Patterson-UTI Energy (NASDAQ: PTEN) reported Q2 EPS of ($0.05), $0.01 worse than the analyst estimate of ($0.04). Revenue for the quarter came in at $854 million versus the consensus estimate of $866.95 million.

Andy Hendricks, Patterson-UTI's Chief Executive Officer, stated, "In contract drilling, our average rig count increased by seven to 176 rigs during the second quarter. With strong demand for super-spec rigs, we expect our rig count will continue to increase and average 180 rigs during the third quarter."

Mr. Hendricks added, "Average rig margin per day increased by a better than expected $700 to $8,270 for the second quarter. The $330 per day sequential increase in average rig revenue per day and the decrease in average rig operating costs per day were both better than expected. For the second quarter, average rig revenue per day was $21,870 and average rig operating costs per day were $13,610.

"We recently signed customer contracts to deliver four additional rigs with major upgrades to super-spec for the Permian Basin. The favorable dayrates and four-year term durations of these contracts provide compelling economics, and are expected to pay back the capital investment within the terms of the contracts. Since the beginning of 2018, we have delivered nine rigs with major upgrades, and we have customer contracts to deliver an additional seven rigs with major upgrades through early 2019.

"As of June 30, 2018, we had term contracts for drilling rigs providing for approximately $680 million of future dayrate drilling revenue, an increase from approximately $600 million at March 31, 2018. Since June 30, 2018, we have signed contracts providing for more than $200 million of additional future dayrate drilling revenue. Based on contracts currently in place, we expect an average of 119 rigs operating under term contracts during the third quarter, and an average of 81 rigs operating under term contracts during the 12 months ending June 30, 2019.

"While the industry market for super-spec drilling rigs is tight, the completions market showed signs of oversupply towards the end of the second quarter. In pressure pumping, our revenues for the second quarter were $425 million compared to $407 million for the first quarter. Gross profit for the second quarter was $82.4 million compared to $85.8 million for the first quarter. Both revenues and gross profit in pressure pumping were lower than we expected due to operational delays late in the quarter at multiple well sites, unrelated to our pressure pumping operations. The softening market conditions made it difficult to backfill the unexpectedly high amount of idle time.

"During the second quarter, we activated two frac spreads, the first of which was created early in the second quarter from already active equipment. The second frac spread was activated late in the second quarter, and therefore did not significantly contribute to second quarter revenues. Based on current market conditions, we do not plan to reactivate additional frac spreads at this time.

"In directional drilling, revenues for the second quarter were $52.7 million compared to $48.6 million for the first quarter. Gross margin as a percentage of revenues was 17.1% compared to 22.5% during the first quarter. Activity improved in the second quarter, but margins continue to be negatively impacted by third party rental expense resulting from ongoing delays in the delivery of various components."

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