Patterson-UTI Q1 2025 Earnings Call Summary

Overall Tone and Key Takeaways: Patterson-UTI’s Q1 2025 earnings call had a moderately positive tone, driven by better-than-expected completions activity and resilient demand in gas basins. There was no material change in operational or capital expenditure plans since the last report, with management maintaining a $600 million capex guidance for the year. While caution surrounds oil markets, natural gas activity surprised to the upside, especially in Haynesville.

There were no major new business announcements, but the company highlighted the success of its integrated service model and growing demand for its 100% natural gas-powered "Emerald" frac fleets.

Management Commentary (Presentation Segment)

1. Rig, Frac Crew, and Completion Activity

• Rig Activity: Patterson-UTI operated 9,573 rig days in Q1, with an average of 62 rigs under contract projected for Q2.

• Completion Ramping: “The first quarter ramped up probably faster than we thought it would,” said CEO Andy Hendricks, particularly in the Haynesville. He added: “We’ve been very busy out of our East Texas operations covering Haynesville more than we thought.”

• Forward outlook is for flat to slightly lower rig activity, with “low to mid-single-digit declines” possible in Q2.

• Q1 revenue: $1.28 billion; EBITDA: $251 million.

2. Natural Gas Market Commentary

• The outlook is “increasingly constructive.” Activity picked up in Haynesville and Northeast basins, and Patterson has added “multiple rigs and frac fleets” in gas-focused regions.

• “We continue to believe that the industry needs higher natural gas drilling and completion activity over the next several years.”

• Hendricks also highlighted that “more than 80% of our active frac fleet can be powered by natural gas,” a key competitive edge.

3. Oil Market Commentary

• Oil market sentiment was more muted. "If oil prices remain near current levels for an extended period, we could see some of our customers reevaluate their plans.”

• However, “60% of our revenue comes from the 15 most active E&Ps… who have large, multi-year programs,” which buffers against short-term price swings.

• The company anticipates a possible softening, but not a drastic downturn.

4. Pipelines, LNG, and Infrastructure

• While no new pipelines or LNG export projects were directly mentioned, management emphasized the need for higher US shale gas production to meet LNG demand, implying future infrastructure needs.

• Patterson’s CNG compression and delivery logistics support natural gas operations even in oil basins like the Permian.

5. Technology Developments

• The Cortex drilling automation platform is driving operational efficiency through “real-time analytics, pattern recognition, and intelligent control logic.”

• The Emerald fleet of 100% natural gas-powered frac units is now “sold out” across the industry, with increasing demand for simul-frac operations.

• Drilling Products segment is expanding with the Maverick drill bit, delivering strong returns.

6. Customers and Regions of Focus

• Patterson-UTI is aligned with “larger, better capitalized customers,” including the top 15 E&Ps in the U.S.

• Key regional activity includes:

  • Haynesville (completion-heavy)

  • Permian (directional drilling, Emerald fleet use)

  • Marcellus/Utica (not explicitly mentioned but likely covered under “Northeast”)

  • International: growth in Argentina, Saudi Arabia, North Africa for drilling products.

Q&A Session Insights

1. Operational and Activity Outlook

• On rig visibility, Hendricks noted that drilling rigs typically have 1-2 pad advance notice, while completions now also have more advance notice due to high-quality customer base.

• Flat rig count guidance for Q2, but with awareness of a “small number of rigs that could be idled.”

• “White space” or idle time in completions may appear later in Q2 if oil prices don’t rebound.

2. Capital Expenditures

• $162 million spent in Q1 across segments:

  • Drilling: $73M

  • Completions: $62M

  • Drilling Products: $18M

  • Other: $8M

• Maintenance capex estimates:

  • Drilling: ~$175M

  • Completions: ~$200M

• Capex remains unchanged but is flexible. “We have the flexibility to decrease our budget just as we have done in the past.”

3. Commodity Price Sensitivity

• Oil at low $60s could trigger “softening” in the market, but major customers may not react drastically.

• Natural gas remains robust; demand driven by LNG and domestic use.

• “We are encouraged by early signs of recovery in natural gas basins.”

4. Integrated Services and Performance-Based Contracts

• Integrated work is about 10% of current operations, and growing.

• Contracts are increasingly performance-based, especially in completions.

• Management emphasized data integration, operational synergy, and digital systems as selling points.

5. Other Strategic Comments

• Decision to stop disclosing revenue per rig/day is to align with “performance-based, integrated operations.”

• Exploring drilling products M&A in softer markets if price and fit are right.

• International drilling products growth expected in Saudi Arabia, Argentina, and North Africa.

Key Figures and Dates

• Q1 Revenue: $1.28 billion

• Q1 Net Income: $1 million

• Adjusted EBITDA: $251 million

• Rig Operating Days: 9,573

• CapEx Guidance for 2025: $600 million (unchanged)

• Cash on hand: $225 million

• No debt maturities until 2028

• Q2 dividend: $0.08/share (payable June 16, record date June 2)

• Term Contracts (Q2 2025): 62 rigs average

• Term Contracts (next 12 months): 35 rigs average