Patterson-UTI Energy Inc. (NASDAQ:PTEN) Q2 2019 Earnings Conference Call Transcript
Jul 25, 2019 • 10:00 am ET
William A. Hendricks
is today as pressure pumping activity was increasing, and the industry was moving to finer mesh sizes. In order to increase our access to these finer mesh sizes, we placed the deposit as part of the sand capacity reservation contract. We have been amortizing this deposit based on discounts received on sand purchases. However, with the substantial decrease in sand prices, it makes good economic sense to purchase lower-cost sand outside of this capacity reservation portion of the contract, and thus, we have revalued the deposit at its expected realizable value.
Excluding these noncash charges, adjusted EBITDA for the second quarter would have been $177 million, which was used in part to repurchase $75 million or 6.3 million shares of our stock. Through the first half of 2019, we have repurchased $150 million of our stock representing 5.5% of our shares outstanding at the beginning of the year. Subsequent to the end of the second quarter, our Board of Directors increased the share repurchase authorization to $250 million. In addition to the share repurchases, we have also paid dividends of $8.3 million in the quarter. Our balance sheet remains strong. Even after more than $165 million of combined share repurchases and dividends in the first half of 2019, our cash balance at June 30 improved to $256 million, an increase of just over $10 million from the $245 million at the end of last year.
Additionally, our $600 million revolver remains undrawn, and we remained modestly levered with a net debt-to-capital ratio of 20.9%. Cash capital expenditures for the second quarter totaled $96.9 million, down from $118 million in the first quarter. We now expect to spend $400 million in 2019, a decrease from our previous forecast of $465 million. This new forecast breaks down as follows. $235 million for contract drilling, including $115 million for maintenance capital; $110 million for pressure pumping, which is primarily maintenance related, $15 million for directional drilling; $30 million for our oilfield, rental, technology and E&P businesses and $10 million for general corporate purposes. While we are not prepared to give specific guidance for 2020 capex, we expect that 2020 capital spending would be lower if drilling and completion activity remains around current level. For the third quarter, depreciation expense is expected to be approximately $212 million, SG&A is expected to be $32 million and our effective tax rate is expected to be approximately 20%.
With that I'll now turn the call over to Andy Hendricks.
Thanks, Andy. Before we get into our second quarter results, I wanted to give everyone an overview of what we're seeing in the market. The second quarter began with a sense of cautious optimism as oil prices rose throughout the first quarter and started the second quarter in the mid-$60 range. Unfortunately, this optimism faded as concerns about trade, inventory levels and overall demand pushed oil prices into the low $50 range. With the commodity price volatility and the increased focus on spending within budget, E&P companies are