The third quarter saw Patterson-UTI Energy complete $6.18 billion in acquisitions, and the company has turned its focus to integrating those businesses.
Patterson CEO Andy Hendricks, during a Nov. 8 earnings call, called the third quarter a monumental period that reshaped the company. Patterson closed two deals: the $5.4 billion acquisition of NexTier Oilfield Solutions in September and the purchase of Ulterra Drilling Technologies in August for $780 million.
“We cannot ignore the benefit of size and scale that comes with these transactions,” he said.
He said the company will use its “strong capital structure to be opportunistic at all points in the cycle on capex” as the company seeks to advance its core competencies in the oilfield service market.
But those opportunities won’t come immediately, he said.
“When we're talking about being opportunistic over cycles. We're talking about over the next five to 10 years. Right now, we're focused on integration of the businesses,” he said. “In terms of further M&A in the service space, I think it's possible. I don't want to speculate because we're focused on integration right now. But I do think there's probably some opportunity out there.”
Hendricks said the NexTier and Ulterra acquisitions will help create many efficiencies and synergies. The company will look to squeeze at least $200 million in annualized synergies out of the NexTier deal by first-quarter 2025; and opportunities for revenue synergies between Patterson’s drilling services and Ulterra products, he said.
Rigs and frac fleets
Patterson wrapped up the third quarter with 117 active rigs in the U.S. and expects to exit the fourth quarter with 120 active rigs. The company estimates an average of 118 rigs operating in the U.S. during the quarter. The company’s revenue per day from rigs is in the mid- to low-thirties, he said.
“Super-spec rig utilization remains very high, with activity for this class of rig outperforming the overall rig count,” Hendriks said. “We think super spec rig activity recovers before the idle lower-spec rigs, which should position Patterson-UTI to outperform the expected recovery over the next several quarters.”
He is also optimistic about rig recovery next year.
“You’re going to see an initial step-up just kind of based on the forward strip. [There will] be some moderate growth there. You’ll see another step up towards the end of ‘24 getting ready for ‘25 and LNG takeaway,” he said.
And when the rig count rises, there will be “the traditional lag between the drilling rigs picking up and the frac operations just because there’s really no DUCs out there right now. We’ve got frac spreads bumping into drilling rigs and drilling rig activity does need to pick up so the frac activity can pick up.”
Currently, the company’s frac fleet has a total of 3.3 MMhp, some of which will be stacked.
“We did park some of that horsepower as things slowed down,” Hendricks said. “We’re choosing to stack some equipment before working at pricing that does not meet our threshold, and we continue to believe that is the right thing for our company.”
The company is taking advantage of those breaks for maintenance so the fleets will be ready to return to service when demand climbs.
If Patterson sees strong returns, the company will continue to upgrade the frac fleet, he said.
“Any new capacity we bring into the market would likely be a hundred percent natural gas powered and would be replacement horsepower for equipment that is reaching the end of its useful life,” he said.
The industry needs about 1.5 MMhp in new equipment per year just to keep horsepower flat, he said. Investments have been “considerably below that over the past several years.” In that light, frac fundamentals are likely to remain strong over the next several years.
Third quarter results
Patterson posted a third-quarter net loss of $278,000 on revenue of $1 billion, compared to $84.6 million net income on $758.9 million in revenue in the previous quarter.
Third-quarter 2023 results include $70 million in merger and integration expenses, which were partially offset by $29 million of previously deferred revenue from a customer’s changed drilling schedule.
The results include the full quarter of Patterson’s operations as well as NexTier from Sept. 1 and Ulterra Drilling Technologies from Aug. 14.
Patterson’s adjusted EBITDA for the third quarter was $277 million, which excludes merger and integration expenses and includes recognition of previously deferred revenue.
Recommended Reading
Investment Firm Elliot Calls for Honeywell Restructuring in Letter to Board
2024-11-13 - As Honeywell’s largest active investor, Elliott Investment Management’s letter to Honeywell International argued that Honeywell should split into two entities—Honeywell Aerospace and Honeywell Automation.
Dividends Declared Sept.16 through Sept. 26
2024-09-27 - Here is a compilation of dividends declared from select upstream, midstream and service and supply companies.
EQT to Cut Workforce 15% Following Close of Equitrans Acquisition
2024-10-02 - EQT Corp. closed its $5.5 billion all-stock buy of Equitrans Midstream Corp. on Sept. 22.
SM Energy Adds Petroleum Engineer Ashwin Venkatraman to Board
2024-12-04 - SM Energy Co. has appointed Ashwin Venkatraman to its board of directors as an independent director and member of the audit committee.
Diamondback to Sell $2.2B in Shares Held by Endeavor Stockholders
2024-09-20 - Diamondback Energy, which closed its $26 billion merger with Endeavor Energy Resources on Sept. 13, said the gross proceeds from the share’s sale will be approximately $2.2 billion.
Comments
Add new comment
This conversation is moderated according to Hart Energy community rules. Please read the rules before joining the discussion. If you’re experiencing any technical problems, please contact our customer care team.