Patterson-UTI Energy Inc. (NASDAQ:PTEN) Q3 2019 Earnings Conference Call - Final Transcript

Oct 24, 2019 • 10:00 am ET

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Patterson-UTI Energy Inc. (NASDAQ:PTEN) Q3 2019 Earnings Conference Call - Final Transcript

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Q & A
Operator
Operator

[Operator instructions] Your first question comes from Sean Meakim with J.P. Morgan. Your line is open.

Analyst
Sean Meakim

Thanks. Hey, good morning.

Executive
Mark S. Siegel

Good morning, Sean.

Analyst
Sean Meakim

Andy, could you maybe give us your take on your customers' expected actions in the first half of next year for both pumping and drilling activity? It seems to me they definitely use frac crews to moderate their spend as needed. But the rig count declines seems to indicated sustainably lower activity. I'm concerned that perhaps their shareholder base won't take too kindly upon rig additions earlier in the year even if maybe there's a little more flexibility around the frac crews. Just how do you think about those two dynamics given you guys are important competitors in both of those markets?

Executive
William A. Hendricks

Yeah. It's hard to know exactly what's going to happen throughout 2020 so far. Our customers are still, obviously -- have a ways to go before they work out their budgets for 2020. The most visibility we have at this point is what we've been discussing and that we've already been in discussions with operators who want to put rigs up towards the end of December and into early Q1. So, we have some visibility on some increase in the rig activity into Q1. As we also mentioned, there are some customers that are looking at putting frac spreads out as well, but it's just not clear if, for us, it makes economic sense.

So, I think there are still some moving pieces to go to fully understand this as we work through the rest of Q4, but we certainly don't have full visibility on 2020. But we agree with you that over the last two years, operators have used all the completion services to moderate their budgets more than they have the rig count. But if we have the opportunity to put some rigs back to work under good terms, we're certainly going to take it toward the end of this year and early next year.

Analyst
Sean Meakim

Right. I appreciate that. That's totally fair. And in the prepared comments, you noted the attrition obviously for your own fleet, but for a lot of your peers. So we are seeing that horsepower attrition, but it's not clear how much of that is the incremental horsepower, right? So maybe a lot of what's getting fenced is not necessarily going to be the first that will come off the fence if there is an improvement in activity. Could you maybe give us a sense of your confidence level with respect to a supply-driven solution to the underutilization in the market heading into next year?

Executive
William A. Hendricks

Yeah. In our particular case, the 300,000 horsepower that we're retiring will be gone. We may use some of the components of that. If some of the components on some of those -- whether it's pump systems or blenders have low hours, then we may use the components. But in essence, that horsepower and that equipment will be gone and won't return in -- complete