Patterson-UTI Energy's CEO Discusses Q3 2011 Results - Earnings Call Transcript

Patterson-UTI Energy (PTEN)

Q3 2011 Earnings Call

October 27, 2011 10:00 am ET

Executives

John E. Vollmer - Chief Financial Officer, Senior Vice President of Corporate Development and Treasurer

Douglas J. Wall - Chief Executive Officer and President

Mark S. Siegel - Chairman and Member of Executive Committee

Geoff Lloyd - IR

Analysts

Joe Hill - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division

Kurt Hallead - RBC Capital Markets, LLC, Research Division

Chris Enright - Weeden & Co., LP, Research Division

James Crandell - Dahlman Rose & Company, LLC, Research Division

David Wilson - Howard Weil Incorporated, Research Division

Luke M. Lemoine - Capital One Southcoast, Inc., Research Division

Michael Breard - Hodges Capital Management

John M. Daniel - Simmons & Company International, Research Division

Andrea Sharkey - Gabelli & Company, Inc.

J. Marshall Adkins - Raymond James & Associates, Inc., Research Division

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Q3 2011 Patterson-UTI Energy Incorporated Earnings Conference Call. My name is Laura, and I will be your operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to Geoff Lloyd on behalf of Patterson-UTI Energy. Please proceed.

Geoff Lloyd

Thank you, Laura. Good morning, and on behalf of Patterson-UTI Energy, I'd like to welcome you to today's conference call to discuss the results of the 3 and 9 months ended September 30, 2011. Participating in today's call will be Mark Siegel, Chairman; Doug Wall, President and Chief Executive Officer; and John Vollmer, Chief Financial Officer.

Again, just a quick reminder that statements made in this conference call, which state the company's or management's intentions, beliefs, expectations or predictions for the future, are forward-looking statements. It's important to note that actual results could differ materially from those discussed in such forward-looking statements. Important factors that could cause actual results to differ materially include, but are not limited to, deterioration in global economic conditions; decline in oil and natural gas prices that could adversely affect demand for the company's services and their associated effect on rates, utilization, margins and planned capital expenditures; excess availability of land drilling rigs and pressure pumping equipment, including as a result of reactivation or construction; adverse industry conditions; adverse credit and equity market conditions; difficulty in integrating acquisitions; shortages of equipment and materials; government regulation; and ability to retain management and field personnel.

Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained from time to time in the company's SEC filings, which may be obtained by contacting the company or the SEC. These filings are also available through the company's website and through the SEC's EDGAR system. The company undertakes no obligation to publicly update or revise nay forward-looking statements.

Statements made in this conference call include non-GAAP financial measures. The required reconciliations to GAAP financial measures are included in the company's website 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 Mark Siegel for some opening remarks. Mark?

Mark S. Siegel

Thanks, Jeff. Good morning, and welcome to Patterson-UTI's conference call for the third quarter of 2011. We are pleased that you are able to join us today. As is customary, I will start by briefly reviewing the financial results for the quarter ended September 30 and the year-to-date. I will then turn the call over to Doug Wall, Patterson-UTI's President and CEO, who will make some detailed comments on each segments results as well as sharing some operational highlights for the quarter. After Doug's comments, I will make a few brief -- I will offer a few brief thoughts on general market conditions. As usual, following our prepared remarks, we will take your questions.

First, I'd like to begin with a quick recap of the financial results. As set forth in our earnings press release issued this morning before market opening, we reported net income of $81.9 million or $0.53 per share for the 3-month period ended September 30, 2011, and $235 million or $1.50 per share for the 9-month period. This compares to net income of $29.4 million or $0.19 per share and $63.1 million or $0.41 per share for the comparable 3- and 9-month periods in 2010. The financial results for the 3 and 9 months ended September 30, 2011 include pretax impairment charges of $4.3 million or $2.7 million after-tax from the retirement of 22 of the company's rigs. Components from these rates are now available as spare parts to support other rigs in the fleet. These retirements reduced net income per share by $0.02 for the 3- and the 9-month periods ended September 30, 2011.

Revenues for the quarter were $674 million compared to $379 million for the same quarter last year, and for the 9-month period, revenues totaled $1,840,000,000 compared to $957 million. EBITDA for the quarter improved to $243 million, which marks the ninth consecutive quarter of growth in EBITDA driven by increases in both of the 2 core businesses. Before turning to CapEx, I want to highlight that these results showed substantial improvements in key year-over-year metrics for the 3- and 9-month periods. On a year-over-year basis, revenue increased by 78% on a quarterly basis and by 92% on a 9-month basis, and net income increased by 179% on a quarterly basis and by approximately 272% on a 9-month basis.

I'd now like to go to CapEx and give a quick recap. For the quarter, capital expenditures were $284 million. This spending is, of course, consistent with our long-term strategic plan, and a large majority of this CapEx continues to relate to our Apex rig new build program and to our continued expansion of our high horsepower frac fleet. As expected, our new rig construction program completed 7 new rigs in the quarter, which brings our total of new rigs completed through the end of the third quarter to 18 rigs. We expect to complete 7 rigs in the fourth quarter, and thus we are on pace to meet our overall target of 25 new rigs for the year. In addition, on the pressure pumping side, we took delivery of 76,250 of additional horsepower during the quarter, which brings our total through the third quarter to 138,750-horsepower. Similarly, we expect to be able to deliver in the latter part of the fourth quarter an additional 65,500-horsepower and to be able to meet our overall delivery target of 204,250-horsepower for the year.

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