Patterson-UTI Energy Inc. (NASDAQ:PTEN) Q2 2019 Earnings Conference Call Transcript

Jul 25, 2019 • 10:00 am ET

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Patterson-UTI Energy Inc. (NASDAQ:PTEN) Q2 2019 Earnings Conference Call Transcript

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Q & A
Operator
Operator

Thank you. [Operator Instructions] Your first question comes from the line of Sasha Sanwal with UBS.

Executive
William A. Hendricks

Good morning.

Analyst
Sasha Sanwal

Thank you and good morning. So maybe to start just on drilling, as we think about the Q3 rig count guidance, can we get some color on what you're seeing from different types of customers. You saw the contract extension with a major. And maybe what indications are customers giving you about the rig requirements for 2020, if any, as rigs are being released?

Executive
William A. Hendricks

So you can look at the different types of customers that we have across the U.S., North American landscape. As we look at the major international oil companies that operate in the U.S, they seemed to be in a hold, just kind of holding steady in their operations. And therefore, we were able to recontract a number of the rigs with one of the majors. When you look at the public independents, whether large or small, they seemed to be exerting a lot of discipline in their budgets right now and trying to manage how that's going to look for the rest of the year. Thus -- that's why we're guiding down on the rig count the way we are.

With some of the private players, you've still got some sitting on the sideline waiting to see what's going to happen with pricing volatility. So we're seeing a shift in the rig count where it's going to continue to move downward, but also you have to remember that we operate both super-spec AC rigs along with SCR rigs, and we're seeing a shift in that mix. But one thing I'd like to point out is that in terms of our market share, which we don't chase market share, we're very focused on margins, but just looking at the numbers and what we believe is happening in the market, in terms of super-spec rigs, we believe that we're holding share and that's what's important in the market. And that's what generates free cash flow for us.

Analyst
Sasha Sanwal

Okay, great. That's helpful. And then maybe just also touching dayrates, can I get your views on where leading edge eventually gave way to super-spec rigs today, and have you seen any diversions in rates for term and spot work in the last few weeks?

Executive
William A. Hendricks

I think it's hard to call out if there's been any diversions in term and spot over the last few weeks. With rig count coming down, there is pressure on pricing, but also remember on super-spec rigs, utilization is still relatively high. So while there is some pressure, utilization is still relatively high.

Operator
Operator

Your next question comes from the line of Sean Meakim with JPMorgan.

Analyst
Sean Meakim

Thank you hey good morning.

Executive
William A. Hendricks

Good morning.

Analyst
Sean Meakim

So Andy, the E&P behavior seems to indicate that they are more concerned around the impact of dropping rigs than dropping frac crews, at least last year and into this year. Frac crews seemed to be more, how they are managing their budgets. So as some of