Patterson-UTI Energy (NASDAQ: PTEN) reported Q4 EPS of ($0.44), $0.02 worse than the analyst estimate of ($0.42). Revenue for the quarter came in at $492 million versus the consensus estimate of $486.03 million.

Andy Hendricks, Patterson-UTI's Chief Executive Officer, stated, "We believe our rig count bottomed in the fourth quarter and will modestly increase in early-2020. Lower than expected rig activity and higher than expected operating costs in the fourth quarter were the result of changes in our geographic mix and gaps in rig activity between jobs. In the first quarter, increasing rig count in the Permian should more than offset lower activity in other markets."

Mr. Hendricks continued, "In contract drilling, our rig count averaged 123 rigs in the fourth quarter, down from 142 rigs in the third quarter. The decrease in activity primarily occurred early in the fourth quarter with our December rig count showing the first increase in a year. For the first quarter, we expect activity will improve from December levels and result in an average rig count similar to the fourth quarter.

"During the fourth quarter, the fluctuation in activity resulted in increased revenues and expenses associated with stacking rigs in some basins, while reactivating rigs in the Permian. Additionally, gaps in the work schedule resulted in some rigs being stacked early in the quarter and being reactivated later in the quarter, which required us to carry extra labor while the rigs were not generating revenue or operating days. Therefore, average rig revenue per operating day and average rig direct operating cost per day of $23,980 and $15,540, respectively, were both higher than expected.

"As of December 31, 2019, we had term contracts for drilling rigs providing for approximately $605 million of future dayrate drilling revenue. Based on contracts currently in place, we expect an average of 77 rigs operating under term contracts during the first quarter and an average of 58 rigs operating under term contracts during 2020.

"In pressure pumping, our gross profit was $21.9 million for the fourth quarter, which included the benefit of a $10.8 million sales tax refund that reduced direct operating costs. We started the fourth quarter with 14 active spreads and stacked one spread in October and two spreads in November, as activity declined throughout the quarter. We expect to average 10 active spreads for the first quarter and will be negatively impacted by the sudden operational stoppage of a major oil company customer, however, due to the actions we have taken and continue to take, we believe that pressure pumping results should improve later in the year.

"In directional drilling, as we expected, a steep drop in fourth quarter activity resulted in revenues falling to $38.6 million in the fourth quarter from $47.0 million in the third quarter. Lower activity levels, combined with higher than expected expenses for repairs and maintenance, contributed to a lower than expected gross margin of $3.8 million for the fourth quarter."

Mr. Hendricks concluded, "Based on our current outlook for 2020 activity, we expect to spend approximately $250 million of capex for the year, down from $348 million in 2019. Our capex budget is primarily focused on maintenance spending to preserve the service quality for our customers and the earnings power of our assets."

Mark S. Siegel, Chairman of Patterson-UTI, stated, "In 2019, Patterson-UTI proactively responded to tough market conditions. We reduced capital spending by 46% and focused spending on maintaining the high quality of our equipment. We also made strategic investments in automation and performance technologies, a number of which will come to the market in 2020.

"In 2019, we generated strong cash flow and further strengthened our financial position. During the year, we spent $250 million to reduce our number of outstanding shares by more than 10%, and we reduced our long-term debt by $150 million," he concluded.

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