Patterson-UTI Energy, Inc.

Thank you for standing by. At this time, I'd like to welcome you to the Patterson UTI Energy fourth quarter 2023 earnings conference call. All lines have been placed on mute to prevent background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, press star 1 on your telephone keypad. If you'd like to withdraw your question, just press star 1 again. Thank you. I'll now hand the floor over to Mike Stabella, VP of Investor Relations. Please go ahead.

Thank you, operator. Good morning and welcome to Patterson UTI's earnings conference call to discuss our fourth quarter 2023 results. With me today are Andy Hendrix, President and Chief Executive Officer, and Andy Smith, Chief Financial Officer. As a reminder, statements that are made in this conference call that refer to the company's or management's intentions, targets, beliefs, expectations, or predictions for the future are considered 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 takes no obligation to publicly update or revise any forward-looking statements. Statements made in this conference call include non-GAAP financial measures. The required reconciliations to GAAP financial measures are included on our website at patenergy.com and in the company's press release issued prior to this conference call. I will now turn the call over to Andy Hendricks, Patterson UTI's Chief Executive Officer.

Thank you, Mike, and welcome to Patterson UTI's fourth quarter conference call. In the first full quarter following our combination with Nextier and Altera, we showcased the earnings power of the new company and delivered a quarter of strong results for our investors. Our leadership position in both U.S. onshore drilling and completions is allowing us to strengthen partnerships with the leading U.S. shale operators that place a high value on our technology and on our top-tier assets. which in turn is allowing us to outperform the industry. We are very pleased with our results, and the fourth quarter profitability and free cash flow highlights the benefit of the combined company. As we reflect on this past year, we take great pride in our achievements. In U.S. contract drilling, we outperformed our peer group, both in activity and adjusted gross profit per operating day. In completions, we maintained a focus on returns while actively contributing to the advancement of lower cost and emission reducing assets. We delivered extremely strong results while at the same time successfully closing and integrating two transactions. Our team performed a very high level in what was a challenging year for the industry, which reflects our ability to successfully manage our business through the cycle and consistently create value for our shareholders. All that is to say our business is performing very well, and we have high conviction that we have the right strategy in place. We anticipate 2024 will be another year of strong results and considerable free cash flow, and we remain committed to our policy returning at least half of our free cash flow to our shareholders on an annual basis. As our customers look to maximize their own returns, they are consolidating their drilling and completions budgets to fewer higher quality service providers And the divergence in financial results in our sector last year's highlights the widening differential in service quality across the industry. This high grading process positions Patterson UTI favorably and aligns us with our customers as the industry transitions to manufacturing mode. The acquisitions of next year in Altera will significantly strengthen Patterson UTI's competitive position over the long term, as we realize the benefits of our combined expertise and continue to advance our technology lead over much of the oil field. This should offer a tailwind for our company as the entire industry looks to grow returns in a capital-constrained environment. We have played a critical role in enhancing the efficiency of our customers. For Patterson UTI, the benefit from these efficiency gains can largely be seen through our own improved capital efficiency, and we have worked to reduce our capital intensity even as we have improved operationally. We expect total capex for Patterson UTI to decline in 2024 relative to what the combined company spent in 2023. This reflects our commitment to optimize long-term financial performance as we navigate the evolving energy sector landscape. Over the near term, the outlook for U.S. shale activity continues to reflect the expected reduced cyclicality in our sector. The steady outlook presents us with opportunities to enhance our returns and grow our profits in the most capital efficient manner. While we do not see a benefit to adding drilling or completion capacity into the U.S. shale market, we do have several levers we will focus on this year that should help us improve our returns as the year progresses. Our rig technology offerings have momentum with growing demand for our process and equipment automation packages. alternative power solutions that use natural gas and high-line electricity to power our rigs, and numerous other applications that improve efficiencies, minimize the environmental footprint, and add value to the drilling process. Our customers value the uplift provided by these technology offerings, and given the value that can be unlocked, we expect our rig count will continue to outperform the industry. In FRAC, we are investing to convert more of our fleet to electric and other natural gas-powered technologies at a measured pace over the next several years. These new technologies consistently earn a higher return over the diesel equipment that they are replacing, which should allow us to grow profits even at steady activity levels. By mid-2024, we expect to be operating around 140,000 electric horsepower, with nearly 80% of our active fleets capable of using natural gas by then. We are making this transition to electric and other natural gas powered assets, even as CapEx for the combined completions company is expected to be down significantly from 2023. Also on the frac side, we still have considerable upside relative to where we are today as we capture synergies from the next year transaction. At the start of the year, we were roughly halfway to our $200 million annualized target, and we are confident we should be able to fully realize those synergies by the first quarter of 2025. Internationally, Altera offers long-term growth potential to expand our footprint. Altera is expected to grow revenue in EBITDA in 2024 compared to 2023, with potential for record-free cash flow generation that surpasses any period in the company's history prior to our acquisition. Altera's drill bits were used to drill over 82 million feet in 2023, for more than 625 different operators across 25 countries. The presence in these global markets will be a long-term opportunity for our company and should offer our investors growth for the next several years or more. Non-US revenue has accounted for roughly 30% of Altera's revenue since we closed the acquisition in August and for 2024. Altera's international revenue is expected to grow in the high teens percent year over year. highlighting strong prospects in various global markets across the world. By 2024, Altera's revenue from the Middle East is likely to have doubled over the past three years, with additional upside potential over the next several years. In addition to the international opportunities for Altera, in the U.S., revenue per industry rig was up more than 5% sequentially, a function of steady pricing and strong market share gains and reflecting our strong performance in the U.S., complementing the international opportunity. Aside from these operational growth opportunities, our capital allocation strategy should offer our investors an added benefit to earnings per share and return on capital. We are committed to returning at least 50% of our free cash flow to investors, including through stock buybacks, which should help grow earnings per share in the coming years as we reduce the share count. We have committed to return at least 50% of our free cash flow to shareholders on an annual basis. And given our current share price, we are likely to exceed that commitment in 2024, as we believe investing in our own shares at this price is one of the most attractive opportunities available. We expect to return at least $400 million to shareholders in 2024 through the combination of dividends and share repurchases, which would considerably lower our share count by the end of the year. Our board of directors just increased our stock repurchase authorization to a total of $1 billion. As we said previously, the macro outlook appears to be relatively stable through 2024. Current oil prices should support current oil basin activity, although we do see some potential downside in the natural gas basins. On the oil front, according to various data sources, including the EIA, U.S. shale oil production appears to have stabilized. function of the decline in activity over the past year. We do not believe current commodity prices will prompt a reduction in activity to levels that result in production declines. Therefore, a steady activity outlook in the oil basins seems reasonable. Given that 80% of the U.S. rigs are targeting oil, this should contribute to a relatively stable outlook for the entire industry in the coming year. In the near term, the outlook for natural gas is less certain, but we do not think the downside potential will have a material impact on our business over the long term. We are working for some of the best and steadiest operators in the natural gas basins, which should help limit the downside if activity slows. It is also worth noting that the Patterson UTI rig count in the Northeast and the Haynesville combined is down just five rigs total over the past year, even as the industry has reduced activity in those basins by more than 30 rigs over that same time. Our resilience demonstrates our ability to navigate challenges in those basins even in the face of declining industry activity. Further, even as our natural gas customers are slightly reducing activity in the near term, we are already having conversations with those same customers about the potential to add rigs possibly later this year, but also into next year as LNG demand comes closer into focus. Over the long term, we do not anticipate a material impact to our business from the near-term softness in natural gas prices. In drilling, if natural gas activity does fall slightly, we would anticipate only a slight decline to our own activity levels, although we are halfway through this first quarter and we haven't seen much change from our customers. In the US, we started the year operating 121 rigs, and we are currently operating 122 rigs. In 2023, our rig count significantly outperformed the industry, and we achieved this while still improving our margins. The industry rig count exited 2023 over 20% lower than it started. But in contrast, Patterson TI's rig count was down just 8%, while our average daily margins in the most recent quarter were up more than 20% compared to the fourth quarter last year. We are constantly aligning ourselves with partners that offer stable drilling programs and exhibit less sensitivity to commodity prices compared to smaller operators. Our customers benefit greatly from our Tier 1 drilling rigs, which can deliver 35% more lateral footage on average per year compared to a standard super spec rig. More than 90% of our active rigs are Tier 1 with nearly 90% utilization for this category of rig. Given the high demand and the significant value that this class of rig and technology add-ons create, average pricing on recent term contracts has been steady at close to the mid $30,000 per day, and we do not anticipate our rates changing in a flat activity market. We believe the trend towards Tier 1 rigs should continue through 2024. On the completions front, the business is performing well through the ongoing integration. In the fourth quarter, completion services revenues exceeded $1 billion and meaningfully outperformed the completions industry average. We aligned ourselves with the right customers, which helped activity remain steady through the holidays and into the year end. Our natural gas dual fuel assets continue to have success in the market, and we are confident that these assets will maintain competitiveness over the long term even with the increasing market share of natural gas-powered electric equipment. Notably, on several recent occasions, we have displaced a third-party 100% natural gas-powered electric fleet with one of our natural gas dual-fuel fleets. We believe there are multiple technology winners, including natural gas dual-fuel, as the completions industry transitions. The market for horsepower remains relatively tight, and any equipment that can be powered by natural gas is effectively sold out. This should help limit potential downside from current natural gas prices. We are confident in our ability to achieve our goals for 2024 with a significantly reduced capex budget. We expect total company capex of $740 million for 2024. This represents a significant reduction compared to the combined capex budgets of Patterson UTI, Next Year, and Altera that we all had in 2023. We believe we can achieve this while still maintaining our activity throughout 2024 and building on the strong technological advantage that we have over many other players in our industry. This positions us to generate strong free cash flow for the year and return significant cash to shareholders while still building on our competitive advantage over the long term. I'll now turn it over to Andy Smith, who will review the financial results for the fourth quarter.

Thanks, Andy. Total reported revenue for the quarter was $1,584,000,000. The reported net income attributable to common shareholders of $62,000,000 or 15 cents per share in the fourth quarter. This included $20,000,000 in merger and integration expenses. Our adjusted net income attributable to common shareholders excluding the merger and integration expenses was $78,000,000 or 19 cents per share. This adjustment excludes the previously mentioned merger and integration expense and assumes a 21% federal statutory tax rate on those charges. Adjusted EBITDA for the quarter totaled $409 million, which also excludes the previously mentioned merger and integration expenses. Our weighted average share count was 416 million shares during Q4, and we exited the quarter with 411 million shares outstanding. Our free cash flow for the fourth quarter was $247 million. During the fourth quarter, we returned $110 million to shareholders, including an $0.08 per share dividend and $76 million to repurchase 7 million shares. Annualized, this shareholder return amounted to almost 10% of the market cap at the end of the fourth quarter. For the full year, we returned $301 million to shareholders, which was approximately 77% of our free cash flow. Our board has approved an $0.08 per share dividend for Q1 and approved an increase in our stock repurchase authorization up to $1 billion. We expect to return over $100 million to shareholders again in the first quarter, including approximately $75 million to repurchase shares. For 2024, we expect to use at least $400 million to pay dividends and repurchase shares which represents more than our commitment to return 50% of free cash flow to shareholders. In our drilling services segment, fourth quarter revenue was $464 million. Drilling services adjusted gross profit totaled $187 million during the quarter. In U.S. contract drilling, operating days totaled 10,841 days. Average rig revenue per day was $36,280. The sequential decline of $1,830 per day was primarily attributable to the absence of the benefit of $2,630 per day from the recognition of previously deferred revenue in the prior quarter. Excluding the impact of this previously deferred revenue last quarter, average revenue per day would have increased $800 sequentially. Average rig operating costs per day were $19,940, which increased $70 sequentially although the prior quarter included $790 per day in insurance reserve adjustments and inventory write-downs. The average adjusted RIG gross profit per day was $16,330, a $1,910 per day decrease from the prior quarter. Excluding the previously mentioned revenue and costs in the prior quarter, adjusted RIG gross profit per day would have declined just $70 for the prior quarter. At December 31st, we had term contracts for drilling rigs in the U.S. providing for approximately $700 million of future day rate drilling revenue. Based on contracts currently in place, we expect an average of 79 rigs operating under term contracts during the first quarter of 2024 and an average of 52 rigs operating under term contracts over the four quarters ending December 31st, 2024. In our other drilling services businesses besides U.S. contract drilling, which is mostly international contract drilling and directional drilling, fourth quarter revenue was $70 million with an adjusted gross profit of $10 million. For the first quarter in U.S. contract drilling, we expect to average 120 active rigs compared to 118 active rigs in the fourth quarter. We expect drilling services adjusted gross profit to be relatively flat compared to the fourth quarter, with relatively flat adjusted gross profit in U.S. contract drilling. Reported revenue for the fourth quarter in our completion services segment totaled $1,014,000,000 with an adjusted gross profit of $232,000,000. We saw improved returns in the quarter even on slightly lower revenue, a function of the ongoing merger synergies as well as strong operations. Segment revenue was just 2% lower than the pro forma results for the segment in the third quarter, and noticeably outperformed the industry. Completion activity was relatively steady throughout the fourth quarter, with strong fundamentals for natural gas-powered equipment, as well as strong demand for our well-side integration services, with good customer alignment that kept us working through more of the holidays than we anticipated. So far in the first quarter, activity has been mostly steady, although we are seeing some white space as we strategically reposition our fleets in response to natural gas prices. After finishing a stronger than expected fourth quarter for the first quarter, we expect completion services revenue of $940 to $950 million with an adjusted gross profit of $190 to $200 million. Fourth quarter drilling products revenue totaled $88 million, which was up 1% compared to the third quarter for that business. Adjusted gross profit was $39 million. In the U.S., drilling product revenue outperformed the rig count as the company continued to deliver strong results domestically. Internationally, revenue was relatively steady sequentially. Direct operating costs included a non-cash charge of $5 million associated with the step-up in asset value of the drill bids that were on the books at the time the Altera transaction closed. The same purchase price accounting adjustment increased reported segment depreciation and amortization by $10 million during the quarter. We expect these non-cash charges will continue through 2024. We continue to see growth potential for Altera even in a flattest U.S. onshore market with opportunities to expand internationally. For the first quarter, we expect drilling products revenue of $90 million with an adjusted gross profit of $40 million. We expect $5 million in non-cash direct operating costs associated with a step-up in drill bit value at Altera, without which the segment adjusted gross profit expectation would be $45 million. Other revenue totaled $18 million for the quarter, with $8 million in adjusted gross profit. We expect other first quarter revenue and adjusted gross profit to be flat with the fourth quarter. Reported selling general and administrative expenses in the fourth quarter were $61 million. For Q1, we expect SG&A expenses of $65 million. On a consolidated basis for the fourth quarter, total depreciation, depletion, amortization, and impairment expense totaled $279 million. For the first quarter, we expect total depreciation, depletion, amortization, and impairment expense of approximately $280 million. For 2024, we expect an effective tax rate of 24%, with annual cash taxes expected to be $35 to $45 million after utilizing tax attributes to offset a portion of our taxable income. During Q4, total capex was $205 million, including $74 million in drilling services, $107 million in completion services, $17 million in drilling products, and $8 million in other and corporate Our CapEx in 2024 is expected to be $740 million, comprised of $285 million for drilling services, $360 million for completion services, $55 million for drilling products, and $40 million for other and corporate. On the drilling side, we expect to fund limited rig upgrade programs, which are for specific customers. On the completion side, we will continue to invest at a measured pace to expand our fleet of electric and natural gas-powered assets, with fleet additions serving as replacements for retired diesel assets. Of the $360 million in completion services capex, we expect capex of roughly $220 million in the first half of the year as we fund investments in next-generation frack equipment, as well as growth in our power solutions natural gas fueling business. We expect completions CapEx will largely focus on maintenance in the second half of the year. Next year and our legacy universal pressure pumping business have now been consolidated into one legal entity and are operating as one completions business, which is a big step as we continue to move through the integration process. We entered 2024 having achieved approximately half of the anticipated $200 million in annualized synergies. We remain highly confident that we will achieve at least $200 million in synergies by the first quarter of 2025. We closed Q4 with nothing drawn on our $600 million revolving credit facility, as well as $193 million in cash on hand. We do not have any senior note maturities until 2028. We expect to generate another quarter of strong free cash flow in the first quarter, although not quite at the same level we saw in the fourth quarter, mostly as we need to fund seasonal working capital adjustments and cash merger and integration costs. I'll now turn the call back to Andy Hendrich for closing the remarks.

Thanks, Andy. I want to close the call by quickly reiterating how we see 2024 unfolding. Macro conditions give us confidence for relatively stable near-term industry activity considering both the oil and natural gas markets. U.S. oil production is expected to have stabilized, according to the EIA and others, which should be a positive for global oil markets. At current oil prices, we do not anticipate much change in the oil rig count, with oil-focused activity about 80% of the industry activity. On the natural gas side, yes, there could be some decline in industry activity in the near term, but we do not expect it will be material to our business over the long term. The outlook for natural gas activity could improve later this year and into next year as LNG demand comes closer into focus. For Patterson UTI, this relatively steady industry environment in 2024 should give us opportunities to focus on high return, capital efficient ways to grow our profitability. We expect to enhance our technology offerings in both drilling and completions. We still have runway to benefit from the synergies associated with the next year merger, And Altera's long-term growth prospects in the Middle East are very promising. And our current expectation is that we will return at least $400 million to shareholders this year through dividends and share repurchases, which should improve our earnings per share and return on capital through a steady reduction in share count. We believe these profitability growth initiatives are achievable even in a steady recount environment. We're excited about the year ahead and expect to deliver another year of strong results for our investors. Before we go to Q&A, I'd like to thank the women and men of Patterson UTI for all of your hard work and all of your accomplishments. You had a record year of performance in 2023. You transformed the company and you knocked it out of the park. So thank you. With that, I'll turn it over to Adam for questions.

Thank you. At this time, I'd like to remind everyone to ask a question. Press star, then the number one on your telephone keypad. Our first question comes from the line of Arun Jayaraman with JPMorgan. Your line is open.

Good morning, Andy. I wanted to maybe focus on the completion services segment. Your outlook is for $195 million of gross profit in one queue. I was wondering, as you think about the full year, do you think that as a good baseline, as you think about the full year and you're adding some E capacity by mid-year, how should we think about kind of a baseline for that segment in a relatively steady state and environment in U.S. shale?

Yeah, we're really excited about how the completions business has been performing. I mean, you see it in the Q4 results. The teams who have had to integrate and come together are just doing a fantastic job, and it is one company today. It is next year, and they're just doing a great job. I can't say enough for the teams that are performing every day. When you look at Q1, what we're projecting on Q1 in terms of revenue and profitability is relatively steady activity, but also some white space in there as we move some fleets around. And so I think as I look out across 2024 for completions, and it holds for drilling as well, we're seeing relatively steady. And I realize that natural gas is trading at a low level, and there's probably some concerns over that market. But I think we've shown that last year, whether it's drilling or completions, that we're working for the right customers in these basins, and that we can keep things relatively steady. So when it comes to the profitability on completions, I think as we continue to roll out some new technology, even in steady activity, there's some potential to improve the profitability as we work towards the end of the year. So we've got, as I mentioned earlier, we've got various levers that we can pull through both technologies, through integration, through performance, and I still think that we can still work to some higher profitability even in a steady environment.

Great. Andy, my follow-up is just kind of an industry question. One of your peers in earnings season highlighted how they expect to get 40% of their frac fleets to be E-fleets by the end of this year. Another of your peers mentioned that 25% of their fleets would be next-generation E-fleets and dual-fuel by the end of the year. How does that influence your strategy? And talk to us maybe about the types of returns on capital you're seeing on some of the E-Fleet horsepower you're expected to deploy by mid-year.

So, you know, as we mentioned, we are deploying the E-Fleets this year. And, you know, we're going to start to grow our presence in that. But our strategy is more of a measured pace because our focus is return of cash to shareholders. We do see the opportunity to improve the profitability in the completions business by rolling out the E-Fleets. But we also have other things we're doing in 24 to improve profitability, including integrating some of the vertical services that next year has been offering for years onto some of the fleets that aren't currently operating those. When you look specifically at the E-Fleets, there's also some other technologies that we're going to be looking at rolling out later this year, too, that are 100% natural gas. And there's just going to be a variety of solutions. So it's not a one-size-fits-all. We don't think the entire industry converts over to electric. We think there's still solid markets for high-performing dual-fuel, natural gas-powered systems. But we will continue to push technology. We will continue to invest in both electric and other new technologies. But for us, it's going to be more of a measured pace as we focus on returns to shareholders.

Great. Thanks, Andy. Your next question comes from the line of Scott Berber with Citigroup. Your line is open.

Yes, good morning.

Morning, Scott.

I want to come back to the completion outlook, if you don't mind. It's just a focal point today for folks. The white space, did that start to emerge early in the first quarter, or is that more of a second half of the quarter impact? And then as you reposition fleets, you know, those getting picked up in the oil basins, you know, I'm really trying to think about the trend into the second quarter. Assuming gas activity stays weak, you know, does the second quarter activity end up looking better than the first quarter? Can you get some more oil activity or is it potentially down versus the first because gas stays weak and it's a full quarter impact? Are you able to provide some more color there?

I think, you know, there's, you know, given that, you know, natural gas has only recently dropped below two, we don't know the full impact of that yet. But we are working for some good customers in these gas basins, and we are repositioning, you know, some of our horsepower into more liquids, more oil. So, you know, we're going to have some exposure to gas, but we had exposure to gas last year, and we still had strong performance. So we still think that, you know, we're going to have some relatively steady activity. You know, if I had to make a guess right now in Q2, I'd say just consider it relatively steady to what we're seeing with Q1, including the white space. I think, you know, there still is some uncertainty out there. But also, I think we have the potential to improve some profitability as we roll out some new technology and enhance some of the integration.

That's great. And just on that point, you know, one of the debating points post-deal was your ability to secure revenue synergies and and do so in a timely fashion. Can you just speak to, you know, what you're seeing on that front? You know, what type of revenue synergies you've already achieved, and what do you think, you know, occurs in 24?

Yeah, so if you go back to, you know, pre-closing, which, you know, go back to the summer of 2023, you know, Patterson UTI, our universal division, was operating, you know, 12 rack fleets, And those frac fleets were performing well, but the market softened. But look at what Next Year was doing with vertical integration and all the other services they provide. You know, they provide the wireline services. They're providing power solution CNG, you know, creating CNG, transporting it to the well site, blending it with, you know, the natural gas that's available in the field gas. And, you know, look at the trucking and logistics operation that next year has with well over 600 people in that business alone. And so there's a lot of verticals that, you know, we didn't have at Patterson ETI. So one of the first things that we did as part of the synergies was start to reach out to customers to say, look, we believe we can improve your service, you know, if we have control of some of these other services that are affecting logistics and efficiencies and performance at the well site. And so we have added wireline. We have added trucking and logistics. We have added some power solutions onto some of those fleets that didn't have that pre-close. And so that's been progressing. And we had some quick early wins, but we think we'll have continued wins on that from a revenue and profitability standpoint throughout 2024. So that's really how it's playing out, and our teams are doing a great job working together to make this happen.

Yeah, I would also point out on that one that, again, and Andy mentioned it, but I would just highlight it, that really the productivity gains that we're getting, you know, again, kind of pushing the fully integrated well-signed offering onto the legacy UPP fleets is really an improvement as well in overall profitability.

I appreciate the color. I'll turn it back.

Our next question comes from the line of Derek Podhaser with Barclays. Your line is open.

Hey, good morning, guys. I want to talk about your shareholder returns and maybe just how you're thinking about the remaining free cash flow over that 50%. Can you talk about maybe some of your M&A, whether it be tuck-ins or bolt-ons, or what can we expect out of that? Debt, I know the maturities are far out to 2028, but any servicing of debt that you're looking at? And really just trying to get at what the upside to that return number could look like.

Yeah, so look, on the return to number that we've given, the $400 million that we expect for the year, that's above our 50% commitment. I would say that right now M&A is not a high priority. Again, it's hard to predict when it comes, and we'll certainly look at a lot of things, but it's not the highest priority for us right now. Neither is in this market just yet, I think, any kind of significant debt reduction. From time to time, we may nibble at debt and If we think there's a good buy to buy some back kind of on the open market, we'll do that. But I don't see anything right now that warrants us making any kind of a large debt reduction.

Okay, that's helpful. Switching over to the drilling side, can you just walk us through the daily margin trajectory that you're thinking about for first quarter? And for the rest of the year, the cost per day had a big step up there. Could that come back a little bit? Just curious what's going on there. And then how should we think about the revenue per day as you have some contract churn? And you talked about leading price in that mid-30s, but just a little help to break apart those two, the revenue per day and the cost per day.

Yeah, so really pleased with this team on the drilling side. You know, what they did year over year, you know, 23 over 22 was huge in terms of, you know, improving our performance in the field to sustain the activity levels that we had and outperform the others, but also to raise the profitability per rig at the same time. So that was just amazing what that team accomplished. You know, as we work through this year, there was some softening in leading edge in rigs, you know, towards the end of last year in the second half, and we acknowledged that on some previous calls. So we will have some leading edge come down. But we're still running around the mid-30s for all the performance and ancillary technology options that we're offering on the rigs. So I think that while the costs went up, and costs I think are going to be relatively steady, but I think margins will be relatively steady as well. And so our teams have done a great job. I don't think we're going to see this profitability increase that we saw in 23 versus 22. But at the same time, you know, I think it's steady, and this business is going to throw off a lot of free cash.

Yeah, I would reiterate that. I would just say that from this point forward through the year, as we view it today, we kind of look at both revenue and cost being relatively steady.

Got it. Maybe just a quick follow-up. The cost per day, what was the lead driver of that step up?

Yeah, there's just a lot of things going on at the end of the year, truing up some cost estimates and things like that. Nothing in particular that was significant. I mean, again, from quarter to quarter, you can have a bunch of things bumping around in there, whether it's working capital or insurance reserves and all those types of things. I'm sorry, workers' comp. So you've got those items that come through in the fourth quarter sometimes, and it just causes a little bit of a change, but I would say nothing that I would point to that I would say is hugely significant.

Great. Thanks for all the color. I'll turn it back.

Thanks. Your next question comes from the line of Jim Rawlinson with Raymond James. Your line is open.

Hey, good morning, guys, and great job on the quarter and free cash flow and returning free cash flow. Andy, just a couple questions around the rig side. So you're at 122 in January. You're at 122 today, and we're halfway through the quarter. And obviously, guidance is for 120, so implying things come down. Just kind of curious what you're seeing on the rig side around the gassy basins and similar to what you're doing on completions. Are you looking at moving any rigs around out of gassy basins into oily basins? Just maybe a little color around that.

Sure. I think for now, you know, our view is that the oil basins are going to stay relatively steady. And so, you know, the rigs that we have working in those basins, which is really about 70% of our rigs are in oil basins. But even though 30% of our rigs are operating in gas basins, some of those rigs are on gas liquids and not dry gas. So it's not a, you know, it's not full 30%. It's probably closer to 20% to 25% are drilling dry gas. So I think, you know, you're going to see it relatively steady in those oil and gas liquids basins for us. In natural gas, sure, you know, we're anticipating some softness. We could be down maybe three rigs over the next few months, maybe five rigs. based on where natural gas is trading today, but again, that's off the base of 122 rigs. And then you've got a longer-term outlook as we get closer to LNG takeaway needs. So could there be some softening in natural gas? Sure. Is it going to be a big impact for the company? No. Is it going to change margin profitability? No. We're performing really well. We don't have a need to reduce rates. we're not likely to necessarily move those rigs out of the gas basins because if you look at the longer term, we're going to probably need them there in 2025. So I think it's still, you know, I still call that relatively steady, even with some potential softening in the gas basin.

Got it. That's helpful. And you mentioned rig upgrades. You know, normally when we're in an upward trajectory market, you guys are reactivating rigs, upgrading rigs. and getting a lot of that covered or all of that covered on term contracts. Can you talk about what specific rig upgrades you're doing for specific customers and kind of how you see capturing that capital back and the return on that capital in this kind of market where we're more steady instead of upward moving?

Yeah, one of the upgrades I'm really excited about is some of the upgrades related to technology in terms of Our process automation packages that we're putting on the rig, this is really a capital light upgrade that has to do with electrical systems and software. And when we layer out onto a rig, we add automation capabilities to improve performance and consistency of the drilling operations. And so we're going to go through a steady pace of doing rigs and transforming that. And our customers are excited about that. They want this. This is something that they're asking for.

and uh in demand but again you know it's a capital life type upgrade got it thanks i'll turn it back our next question comes from the line of stephen gangaro with stifle your line is open uh thanks good morning gentlemen uh a couple of things for me and it's it's probably a a long a long question so I apologize. But when we think about the well site integration on the frack side, I have kind of like two or three questions around that. And one is, can you give us a sense for sort of the percentage of assets that are kind of at the high end of integrated services versus the low end? And I'm not sure if there's a way to kind of give us any color around the profitability gap. I know next year had legacy next year. I provided some color on that. And then just the final part of that long question is, any impact on your ability to do that with the M&A of your customers? Are the larger customers more or less willing, and how should we think about that?

Yeah, I'll answer the first part of that, and then I'll let Andy talk to the customers in the harder question. Yeah, right now, in terms of the integrated well-side offering and sort of how that works across our fleet, where you think about sort of a heavy concentration versus less. It's about 50-50 on the fleet. We still have a lot of opportunity to push more of that integrated offering across our work in the pressure pumping space.

Yeah, in terms of customers and M&A, we all can see that there's been a huge wave of consolidation from the E&P customers. And when that happens, you're going to get a pause in activity. And for some customers that we're working for, that might be a pause for us. For some other customers, it might be kind of a net neutral for us in the near term. But you're going to get a pause until they decide what resources they want to use and what they want to do going forward from an operations standpoint. But when they evaluate that, I think we are well positioned with our ability to integrate the necessary services to enhance performance on the completion side, and even on the drilling side with the new technologies that we're rolling out. So I think we're in great shape for this wave of consolidation that's happening on the EMP side.

Great. Thank you. And just a quick follow-up to that. When we think about underlying price, not sort of the mix issue from increased offerings, but underlying track prices, If we modeled something that was kind of flattish from current levels for 24, is that something you're comfortable with? Or how do you think about that?

Yeah, we acknowledge that there was softening in completions pricing and rig pricing in H2 of last year. But I think from where we are this year, it's going to be relatively steady for us. And I want to qualify that for us. You know, we are seeing some white space, as we discussed earlier, and we are moving some assets. But part of that is just because we don't feel like we want to take lower rates. And so, you know, we're going to work to protect pricing in the markets and protect our margins in the markets. And so for us, I think it's relatively steady.

Great. I appreciate all the color. Thank you.

Thanks. Our next question comes from the line of Sir Rob Pant with Bank of America. Your line is open.

Hi, good morning, Andy and Andy. Good morning. If you can spend, Andy, a little time on your E-Fleet strategy. I'm thinking from the perspective of leasing versus buying, and then also from a perspective of when you're buying something, how important it is in your mind to own that technology versus just buy it off the shelf from a vendor. And then related to that, how should we think about power solutions in the context that 80% of your fleet is going to be natural gas fired by the middle of 24? How much of that do you think is being supported by power solutions at that point?

So I'm going to start, and then I'll let Andy Smith talk about this as well from a business growth profitability standpoint. But when you think about the E-fleets, We certainly realize there's customer demand out there. We want to have those technology offerings as well. There is improved profitability to be able to do that. And so we are investing in heat, but also some other technologies as well, not just the heat. And so, yes, we are working with a couple of different suppliers of electric frack equipment to look and see how the performance is on different types of equipment. And we've tested other equipment in the past. We do request some changes when we get some of this equipment delivered. So what we offer may be slightly different from others using similar equipment. But we have some experience, and we're excited about this offering. We'll continue to evaluate who our suppliers should be and who we want to work with going forward. But suffice it to say that we are moving in that direction. And I'll add that we also have a drilling company that has a great history of operating over 1,000 AC induction motors. We also have an electrical engineering company that has experience building high-voltage control systems for AC induction electric motors, including for electric frac. And so stay tuned, and we'll keep you posted on how this is going to evolve from a technology standpoint. But we're in it, that's for sure.

Yeah, right now, in terms of power solutions supporting our own work, about 40% of our work out there is being supported by power solutions. And we've got opportunities to grow that in the current year.

Okay, fantastic. No, Andy, and thanks for teasing us on the technology side. So we'll stay tuned on that. And a quick unrelated follow-up for me on the Synergy side, by the way, really good progress. I don't know if Kenny is on the call or not, but a shout out to him. Definitely doing a fantastic job. And I think Andy Smith, I think you said on the call in your prepared remarks that you expect at least $200 million. So I just want to emphasize the at least. And see now that it's been five months, a little more than five months since you closed the merger, how do you look at any potential upside to that $200 million or maybe accelerating that from 18 months to maybe you realize that sooner than 18 months?

Yeah, look, we've got, as you can imagine, there's a whole range of items included in the bucket that we're tracking in terms of synergies. And, you know, as we've kind of gone through the market since we've closed, and the market's been sideways to potentially down a little bit, you know, probably what we when we first started talking we said you know look there's a lot of synergies that we're going to get out of this business some of it can be a little obscured by the market the pricing we are not that's not how we're looking at it internally internally we are we're there's a there's a very there's a there's a lot of rigor around making sure that we prove out that each one of these is actually hitting our income statement so we feel very good about that 200 i think In an improving market, that number only goes up. But, you know, I don't want to guide to a higher number than that right now. But I think as the market improves, the benefit of those synergies only increases over and above that $200 million.

Yeah, so Rob, as you mentioned, Kenny and the team are doing a great job. You know, there's a number of different teams that are looking at different aspects. We've talked about the different buckets in the past. You know, whether it's, you know, increasing revenue, supply chain, or some cost savings. And we still have levers to pull on all those, and we'll continue to work at it.

No, that's fantastic. Okay, Andy and Andy, thank you. Thanks for those answers. I'll turn it back.

Your next question comes from the line of Ati Modak with Goldman Sachs. Your line is open.

Hi, good morning, team. You mentioned steady outlook, but as we think about the cadence through the rest of the year, maybe it sounds like fleet count is steady in 2Q and 3Q. But do you anticipate risk of larger white spaces on the calendar as customers manage activity, particularly around gas prices? How should we think about that? And do you have anything that would offset that?

I think, you know, as we mentioned before, we're already transitioning some horsepower, you know, from gas to liquids. And so that's already in our Q1 projections. Maybe we can see some more softness in Q2, you know, if the commodity prices hang in there for longer. I think we'll just have to wait and see how that plays out. But then, you know, if you think about the end of this year and going into 25, it's, you know, we've actually been in some discussions with some operators about increasing activity at the end of this year and in 2025. So, you know, I take a longer-term view, and I recognize there's going to be some softness, but it's relatively steady longer-term.

God, I'd appreciate that. And then on the repurchases, how should we think about the cadence? It sounds like it's going to be a little bit more opportunistic, but any thoughts around that, whether it's opportunistic or steady, and how should we think about it?

Yeah, I mean, we've always kind of been opportunistic, and I don't want to be too prescriptive about how we're going to be in the market. Again, we're doing all this through open market purchases, so, you know, We're comfortable given that guidance for the full year, but I don't want to be too prescriptive about quarter to quarter.

Sounds good. Thank you. Appreciate it. You're taking the questions.

Thanks. Our next question comes from the line of Keith Mackey with RBC Capital Markets. Your line is open.

Hi, good morning. Just wanted to start out on that 40% free cash flow conversion number that we saw in the press release. Can you talk about maybe the main drivers behind impacting where you've sort of set that target, assuming EFRAC build-out is certainly one of them? And then a follow-up to that would be, do you see the 40-plus percent as a good approximate longer-term target for the business, or should we be thinking about that as a 35, 40, 45, or 50 kind of number?

Yeah, look, I think 40 is a pretty good target for the business. And as we look, you know, as we set our capital budget, we look at the opportunities set in front of us. We think about how can we balance, you know, all the competing priorities and competing calls on our capital, and that includes return to shareholders. So as you think about our CapEx number, you know, it's probably roughly, you know, two-thirds or so of maintenance capital with some additional what we would call either conversion capital, you know, likely not really growth, not really incremental horsepower coming into our fleet. It would displace older stuff. But that's kind of how we approach it. And we kind of look at that 40% as a pretty good target, at least in the intermediate term. You know, as our fleet changes shape over the years, we'll sort of look at it and reevaluate. But right now, we feel pretty comfortable with that as a a pretty good target going forward.

I'd like to commend the team on completion side for their efficient use of the capital. They've got a good plan in place this year to move us away from having to invest maintenance capex in diesel-only type engines and pumps as we transition into newer technologies, whether it's electric or other. And so, yes, we're investing in the newer technologies. we're also moving away from having to maintain the older technology at the same time.

Got it. That's helpful. And just an unrelated follow-up, certainly there are quite a large number of rigs working in the U.S. now that are subject to E&P consolidation on one side or the other, and Andy mentioned you're fairly comfortable with your positioning given the spec of your rigs, but can you talk about just generally how you see the market unfolding given the large amount of pending consolidation? Do you think there will be a significant number of rigs that get reduced as part of this, or do you see any notable potential impacts on pricing as potentially some of those displaced rigs have to re-compete for work? Or just any thoughts on how you see that unfolding would be helpful.

Well, I'll start by saying there's a lot of different rigs in the market. And, you know, what we operate are the tier one super spec rigs, you know, the highest performing type rigs that are on the market. And you saw how we performed last year in a market where the overall Baker Hughes count went down. And yet, you know, while we went down as well, not near as much as the overall Baker Hughes count. There's still a large number of SCRs and mechanicals in that overall rig count. I think you're going to see a similar trend this year. We're going to have some softening in the overall market. You're going to see the overall industry rig count go down, but I think you're going to see us and one or two other drilling contractors gain shares because of the technologies that we operate. We're not immune to the softening, but at the same time, we're running the highest performing rigs that are out there. It's going to be more about overall supply and demand, but I think that overall, you're going to see relatively steady activity from us, even if the market softens. And I do think you're going to see the overall rig count have some downside swings, either based on commodity prices or based on some of these mergers and acquisitions and consolidation on the EMP side. But I think you're going to see high grading at the same time, like we've seen over the last few years.

Okay, thanks very much. Appreciate it.

Your next question comes from the line of Ugalar Syed with ATB Capital Markets. Your line is open.

Thanks for taking my question. Andy, you mentioned the synergies, $100 million of synergies come from different buckets. I just want to drill a little deeper into that. Could you maybe quantify which of these buckets are contributing more or maybe just give them some numbers to what has been achieved from the different buckets and what's still remaining?

Yeah, since I called it out earlier, I'll answer the question. Hey, good morning, Makar. So we talked about three different buckets, one being revenue, one being supply chain, one being cost. I think that You know, the ones that went the fastest were probably related to supply chains and savings that we picked up last year as the market softened as well. And we were able to accelerate some of those. You also had some quick wins on the revenue, but the revenue one will still continue kind of a steady pace over the next four quarters. We saw some cost improvements last year, but we'll see some further cost improvements this year. But the early one that moved probably the fastest was on supply chain, so hats off to the teams that pulled that off.

Yeah, and I would even say on the G&A side, so there's, you know, there's, you know, the obvious things around, you know, again, two larger corporate companies coming together, so you've got, you know, kind of a lot of savings in terms of overall kind of top-level management. Those have been achieved, obviously, but then as you go through, there's still a lot of consolidation savings to come A lot of that, some of that's from third-party services, whether it's insurance, outside advisors, things like that. And then some of it is just over time as you continue to sort of rationalize systems and processes and things like that, you'll continue to achieve those savings.

Okay, great. And then just one unrelated follow-up. In terms of... Your pressure pumping fleet mentioned that it could be at 80% national gas powered or dual fuel. Could you maybe further break down like what proportion would be like tier four DGB versus tier two national gas or dual fuel?

You know, because we're just now stepping into more electric. than we've been running in the past. The Tier 4 dual fuel is still going to make up the majority of that, but we also do some things to enhance that, especially through our power systems, where with our power systems, C and G systems, and being able to blend C and G and fuel gas, that we can enhance that. But the largest portion is still going to be Tier 4 DGB this year, but you'll see a continued you know, transition as we move to more electric and other new 100% natural gas technologies, you know, going forward after this year.

And from a tier 4 DGP, what kind of fuel switching, percentage switching are you seeing from diesel to natural gas and DGP engines?

I'm sorry, what kind of what?

The fuel switching percentage goes to 60%, 65% or higher than that from switching from diesel to gas in the Tier 4 DGBs?

Yeah, it depends what we can offer because we can offer the combination of CNG and fuel gas blending through our power solutions business. We can get anywhere from 65% but all the way up to 80% displacement on Tier 4 dual fuel, and that's a very popular solution. And so we also do some other things to enhance that that I think we'll explain at future dates. But, you know, as I mentioned earlier today, we have also replaced 100% natural gas electric offerings with Tier 4 dual fuel because, you know, there are just some places that, you know, an operator can't operate 100% natural gas. It's not the right fit. So Tier 4 DGB will still be a large portion of the market. but we are moving towards more electric and more new technology at a measured pace.

Thank you very much.

Your next question comes from the line of Doug Beckel with Capital One. Your line is open.

Thank you. Just wanted to quickly circle back on completion services. Is the reposition expected to be fully completed during the first quarter, or is there a chance it spills into the second quarter? And then what's allowing you whether it's the market or the technology that you bring to the table, to really move this equipment without conceiving price in an uncertain market?

Well, first off, the oil markets are still relatively steady. Second, it gets into performance and how we operate with not just providing pressure pumping, but also wireline, trucking and logistics, moving sand, power solutions with natural gas for the customers that are wanting dual fuel or full electric. And so when we offer all those together, we can enhance the performance of the operation. And so that provides efficiency and savings at the end. We also have very strong customer relationships at Patterson UTI. We've talked about that for years. It does matter. And we work to protect those relationships too. But we're real excited about how well this completion team has performed, especially coming together through a merger, and you saw that in the Q4 numbers. You know, we do recognize that, you know, with the natural gas, that things are a little bit softer, but we expect, you know, the transition of the horsepower really just to happen in Q1, so those numbers are in our Q1 projections. But, you know, the performance is definitely there, and the oil basins are steady.

Fair point. And then just quickly, just All the commentary suggests that, sure, the purchases are going to be the primary, but maybe more explicitly, a dividend bump this year doesn't seem likely based on the commentary you said. Is that so?

Yeah, I think that's fair as we stand today.

Thank you very much.

Your next question comes from the line of Don Criss with Johnson Rice. Your line is open.

Good morning, gentlemen. We've covered a lot of ground here today, but I just wanted to ask one about the international markets. You know, Altera gives you an entry point into the Middle East in particular. Do you have aspirations to move either rigs, indoor pressure pumping, or other service lines into the area, and what kind of opportunities are there for you all?

First, we're really excited about Altera and their ability to grow internationally. It's got the potential for double-digit growth in these markets, not just with the activity level in these markets, but increasing share in these markets. And so that is our focus on the international. When you ask about moving rigs from the U.S. to other markets, typically it takes a fairly significant capital upgrade to move a rig to a different market outside of the U.S. because we've become very specific about what we do here in the U.S. And right now our focus is on returning cash to shareholders. So our international focus is growing Altera, and then overall that's part of what we're trying to do to return cash to shareholders. So there could be an opportunity longer term, but this year our focus is returning cash to shareholders.

Just to follow up to that, is there a pressure pumping opportunity over there? I know Nessar does a little bit, but is there an opportunity given the gas shale drilling that they're commencing upon?

I would say that market's still very competitive. You've still got the big guys doing pressure pumping over in those markets, even the ones that no longer do it here in North America. We're only going to move large assets to markets like that if we think it makes sense for us and we think it's positive for shareholders. But again, right now, our focus is on returning cash to shareholders.

I got it. I appreciate all the color. Good quarter, guys.

Our next question comes from the line of Kurt Hale with Benchmark Company. Your line is open.

Hey, good morning, everybody.

Morning, Kurt.

Hey, thanks for sliding me in here. So, Andy Hendricks, you have me definitely intrigued on the context of what's going on with the evolution of the land drilling fleet. And it seems like there's a new category, super-duper spec rigs versus just plain super spec rigs. So just kind of curious as to, you know, what the dynamics here are differentiating, you know, even the higher-end assets, technologies, you know, you talk about automation, but kind of curious, like, what makes up this, you know, new class of rig that everybody wants versus what they

Thought they wanted a year ago, you know, I don't know how much time we have on this call, but it's not 1 single thing. You know, there's, there's a number of different. Things that are happening and initiatives that are our teams have been working on. To improve overall performance, you know, there are various components that we upgrade on rigs, whether it's. You know, adding a pump for better hydraulics for longer laterals, which also includes adding a gen set transitioning to. lithium battery hybrids for more fuel efficiency and savings on the rigs, which is something that we manufacture and something that we charge for. Or producing transformer stations for high-line power on the energy side. On performance side, it's how we run our real-time data centers and how we share data across the rigs and throughout the field and the teams that we have that are looking at data analytics and performance and following up with the rigs to make sure that we're maximizing that performance. Or new software and automation technology that we're layering in where we're going to upgrade some of the electrics on some of these rigs and in an asset type light type upgrade and add new software for automation. And we're doing it on a number of rigs today, but we're going to work at a steady pace to continue to roll that out. And it's got great traction in the market. and really excited about how that's performing as well. So it's certainly not any one thing that you can point to. Our teams do a fantastic job, you know, whether it's, you know, an operations engineering technology, you know, real-time performance data analytics, you just go down the list. And, you know, that's what's, you know, showing up in our numbers.

Thank you.

Our next question comes from the line of Dan Cutts with Morgan Stanley. Your line is open.

Hey, thanks. Good morning. Thanks for squeezing me in. So I just wanted to ask one more on the international space. I think you guys mentioned that the Altera outlook is for high teams growth this year. That kind of compares to what seems like the industry bogey for international growth being kind of high single digits, low double digits. I assume there's market share gains and pricing factored into your outlook, but I wanted to ask whether kind of Patterson or the Altera team would be more or less constructive on kind of the total addressable market growth in the international space versus that kind of 10% growth consensus view. Thanks.

Well, you know, we're excited about the, you know, the double digit growth we're going to see. I think that, you know, you are, you know, there are some projections on double digit growth in the internationals. We'll see how that plays out in terms of activity. But I think whatever that is on activity will outperform that in terms of growth on the Ulterra side in terms of product sales. You know, we've got a big focus on the Middle East right now. We're still working on transitioning from just doing drill bit remanufacturing in Saudi to full manufacturing in Saudi. And that's going to increase our ability not only to support Aramco in Saudi Arabia, but also be able to export from Saudi into some of the GCC countries nearby. So we're excited about that. But what drives this growth relative to others is performance. And we've talked about this before, you know, Altera has a unique ability in the industry to turn around designs and make the improvements that the operators ask for, you know, based on the type of formation and rock that they're drilling. And that team does a great job at that. And so as we start to do more and more work, you know, in countries outside of North America, then, you know, those countries are going to experience those performance improvements as well. And so that's why we're really confident about our ability to grow.

Great. Thank you. And then just a quick one on the completion services upgrades and investments. Are there any Tier 2 to Tier 4 upgrades contemplated, or it's mainly just kind of the dual fuel upgrades and the electric track investments? Thanks.

Yeah. So we're not doing any Tier 2 to Tier 4 upgrades. Tier 2 is going to fade away. You know, we're going to start to wind down maintenance investment on those older assets. You know, we've got Tier 4 DGB in place. We still think there's a very strong market, and that's going to go for years in Tier 4 DGB. But as some of the older technology rolls out, we're going to see more electric but also other types of new technology come in that burn 100% natural gas. And so, you know, that's how we're making that transition. We're doing it at a measured pace that we think fits the capital allocation and meets the needs of our shareholders who are looking for returns right now. But we're still excited about these investments and technologies that we're making.

Great. Thanks a lot. I'll turn it back.

Our next question comes from the line of Sean Mitchell with Daniel Energy Partners. Your line is open.

Thanks, guys, for squeezing me in. Andy, just one question on the electric equipment, the 140,000 horsepower by mid-year. Is that going to come in the form of a couple of spreads, full spreads, or will that be horsepower that gets sprinkled in across your other fleets?

Some of it's already out there working in the field. It has been for a while. This is just a continued addition to what we have out there. You're going to see more of it come in really kind of Q2, Q3. And so that's where, you know, we'll get some improved profitability from that horsepower that's working in the field, you know, second, third quarters and forward. And so it's going to add roughly a couple more fleets to what we're already working in the field today.

Okay. That's helpful. And then Andy Smith, maybe. I know you gave a lot of color around CapEx, $740 million in 24. Can you remind us what the combined company CapEx was for all the companies in 23, just the total number?

You know, it's funny. I can't.

No, we can do it offline.

Yeah, no, I think we've got those numbers, and we can get them to you. I believe it was in excess of $900 million, though.

Yeah, no, I know your number's lower. You mentioned that. I was just trying to get magnitude, but we can... No worries. All right, guys. Thanks. Great quarter.

Thanks. I will now turn the call back over to Andy Hendricks for closing remarks.

Listen, I want to thank everybody for dialing in today for the call. 23 was a great year for us. I want to thank our team at Patterson UTI for everything they did in 23. It was a great year, and we're looking forward to another good year in 24, especially free cash flow and returning cash to shareholders. So thanks for that.

Ladies and gentlemen, that concludes today's call.

Thank you all for joining.

You may now disconnect.