Douglas J. Wall, Patterson-UTI Energy’s chief executive officer, stated, “As anticipated, the decline in demand that we experienced in the fourth quarter of 2008 continued into the first quarter of 2009, as customers continued to scale back their drilling operations in response to lower oil and natural gas prices along with continued weakness in the credit and equity markets. We had an average of 127 rigs operating in the first quarter of 2009, comprised of 116 in the U.S. and 11 in Canada. This represents a decrease of 125 rigs from the average of 252 rigs operating in the fourth quarter of 2008. Currently, the Company has 63 rigs operating, including 62 in the U.S. and 1 in Canada. It should be noted that Canadian drilling activities are affected by the annual spring break up.”
Wall added, “Average revenue per operating day for the three months ended March 31, 2009 was $19,670, a decrease of $540 from the three month period ended December 31, 2008. Average direct operating costs per operating day for the first quarter of 2009 decreased by $200 to $11,010, compared to the three months ended December 31, 2008. As a result, the average margin per operating day in the first quarter of 2009 was $8,660, a decrease of $340 compared to the fourth quarter of 2008.”
“Our average rigs operating during the first quarter include 11 rigs operating under term contracts that earned standby revenues of $10.7 million. Our current rig count of 63 includes 7 rigs on standby. Rigs on standby earn a discounted dayrate since they do not have crews and have lower costs. In addition, we recognized $6.6 million of revenues during the quarter from the early termination of drilling contracts.”
“During the first quarter we had an average of approximately 49 rigs operating under term contracts, including the 11 rigs earning standby revenues. We expect to have an average of approximately 31 rigs under term contract for the remainder of this year, and then to average approximately 28 rigs in 2010 and 21 rigs in 2011 under the terms of existing long-term contracts.”
“During the first quarter of 2009, we activated 4 new Apex(R) rigs. We currently have multi-year contracts for seventeen additional new advanced technology Apex(R) rigs,” he concluded.”
Mark S. Siegel, chairman of Patterson-UTI Energy stated, “Drilling activity has fallen dramatically as our customers felt the impact of declining commodity prices and the contraction of commercial credit. This severe downturn has affected virtually every segment of the land rig market; all of our regions and all sizes of rigs have been impacted. Across the industry, customers have laid down rigs regardless of the rigs’ performance. As the downturn has progressed, they have even laid down many rigs subject to term contracts with substantial costs for termination.”
“In this difficult period for the oil services industry, we believe we are in a strong position. At March 31, 2009 we had no debt, $192 million in cash, and a huge array of unencumbered ‘hard assets.’ These ‘hard assets’ include significantly upgraded fleets of drilling rigs and pressure pumping equipment. In addition, we have substantial other drilling and pressure pumping assets, as well as assets in our E&P and drilling fluids businesses.”
Siegel added, “Beyond our strong financial position, a fundamental strength of our business is the very high degree to which operating costs are variable. Patterson-UTI Energy has a track record, in past industry cycles, of being able to scale the business to the current levels of activity – whether expanding or contracting. During the current contraction period, we are reducing our costs and streamlining our business, while maintaining the capability to run a large number of rigs. This streamlined structure, along with our large fleet of new and recently upgraded equipment, makes us confident that we will greatly benefit from the next upturn in drilling.”
Patterson-UTI Energy also declared a quarterly cash dividend on its common stock of $0.05 per share, to be paid on June 30, 2009 to holders of record as on June 15, 2009.
