Hendricks: Thanks.
Speaker #3: You're next question comes from the line of Surabhand with Bank of America. Please go
Operator: Your next question comes from the line of Saurabh Pant with Bank of America. Please go ahead.
Operator: Your next question comes from the line of Saurabh Pant with Bank of America. Please go ahead.
Speaker #3: ahead. Hi, good morning, Andy and
Saurabh Pant: Hi, good morning, Andy and Andy.
Saurabh Pant: Hi, good morning, Andy and Andy.
Speaker #2: Good morning, Andy. Surab.
William Hendricks: Morning, Saurabh.
Andy Hendricks: Morning, Saurabh.
Saurabh Pant: Andy, maybe I'll just start with a bigger picture question. I think you were talking about increasing differentiation in your prepared remarks. And honestly, I see that in the Kimberly data as well, right? I think, your performance, your value proposition seems to be improving in the eyes of the customers in both drilling and completion. As I think about, what it means for financial, right, it seems to me like, the gap between the top two, three, call it four players, including yourselves and the other small, medium-sized providers, is actually increasing, right? So maybe just talk to that dynamic a little bit, differentiation and pricing power and how pricing has held up a lot better.
Saurabh Pant: Andy, maybe I'll just start with a bigger picture question. I think you were talking about increasing differentiation in your prepared remarks. And honestly, I see that in the Kimberly data as well, right? I think, your performance, your value proposition seems to be improving in the eyes of the customers in both drilling and completion. As I think about, what it means for financial, right, it seems to me like, the gap between the top two, three, call it four players, including yourselves and the other small, medium-sized providers, is actually increasing, right? So maybe just talk to that dynamic a little bit, differentiation and pricing power and how pricing has held up a lot better.
Speaker #5: in the Kimberly data as well, right? I think your performance, your value proposition seems to be improving in the eyes of the customers in both drilling and completion, as I think to me like the gap between the top two, three call it four players about what it means for financials, right?
Speaker #5: other small, medium-sized providers is actually increasing, right? So it should be good for your pricing power in the It seems market. So maybe just talk to that dynamic a little bit.
Speaker #5: Differentiation and pricing a lot better.
Speaker #2: Yeah, I appreciate that question, and thanks for noticing. Some third-party data that shows that we continue to improve our operations really pleased with how the teams have improved execution over the years.
William Hendricks: Yeah, I appreciate that question, and thanks for noticing, you know, some third-party data that shows that we continue to improve our operations. Really pleased with, you know, how the teams have improved execution over the years. And also, you know, it gives us confidence to continue to fund them with capital for new technology. And we do think that continues to differentiate us in the market, you know, both on drilling services and completion services. So, you know, really pleased with the performance overall for the teams.
Andy Hendricks: Yeah, I appreciate that question, and thanks for noticing, you know, some third-party data that shows that we continue to improve our operations. Really pleased with, you know, how the teams have improved execution over the years. And also, you know, it gives us confidence to continue to fund them with capital for new technology. And we do think that continues to differentiate us in the market, you know, both on drilling services and completion services. So, you know, really pleased with the performance overall for the teams.
Speaker #2: And to fund them with capital for new technology. And we do think that market, both on drilling services and completion the performance overall for the teams.
William Hendricks: You know, we're working for some of the biggest EMPs, you know, in the US in both drilling and completions, and it's, you know, the size and scale of the operations, it's the breadth of services that we can provide, the level of technology we can provide, and the execution that we're providing in the field that's really driving all that. So it's not just one thing in particular, but it's multiple factors, and just really pleased with how that's been working out. You know, in terms of pricing, you know, one of the things that we've shown here over the last couple of years is, even though you've seen, especially in drilling, a decline in the rig count, you haven't seen compression in margins like you've seen in previous years.
Andy Hendricks: You know, we're working for some of the biggest EMPs, you know, in the US in both drilling and completions, and it's, you know, the size and scale of the operations, it's the breadth of services that we can provide, the level of technology we can provide, and the execution that we're providing in the field that's really driving all that. So it's not just one thing in particular, but it's multiple factors, and just really pleased with how that's been working out. You know, in terms of pricing, you know, one of the things that we've shown here over the last couple of years is, even though you've seen, especially in drilling, a decline in the rig count, you haven't seen compression in margins like you've seen in previous years.
Speaker #2: We're working for some of the biggest EMPs in the US in both drilling and completions, and the size and that continues to differentiate us in the scale of the operations is the provide, the level of technology we can breadth of services that we can we're providing in the field that's really driving all that.
Speaker #2: So it's not just one thing in particular, but it's multiple factors and just really provide, and the execution that also, it gives us confidence to continue pleased with how that's been working out.
Speaker #2: In terms of pricing, one of the things that we've shown here over the last couple of years—drilling, a decline in the rig count—you haven't seen compression in margins like you've seen in previous years.
Speaker #2: And technology is a big part of that driver where we can differentiate certainly from much smaller companies. And it is even though you've seen, especially in to really kind of shore up our ability to protect the pricing and margins where we in West Texas, where you've seen a little bit more slowdown in the oil markets versus the gas markets.
William Hendricks: And technology is a big part of that driver, where we can differentiate, certainly for much smaller companies, and it, you know, helps to, to, really kind of shore up, you know, our ability to, you know, protect the pricing and margins where we can. You know, our business is certainly still competitive in nature, especially in West Texas, where you're seeing, you know, a little bit more slowdown in the oil markets versus the gas markets. So there's still competitive, you know, market out there, but really pleased with how we're performing in general, and also very pleased at how well we've been able to, you know, keep the margins up relative to previous cycles.
Andy Hendricks: And technology is a big part of that driver, where we can differentiate, certainly for much smaller companies, and it, you know, helps to, to, really kind of shore up, you know, our ability to, you know, protect the pricing and margins where we can. You know, our business is certainly still competitive in nature, especially in West Texas, where you're seeing, you know, a little bit more slowdown in the oil markets versus the gas markets. So there's still competitive, you know, market out there, but really pleased with how we're performing in general, and also very pleased at how well we've been able to, you know, keep the margins up relative to previous cycles.
Speaker #2: still competitive in nature, especially So there's still competitive market out there, but really pleased with how we're also very pleased at how well we've been able to keep the margins up relative to previous performing in general.
Speaker #2: cycles.
Speaker #4: No, that's fantastic, Andy. Thank you. And then maybe just a quick follow-up on what Scott was asking on the supply-demand side of
Saurabh Pant: No, that's fantastic, Andy. Thank you. And then, maybe just a quick follow-up on what Scott was asking on the supply-demand side of things. I know it's very early to ask him about pricing power coming back to the market, but I know it will at some point, right? So in some ways, Andy, how should we think about how much incremental demand, maybe on the rig side and on the frac side, would it take for some pricing power to come back to the industry? Now, I don't know when it happens, but just some sense of what kind of demand pool we might need for that.
Saurabh Pant: No, that's fantastic, Andy. Thank you. And then, maybe just a quick follow-up on what Scott was asking on the supply-demand side of things. I know it's very early to ask him about pricing power coming back to the market, but I know it will at some point, right? So in some ways, Andy, how should we think about how much incremental demand, maybe on the rig side and on the frac side, would it take for some pricing power to come back to the industry? Now, I don't know when it happens, but just some sense of what kind of demand pool we might need for that.
Speaker #4: things. I know it's very early to asking about pricing power coming back to the market, but I know it will at some point, right?
Speaker #4: So in some ways, Andy, how should we think about how much incremental demand maybe on the rig side and on the frac side? Would it And take for some pricing power to come back to the industry?
Speaker #4: Now, I don't know when it happens, but just some pull we might need for that. sense of what kind of demand
William Hendricks: Yeah, it's a really interesting situation, especially for us, where all of our equipment that can burn natural gas is out working today. And so, you know, if we see the activity increase in the natural gas basins towards the end of this year to supply, you know, both LNG demand ... over time, you know, increasing power demand in the US. You know, that draw on natural gas is going to cause an increase in activity in both drilling and completions. And on the completion side, we are essentially sold out of all of our equipment that can burn natural gas.
Andy Hendricks: Yeah, it's a really interesting situation, especially for us, where all of our equipment that can burn natural gas is out working today. And so, you know, if we see the activity increase in the natural gas basins towards the end of this year to supply, you know, both LNG demand ... over time, you know, increasing power demand in the US. You know, that draw on natural gas is going to cause an increase in activity in both drilling and completions. And on the completion side, we are essentially sold out of all of our equipment that can burn natural gas.
Speaker #2: Where all of our equipment that can burn—yeah, it's a really interesting situation. Natural gas is out working today. Activity increases in the natural gas base towards the end of this year to supply both LNG U.S.—that draws demand initially, and overall, natural gas is going to cause an increase in activity in both drilling and completions.
Speaker #2: And on the completions side, we are essentially sold out of all of our equipment that can burn natural gas. And when you're working in those gas markets, And so if we see the fuel that equipment with natural gas and we the operators, the EMPs certainly want to would have to add to our asset base at that point.
William Hendricks: When you're working in those gas markets, you know, the operators, the E&Ps, certainly want to fuel that equipment with natural gas, and we would have to add to our, you know, asset base at that point, and that's going to cause a significant inflection in pricing in that point. My expectation is that, you know, once we see an activity increase in these gas basins, it's really going to drive an increase in the pricing on the completions as well, because we're going to have to add assets to do that.
Andy Hendricks: When you're working in those gas markets, you know, the operators, the E&Ps, certainly want to fuel that equipment with natural gas, and we would have to add to our, you know, asset base at that point, and that's going to cause a significant inflection in pricing in that point. My expectation is that, you know, once we see an activity increase in these gas basins, it's really going to drive an increase in the pricing on the completions as well, because we're going to have to add assets to do that.
Speaker #2: And that's going to cause a significant inflection in pricing at that point. So my expectation is that once we see an activity increase in these gas basins, it's really going to drive an increase in the pricing on the completions as well, because we're going to have to add assets to do that.
Speaker #4: Right, right. No, I think things moved pretty fast. And a very quick follow-up for Andy—Andy Smith, if you don't mind. Andy, you were talking about some weather impact on your first quarter guidance.
Saurabh Pant: Right. Right. No, I think things move pretty quickly on both sides, right? So we should not forget that. And a very quick follow-up for Andy, Andy Smith, if you don't mind. Andy, you were talking about some weather impact on your Q1 guidance. Did you quantify the impact, if I missed that, if you have any color on how big that impact is?
Saurabh Pant: Right. Right. No, I think things move pretty quickly on both sides, right? So we should not forget that. And a very quick follow-up for Andy, Andy Smith, if you don't mind. Andy, you were talking about some weather impact on your Q1 guidance. Did you quantify the impact, if I missed that, if you have any color on how big that impact is?
Speaker #4: Did you quantify the impact, if I missed that, if you have is?
Speaker #4: any color on how big that impact
Andrew Smith: We didn't quantify it, but it's in the range of $5 to 10 million. It's included in our guidance, so-
Andy Smith: We didn't quantify it, but it's in the range of $5 to 10 million. It's included in our guidance, so-
Speaker #5: We didn't quantify it, but it's in the range of 5 to 10 guidance, so certainly not incremental to anything. It's already included, but million dollars.
Speaker #5: It's included in our it's probably in the 5 to 10 million dollar
Saurabh Pant: Okay.
Saurabh Pant: Okay.
Andrew Smith: It's certainly not incremental to anything. It's already included, but it's probably in the $5 to 10 million range.
Andy Smith: It's certainly not incremental to anything. It's already included, but it's probably in the $5 to 10 million range.
Speaker #5: range.
Speaker #4: Okay. I got it. Okay, Andy,
Saurabh Pant: Okay, I got it. Okay, Andy, thank you. Thanks a lot. I'll turn it back.
Saurabh Pant: Okay, I got it. Okay, Andy, thank you. Thanks a lot. I'll turn it back.
Speaker #4: Thank you. Thanks a lot. I'll turn it back.
Speaker #2: Thanks,
William Hendricks: Thanks, Rob.
Andy Hendricks: Thanks, Rob.
Speaker #3: And you're next question comes from the line of Jim Rollison with Raymond James. Please go
Operator: Your next question comes from the line of Jim Rollyson with Raymond James. Please go ahead.
Operator: Your next question comes from the line of Jim Rollyson with Raymond James. Please go ahead.
Speaker #3: ahead.
Jim Rollyson: Hey, good morning, guys.
Jim Rollyson: Hey, good morning, guys.
Speaker #2: Good morning. Hey, good morning, guys. Jim.
William Hendricks: Good morning, Jim.
Andy Hendricks: Good morning, Jim.
Jim Rollyson: Andy, you kind of talked about the demand side with your technology and all the things you've been doing through this kind of market over the last couple of years. You know, one of the things that's really been pretty notable here over the last, at least the back half of 25, if not longer, is what you guys have been doing on the cost side. It showed up, you know, really in completion services kind of first. It certainly showed up in drilling services this quarter.
Jim Rollyson: Andy, you kind of talked about the demand side with your technology and all the things you've been doing through this kind of market over the last couple of years. You know, one of the things that's really been pretty notable here over the last, at least the back half of 25, if not longer, is what you guys have been doing on the cost side. It showed up, you know, really in completion services kind of first. It certainly showed up in drilling services this quarter.
Speaker #6: Andy, you kind of talked about the demand side with your
Speaker #6: you've been doing through this kind of market over the last couple of years. One of the things that's really been pretty notable here over the last, at least the back half of '25, if not longer, is what you guys have been doing on the cost side.
Speaker #6: It showed up really in completion services kind of first. It certainly showed up in drilling services this quarter. Maybe just spend a minute on kind of what all you're doing to bring your cost structure down
Jim Rollyson: Maybe just spend a minute on kind of, you know, what all you're doing to, to bring your cost structure down and kind of what inning you might be in, just as we think about, you know, and maybe a stable market, not that that happens, but you know, how margins proceed in both those businesses going forward.
Jim Rollyson: Maybe just spend a minute on kind of, you know, what all you're doing to, to bring your cost structure down and kind of what inning you might be in, just as we think about, you know, and maybe a stable market, not that that happens, but you know, how margins proceed in both those businesses going forward.
Speaker #6: market, not that that happens, but how and kind of what ending you might be in just as we margins proceed in both those businesses going forward.
Speaker #2: Yeah. So my hat's hard as to off to the teams. They've really been digging in how we're spending every dollar out there, both in OPEX and CAPEX.
William Hendricks: Yeah. So, you know, my hat's off to the teams. They've really been digging in hard as to, you know, how we're spending every dollar out there, both in OpEx and CapEx. And, you know, you look at things like maintenance CapEx, you know, what are we spending our money on? You know, are there things that we can do to refurb versus buy new parts? Are there things that we can do to negotiate with some of our suppliers, given the state of the market? There's just a number of efforts out there, to try to rein that in. I'll also say that, the teams have worked to become more efficient, so they can do more with the same amount of people and get more accomplished from a maintenance standpoint.
Andy Hendricks: Yeah. So, you know, my hat's off to the teams. They've really been digging in hard as to, you know, how we're spending every dollar out there, both in OpEx and CapEx. And, you know, you look at things like maintenance CapEx, you know, what are we spending our money on? You know, are there things that we can do to refurb versus buy new parts? Are there things that we can do to negotiate with some of our suppliers, given the state of the market? There's just a number of efforts out there, to try to rein that in. I'll also say that, the teams have worked to become more efficient, so they can do more with the same amount of people and get more accomplished from a maintenance standpoint. Maintenance has been a big driver in the cost savings in both, you know, the drilling services and completion services segments, both OpEx and CapEx.
Speaker #2: And you look at things like what are we spending our money on? Are there things that we can do to parts? Are there things that we can do to negotiate with some of our suppliers given the state of the market?
Speaker #2: And you look at things like what are we spending our money on? Are there things that we can do to parts? Are there things that we can do to negotiate with some of our suppliers refurb versus buy new Surab.
Speaker #2: there to try to rein that in. I'll also say efficient. So they can do more with the same amount of people and get more accomplished from a maintenance standpoint.
Speaker #2: So maintenance has maintenance CAPEX,
William Hendricks: Maintenance has been a big driver in the cost savings in both, you know, the drilling services and completion services segments, both OpEx and CapEx.
Speaker #2: been a big driver in the cost savings in both the drilling services and completion services CAPEX.
Speaker #5: Yeah, Jim, I would add to particularly around in the completion services area, as well as the support
Andrew Smith: Yeah, Jim, I would add to that. So, yeah, as Andy said, you know, you know, crew sizes, particularly around in the completion services area, as well as the support structure footprint. As we have consolidated these businesses over time, you know, we've looked to co-locate where we can or slim down sort of our fixed asset footprint in terms of our support facilities. And then on the SG&A side, as we've gone through and tried to integrate the back office even more, consolidate, centralize, it allows us to control some of those costs, get them out of the businesses, and let them be managed, quite honestly, from the corporate side. So we turn the business units loose to sort of focus on their operations more so than kind of what they're doing on the back office side.
Andy Smith: Yeah, Jim, I would add to that. So, yeah, as Andy said, you know, you know, crew sizes, particularly around in the completion services area, as well as the support structure footprint. As we have consolidated these businesses over time, you know, we've looked to co-locate where we can or slim down sort of our fixed asset footprint in terms of our support facilities. And then on the SG&A side, as we've gone through and tried to integrate the back office even more, consolidate, centralize, it allows us to control some of those costs, get them out of the businesses, and let them be managed, quite honestly, from the corporate side. So we turn the business units loose to sort of focus on their operations more so than kind of what they're doing on the back office side. So I would say all of those things have an effect, and we'll continue to do more, on those. But yeah, it's, it's been a real focused effort over the last year or two.
Speaker #5: That. So, yeah, as Andy—there's just a
Speaker #5: structure, footprint, as we have consolidated these businesses said, crew sizes, to co-locate where we can or slim down sort of our support our fixed asset footprint in terms of side, as we've gone through and tried to integrate the back office even centralized it allows us to control some of more consolidate those costs and get them out of the businesses and let them be managed quite So we've turned the business units loose honestly from the corporate side.
Speaker #5: facilities. so than kind of what they're doing on the back office side. So I would say all of those things have an effect and will continue to to sort of focus on their operations more do more.
Andrew Smith: So I would say all of those things have an effect, and we'll continue to do more, on those. But yeah, it's, it's been a real focused effort over the last year or two.
Speaker #5: And then on the SG&A, but yeah, it's been a real focused effort over the last year or so.
Speaker #6: Yeah. Well, it's been impressive. And then just as a follow-up, you kind
Jim Rollyson: Yeah. Well, it's been impressive. And then just as a follow-up, you know, you kind of took upon this, this path of returning at least half your free cash flow, a couple of years or so back, and you've obviously exceeded that number pretty handily each year. You just raised the dividend by 25%, and, you know, I presume with all the things going on, your free cash flow conversion rate should probably be pretty, pretty stable, at least. Just curious, you didn't buy a whole lot of stock back in Q4, and even with the dividend hike, and kind of where numbers are, you, you have quite a bit of room to be able to buy back stock throughout 2026.
Jim Rollyson: Yeah. Well, it's been impressive. And then just as a follow-up, you know, you kind of took upon this, this path of returning at least half your free cash flow, a couple of years or so back, and you've obviously exceeded that number pretty handily each year. You just raised the dividend by 25%, and, you know, I presume with all the things going on, your free cash flow conversion rate should probably be pretty, pretty stable, at least. Just curious, you didn't buy a whole lot of stock back in Q4, and even with the dividend hike, and kind of where numbers are, you, you have quite a bit of room to be able to buy back stock throughout 2026.
Speaker #6: Returning at least half your free cash flow upon this path of cash flow a couple of years or so back, and you've obviously exceeded that number pretty handily each year.
Speaker #6: You just raised the dividend by 25%. And I presume with all the things going on, your free cash flow conversion rate should probably be pretty stable at least.
Speaker #6: Just curious, you didn't buy a whole lot of stock back in 4Q. And even with the dividend hike, and kind of where numbers are, you have quite a bit of room to be able to buy maybe your philosophy on that, given that your share price hasn't ripped, from where it was at the bottom.
Speaker #6: And just Absolutely. It makes perfect sense. Appreciate the answer.
Jim Rollyson: And just maybe your philosophy on that, given that, you know, your share price hasn't ripped, but it's certainly improved a little bit from where it was at the bottom. So I'm just kind of curious the philosophy there.
Jim Rollyson: And just maybe your philosophy on that, given that, you know, your share price hasn't ripped, but it's certainly improved a little bit from where it was at the bottom. So I'm just kind of curious the philosophy there.
Speaker #6: So I'm just kind of curious the
Speaker #5: Yeah, I would
Andrew Smith: Yeah, I would say, this is Andy Smith. I would say that nothing has really changed philosophically for us, Jim. You know, look, it's pretty clear for those that have been following us for a while, that we run this company to maximize free cash flow. And so as we look at anything on the capital allocation front, that's kind of our primary focus, whether it's, you know, looking at, you know, investing, reinvesting into our fleet, whether it's looking at buying back shares, or whether it's looking at M&A. We kind of look at them all in terms of how much cash flow per share accretion can we get out of those opportunities.
Andy Smith: Yeah, I would say, this is Andy Smith. I would say that nothing has really changed philosophically for us, Jim. You know, look, it's pretty clear for those that have been following us for a while, that we run this company to maximize free cash flow. And so as we look at anything on the capital allocation front, that's kind of our primary focus, whether it's, you know, looking at, you know, investing, reinvesting into our fleet, whether it's looking at buying back shares, or whether it's looking at M&A. We kind of look at them all in terms of how much cash flow per share accretion can we get out of those opportunities.
Speaker #5: say this is Andy Smith. I would
Speaker #5: say that nothing has really changed philosophically for philosophy there. us, Jim. those that have been following us for a while Look, it's pretty clear for that we run this company to maximize free front, that's kind of our look at anything on the capital allocation primary focus, whether it's looking at investing, reinvesting into our fleet, whether it's looking at M&A, we kind of look whether it's looking at buying back shares, at them all in terms of how much cash flow per share accretion can we get out of those opportunities.
Andrew Smith: I would say in the Q4, the reason that there was a little bit of pause on the buyback was more about lumpiness of working capital and things like that, and it kind of came in late in the quarter, and so nothing really has changed. But we continue to look at all of our capital allocation priorities through that sort of free cash flow per share metric. You know, we ultimately think that in the end that serves us pretty well, and that's how we run the business. So again, I wouldn't say to read too much into that. I don't think anything has really changed in terms of our philosophy.
Speaker #5: And I would say, in the fourth quarter, the reason that there was a little bit of a pause on the buyback was more about lumpiness of working capital and things like that.
Andy Smith: I would say in the Q4, the reason that there was a little bit of pause on the buyback was more about lumpiness of working capital and things like that, and it kind of came in late in the quarter, and so nothing really has changed. But we continue to look at all of our capital allocation priorities through that sort of free cash flow per share metric. You know, we ultimately think that in the end that serves us pretty well, and that's how we run the business. So again, I wouldn't say to read too much into that. I don't think anything has really changed in terms of our philosophy.
Speaker #5: And it kind of came in cash flow. late in the quarter. And so nothing And so as we really has back stock throughout 2026.
Speaker #5: changed. But we continue to look at all of our capital allocation priorities through flow per that sort of free cash share metric. And we ultimately think that in the end, that serves us pretty well.
Speaker #5: And that's how we run the business. So, don't read too much into that. I don't think anything has really changed.
Speaker #5: in terms of our philosophy. Yeah, I
William Hendricks: Yeah, I agree. I don't think anything's changed in how we look at that. But one thing, you know, when you look at the bigger macro, and you look at what's happened in the industry over the last couple of years, and, you know, the market softened over the last couple of years, but yet we're still generating strong free cash flow, you know, that's our focus. And so we, you know, that gave us the confidence to go ahead and just raise the dividend. Because here we are in a softer portion of the market, but yet we're still producing strong free cash flow, and we still have forward visibility on that.
Andy Hendricks: Yeah, I agree. I don't think anything's changed in how we look at that. But one thing, you know, when you look at the bigger macro, and you look at what's happened in the industry over the last couple of years, and, you know, the market softened over the last couple of years, but yet we're still generating strong free cash flow, you know, that's our focus. And so we, you know, that gave us the confidence to go ahead and just raise the dividend. Because here we are in a softer portion of the market, but yet we're still producing strong free cash flow, and we still have forward visibility on that.
Speaker #2: Agree. I don't think anything's changed in how we look at that. But one thing, when you look at the bigger macro and you look at what's happening in the industry over the last couple of years, and the market's softened over the last couple of years, but yeah, we're still generating strong free cash flow.
Speaker #2: agree. I don't think anything's changed in how we look at that. But one thing, when you look at the bigger macro and you look at what's happening in the industry over the last couple of years and the market's softened over the last couple of
Speaker #2: our focus. And so yet we're still producing strong free cash that.
Scott Gruber: Absolutely. Makes perfect sense. Appreciate the answer.
Scott Gruber: Absolutely. Makes perfect sense. Appreciate the answer.
Speaker #5: Thanks,
Speaker #5: Thanks,
William Hendricks: Thanks, Jim.
Andy Hendricks: Thanks, Jim.
Speaker #7: And your next question comes from the line of Derek ahead.
Operator: Your next question comes from the line of Derek Podhaizer with Piper Sandler. Please go ahead.
Operator: Your next question comes from the line of Derek Podhaizer with Piper Sandler. Please go ahead.
Derek Podhaizer: Hey, good morning, all. I know you mentioned some of the comments around Argentina and sending some of your idle rigs down there. Maybe just give us a sense of what you're seeing around the world as all this unconventional development picks up. I'm thinking specifically about your Turnwell JV over in the UAE. I mean, what can we think about you guys exploring these international regions, you know, starting with Argentina, maybe UAE, anywhere else? Just some comments and thoughts around that.
Derek Podhaizer: Hey, good morning, all. I know you mentioned some of the comments around Argentina and sending some of your idle rigs down there. Maybe just give us a sense of what you're seeing around the world as all this unconventional development picks up. I'm thinking specifically about your Turnwell JV over in the UAE. I mean, what can we think about you guys exploring these international regions, you know, starting with Argentina, maybe UAE, anywhere else? Just some comments and thoughts around that.
Speaker #8: all. I know you mentioned some of the comments around Argentina and sending some of your flow.
Speaker #8: idle rigs down there. And we still have forward visibility on Maybe just give us a sense of you walk around the development pick up.
Speaker #8: I think it's specifically about world. We're seeing all this unconventional your Turnwell JV over in the UAE. What can we think about you guys exploring these international regions starting with Argentina, maybe UAE, anywhere else?
Speaker #8: Just some comments and thoughts around.
Speaker #8: that. Yeah.
William Hendricks: Yeah. You know, we've looked at these markets for, you know, more than a decade to try to see, you know, where we could fit in and where it makes sense and, you know, where we could get, you know, decent earnings out of it. You know, these markets have, you know, various competitors, but they also have rig specifications that differ from the US in a lot of markets. The interesting thing about Argentina. It's almost an identical rig specification to what we have here in the US.
Andy Hendricks: Yeah. You know, we've looked at these markets for, you know, more than a decade to try to see, you know, where we could fit in and where it makes sense and, you know, where we could get, you know, decent earnings out of it. You know, these markets have, you know, various competitors, but they also have rig specifications that differ from the US in a lot of markets. The interesting thing about Argentina. It's almost an identical rig specification to what we have here in the US.
Speaker #2: We've looked at these markets for more than a decade to try to see where we could fit in and where it makes sense. And where we could get decent earnings out of it.
Speaker #2: And these markets have various competitors, but they also have rig specifications markets. The interesting thing about that, that differ from the US in a lot of identical rig specification to what we have—Argentina is, it's almost—an here in the US.
Speaker #2: And so it's easy from a technology transfer and even a capital efficiency standpoint to say, "Okay, yeah, we can move a drilling rig down to Argentina and work in that environment without big technical changes." And so as the vacuum warranty activity continues to grow in available supply in Argentina, they're looking to the US to bring rigs down from various drilling contractors.
William Hendricks: And so it's easy from a, you know, technology transfer and even a capital efficiency standpoint to say, "Okay, yeah, we can move a drilling rig down in Argentina and work in that environment without big technical changes." And so, you know, as the Vaca Muerta activity, you know, continues to grow in activity, and they continue to use the available supply in Argentina, they're looking to the US to bring rigs down from various drilling contractors. This agreement worked out for us to, you know, partner up with a local supplier and who has a good reputation in the region and is working for, you know, some of the biggest E&Ps there.
Andy Hendricks: And so it's easy from a, you know, technology transfer and even a capital efficiency standpoint to say, "Okay, yeah, we can move a drilling rig down in Argentina and work in that environment without big technical changes." And so, you know, as the Vaca Muerta activity, you know, continues to grow in activity, and they continue to use the available supply in Argentina, they're looking to the US to bring rigs down from various drilling contractors. This agreement worked out for us to, you know, partner up with a local supplier and who has a good reputation in the region and is working for, you know, some of the biggest E&Ps there.
Speaker #2: This agreement worked out for us to partner up with a local supplier who has a good reputation in the region and is working for some of the biggest EMPs there.
Speaker #2: And able to get to an agreement with them to provide them so this worked out really well for us to be with a couple of drilling rigs to go down there.
William Hendricks: And so, you know, this worked out really well for us to be able to get to an agreement with them to provide them with a couple drilling rigs, to go down there. And, you know, while it's only 2 rigs leaving the US market, you know, I think everybody who's been following Argentina knows that you've got operators that are there currently. You've got US operators that are looking to move into Argentina, and activity will continue to grow in Argentina over the next 5 years, and those rigs are gonna come out of the US, and over time, that's gonna reduce the US rig supply. And so, you know, we'll, we'll continue discussions with companies that are currently there and companies that are going down there, and we'll provide rigs where it makes sense for us to provide rigs.
Andy Hendricks: And so, you know, this worked out really well for us to be able to get to an agreement with them to provide them with a couple drilling rigs, to go down there. And, you know, while it's only 2 rigs leaving the US market, you know, I think everybody who's been following Argentina knows that you've got operators that are there currently. You've got US operators that are looking to move into Argentina, and activity will continue to grow in Argentina over the next 5 years, and those rigs are gonna come out of the US, and over time, that's gonna reduce the US rig supply. And so, you know, we'll, we'll continue discussions with companies that are currently there and companies that are going down there, and we'll provide rigs where it makes sense for us to provide rigs.
Speaker #2: And while it's only two rigs leaving the US market, I think everybody who's been following Argentina knows that you've got operators that are there currently.
Speaker #2: You've got US operators that are looking to move into Argentina. And activity will continue to grow in Argentina over the next five years. And those rigs are going to come out of the US and over time, that's going to reduce the US rig supply.
Speaker #2: so we'll continue And discussions. With companies that are currently there and companies that are going down there. And we'll provide rigs where it makes sense for us to provide
Speaker #2: rigs.
Speaker #8: Got it. That
Derek Podhaizer: Got it. Makes sense. Very helpful color. And then, just thinking about the frac side of things, you know, appreciate the comments quantifying some of the impact here in Q1, due to winter. But maybe you can take a chance on walking through Q2, Q3, what you see out there, your customer conversations, you know, will we get a snap back in utilization? Just trying to think through the different crosswinds around pricing resetting. Just maybe some help understanding as we move through the year, what we could see out of the completion side of the business.
Derek Podhaizer: Got it. Makes sense. Very helpful color. And then, just thinking about the frac side of things, you know, appreciate the comments quantifying some of the impact here in Q1, due to winter. But maybe you can take a chance on walking through Q2, Q3, what you see out there, your customer conversations, you know, will we get a snap back in utilization? Just trying to think through the different crosswinds around pricing resetting. Just maybe some help understanding as we move through the year, what we could see out of the completion side of the business.
Speaker #8: makes sense. Very helpful frac side of things, I appreciate the comments quantifying some of the impact here. In the you can take a chance on walking through second quarter, third quarter, what you see out there, color.
Speaker #8: Utilization—just trying to think through the your customer conversations—first quarter, due to winter, but maybe different crosswinds around. Just maybe some help what we'll get a snapback and then just thinking about the understanding as we move through the year, what we could see out of the completion side of the—
Speaker #8: Utilization—just trying to think through your customer conversations. First quarter, due to winter, but maybe different crosswinds around. Just maybe some help—will we get a snapback? And, and then just thinking about understanding as we move through the year, what we could see out of the completion side of the business.
Speaker #2: Yeah. We were really pleased to see that the first quarter was still relatively steady. The fourth quarter, we overall were able to exceed expectations in activity relative to how a fourth quarter normally plays out.
William Hendricks: Yeah, you know, we were really pleased to see that the Q1 was still relatively steady. You know, the Q4, we were able to exceed expectations in overall activity, you know, relative to how a Q4 normally plays out. And then relatively steady, you know, into the Q1, you know, the weather issues aside, that everybody went through. You know, as we go through the year, if the commodity prices stay in this $60 range, you know, my expectation is that the oil markets stay relatively steady.
Andy Hendricks: Yeah, you know, we were really pleased to see that the Q1 was still relatively steady. You know, the Q4, we were able to exceed expectations in overall activity, you know, relative to how a Q4 normally plays out. And then relatively steady, you know, into the Q1, you know, the weather issues aside, that everybody went through. You know, as we go through the year, if the commodity prices stay in this $60 range, you know, my expectation is that the oil markets stay relatively steady.
Speaker #2: And then relatively steady into the first quarter, the weather issues aside that everybody went through. As we go through the year, if the commodity prices stay in this $60 market, things stay relatively steady.
Speaker #2: I think range, my expectation is that the oil that as a lot of EMPs, we're working on their budgets in December. You had oil commodity prices at various levels in December, which kind of made it challenging for a number of our customers to decide what their activity is going to be during the year.
William Hendricks: I think that, you know, as a lot of E&Ps were working on their budgets in December, you had, you know, oil commodity prices at various levels in December, which kind of made it challenging for a number of our customers to decide what their activity is gonna be during the year. But we've seen more resilience, I think, than many of us expected. And if that resilience persists and oil stays in that, you know, upper 50 to 60 range, then the market will likely remain relatively steady.
Andy Hendricks: I think that, you know, as a lot of E&Ps were working on their budgets in December, you had, you know, oil commodity prices at various levels in December, which kind of made it challenging for a number of our customers to decide what their activity is gonna be during the year. But we've seen more resilience, I think, than many of us expected. And if that resilience persists and oil stays in that, you know, upper 50 to 60 range, then the market will likely remain relatively steady.
Speaker #2: But we've seen more resilience, I think, than many of us had expected. And if that resilience persists and oil stays in that upper $50 to $60 range, then the market is likely to remain relatively stable.
Speaker #2: steady. Great.
Derek Podhaizer: Great. Thanks, Andy. I'll turn it back.
Derek Podhaizer: Great. Thanks, Andy. I'll turn it back.
Speaker #8: Thanks, Andy. I'll turn it
Speaker #8: back. And your next
Operator: Your next question comes from the line of Stephen Gengaro with Stifel. Please go ahead.
Operator: Your next question comes from the line of Stephen Gengaro with Stifel. Please go ahead.
Speaker #7: Jengaro with Depot. Please go
Speaker #7: ahead. Thanks.
Stephen Gengaro: Thanks. Good morning, everybody. I guess, on the frac side, I was just curious what your view is on two things. One is, if you think we'll see further consolidation in the business, and maybe tied to that, do you feel like over the last, I don't know, six months or a year, that the behavior of the industry and the peers has been fairly good, or do you still see some people who are underpricing the market?
Stephen Gengaro: Thanks. Good morning, everybody. I guess, on the frac side, I was just curious what your view is on two things. One is, if you think we'll see further consolidation in the business, and maybe tied to that, do you feel like over the last, I don't know, six months or a year, that the behavior of the industry and the peers has been fairly good, or do you still see some people who are underpricing the market?
Speaker #4: Good morning, everybody. I question comes from the line of Steven guess on the frac side, I was just curious what your view is on two things.
Speaker #4: One is, if you think we'll see further consolidation in the business, and maybe tied to that, do you feel like over the last, I don't know, six months or a year, that the behavior of the industry and the peers has been fairly good?
Speaker #4: Or do you still see some people who market?
William Hendricks: So I think the frac market has been evolving from a technology standpoint, and I think that you're seeing differentiation with the top 3 or 4 players versus others. I think that technology differentiation continues, you know, for the next few years. You know, and you can certainly see it in where we're investing dollars. So we continue to invest in the 100% natural gas Emerald fleets that we have deployed. There's still very strong demand for equipment that can burn 100% natural gas, and we're gonna continue to do that. And so we're gonna continue to grow our capacity of that high-end frac equipment, probably higher than some of the others are deploying today. So we see that. And then you see digital. Digital is, still has a lot of evolution to go in the frac space.
Andy Hendricks: So I think the frac market has been evolving from a technology standpoint, and I think that you're seeing differentiation with the top 3 or 4 players versus others. I think that technology differentiation continues, you know, for the next few years. You know, and you can certainly see it in where we're investing dollars. So we continue to invest in the 100% natural gas Emerald fleets that we have deployed. There's still very strong demand for equipment that can burn 100% natural gas, and we're gonna continue to do that. And so we're gonna continue to grow our capacity of that high-end frac equipment, probably higher than some of the others are deploying today. So we see that. And then you see digital. Digital is, still has a lot of evolution to go in the frac space.
Speaker #2: others. And I think that continues for the next few years. You can certainly see it in where we're investing dollars. technology differentiation So we continue to invest in the 100% natural gas emerald fleets that we have deployed.
Speaker #2: Probably higher than some of the others are deploying today. So, we see Digital still has a lot of evolution to go in the frac space.
William Hendricks: And so, you know, we announced, it was a big event at an industry conference this week in the Houston area, where our teams rolled out the new EOS platform for digital. It allows, you know, our customers to be able to aggregate all their data without various third parties, put it all in one place, visualize it, work with it, do what they need to do with it. But that platform is not just about data aggregation and moving data, it's also about the controls and working with the control systems that we have, which are proprietary to our equipment. And, you know, we have the Vertex automation on the frac. And so it's these kind of investments in the higher-end technology on the equipment side, but also the investments on the digital, which will allow us to continue to differentiate.
Andy Hendricks: And so, you know, we announced, it was a big event at an industry conference this week in the Houston area, where our teams rolled out the new EOS platform for digital. It allows, you know, our customers to be able to aggregate all their data without various third parties, put it all in one place, visualize it, work with it, do what they need to do with it. But that platform is not just about data aggregation and moving data, it's also about the controls and working with the control systems that we have, which are proprietary to our equipment. And, you know, we have the Vertex automation on the frac. And so it's these kind of investments in the higher-end technology on the equipment side, but also the investments on the digital, which will allow us to continue to differentiate. I think that, you know, it's gonna roll up to the top 4, maybe just 3 players that can do that and differentiate from the others.
Speaker #2: it, work with it, do what they need to do with it. But that platform is not just about data aggregation and moving data. It's also about the controls and working with the control systems that we have, which are proprietary to our equipment.
Speaker #2: And we have the Vertex Automation on the frac, and investments in the higher-end technology on the—so it's these kind of equipment side, but also the investments on the digital, which will allow us to continue to differentiate. And I think that it's going to roll up to the players that can do that and differentiate from the others.
William Hendricks: I think that, you know, it's gonna roll up to the top 4, maybe just 3 players that can do that and differentiate from the others.
Speaker #2: top four, maybe just three
[Analyst] (Stifel): Okay. Thank you. That's, that's helpful. And just the other quick question, just on the rig side, just on the North American market, do you feel like pricing has, has stabilized?
Stephen Gengaro: Okay. Thank you. That's, that's helpful. And just the other quick question, just on the rig side, just on the North American market, do you feel like pricing has, has stabilized?
Speaker #4: And just the other quick thank you. That's helpful. Question—just on the rig side, just in the North American market, do you feel like pricing has
Speaker #4: stabilized? I think where
William Hendricks: You know, I think, where we are today, you've got some available rigs in West Texas. You know, it's still a price-competitive environment out there, but I'm pleased with our ability to, you know, protect our pricing and margins the way we have. And, you know, we'll just have to see how it plays out. I think, you know, where the commodity price, you know, lands as an average for the year will be a lot that drives that. So if it stays upper $50s to 60s, then, you know, I think pricing remains relatively stable. It'll get a little bit more competitive if we see a different commodity price that's lower. But I think, you know, where we are now, that it stays relatively stable.
Andy Hendricks: You know, I think, where we are today, you've got some available rigs in West Texas. You know, it's still a price-competitive environment out there, but I'm pleased with our ability to, you know, protect our pricing and margins the way we have. And, you know, we'll just have to see how it plays out. I think, you know, where the commodity price, you know, lands as an average for the year will be a lot that drives that. So if it stays upper $50s to 60s, then, you know, I think pricing remains relatively stable. It'll get a little bit more competitive if we see a different commodity price that's lower. But I think, you know, where we are now, that it stays relatively stable.
Speaker #2: we are today, you've got some available rigs in West Texas. It's still a price-competitive environment out there. But I'm pleased with our ability to protect our pricing and margins the way And we'll just have to see how it plays out.
Speaker #2: I we have. think where the commodity price lands as an average for the year will be a lot that drives that. So if it stays upper 50s to 60s, then I think pricing remains relatively stable.
Speaker #2: It'll get a little bit more competitive if we see a different commodity price that's lower. But I think where we are now
Speaker #2: stable. Okay. that it stays relatively
[Analyst] (Stifel): Okay, great. Thanks for your help.
Stephen Gengaro: Okay, great. Thanks for your help.
Speaker #4: Great. Thanks for your help.
Operator: Thank you. Your next question comes from the line of Arvind Jayaram with J.P. Morgan. Please go ahead.
Operator: Thank you. Your next question comes from the line of Arun Jayaram with JPMorgan. Please go ahead.
Speaker #7: Thank you. And your next question comes from the line of Arun Jayaram with JPMorgan. Please go
Speaker #8: Yeah. Good morning, gentlemen. I was wondering if we could start with you're reducing CapEx by around 15% to less than 500 million. I was wondering if you could maybe unpack the year-over-year declines with that kind of represents maybe a little bit of a mix between drilling and completions and perhaps how much of the CapEx is going to be earmarked for the emerald direct drive kind of horsepower?
Arun Jayaram: Yeah, good morning, gentlemen. I was wondering if we could start with the CapEx. You mentioned how you're reducing CapEx by around 15% to less than $500 million. I was wondering if you could maybe unpack the year-over-year declines, what that kind of represents, maybe a little bit of a mix between drilling and completions. And perhaps, you know, how much of the CapEx is going to be earmarked for the Emerald direct drive kind of horsepower?
Arun Jayaram: Yeah, good morning, gentlemen. I was wondering if we could start with the CapEx. You mentioned how you're reducing CapEx by around 15% to less than $500 million. I was wondering if you could maybe unpack the year-over-year declines, what that kind of represents, maybe a little bit of a mix between drilling and completions. And perhaps, you know, how much of the CapEx is going to be earmarked for the Emerald direct drive kind of horsepower?
Andrew Smith: Yeah. So I can give you a little bit of color on that. So of our total CapEx projection or for CapEx guidance, about 40% of it is going to drilling, about 45% of it's going to completion services, a little over 10% is going to drilling products, and the rest is sort of corporate and other, on a percentage basis. And in completions, of that 45%, about, gross dollars, about $65 million or so is going to new Emerald equipment that'll be coming into the fleet over the course of the year.
Andy Smith: Yeah. So I can give you a little bit of color on that. So of our total CapEx projection or for CapEx guidance, about 40% of it is going to drilling, about 45% of it's going to completion services, a little over 10% is going to drilling products, and the rest is sort of corporate and other, on a percentage basis. And in completions, of that 45%, about, gross dollars, about $65 million or so is going to new Emerald equipment that'll be coming into the fleet over the course of the year.
Speaker #3: Yeah, so of our total CapEx projection, or CapEx guidance, about 40% of it is going to drilling. I can give you a little bit of color on that.
Speaker #3: About 45% of it is going to Completion Services, a little over 10% is going to Drilling Products, and the other. On a percentage basis.
Speaker #3: And in completions, of that 45%, about gross dollars, about 65 million dollars or so is going to new emerald equipment that'll be coming into the fleet over the course of the year.
Arun Jayaram: That's super helpful. Andy, for you, I wondered if you could maybe elaborate on this trend you're seeing with continuous pumping. You know, I think in one of your previous slides, I've seen that you've talked about how simul-frac now is representing about 30% of frac activity today. Where are we in terms of continuous pumping? And is it advantageous for operators such as Patterson-UTI to pursue continuous pumping? Just, you know, obviously, I assume you're getting paid for the extra horsepower, you know, on site.
Arun Jayaram: That's super helpful. Andy, for you, I wondered if you could maybe elaborate on this trend you're seeing with continuous pumping. You know, I think in one of your previous slides, I've seen that you've talked about how simul-frac now is representing about 30% of frac activity today. Where are we in terms of continuous pumping? And is it advantageous for operators such as Patterson-UTI to pursue continuous pumping? Just, you know, obviously, I assume you're getting paid for the extra horsepower, you know, on site.
Speaker #8: That's super wondered if you could maybe elaborate on this trend you're seeing with continuous pumping? I think in one of your previous slides I've seen that you've talked about how simul frac now is representing about 30% of frac activity today.
Speaker #8: continuous pumping? Where are we in terms of And is it advantageous for operators such as Patterson with the to helpful. Andy, for you, I horsepower
Speaker #8: on-site. Yeah.
William Hendricks: Yeah. Continuous pumping is interesting in that, you know, there are certain advantages for the E&P to-- if they don't have to stop, you know, you're basically pulling production forward. So there's a value to the E&P to do that. And the E&P has to, to work through those economics to decide what that value is. Because on average, if we're pumping, you know, 22 hours per day across all of our fleets, and you wanna take that number from 22 to 24, we may have to deploy, you know, in terms of capital, another 20 to 30% of capital on location with more frac pumps, more, you know, high-pressure iron, more valves, to be able to have a system out there that can achieve that. And so the E&Ps-- and we, we charge for all that equipment when it goes on location.
Andy Hendricks: Yeah. Continuous pumping is interesting in that, you know, there are certain advantages for the E&P to-- if they don't have to stop, you know, you're basically pulling production forward. So there's a value to the E&P to do that. And the E&P has to, to work through those economics to decide what that value is. Because on average, if we're pumping, you know, 22 hours per day across all of our fleets, and you wanna take that number from 22 to 24, we may have to deploy, you know, in terms of capital, another 20 to 30% of capital on location with more frac pumps, more, you know, high-pressure iron, more valves, to be able to have a system out there that can achieve that. And so the E&Ps-- and we, we charge for all that equipment when it goes on location.
Speaker #2: Continuous pumping is interesting in
Speaker #2: If they don't have to stop, you're basically advantageous for the E&P to pulling production forward. So there's a—there are certain value to the E&P to do that.
Speaker #2: And the E&P has to work through those economics to pursue continuous pumping—just pumping 22 hours per day across all of our fleets. And you want to take that number from 22 to, in terms of capital, another 20 to 30% of capital on location with more frac high-pressure iron, more valves.
Speaker #2: To be able to have a system out, pumps—more there that can achieve that. And so the E&Ps, and we charge for all that equipment when it goes on location.
Speaker #2: So the E&Ps have to do their own earnings math to decide is that worth the extra equipment that's on location to be able to accomplish bringing production forward on that particular pad or multiple pads really worth that a number of E&Ps that are trialing it to see how it works, to see what the costs are going to be.
William Hendricks: So the E&Ps have to do their own, you know, earnings math to decide, you know, is that worth the extra equipment that's on location to be able to accomplish that? You know, is that value of bringing production forward, you know, on that particular pad or multiple pads, really worth that effort? So what we see today is we see a number of E&Ps that are trialing it to see how it works, to see what the costs are gonna be. And we're working with, you know, a number of our customers to reduce those costs, so we don't maybe have to put so much equipment out on there. So it's all evolving at the same time. But at the end of the day, it's gonna be up to the E&P to decide, does it make economic sense for them? Technically, we can do it.
Andy Hendricks: So the E&Ps have to do their own, you know, earnings math to decide, you know, is that worth the extra equipment that's on location to be able to accomplish that? You know, is that value of bringing production forward, you know, on that particular pad or multiple pads, really worth that effort? So what we see today is we see a number of E&Ps that are trialing it to see how it works, to see what the costs are gonna be. And we're working with, you know, a number of our customers to reduce those costs, so we don't maybe have to put so much equipment out on there. So it's all evolving at the same time. But at the end of the day, it's gonna be up to the E&P to decide, does it make economic sense for them? Technically, we can do it. Technically, we know how to do it. We're working to continue to reduce the cost to do it, but it's the E&P's economic decision at the end of the day.
Speaker #2: effort? working with a number of our customers So what we see today is we see And we're to reduce those costs so we on it on there.
Speaker #2: You don't maybe have to put so much equipment, so it's all evolving at the same time. But at the end of the day, it's going to be up to the E&P to decide, does it make economic sense for them?
Speaker #2: Technically, we can do it. Technically, we know how to do it. We're working to continue to reduce the cost to do it. But it's the E&P's economic decision at the end of the day.
William Hendricks: Technically, we know how to do it. We're working to continue to reduce the cost to do it, but it's the E&P's economic decision at the end of the day.
Speaker #8: Yeah, Andy, you said it's 20 days to 30% more horsepower at the well site to do.
Arun Jayaram: Yeah. Andy, you said it's 20% to 30% more horsepower at the well site to do that?
Arun Jayaram: Yeah. Andy, you said it's 20% to 30% more horsepower at the well site to do that?
Speaker #8: that?
William Hendricks: ... I would say 20 to 30% more capital in general, because you've got pump equipment, you've got, maybe redundancy on a number of things. You've got more piping, more valves out there. Because, you know, if you're gonna pump for multiple days straight, you still need to be able to access pumps to maintain them. So you have to have-
Andy Hendricks: ... I would say 20% to 30% more capital in general, because you've got pump equipment, you've got, maybe redundancy on a number of things. You've got more piping, more valves out there. Because, you know, if you're gonna pump for multiple days straight, you still need to be able to access pumps to maintain them. So you have to have-
Speaker #2: It's generally about 20% to 30% more capital, because you've got pump equipment, you might have redundancy on a number of things, and you've got more piping and more valves out there.
Speaker #2: Because if you're going to pump for multiple days straight, you still need to be able to access pumps to maintain them. So you have to have more pumps than you're using so that you can swap pumps in and out of the lines while you're circulating without stopping the circulation.
Arun Jayaram: Yep.
Arun Jayaram: Yep.
William Hendricks: You know, more pumps than you're using, so that you can swap pumps in and out of the lines while you're circulating, without stopping the circulation. So you're gonna have more equipment on location so you can manage all that.
Andy Hendricks: You know, more pumps than you're using, so that you can swap pumps in and out of the lines while you're circulating, without stopping the circulation. So you're gonna have more equipment on location so you can manage all that.
Speaker #2: So you're going to have more equipment on location so that you can manage all that.
Speaker #8: Okay. If I could just sneak in one more, Andy, I believe you're anticipating running around 2 million horsepower plus or minus in one queue or currently.
Arun Jayaram: Okay. If I could just sneak in one more, Andy, I believe you were anticipating running around 2 million horsepower, plus or minus in, you know, Q1 or currently. What is your average fleet size in terms of horsepower today?
Arun Jayaram: Okay. If I could just sneak in one more, Andy, I believe you were anticipating running around 2 million horsepower, plus or minus in, you know, Q1 or currently. What is your average fleet size in terms of horsepower today?
Speaker #8: size in terms of horsepower today?
William Hendricks: You know, there, there's no average fleet size. I mean, I can tell you every fleet that we have deployed is a different size. You know, is it in the Midland Basin? Is it in the Delaware Basin? Is it a simul-frac in the Delaware Basin? Is it pumping in the Haynesville? And so every one is different. Every one has become very bespoke to whatever, you know, operation the operator's trying to accomplish. You know, as I mentioned earlier, just, you know, even a simul-frac job, we might have a simul-frac job today that's got another 20% of horsepower versus a simul-frac last year, because they wanna do it at higher rates and higher pressures, because they're seeing increases in production. So, you know, and it even changes from pad to pad.
Andy Hendricks: You know, there, there's no average fleet size. I mean, I can tell you every fleet that we have deployed is a different size. You know, is it in the Midland Basin? Is it in the Delaware Basin? Is it a simul-frac in the Delaware Basin? Is it pumping in the Haynesville? And so every one is different. Every one has become very bespoke to whatever, you know, operation the operator's trying to accomplish. You know, as I mentioned earlier, just, you know, even a simul-frac job, we might have a simul-frac job today that's got another 20% of horsepower versus a simul-frac last year, because they wanna do it at higher rates and higher pressures, because they're seeing increases in production. So, you know, and it even changes from pad to pad. It may be a high amount of horsepower on one pad, for the same customer. It moves and it shrinks for the next pad. So it's, it's constantly changing.
Speaker #2: There's no average fleet size. I mean, I can tell you every fleet that we have deployed is a different size. Is it in the Midland Basin?
Speaker #2: Is it in the Delaware Basin? Is it a simul frac in the Delaware Basin? Is it pumping in the Haynesville? And so every one is different.
Speaker #2: Every one has become very bespoke to whatever operation the operator's trying to accomplish. As I mentioned earlier, even a simul frac job, we might have a simul frac job today that's got another 20% of horsepower versus a simul frac last year.
Speaker #2: If they want to do it at higher rates and higher pressures because they're seeing increases in production. So it even changes from pad to pad.
Speaker #2: It may be a high amount of horsepower in one pad for the same customer. It moves, and it shrinks for the next pad. So it's constantly changing.
William Hendricks: It may be a high amount of horsepower on one pad, for the same customer. It moves and it shrinks for the next pad. So it's, it's constantly changing.
Speaker #1: And your next question comes from the line of Atti Modak with Goldman Sachs. Please go ahead.
Operator: Your next question comes from the line of Ati Modak with Goldman Sachs. Please go ahead.
Operator: Your next question comes from the line of Ati Modak with Goldman Sachs. Please go ahead.
Atidrip Modak: Hey, good morning, team. Andy, I was wondering if you could give us color on the private versus public customer conversations, as we think about your exposure in the US?
Atidrip Modak: Hey, good morning, team. Andy, I was wondering if you could give us color on the private versus public customer conversations, as we think about your exposure in the US?
Speaker #9: Hey, good morning, team. Andy, I was wondering if you could give us color on the private versus public customer conversations, as we think about your exposure in the—
Speaker #9: US. Hey, Andy, good
William Hendricks: Hey, Ati, good morning. So, you know, we work for some of the biggest publics, and we also work for some of the biggest privates in the US. And I would say that the large privates, you know, think of things long term, just like the large publics think of things long term. You know, they take a multi-year view to everything, and, you know, that's how they view it. We do some work for some of the small private equity-backed privates, but that's a very small percentage of what we do. We're heavily weighted to, you know, the largest EMPs in the US, whether they're both public or private.
Andy Hendricks: Hey, Ati, good morning. So, you know, we work for some of the biggest publics, and we also work for some of the biggest privates in the US. And I would say that the large privates, you know, think of things long term, just like the large publics think of things long term. You know, they take a multi-year view to everything, and, you know, that's how they view it. We do some work for some of the small private equity-backed privates, but that's a very small percentage of what we do. We're heavily weighted to, you know, the largest EMPs in the US, whether they're both public or private.
Speaker #2: Morning. So, we work for some of the biggest publics, and we also work for some of the biggest privates in the US. And I would say that the large privates think of things long-term just like the large publics think of things long-term.
Speaker #2: They take a multi-year view to everything. And that's how they view it. We do some work for some of the small private equity-backed privates, but that's a very small percentage of what we do.
Speaker #2: We're heavily weighted to the largest E&Ps in the US, whether they're both public or
Speaker #2: private. Got it.
Atidrip Modak: Got it. And the Saudi opportunity, it sounded like it's mostly on the bit side because of in-country value. Is that the right way to think about it, or are there other strategic opportunities for you down the road?
Atidrip Modak: Got it. And the Saudi opportunity, it sounded like it's mostly on the bit side because of in-country value. Is that the right way to think about it, or are there other strategic opportunities for you down the road?
Speaker #9: And the Saudi opportunity it sounded like it's mostly on the bid side because of in-country value. Is that other strategic opportunities the right way to think about it, or are there for you down the road?
Speaker #9: And the Saudi opportunity it sounded like it's mostly on the bid side because of in-country value. Is that other strategic opportunities the right way to think about it, or are there for you down the
William Hendricks: The Saudi, for now, is focused on drill bits for us. And you're absolutely right, it's the in-country value equation that the country uses. And so if you manufacture in country, you know, it improves your score. It allows your customers to buy more products from you. If you're manufacturing in country and exporting out to other countries in the region, that improves your score and allows your customer there to buy more from you. So we think that that's, you know, certainly a benefit for us, and our team's done a great job of getting us to the point where we can manufacture the first one in December, and we'll continue from here.
Andy Hendricks: The Saudi, for now, is focused on drill bits for us. And you're absolutely right, it's the in-country value equation that the country uses. And so if you manufacture in country, you know, it improves your score. It allows your customers to buy more products from you. If you're manufacturing in country and exporting out to other countries in the region, that improves your score and allows your customer there to buy more from you. So we think that that's, you know, certainly a benefit for us, and our team's done a great job of getting us to the point where we can manufacture the first one in December, and we'll continue from here.
Speaker #2: So, Saudi for now is focused on drill bits for us, and you're absolutely right. It's the in-country value equation that the country uses, and so if you manufacture in-country, it improves your score. It allows your customers to buy more products from you.
Speaker #2: If you're manufacturing in-country and exporting out to other countries in the region, that improves your score and allows your customer there to buy more from you.
Speaker #2: So we think that that's certainly a benefit for us, and our team's done a great job of getting us to the point where we could manufacture the first one in December, and we'll continue from
Speaker #2: here. Thank
Speaker #9: you. And your next question comes from
Atidrip Modak: Thank you.
Atidrip Modak: Thank you.
Operator: Your next question comes from the line of Keith Mackey with RBC Capital Markets. Please go ahead.
Operator: Your next question comes from the line of Keith Mackey with RBC Capital Markets. Please go ahead.
Speaker #1: the line of Keith Mackey with RBC Capital Markets. Please go ahead.
Keith Mackey: Hey, good morning.
Keith Mackey: Hey, good morning.
Speaker #10: Hey, good morning. Just wanted to start out on the rig side. Can you just talk through some of the technology offerings on your rigs, how has that changed, and what sort of revenue or just net benefit uplift do you get from the technology in this market?
William Hendricks: Good morning.
Andy Hendricks: Good morning.
Keith Mackey: Morning. Just wanted to start out on the rig side. Can you just talk through some of the technology offerings on your rigs? How has that changed, and what sort of revenue or just net benefit uplift do you get from the technology in this market? And finally, to that, more of your customers are starting to talk about robotics on the rig floor. What's your view there?
Keith Mackey: Morning. Just wanted to start out on the rig side. Can you just talk through some of the technology offerings on your rigs? How has that changed, and what sort of revenue or just net benefit uplift do you get from the technology in this market? And finally, to that, more of your customers are starting to talk about robotics on the rig floor. What's your view there?
Speaker #10: And finally, to that, more of your customers are starting to talk about robotics on the rig floor. What's your view
Speaker #10: there? So our Cortex
William Hendricks: So, you know, our Cortex automation is a number of applications that enhance our control systems and automate a number of the functions that a driller might normally do when he's operating the drilling rig and working with his crew. And we've developed a number of these applications over the years, and it's been an interesting evolution, because as you start to develop applications, then, you know, your customer comes back with what ifs. "Well, what if we do this? Or what if we do that?" And that either improves the existing applications, you know, where you tweak them some more. Where our data analytics team will, you know, look at the data in different ways and decide how to best fine-tune these applications.
Andy Hendricks: So, you know, our Cortex automation is a number of applications that enhance our control systems and automate a number of the functions that a driller might normally do when he's operating the drilling rig and working with his crew. And we've developed a number of these applications over the years, and it's been an interesting evolution, because as you start to develop applications, then, you know, your customer comes back with what ifs. "Well, what if we do this? Or what if we do that?" And that either improves the existing applications, you know, where you tweak them some more. Where our data analytics team will, you know, look at the data in different ways and decide how to best fine-tune these applications.
Speaker #2: Automation is a number of applications that enhance our control systems and automate a number of the functions that a driller might normally do when he's operating the drilling rig and working with his crew.
Speaker #2: And we've developed a number of these applications over the years, and it's been an interesting evolution because as you start to develop applications, then your customer comes back with, "What ifs?
Speaker #2: "Well, what if we do this? Or what if we do that?" And that either improves the existing applications where you tweak them some more, or our data analytics team will look at the data in different ways and decide how to best fine-tune these applications. Or the customer works with you to come up with a new application that they see as beneficial and asks for priority on that.
William Hendricks: Or the customer works with you to come up with a new application that they see as beneficial and, you know, ask for priority on that. And so, you know, over the years, we've continued to develop those out, and it's. You know, there's revenue involved. We certainly charge for these, but, you know, it also means that we, you know, become more important for that customer when we're offering these things. And we tune these applications to their specific procedures, or their workflows, or their spec, you know, specifications on how they wanna see the drill bit go back to bottom, or what kind of weight on bits or, you know, they want to carry on the drill bit, or what kind of differential pressures they want to maintain.
Andy Hendricks: Or the customer works with you to come up with a new application that they see as beneficial and, you know, ask for priority on that. And so, you know, over the years, we've continued to develop those out, and it's. You know, there's revenue involved. We certainly charge for these, but, you know, it also means that we, you know, become more important for that customer when we're offering these things. And we tune these applications to their specific procedures, or their workflows, or their spec, you know, specifications on how they wanna see the drill bit go back to bottom, or what kind of weight on bits or, you know, they want to carry on the drill bit, or what kind of differential pressures they want to maintain.
Speaker #2: And so over the years, we've continued to develop those out. And there's revenue involved. We certainly charge for these, but it also means that we become more important for that customer when we're offering these things.
Speaker #2: And we tune these applications to their specific procedures, or their workflows, or their specifications on how they want to see the drill bit go back to bottom, or what kind of weight on bit they want to carry on the drill bit, or what kind of differential pressures they want to maintain.
Speaker #2: And so, it just allows us to be closer with the customers on how we run those types of operations. In terms of robotics, our teams have certainly been looking at it.
William Hendricks: And so, you know, it just allows us to, you know, be closer with the customers on how we run those types of operations. In terms of robotics, you know, our teams have certainly, they're looking at it. There are some advantages. There are also some big costs. And we've done a lot of the groundwork to deploy that on either our Apex XE Plus rig or our Apex XK. And, you know, I think over time, we'll do that as well, depending on what the customers are requesting.
Andy Hendricks: And so, you know, it just allows us to, you know, be closer with the customers on how we run those types of operations. In terms of robotics, you know, our teams have certainly, they're looking at it. There are some advantages. There are also some big costs. And we've done a lot of the groundwork to deploy that on either our Apex XE Plus rig or our Apex XK. And, you know, I think over time, we'll do that as well, depending on what the customers are requesting.
Speaker #2: There are some advantages. There are also some big costs. And we've done a lot of the groundwork to deploy that on either our apex XC plus rig or our apex XK.
Speaker #2: And I think over time, we'll do that as well depending on what the customers are requesting.
Speaker #10: Got it. Thanks for the color. And just finally, Q4, we're expecting a lot more seasonality from you and several of your peers can you just give us a little bit more color on really why you think that didn't happen and things were a lot more resilient?
Jeff LeBlanc: ... Got it. Thanks for the color. And just, just finally, you know, Q4, we were expecting a lot more seasonality from, you know, you and several of your peers. Can you just give us a little bit more color on, on really why you think that didn't happen, and, and things were a lot more resilient? You know, is there some element of the E&Ps just not being able to slow down, given where current activity levels are, or are there pricing incentives given to keep, keep fleets going? Just what is, what is your sense of really why activity was so resilient in Q4?
Atidrip Modak: ... Got it. Thanks for the color. And just, just finally, you know, Q4, we were expecting a lot more seasonality from, you know, you and several of your peers. Can you just give us a little bit more color on, on really why you think that didn't happen, and, and things were a lot more resilient? You know, is there some element of the E&Ps just not being able to slow down, given where current activity levels are, or are there pricing incentives given to keep, keep fleets going? Just what is, what is your sense of really why activity was so resilient in Q4?
Speaker #10: Is there some element of the E&Ps just not being able to slow down, given where current activity levels are, or are there pricing incentives given to keep fleets going?
Speaker #10: Just what is your sense of really why activity was so resilient
Speaker #10: to Q4? I think for
William Hendricks: I think for us, it was a combination of two main things. It was our customer base. You know, as I've mentioned before, we work for some of the largest customers, you know, in the US, and those customers have stayed, you know, even more resilient than we've thought and just kind of kept working through the quarter, maybe more than they normally would. And then the other piece is, for some of those customers that may have slowed down, our teams have done a real good job, you know, placing that equipment in other places to be able to do that. Certainly wasn't, you know, pricing concessions, but really more working with the customers.
Andy Hendricks: I think for us, it was a combination of two main things. It was our customer base. You know, as I've mentioned before, we work for some of the largest customers, you know, in the US, and those customers have stayed, you know, even more resilient than we've thought and just kind of kept working through the quarter, maybe more than they normally would. And then the other piece is, for some of those customers that may have slowed down, our teams have done a real good job, you know, placing that equipment in other places to be able to do that. Certainly wasn't, you know, pricing concessions, but really more working with the customers.
Speaker #2: For us, it was a combination of two main things. It was our customer base. As I've mentioned before, we work for some of the largest customers.
Speaker #2: In the US, and those customers have stayed even more resilient than we've thought and just kind of kept working through the quarter maybe more than they normally would.
Speaker #2: And then the other piece is for some of those customers that may have slowed down, our teams have done a real good job placing that equipment in other places to be able to do that.
Speaker #2: Certainly wasn't pricing concessions, but really more working with the customers but again, I think it goes back to our customer base. And the ability of our teams to know all the customers so that when we do have to move something around, that we can do that efficiently.
William Hendricks: But again, I think it goes back to our customer base and the ability of our teams, you know, to know all the customers so that when we do have to move something around, that we can do that efficiently.
Andy Hendricks: But again, I think it goes back to our customer base and the ability of our teams, you know, to know all the customers so that when we do have to move something around, that we can do that efficiently.
Speaker #10: Got it. Thanks very much.
Jeff LeBlanc: Got it. Thanks very much.
Atidrip Modak: Got it. Thanks very much.
William Hendricks: Thanks.
Andy Hendricks: Thanks.
Speaker #1: And your next question comes from the line of Eddie Kim with Barclays. Fiscal.
Operator: Your next question comes from the line of Eddie Kim with Barclays. Please go ahead.
Operator: Your next question comes from the line of Eddie Kim with Barclays. Please go ahead.
Speaker #1: Head. Hi, good morning.
Eddie Kim: Hi, good morning. Just wanted to dig into the completion services guide for the first quarter. You said you expected gross profit of around $95 million, which represents about a 14% sequential decline. At the same time, you said you expected activity to decline only slightly in the first quarter due to winter weather. So, I mean, that would seem to imply a not insignificant pricing decline from fourth quarter to first quarter. Is that a fair assessment? And should we expect that to be sort of a headwind for you as your fleets move on to this lower pricing level as we move throughout the year?
Eddie Kim: Hi, good morning. Just wanted to dig into the completion services guide for the first quarter. You said you expected gross profit of around $95 million, which represents about a 14% sequential decline. At the same time, you said you expected activity to decline only slightly in the first quarter due to winter weather. So, I mean, that would seem to imply a not insignificant pricing decline from fourth quarter to first quarter. Is that a fair assessment? And should we expect that to be sort of a headwind for you as your fleets move on to this lower pricing level as we move throughout the year?
Speaker #11: Just wanted to dig into that completion services guide for the first quarter. You said you expected gross profit of around $95 million, which represents about a 14% sequential decline.
Speaker #11: At the same time, you said you expected activity to decline only slightly in the first quarter due to winter weather. So I mean, that would seem to imply not insignificant pricing decline.
Speaker #11: From first quarter to fourth quarter, first quarter, is that a fair assessment? And should we expect that to be sort of a headwind for you as your fleets?
Speaker #11: Move on to this lower pricing level as we move throughout the year?
Speaker #2: No, not at all. I wouldn't say this is any significant pricing decline by any means. I think this is all more activity-related. You can go back and look at the number of days below freezing in the Permian or the number of days that Pennsylvania had heavy snowfall, and that's where we were held up in activity in the first quarter.
William Hendricks: No, not at all. I wouldn't say this is any significant pricing decline by any means. I think this is all more activity related. You know, you can go back and look at the number of days below freezing in the Permian or the number of days that Pennsylvania had heavy snowfall, and that's where we were, you know, held up in activity in Q1. So that's just pushing, you know, revenue from Q1 eventually, you know, into Q2. So, you know, that's, that's how that's, you know, kind of moving. In terms of pricing decline, you know, what we've said before, even at the last earnings call, we're gonna have a slight decline because of various tenders that have happened, you know, in the second half of last year, but that's in the single digits.
Andy Hendricks: No, not at all. I wouldn't say this is any significant pricing decline by any means. I think this is all more activity related. You know, you can go back and look at the number of days below freezing in the Permian or the number of days that Pennsylvania had heavy snowfall, and that's where we were, you know, held up in activity in Q1. So that's just pushing, you know, revenue from Q1 eventually, you know, into Q2. So, you know, that's, that's how that's, you know, kind of moving. In terms of pricing decline, you know, what we've said before, even at the last earnings call, we're gonna have a slight decline because of various tenders that have happened, you know, in the second half of last year, but that's in the single digits. So it's, you know, any price decline on average is single digits, but certainly that's not what's driving, you know, what you're seeing in the decrease in gross profit. It's more had to do with weather activity and some mix in activity during the quarter.
Speaker #2: So that's just pushing revenue from the first quarter eventually into the second quarter, so that's how that's kind of moving. In terms of pricing decline, what we've said before, even at the last earnings call, we're going to have a slight decline because of various tenders that have happened.
Speaker #2: In the second half of last year, but that's in the single digits. So, any price decline on average is single digits. But certainly, that's not what's driving what you're seeing in the decrease in gross profit.
William Hendricks: So it's, you know, any price decline on average is single digits, but certainly that's not what's driving, you know, what you're seeing in the decrease in gross profit. It's more had to do with weather activity and some mix in activity during the quarter.
Speaker #2: It's more had to do with weather activity and some mix in activity during the quarter.
Speaker #11: Got it. Got it. Okay. Thanks for clarifying my understanding there.
Eddie Kim: Got it. Got it. Okay. Thanks for clarifying my understanding there.
Eddie Kim: Got it. Got it. Okay. Thanks for clarifying my understanding there.
William Hendricks: That's no problem.
Andy Hendricks: That's no problem.
Eddie Kim: My follow-up is just, you opened up a new manufacturing facility in Saudi. You said you're manufacturing drill bits in the country. Could you sort of talk about the growth ramp-up you expect in Saudi, maybe this year and next? And do you think Saudi demand is gonna be sufficient to absorb all that capacity coming out of that new facility, or is there gonna be opportunity to sell drill bits into other countries in that region in a couple of years?
Eddie Kim: My follow-up is just, you opened up a new manufacturing facility in Saudi. You said you're manufacturing drill bits in the country. Could you sort of talk about the growth ramp-up you expect in Saudi, maybe this year and next? And do you think Saudi demand is gonna be sufficient to absorb all that capacity coming out of that new facility, or is there gonna be opportunity to sell drill bits into other countries in that region in a couple of years?
Speaker #11: My follow-up No problem. is just you opened up a new manufacturing facility in Saudi. You said your manufacturing drill bits in the country. Could you sort of talk about the growth ramp-up you expect in Saudi?
Speaker #11: Maybe this year and next, and do you think Saudi demand is going to be sufficient to absorb all that capacity coming out of that new facility, or is there going to be opportunity to sell drill bits into other countries in that region in a couple of years?
Speaker #2: Yeah. We've seen, of course—we follow the rig count and the announcements on increasing rig count in Saudi, because that's what drives our drill bit business.
William Hendricks: Yeah, you know, we've seen, you know, of course, we follow the rig count and the announcements on increasing rig count in Saudi, because that's what drives our drill bit business. You know, they've had a big slowdown over the last year and a half in both onshore and jackup drilling rigs over in Saudi, and we're seeing the calls to put the onshore drilling rigs back to work. And, you know, that will start to drive an increase in drilling, drill bit demand.
Andy Hendricks: Yeah, you know, we've seen, you know, of course, we follow the rig count and the announcements on increasing rig count in Saudi, because that's what drives our drill bit business. You know, they've had a big slowdown over the last year and a half in both onshore and jackup drilling rigs over in Saudi, and we're seeing the calls to put the onshore drilling rigs back to work. And, you know, that will start to drive an increase in drilling, drill bit demand. We do expect, you know, the customer over there to consume some of their existing drill bits that they might have in a warehouse, but as they, you know, go through that, then, you know, they'll be calling for new drill bits, and, you know, we'll have some manufacturing capacity over there to be able to to meet that need. We'll probably still likely ship drill bits from the US at the same time, so it'll be a mix of local manufacturing plus drill bits coming into the US until we expand our manufacturing over there. But, real pleased with, you know, what the team did, given some of the constraints and challenges we had over there to get manufacturing set up. We've been doing remanufacturing in Saudi for years, so it was really a matter of expanding, you know, the space, the types of machines that we needed over there, and also the skills that we needed over there to be able to go to full manufacturing. But, they were able to produce that first drill bit in December.
Speaker #2: They've had a big slowdown over the last year and a half in both onshore and jackup drilling rigs over in Saudi. And we're seeing the calls to put the onshore drilling rigs back to work.
Speaker #2: And so, you've had a number of drilling contractors that operate in Saudi that have made those announcements. And that will start to drive an increase in drilling drill bit demand.
William Hendricks: We do expect, you know, the customer over there to consume some of their existing drill bits that they might have in a warehouse, but as they, you know, go through that, then, you know, they'll be calling for new drill bits, and, you know, we'll have some manufacturing capacity over there to be able to to meet that need. We'll probably still likely ship drill bits from the US at the same time, so it'll be a mix of local manufacturing plus drill bits coming into the US until we expand our manufacturing over there. But, real pleased with, you know, what the team did, given some of the constraints and challenges we had over there to get manufacturing set up.
Speaker #2: We do expect the customer over there to consume some of their existing drill bits that they might have in a warehouse. But as they go through that, then they'll be calling for new drill bits.
Speaker #2: And we'll have some manufacturing capacity over there to be able to meet that need. We'll probably still likely ship drill bits from the US at the same time.
Speaker #2: So it'll be a mix of local manufacturing plus drill bits coming into the US until we expand our manufacturing over there. But real pleased with what the team did, given some of the constraints and challenges we had over there to get manufacturing set up.
Speaker #2: We've been doing remanufacturing in Saudi for years, so it was really a matter of expanding the space, the types of machines that we needed over there, and also the skills that we needed over there to be able to go to full manufacturing.
William Hendricks: We've been doing remanufacturing in Saudi for years, so it was really a matter of expanding, you know, the space, the types of machines that we needed over there, and also the skills that we needed over there to be able to go to full manufacturing. But, they were able to produce that first drill bit in December.
Speaker #2: But they were able to produce that first drill bit in
Speaker #2: December. Got
Eddie Kim: Got it. Great. Thanks for that color. I'll turn it back.
Eddie Kim: Got it. Great. Thanks for that color. I'll turn it back.
Speaker #11: it. Great. Thanks for that color. I'll turn it back.
William Hendricks: Thanks.
Andy Hendricks: Thanks.
Speaker #1: And we'll take our last question, coming from Jeff Thanks Bellman with Daniel Energy Partners. Fiscal.
Operator: We'll take our last question from Jeff LeBlanc with Daniel Energy Partners. Please go ahead.
Operator: We'll take our last question from Jeff LeBlanc with Daniel Energy Partners. Please go ahead.
Speaker #1: Head. Hi, good morning,
Jeff LeBlanc: Hi, good morning, everybody. Andy, a bit of a high-level question and definitely related to some of what you've already addressed, but I wanted to get your take. If I had a thesis that the US industry's gone a long way working through their Tier One inventory, and activity is gonna have to increasingly shift towards, let's say, more complex or Tier Two resources, how do you view that transition for Patterson, and how does your asset base help operators kind of extend their economic life and expand their resource base if that shift actually has to occur? Thanks.
Jeff LeBlanc: Hi, good morning, everybody. Andy, a bit of a high-level question and definitely related to some of what you've already addressed, but I wanted to get your take. If I had a thesis that the US industry's gone a long way working through their Tier One inventory, and activity is gonna have to increasingly shift towards, let's say, more complex or Tier Two resources, how do you view that transition for Patterson, and how does your asset base help operators kind of extend their economic life and expand their resource base if that shift actually has to occur? Thanks.
Speaker #11: everybody. Andy, a bit of a high-level question. And definitely related to some of what you've already addressed, but I wanted to get your take.
Speaker #11: If I had a thesis that the U.S. industry has gone a long way working through their Tier 1 inventory, and activity is going to have to increasingly shift towards, let's say, more complex or Tier 2 resources, how do you view that transition for Patterson?
Speaker #11: And how does your asset base help operators kind of extend their economic life and expand their resource base if that shift actually has to occur?
Speaker #11: Thanks.
Speaker #2: Sure. There's a lot of talk about shifting from Tier 1 to Tier 2. And I really think that's operator-specific. I've got we work for some EMPs that tell us they have another decade of Tier 1 that they're still working on.
William Hendricks: ...There's a lot of talk about shifting from Tier One to Tier Two, and I really think that's operator specific. You know, we work for some E&Ps that tell us they have another decade of Tier One that they're still working on, and then we have some E&Ps that say, "Yeah, we're gonna start to look at some of the Tier Two or some of the deeper geological horizons." For us to do that, that means more service intensity, and more intensity means that, you know, it's positive for our pricing. But on the drilling side, it means we may need to, you know, continue to add capacity on the size of the rig that we're using, so we'll continue to do that. And on the completion side, it, you know, may require more horsepower and location for some of these deeper plays.
Andy Hendricks: ...There's a lot of talk about shifting from Tier One to Tier Two, and I really think that's operator specific. You know, we work for some E&Ps that tell us they have another decade of Tier One that they're still working on, and then we have some E&Ps that say, "Yeah, we're gonna start to look at some of the Tier Two or some of the deeper geological horizons." For us to do that, that means more service intensity, and more intensity means that, you know, it's positive for our pricing. But on the drilling side, it means we may need to, you know, continue to add capacity on the size of the rig that we're using, so we'll continue to do that. And on the completion side, it, you know, may require more horsepower and location for some of these deeper plays. And so it just increases overall service intensity, which is positive for us.
Speaker #2: And then we have some EMPs that say, "Yeah, we're going to start to look at some of the Tier 2 or some of the deeper geological horizons." For us to do that, that means more service intensity and more intensity means that it's positive for our pricing.
Speaker #2: But on the drilling side, it means we may need to continue to add capacity on the size of the rig that we're using. So we'll continue to do that.
Speaker #2: And on the completion side, it may require more horsepower and location for some of these deeper plays and so it just increases overall service intensity, which is positive for us.
William Hendricks: And so it just increases overall service intensity, which is positive for us.
Speaker #11: Great. Thank you.
Operator: Great. Thank you.
Operator: Great. Thank you.
William Hendricks: Thanks.
Andy Hendricks: Thanks.
Speaker #1: And that concludes our question Thanks. and answer session. I would like to hand it back to Andy Hendricks for closing
Operator: That concludes our question and answer session. I would like to hand it back to Andy, Andy Hendricks, for closing remarks.
Operator: That concludes our question and answer session. I would like to hand it back to Andy, Andy Hendricks, for closing remarks.
Speaker #1: remarks. Thank you.
William Hendricks: Thank you. I appreciate everybody dialing in today, and we'll wrap up this call for the Q4 2025, and look forward to talking to you again in April. Thank you.
Andy Hendricks: Thank you. I appreciate everybody dialing in today, and we'll wrap up this call for the Q4 2025, and look forward to talking to you again in April. Thank you.
Speaker #2: I appreciate everybody dialing in today. We'll wrap up this call for the Q4 2025, and look forward to talking to you again in April.
Speaker #2: Thank you.
Operator: Thank you, presenters, and this concludes today's conference call. Thank you all for joining. You may now disconnect.
Operator: Thank you, presenters, and this concludes today's conference call. Thank you all for joining. You may now disconnect.
