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Edited Transcript of PTEN presentation 7-Mar-17 1:40pm GMT

Patterson-UTI Energy Inc at Raymond James Institutional Investors Conference

Orlando Apr 10, 2018 (Thomson StreetEvents) -- Edited Transcript of Patterson-UTI Energy Inc presentation Tuesday, March 7, 2017 at 1:40:00pm GMT

TEXT version of Transcript


Corporate Participants


* Andy Hendricks

Patterson-UTI Energy, Inc. - President, CEO


Conference Call Participants


* Marshall Adkins

Raymond James & Associates, Inc. - Analyst




Marshall Adkins, Raymond James & Associates, Inc. - Analyst [1]


Okay. Next up in the energy room, we have Patterson-UTI. Like Nabors, Patterson is one of the longest covered names in my universe. I actually picked it up when it was Patterson and it had about 12 rigs.

The Company has been through a massive transformation the last seven or eight years, completely transformed their rig fleet. They now have one of the higher-quality rig fleets out there. And the only questions I ever get are about their pressure pumping business now, which used to be like a fairly small part of their business. But in our model, it potentially could get up to as much as half their business. So, Andy, thank you for coming and take it away.


Andy Hendricks, Patterson-UTI Energy, Inc. - President, CEO [2]


Thanks, Marshall. It's good to be here this week. It's certainly a much better tone than we had a year ago and pleased to talk about what's going on in the business these days.

My name is Andy Hendricks. I'm also joined by Mike Drickamer, our Vice President of Investor Relations, and we'll be answering questions in the breakout after this as well. So we'll just go ahead and get started.

As we're going through a merger with Seventy Seven Energy, our initial pages from our legal team have gotten a little bit longer, but I won't bother to read all this for you. But if you are interested, it's certainly in the handout.

But let's start with an overview of Patterson-UTI and who we are and what we do. Our primary business is still high-spec contract drilling. We have a high-quality fleet of modern land rigs. We have 161 of our APEX rigs in the fleet.

We are a leader in walking rig technology. We've been talking about this for a few years now. But we were the first to bring this out into the lower 48 of the US. It was for use in Colorado on a Piceance project with over 20 wellheads on a particular pad. This technology has spread to every basin in the US today, where we do multiwell pad drilling in every basin today.

We have a large footprint across North America. We are in every major basin in the US. We are also in western Canada, and contract drilling makes up about 60% of the revenue that we generate. And if you look at the picture on the slide, this is our APEX-XK. It's one of the freshest designs in land drilling and we'll talk about some of the features and benefits of that particular rig.

Pressure pumping, so we are not new to pressure pumping. We've been in pressure pumping since 1980. It's the universal, the U in Patterson-UTI, but we've transformed this fleet as we've expanded into hydraulic fracturing and grown it. We have a high-quality fleet of modern pressure pumping equipment, mostly quintuplex, although we do own some of the newer modern triplex as well for the high-pressure work.

We have a very strong reputation for the regional work that we do. So we are concentrated in the Northeast and in Texas. And if you look at the management teams that we have in place in those basins, you're talking about guys and ladies that have been in place for 25 to 30 years. So, we really know the basins that we work in. We know the customers. We know what it takes to run the businesses in these basins.

And this concentrated footprint also gives us an economy of scale. Get back to our concentration in the Northeast and in Texas, and our total horsepower is around 1 million horsepower. Well, for the last few years we were competing against companies that were similar sized, but they were not only in the Northeast, Texas. They may have been in the DJ and the Bakken. They may have been in Canada. They may have been in Argentina and Kazakhstan, but yet they were roughly the same size as us.

So that concentration that we have by having that 1 million horsepower in really two major regions of the US gives us that scale in terms of procurement, in terms of logistics and transport, in terms of storage when necessary of all the sand, the chemicals, things that we have to move. It's not just about the horsepower at the well site. It's about everything else that happens behind the scenes and the logistics and procurement network that we have. So the scale does matter.

Pressure pumping makes up about 40% of our revenue stream, and the picture up here is one of the interesting pictures from a job in south Texas where it was actually two full horizontal frac spreads simultaneously pumping on two horizontal wells and taking measurements in between in order to maximize productivity on the two wells. So we do get involved into some of this higher technology work at the same time.

So let's get into contract drilling. So if you look at our fleet of 161 APEX rigs, let's start to break this down into some of the components and talk about where the market is and why we are excited about the fleet quality that we have. The market has really moved from what started out in high-spec drilling as a 1,000-horsepower rig that dominated the Barnett Shale 10, 12 years ago to what we call the 1,500-horsepower rig. If you look at the rigs that we've been building and we've built various sizes, the majority of the rigs that we have, 132 out of the 161 APEX rigs, are that 1,500-horsepower class.

Then we get into some of the sizes and the ratings of the mast and the substructure, and many of these rigs that we have in that 1,500-horsepower range also have the 750,000-pound masts and sub-load structure, which really kind of lets you know that the rig can drill the longer laterals. It has the higher racking capacity. So our fleet is dominated by what we call the sweet spot in terms of size and load capacity in the high-spec drilling side.

Now I mentioned the merger early on with Seventy Seven Energy and this just happens to be a pro forma slide of what's publicly available between our fleet and their fleet. We're still two separate companies. We are both still publicly traded, so I can't speak to Seventy Seven Energy per se, except for things that are already public and out there. But we have 161 high-spec rigs in our fleet. They have 40 high-spec rigs in their fleet, including 28 of their newer what they call PeakeRig. So very excited to merge all that together, and that gives us a total pro forma of 201 high-spec rigs post merger.

And if you looked at all the other electrics that we both have in the fleet, and there are SCRs in both of our fleets that have walking systems as well that are going to work as the rig count continues to move up, and that gives us a total of 293 electric rigs in the fleet. And so, very excited about where this puts us in terms of scale across North America and rig availability.

So let's come back to Patterson-UTI drilling and some of the technology that we have out there. So the APEX-XK, we see it as one of the freshest designs in land drilling that we've been building for a few years now and we have 52 of these APEX-XKs in the 1,500-horsepower size that are out there working on the market. It's an interesting discussion because it's one of the rigs that we announced in terms of finishing as a new build at our last earnings call and we are still seeing strong demand.

And here are some of the technical features that allow for that strong demand. It has the enhanced X-Y mobility. It can walk with a full set back in the mast. It's more efficient in the rig up and the rig down. What makes it different in terms of the X-Y mobility is the draw works isn't on the ground like some of the older style of land rigs, but the draw work is up on the rig floor. So that opens up the area underneath the substructure to clear the wellheads, clear production equipment when you are walking around in an X-Y direction. This rig has full environmental spill control integrated into the drill floor and it has a reduced number of truckloads.

So we'll move on to a picture of what the walking system looks like fully integrated into this rig, but then also a video of how all this works together. So this video was taken out in west Texas. It shows the rig working out there with a full rackback of pipe in the derrick. And what you are going to see is some mobility on this rig that makes it very popular with many of our customers.

We're essentially booked out on APEX-XKs and that's what drove this latest sale that we announced on our last earnings call. We had one XK remaining in the yard that was over 50% complete and we had a customer that knew this rig very well that decided I want another one of those rigs. What's it going to take to finish this rig?

And you can see here in the video why the customer is interested in this particular rig design. We have wireless technology that allows the rig manager to operate the walking system on the rig. You can see how the rig lifts and slides and moves forward, and when it does, it's carrying not only the pipe up in the derrick, but it's carrying also the BOP and the substructure. It's carrying some of the pressure accumulator systems on it as well, and if you look at the catwalk in front of the rig there, it also has a walking system on it, so everything is mobile and moves together.

So it's a very easy 45-minute process to walk from wellhead to wellhead and only a total of three hours to be back to drilling on the next well. So this allows the mobility to move across multiple wellheads on a pad, move back across those wellheads to drill the next section. You can batch drill; you can drill full wells before moving to the next. It gives an operator a lot of flexibility, and so this is why we were able to enter into this contract to complete one of the XKs that was partially completed back in 2014.


Marshall Adkins, Raymond James & Associates, Inc. - Analyst [3]


You have really speedy workers, too.


Andy Hendricks, Patterson-UTI Energy, Inc. - President, CEO [4]


They move really quick, especially in this video. But if you notice, they are working around the rig while it is walking, so this is a very safe operation. It's just a simple lift-and-slide motion to move the rig over to the next wellhead, but it does allow people to work in certain areas of the rig while it's moving across the pads.


Unidentified Audience Member [5]


(inaudible -- microphone inaccessible)


Andy Hendricks, Patterson-UTI Energy, Inc. - President, CEO [6]


Yes, you've still got a full rackback in the derrick, and that's what's made walking systems so important in the industry is to be able to allow that. But then our design also incorporates this ability to move the blowout preventer, to move the accumulator pressure control system, the walking system on the catwalk, so it's all these things combined that enhances the mobility. And you can't see it, but the draw works is up on the drill floor and so it allows more clearance to move back and forth and around production equipment and wellheads on the pad.


Marshall Adkins, Raymond James & Associates, Inc. - Analyst [7]


And you are walking sideways as well as (inaudible) backwards.


Andy Hendricks, Patterson-UTI Energy, Inc. - President, CEO [8]


You can rotate the walking system to move in any direction, so you can move in an X direction, a Y direction, and also diagonally if you need to.


Marshall Adkins, Raymond James & Associates, Inc. - Analyst [9]


How is this different from Nabors?


Andy Hendricks, Patterson-UTI Energy, Inc. - President, CEO [10]


I'll have to let our friends at Nabors answer that question.

So we've also got a new design out there we call the APEX-XC. We started engineering this rig back in 2013 and this is an extension of a rig that we currently have in place. If you look on our website and you see our list of rigs that start with the 300 numbers, we call them the 300 series. These were the original APEX walking rigs.

We decided there was an opportunity to enhance and improve this design, and so we came up with what we call the APEX-XC. So we started engineering this back in 2013. We finished the engineering work in 2014, and even though we were going through this downturn in 2015, we went ahead and started building the mast and substructure on this rig.

Now this rig offers increased clearance. It offers a higher load rating for even greater setback than what the XK or some of the other rigs in our fleet offer. So for customers drilling a large number of wellheads on a pad or customers drilling even longer laterals than what they might do with an APEX-XK, then this is a rig that is very interesting for some of our customers.

And, in fact, it was one of the other announcements that we made at the last earnings call where we had a customer that was currently using one of our 300 series rigs, got to see the XC rig in our yard, got excited about that, decided this was the next rig that they wanted, and so we came to an economic agreement on how we would finish off this rig.

If you combine the fact that we already had many of the components left over from build program in 2014, then the economics made sense. We're still not to newbuild economics in the industry, we don't believe. Day rates really need to get closer to the mid-20s before we get to true newbuild economics, from our viewpoint, but we did see this opportunity to work with two key customers to finish two rigs that were partially completed and where we had inventory in the yard already.

So back to the XC, it's a very exciting rig for us. We're not showing a lot of pictures at this point, but it does have increased clearance underneath the floor. It has increased setback capacity for the longer laterals. It's still a very mobile rig on the pad, but also will move faster from pad to pad than our current 300 series rig.

It also is going to incorporate the higher torque top drive from our Warrior division. Very excited about this acquisition that we made last year, and then this XC will be finished in the second half of 2017.

So just looking at our footprint and back to a pro forma of public information from Seventy Seven Energy as well, you can see how our footprint and Seventy Seven's footprint really come together nicely. So they have a strong presence in the Mid-Continent where, at the last count, they had 13 rigs working while we had 10 rigs working, and in West Texas where we have 22 rigs, they also have 13 rigs working. So this is going to be a very nice addition in rounding out what we do in very active basins right now, being Permian and Mid-Continent.

Also, if you look at Appalachia, it enhances our leadership position that we currently have up in Appalachia where we are working 15 rigs and it'll add another 13 working rigs up there as well.

So really excited about the merger. The close date is expected to be end of March or early April, as we discussed before, and we're just working through the final regulatory steps with the SEC on that today.

So, Warrior. As I mentioned, we are really excited about this acquisition. We had a chance to do this last year. Warrior didn't start off as an acquisition target at Patterson-UTI. Warrior started off as a potential supplier for top drives. We really liked where they were going with the technology. We liked the improvements that they were making in the design versus the one that we were currently using where there was going to be more redundancy on the motors. The torque output was going to be higher. There was going to be greater redundancy on electricals and data systems on this particular component.

The top drive is still the most challenging component on a drilling rig in terms of reliability. So any improvements in reliability that you can make on a top drive means increased revenue for that rig, because when the rig is not working, we don't get paid, but if the rig is working, we're going to get paid. So anything we can do to improve that is a plus.

We reached out to Warrior and began working with them as a potential supplier, but during the downturn of 2015 and 2016 anybody that was manufacturing components really ended up in a distressed situation, especially if you were a smaller company like Warrior. So it just made sense to roll them in. Warrior will still be a standalone company under Patterson-UTI Energy, but over time our drilling business will become their largest customer.

One of the main things that we are doing with this business right now, they currently have a service center in the US, which we are expanding to service our own top drives. And so when we have to do a service and a full recertification on top drives, we have to do this every five years for the working life of a top drive. This costs us approximately $400,000.

We have been using third-party companies to do this, but with the expansion of Warrior's service center in the US, we'll be able to do this internally now as an OEM. So, immediate cash flow into Warrior's business and then Warrior can continue to do the kind of interesting technology work that they've been doing for the last few years and inventing some new products.

So switching gears and moving on to pressure pumping. We consider ourselves as having a modern pressure pumping fleet. We've been in this business since 1980, so certainly there were some older pumps in our fleet and we still have a few. But, really, the legacy triplex pumps that we have in our fleet make up less than 10% of our fleet.

We've been investing heavily since 2010 in this business and we're up to 80% of what we call the modern quintuplex pumps. We also have modern triplex as well. We've already been in discussions this morning about quintuplex versus triplex. I don't want to disparage a triplex pump. When you are pumping in the higher pressures of the northern Delaware or if we find ourselves pumping in the Haynesville, the modern triplex pump is going to be of benefit in these higher pressure environments.

So we don't want to just go out and disparage all triplex pumps. We do have a mix. The majority of ours are quintuplex because of the areas that we've traditionally operated in the unconventionals. But we also have some of the modern triplex as well, and that's good for our business and especially good for where we are pumping some of the jobs today in the northern Delaware.

Again, back to Seventy Seven Energy and what's public, if you looked at the pro forma, we are roughly 1 million horsepower. They are roughly 0.5 million horsepower. Combined, 1.5 million. So that gets us to even more scale and we do believe that scale matters in pressure pumping. It's not about just what you are bringing to the well site in terms of horsepower, but it's all the behind the scenes, logistics, supply chain, and procurement.

We do believe that sand prices are going to go up in 2017. We've been able to control what we pay for sand so far with the contracts that we have in place. But this increases our leverage with sand suppliers going forward.

If you look at the footprint, there's not a lot of overlap between ourselves and Seventy Seven Energy pressure pumping. They are mostly in the Mid-Continent, with a little bit in South Texas, so regionally this gives us an expansion as well. So, very pleased about how this is going to dovetail together in terms of the merger and excited to go ahead and get this closed as soon as we are allowed to do that.

In pressure pumping, we've been focused on technologyy, discrete technologies where it makes sense for a company of our size. One of the areas -- and we've shown this before, but it's the Patterson Dry Friction Reducer. We think it's been really good technology for us to keep our costs down at the well site. So instead of bringing liquid friction reducers to the well site, we bring out dry powders and then we hydrate and inject those, the dry powders. We hydrate them into liquids. We inject them into the flow stream, and by doing this, it reduces our logistics costs to the well site. It reduces the cost of the friction reducer for us as well.

For instance, Seventy Seven is not currently using this system, so when we bring their horsepower into our fleet, we'll be able to expand this particular Dry Friction Reducer technology into Seventy Seven's fleet as well to help get their costs down. So this is just one of the small synergies that we get through technology.

We also have full comprehensive lab services and we'll be able to expand these for Seventy Seven to use as well. We have a lab in Texas. We have a lab in the Northeast. These labs operate 24 hours a day to support our hydraulic fracturing, our cementing businesses, our acidizing and our nitrogen businesses as well.

Last but not least, we have a strong financial position. We've been investing roughly $1 billion a year into our Company. We've certainly had to scale that back with the slowdown in 2015 and 2016. 2016, we got it all the way down to $120 million. Because of some of the deferments of CapEx from 2016 into 2017, 2017 CapEx estimates are at $350 million.

Now, remember, that also includes the upgrades we're doing on drilling rigs. We talked a little bit about the size of the drilling rigs being 1,500 horsepower with 750,000-pound masts and subs. But we're also upgrading circulating system on drilling rigs to where we go from 5,000 psi to 7,500 psi, and there are other upgrades that we'll be doing on some of the drilling rigs this year as well.

And that's keeping in line with the market. And it's not uncommon to do upgrades on drilling rigs when we come out of these cycles. It's happened in past cycles where previous electric rigs that didn't have top drives received top drives in previous cycles. We're not in what we consider a newbuild cycle yet, but we are in a cycle that allows us to do upgrades. The pricing has been moving up on drilling rigs where it pays for the upgrades to be done, and so we continue to be in a good position there in terms of what we are spending on these upgrades versus what we are getting. There is still room for pricing to move up on drilling rigs.

In pressure pumping, this is not any new equipment for us coming in. We've been in various discussions on that. This is just maintenance on pressure pumping. It also includes a little bit of CapEx for any future activations that we might need to do.

To activate a pressure pumping spread for us has been about $2 million per spread. We've announced three spreads that are being activated and this is what we've spent. Now that $2 million is not all CapEx for us. That's a mixture of labor, OpEx, and CapEx. And we see that moving to about $3 million on average to activate the remainder of our spreads.

So that's where we are. But we see this as a CapEx forecast in 2017 at roughly $350 million.

If you look at our financial position, we are running at about 18% debt to total cap. We've recently had an equity sale as well, so we have the cash from that. We have $35 million in cash as of December 31, 2016, and we also have the $470 million of proceeds from the equity offering that we did here recently.

And this is going to be for -- it's earmarked for paying off the debt for Seventy Seven Energy. Now there's various calculations on this debt, but this debt also includes warrants and potential cash back from these warrants, and we don't know what that total amount is until we actually get through the closing date and we know what the price of those shares are.

So there's various warrants and the calculations are a little bit complicated in terms of how much debt Seventy Seven is going to carry and how much we're going to have to pay back, and it's the reason for the equity sale and the reason we were over $400 million in that particular equity sale. We wanted to make sure that we did take out the existing Seventy Seven debt.

In terms of our own debt, Patterson-UTI, we don't have any debt maturities now until 2020, with two $300 million term loans, one in October 2020 and another in June 2022. So we feel like we are set up well right now. The only thing we have to work on is our existing revolver, which goes through September 2017. We'll be working to extend that, but that's really all we've got to work on right now in terms of the balance sheet.

So why invest in Patterson-UTI Energy? We have high-quality assets. We have 161 APEX rigs, a pro forma that's going to be over 200 once we merge Seventy Seven Energy with us. Very excited about what the quality of the fleet is going to look like post-merger with Seventy Seven Energy.

Also in terms of assets, we're going to be 1.5 million horsepower post-merger with Seventy Seven Energy as well and it gives us the scale to manage procurement and supply chain and still remain very competitive in the market. We are a technology leader in the walking systems for pad drilling and we continue to work on some discrete innovative technologies to keep our costs in line in terms of pressure pumping.

And last but not least, we are financially flexible. You saw us scale everything down during the downturn of 2015 and 2016, and now we've been scaling everything back up to meet the demand of the market.

I think overall, why invest in Patterson-UTI Energy, it's the great things that we are doing at the Company, the teams that we have in place that are running our businesses, but also look at the point where we are in the cycle. We are in an interesting situation in which rig count continues to go up in 2017 at today's oil prices, and as rig count continues to go up, I believe that pricing on the rigs continues to go up as well.

In terms of pressure pumping, as rig count continues to go up, activity continues to go up, and at some point we will get to an 80% industry utilization that allows us to get some full pricing power in that market as well. So I think it's an interesting time in the cycle. We're pleased to be here this year versus last year it was a much tougher time to stand up and talk to you. But the market has certainly taken a turn and very pleased with the over 1,200 men and women that we've got to bring back to Patterson-UTI Energy since last April as well.

So I want to thank everybody for your time today. I appreciate it.


Marshall Adkins, Raymond James & Associates, Inc. - Analyst [11]


We've got time for a couple questions. I guess I'll kick it off. One of the big [pictures] first so far is labor (inaudible) in terms of being one of ours is Seventy Seven (inaudible) got people and in terms of what you are seeing (inaudible). Where do we stand in the labor market?


Andy Hendricks, Patterson-UTI Energy, Inc. - President, CEO [12]


The labor market is tight and will continue to get tighter. Let me give you a little bit of color on that.

First off, if you need people in Midland and Odessa in the Permian basin, they just don't exist. People have to come in from outside of that basin. People didn't exist in that basin even last year as well. If you looked at the unemployment rate in Midland, the unemployment rate was lower than the national average. There just weren't a lot of excess people there to begin with.

At Patterson-UTI Energy, because of the footprint we have across North America, we have a nationwide recruiting program and we started gearing that up again in 2016, preparing for 2017 and 2018 as we came out of this cycle. If you look at the 1,200 people plus that we've brought back since summer of last year, if you look at some of our stats on people coming back to the Company, in September and October of last year, about 90% of the people that we were bringing back were returning Patterson-UTI employees. As of December, it's down to about 70%, with that 30% being kind of split between people with experience from the industry but not necessarily from Patterson-UTI and about 15% new to industry.

So now we are at that point in the cycle where we are starting to bring in people who are new to the industry and it's why we geared up our recruiting, our training, and on-boarding programs last year to prepare for this in 2017.

But the market is tight. It's very different from 2009 and 2010. You know, in 2009 when, unfortunately, our industry -- we had to scale our industry down, people didn't have any place to go. There wasn't another industry to go to. But what we've seen in this downturn is we are really the only sector in the US that did experience such a downturn, and so because of the duration of the downturn, because we've had people that unfortunately have been separated from us for more than six to nine months, many of those people have found jobs elsewhere. And so, we will have to incur those costs for national recruiting again.

We will also go back to recruiting active returning military. We had great success in 2013 and 2014. It's a great group of men and women who come with a quality culture, a safety culture, and willing to work. And so, we'll be tapping into that group of individuals and offering them positions as well as we get busier into 2017. But we do see the labor market starting to tighten up.


Unidentified Audience Member [13]


Talk a little bit about Seventy Seven's (inaudible). I think it's a great deal for you guys. But talk about the rigs. Obviously, you have some unique inventory of rigs (inaudible) somewhat familiar with Seventy Seven's fleet, but the compatibility, where you like to get those rigs, what kind of investment do you think you're going to have to make? And it gets -- where do you see the bracket (inaudible) in terms of rolling out that capacity, similar to the $3 million you referred to for [strainers] that looked like it might be a lot bigger investment.


Andy Hendricks, Patterson-UTI Energy, Inc. - President, CEO [14]


Seventy Seven Energy is a very interesting story for us because it has a little bit of history. We actually tried to buy the businesses back in 2013 when they were still part of Chesapeake. So we actually spent time looking at their assets.

Personally, I was up in Ohio crawling on some of their rigs back in 2013 and that's where we really got to know and like what they call their Peake class of rig, which they have 28 of those in the fleet. We think it's a really interesting rig design. We think it's well situated for some of the plays that they are working in today.

The other interesting thing about the Peake rig is it uses many of the same components that we have. So while the mast and the substructure may be different, it's going to look a little bit different in a picture, the draw works, the operating systems, the BOPs, pressure control systems are very similar to what we already have in our fleet.

So when we integrate these rigs into our fleet, we don't anticipate really spending any money to have to transition any of the equipment on this rig because these rigs are standalone in what they do and the equipment is very functional as it is and it's very similar to what we already have in the fleet. We have technicians that can already work on this equipment. But that being said, they have technicians as well and, frankly, with the growth we're going to need everybody's technicians going forward.

In terms of pressure pumping, there are going to be some slight differences in the equipment. But because of the regions that we are working in, because of the lack of overlap, we don't see a requirement to invest a lot in their equipment, either. We think it's all good quality equipment. I can't speak to their utilization as they are a publicly traded company and they are going to have to speak to that themselves.

They'll also have to speak to the cost of reactivating their spreads, but based on our assessment, we don't see it to be greatly different from our own costs. They parked their equipment very similar to how we parked our equipment. They weren't cannibalizing or taking parts off their equipment. They had continued to fund their operations in pressure pumping in terms of OpEx and CapEx the same as we had. So we don't see a huge difference in the amount of cost to reactivate their equipment versus ours. We see the fleets as very similar.

That being said, there are some slight differences in transmissions and engines and the control systems, but because they are -- for the most part, they are in Mid-Continent where we are not, we don't anticipate having to necessarily change control systems on those spreads, either. So we don't see a lot of extra costs, even though there are some slight differences on the pressure pumping side because of the regional distribution of the equipment. We anticipate operating it as is.


Marshall Adkins, Raymond James & Associates, Inc. - Analyst [15]


I think we've got a breakout room. Pioneer is up next. Andy, thank you very much.


Andy Hendricks, Patterson-UTI Energy, Inc. - President, CEO [16]