PATTERSON UTI ENERGY INC Q1 FY2025 earnings call

• Business Outlook: First quarter 2025 unfolded as anticipated with steady drilling activity and strong recovery in completions. Focus on optimizing operations and disciplined capital allocation.
• Segment Performances: All segments performed well. Integrated agreements in drilling and completion are growing. Cortex automation platform enhances drilling efficiency. Emerald 100% natural gas-powered equipment performing well.
• Financials: Strong balance sheet with $225 million in cash and undrawn $500 million revolver. Returned $51 million to shareholders in Q1.
• Technology and Innovation: Cortex automation platform and Emerald equipment are key differentiators.
• Market Position: Differentiated position in U.S. shale, exposure to large stable operators.

Drilling Services: Q1 revenue was $413 million with adjusted gross profit of $165 million. U.S. contract drilling is the majority. Q2 expected relatively steady rig count with slight decline in adjusted gross profit. Completion Services: Q1 revenue totaled $766 million with adjusted gross profit of $108 million. Q2 expected slight sequential decline in adjusted gross profit. Drilling Products: Q1 revenue was $86 million with adjusted gross profit of $39 million. Q2 expected relatively steady adjusted gross profit. Other Revenue: Q1 totaled $16 million with $7 million in adjusted gross profit. Subsequent to Q1, divested part of Great Plains Oilfield Rental, so Q2 expected proportional decline.

• Drilling Services: Q2 expected relatively steady rig count, slight decline in adjusted gross profit due to legacy contracts rolling and seasonal cost increase.
• Completion Services: Q2 expected slight sequential decline in adjusted gross profit, potential white space later in quarter if oil prices stay low.
• Drilling Products: Q2 expected relatively steady adjusted gross profit.
• Other Revenue: Q2 expected proportional decline as part of divestiture.

• Commodity Volatility: Oil price softness could lead to customer reevaluation of plans.
• Market Uncertainty: Macro factors create uncertainty, could impact activity levels.
• Tariffs: Potential impact on component costs, but addressing through alternative suppliers and pricing pass-through.

Q: Arun Jayaram from JPMorgan asked about the commercial model and integrated services for E&Ps.

A: William Hendricks discussed the breadth of offerings including drilling rigs, cementing services, directional drilling, and completion services with digital integration to help E&Ps be more efficient.

Q: Scott Gruber from Citigroup asked about the completion guide and oil price impact.

A: William Hendricks talked about activity ramp-up in Q1 and potential white space in Q2 if oil prices stay low.

Q: Atidrip Modak from Goldman Sachs asked about completion guide and corporate efficiency.

A: Andrew Smith mentioned cost focus across operating units ratably throughout the year.

Q: Saurabh Pant from Bank of America asked about drilling vs completion trends.

A: William Hendricks discussed bifurcation in market with natural gas steady and oil potentially softening.

Q: Eddie Kim from Barclays asked about distributed power market and activity declines.

A: William Hendricks said they analyze distributed power projects on a case-by-case basis.

Q: Keith Mackey from RBC Capital Markets asked about performance-based contracts and Q2 guide.

A: William Hendricks discussed growth in performance-based contracts and Andrew Smith mentioned low-to mid-single-digit declines in Q2.

Q: Stephen Gengaro from Stifel asked about legacy contracts and capital allocation.

A: Andrew Smith talked about low-to mid-single-digit declines and William Hendricks discussed reasons for stopping segment breakdowns.

Q: Dan Kutz from Morgan Stanley asked about Tier-1 super-spec and international components.

A: William Hendricks and Andrew Smith discussed performance-based definitions and international growth in product segments.

Q: Connor Jensen from Raymond James asked about rig guidance and cost controls.

A: William Hendricks said relatively steady in Q2 with potential slight softening and Andrew Smith discussed cost controls in completions.

Q: Jeff LeBlanc from TPH and Co. asked about maintenance CapEx.

A: Andrew Smith quantified maintenance CapEx for drilling and completion and discussed trend with activity.

Q: Don Crist from Johnson Rice asked about visibility in drilling and completions.

A: William Hendricks said relatively steady with fair notice for changes.

Q: Sean Mitchell from Daniel Energy Partners asked about completion fleet and M&A in Drilling Products.

A: William Hendricks and Andrew Smith discussed natural gas capability of completion fleet and potential M&A in Drilling Products