Patterson-UTI Energy, Inc.

Good morning. My name is David and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Patterson UTI Energy second quarter 2022 earnings conference call. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there'll be a question and answer session. If you'd like to ask a question during this time, simply press the star key followed by the number one on your telephone keypad. If you'd like to withdraw your question, press star one once again. Thank you, Mike. Dick Rummer, Vice President of Investor Relations, you may begin your conference.

Thank you, David. Good morning, and on behalf of Patterson UTI Energy, I'd like to welcome you to today's conference call to discuss the results for the three-month end of June 30, 2022. Participating in today's call will be Andy Hendricks, Chief Executive Officer, and Andy Smith, Chief Financial Officer. A quick reminder that statements made in this conference call that state the company's or management's plans, intentions, beliefs, Expectations or predictions for the future are forward-looking statements. These forward-looking statements are subject to risks and uncertainties as disclosed in the company's SEC filings, which could cause the company's actual results to differ materially. The company undertakes no obligation to publicly update or revise any forward-looking statement. Statements made in this conference call include non-GAAP financial measures. The required reconciliations to GAAP financial measures are included on our website, patenergy.com, and in the company's press release issued prior to this conference call. And now, it's my pleasure to turn the call over to Andy Hendricks for some opening remarks. Andy? Thanks, Mike.

Good morning, and welcome to Patterson UTI's second quarter conference call. Thank you for joining us today. I am pleased with our outstanding second quarter results as we achieved significant increases in activity and pricing. Market fundamentals are strong, and demand is increasing for drilling and completions equipment and services. On top of that, the industry supply remains constrained. We expect this strong market for our services to continue, and we anticipate further improvements in pricing and activity. Therefore, we are increasing our forecast for 2022 consolidated adjusted EBITDA, which we now expect will exceed $600 million. We are also slightly increasing our 2022 capex forecast to $390 million due to increasing activity, including long lead items for rigs that will return to work in 2023, along with cost inflation. Turning now to my review of operations. First, I'm very proud of the solid execution at each of our businesses and their success in increasing both activity and pricing this quarter. While continuing to provide the high level of service quality that our customers have come to expect from Patterson UTI. In contract drilling, our average U.S. rig count for the second quarter increased by six rigs to 121 rigs. As of today, we have 127 active drilling rigs in the U.S., along with five additional rigs that are committed to return to work in 2022. We are also finalizing contracts for some rigs to be upgraded and activated in 2023. Pricing for contract drilling as strong as leading-edge day rates for Tier 1 super spec rigs are in the low to mid $30,000 per day, and then in the mid to upper $30,000 per day when you consider all of the technology and ancillary equipment. Across the industry, we estimate Tier 1 super spec rig utilization is greater than 90%. Within our own fleet, utilization of our 116 Tier 1 super spec rigs is greater than 95%. And all of our Tier 1 super spec rigs in the southern US are currently active. Industry rig demand continues to increase, with the active rig count at the highest level since early 2020. Also, supply is limited, with the lower cost reactivations of super spec rigs having already taken place. The availability of fully crewed super spec rigs is almost non-existent, as few customers are willing to give up rigs. I am aware that there are some operators that are holding off on the signing of a contract to reactivate a super spec drilling rig because they are waiting for an active super spec rig to free up, in other words, a hot rig. However, we don't have any visibility on any of our active rigs coming available. and anticipate that our rig count continues to move higher. Most of the industry's idle rig capacity will likely require meaningful reactivation and upgrade capex to go to work, which will have to be supported by term contracts. At Patterson UTI, we are well positioned to economically upgrade additional rigs. Many of our idle rigs are of the more modern design with the draw works up at the level of the rig floor, which will be cheaper to upgrade to the tier one status than rigs that have the draw works on the ground. In order to spend the necessary capital to upgrade and reactivate additional rigs, we expect term contracts, and we will be disciplined in negotiating for these terms. And in certain cases, we will be receiving upfront cash payments to de-risk our capital investment and reduce the impact that reactivation and upgrade CapEx will have on our cash flow. In pressure pumping, we achieved higher activity and better pricing during the second quarter. We reactivated our 12th spread in June, a Tier 4 dual fuel spread, and seven of our 12 spreads are now utilizing dual fuel. We continue to focus on maximizing the profitability of our 12 spreads with no additional spread reactivations planned this time. In directional drilling, we remain focused on technology, many new developments to enhance wellbore placement performance and improve wellbore quality. We continue to grow our rotary steerable system service where we have acquired additional rotary steerable tools and hired and trained more personnel with experience on these systems. Additionally, we've been successful in reducing the number of people on the rig and improving margins by utilizing remote operations to transition one of the well site technicians to a remote position here in Houston at our MS Directional Go Tech Center. We recently commercialized our directional drilling advisory program, Hi-Fi Guidance. This cloud-based program increases the reliability and consistency of directional drilling services to improve wellbore quality, increase rate of penetration, and also reduce drilling days. HIFI guidance is also designed to communicate with our drilling rig's Cortex automation control systems for improved directional performance. Looking ahead, we continue to believe that the industry is in a multi-year up cycle. We expect the U.S. onshore industry rig count to increase through 2023. Therefore, we are currently in discussions with a number of operators to add rigs in 2023, where reactivation and upgrade CapEx on those particular rigs could be $4 million or more, and with the expectation of a term contract to achieve sufficient cash returns. With that, I will now turn the call over to Andy Smith, who will review the financial results for the second quarter.