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JUNE 22, 2023 / 5:10PM, PTEN.OQ - Patterson-UTI Energy Inc at JPMorgan Energy, Power, & Renewables Conference |
Well, last time we built a large gas pipeline in the U.S. was the Rocky Mountain Express. And both Robert and
I were doing other things at the time, but we remember it well, and it was connecting Pinedale over to Chicago. That was a big deal at the time, it was 1.5 Bs, okay? Now were talking about another 8 to 9 Bs takeaway in LNG in 2025. This is a
huge step up for natural gas.
Arun Jayaram - JPMorgan Chase & Co, Research Division - Senior Equity Research Analyst
And just another question on just what are you seeing in terms of pricing trends? Your rig count actually has been a lot more resilient than your
peers. But what are you how do you sense the overall pricing dynamic day rates?
William Andrew Hendricks - Patterson-UTI Energy, Inc. - President, CEO & Director
So our rig count has been a little more resilient
really because of geography, primarily. If you look at where we operate rigs, only 10% of our rigs were operating in the Haynesville, yes, 30% were in gas, but 20% of those were up in the Northeast, which has essentially been flat because
thats just a separate market. So only 10% of our rigs have been in the Haynesville. Weve seen slowdown across the industry, though, with everything tied to Henry Hub, Haynesville, Mid-Continent,
down in South Texas, but its were more heavily weighted to the Northeast and to the Permian, and its really just been geography.
Certainly, with the rigs that have been coming down, theres more competitive pricing out there, especially from the smaller drilling contractors.
Were down 7 rigs. But if youre a small drilling contractor and youre down 7 rigs, thats material to your business, and youre going to fight to keep some rigs working. So maybe you do put out a day rate in the low 20s to
keep a rig working until things get a little firmer towards the end of the year. But that doesnt affect us. That doesnt mean it causes a repricing in the rigs that Im out there working.
So yes, youre going to hear about some anecdotes as we work through the summer time and into the third and fourth quarter, but I think that, that all
kind of phases away if rig count starts to move up. But just because a small contractors repricing a rig doesnt mean a large contractor has to reprice a rig.
Arun Jayaram - JPMorgan Chase & Co,
Research Division - Senior Equity Research Analyst
Robert, same kind of question for you. What are you seeing in the frac market supply/demand?
Robert Wayne Drummond - NexTier Oilfield Solutions Inc. - President, CEO, & Director
Look, Id say certainly, the drilling rig count impacts the inventory that frac participates in. The key point Id make is that as we sit here,
were fully deployed with all of our horsepower and so is Patterson. The frac business is has been running extremely efficient and extremely hard for the last few quarters. We guided in our last earnings call that we would see Q2 to be
up in price and be up in revenue. And were almost at the end of the quarter. When you project into the back half of the year, you got to remember a couple of things.
Last year, we entered coming into this year, there was 20 frac fleets under sold. It was I mean, oversold, we were 20 frac fleets short of what was
needed. We spent a lot of time on tracking new builds that are scheduled to come into the market and try to balance that with the intelligence you can get around attrition of the fleet. I saw a number of our competitors that spoke this week about a
10% attrition rate. I believe that we believe its in that neighborhood, maybe even a little bit more. We judge that by talking to our own vendors and looking at our own case and projected it into it.
So its basically 1 in, 1 out. And when you look at that, the situation that I referred to at the end of this past year, thats almost
unprecedented. And when you project that into the back half of this year, youre still talking about utilization rates in frac is north of 90%. I have been in this sector for many decades, we used to be always looking for 80% utilization to be
a kind of a price neutral situation. So even though the spot markets got a little churn in it as these rigs relocate from gas basins to oil, that was very telegraphed and its not unexpected to see a little bit of churn in that market as those
fleets look for homes, but the fleet is very mobile.
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