Oil drilling activity may be in for a rough patch, Patterson-UTI CEO Andy Hendricks said during an April 24 first-quarter earnings call. The natural gas outlook is far more optimistic.

Hendricks said the drilling and completions services provider hasn’t seen any material change in customer plans since crude futures dropped off on April 3, the day after President Donald Trump announced a range of tariffs on imports to the U.S. Many of the tariffs have been paused. Oil prices have also come under pressure from increased OPEC production.

Nymex crude prices for June delivery was about $62.75/bbl on April 24, down from more than $71 at the start of the month.

“On the oil front, recent commodity softness created by macroeconomic concerns has introduced some uncertainty,” Hendricks said. “If oil prices remain near current levels for an extended period, we could see some of our customers reevaluate their plans. At present, operations remain stable.”

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Natural gas activity began to recover late in the first quarter, Hendricks said—earlier than anticipated. The Haynesville Shale in East Texas and Louisiana has been the biggest beneficiary so far.

“We have added multiple rigs and frac fleets in natural gas-focused basins already this year,” he said. “It is clear to us that meaningful increases in drilling and completions activity in natural gas basins will be required to meet growing commodity demand, particularly as U.S. natural gas plays an expanding role in supporting global LNG needs.”

The tariff situation is still in the early stages, CFO Andy Smith said. He said the company is looking at potential cost increases and how to manage them.

“We’re trying to cultivate—where we feel like we need to—alternative suppliers,” Smith said. “It’s probably a little too soon to put a fine point on it.”

Patterson-UTI Sees Uptick in Gas Activity, Oil Uncertainty

Hendricks said Patterson-UTI is well positioned for a slowdown if one occurs because of how much work the company performs for large E&Ps with longer time horizons.

“About 60% of our revenue comes from the 15 most active E&Ps in the U.S.,” he said. “So, we’re heavily weighted to people that have large programs in terms of multiyear plans for what they want to do.”

Patterson-UTI reported first-quarter net income of $1 million on revenue of $1.3 billion.

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