Don Crist

Don Crist asked Chris Hill about Core Lab's strategy for future cash flows, free cash flow allocation, and the balance between paying down revolver debt versus share buybacks, following the recent debt restructuring.

Answer

Chris Hill, CFO, stated that the term loan provides flexibility with no early paydown penalty, alongside required annual paydowns. He affirmed Core Lab's view that the stock is undervalued, indicating a continued opportunistic mix of share repurchases and debt reduction. Larry Bruno, Chairman and CEO, added that achieving a leverage ratio below 1.0 would offer a 0.25 point interest rate reduction, a smart target, but the current capital allocation strategy will likely persist.

Don Crist inquired about Core Lab's potential re-engagement in Venezuela, considering its historical presence, should operators expand their activities in the region.

Answer

Chairman and CEO Larry Bruno stated that Core Lab has a nearly 60-year history in Venezuela but exited due to a challenging environment, moving operations to Colombia. He noted that while Core Lab possesses legacy data that could be monetized, near-term opportunities are more likely for 'metal-heavy companies.' Core Lab would follow operators with mobile lab capabilities, but a permanent re-establishment is several quarters away. Chris Hill, CFO, and Larry Bruno also discussed capital allocation strategies, balancing debt reduction with opportunistic share buybacks, aiming to improve the leverage ratio below 1.0 for better interest rates.

Don Crist inquired about the directional impact of early Q1 weather on RPC Inc.'s performance, asking if it would be similar to the fourth quarter's trends. He also asked if RPC Inc. is observing a normalization or reduction in competition in non-pressure pumping service lines (Thru Tubing, coil, wireline) due to competitors facing challenges and equipment moving overseas. Finally, he questioned the potential use of RPC Inc.'s significant cash reserves, specifically asking if stock buybacks are being considered alongside M&A for capital deployment.

Answer

Ben Palmer (President and CEO) stated that the company is still analyzing the weather impact, noting it's not insignificant, especially in the Permian and MidCon. He suggested there might be 'a little bit' of reduced competition in other service lines due to market stress impacting less well-capitalized companies. Regarding capital allocation, Mr. Palmer confirmed that buybacks are 'certainly one of those choices' being evaluated, but indicated no dramatic changes in the near term, while affirming it's 'in the tool chest'.

Don Crist asked about the potential directional impact of early Q1 weather on results compared to Q4, the normalization of other business lines (Thru Tubing, coil, wireline) due to competitors moving overseas or exiting the market, and the possibility of stock buybacks given RPC's substantial cash reserves versus retaining capital for M&A.

Answer

Ben Palmer, President and CEO, stated that the Q1 weather impact is still being analyzed but is not insignificant, particularly in the Permian and MidCon. He noted that while there might be some normalization in other service lines due to market stress on less well-capitalized competitors, it's not a tremendous amount yet. Regarding capital allocation, Mr. Palmer confirmed that buybacks are always evaluated as a choice, but no dramatic changes are expected in the near term, with M&A remaining a focus.

Don Crist from Johnson Rice asked about the timing of unconventional drilling conversations and potential rig count pickup in regions outside the traditional Middle East, such as Libya, Turkey, and Australia, over the next couple of years. He also requested an update on the sale of Utica Square.

Answer

President Trey Adams highlighted future growth opportunities in Australia, with a second Flex Rig recently deployed. He noted active engagement in North Africa (Algeria, Libya) with KNOCs and IOCs, emphasizing the critical role of U.S. unconventional expertise. He cautioned that these programs manifest over long horizons. CEO John Lindsay provided an update on the Utica Square sale, stating the process is going well with multiple interested parties, hoping for news by year-end 2025 or H1 2026.

Don Crist from Johnson Rice inquired about the timing of unconventional drilling conversations and potential rig count increases in international regions beyond the Middle East, such as Australia, Libya, and Turkey, and also requested an update on the sale of Utica Square.

Answer

President Trey Adams discussed future growth opportunities in Australia, including a second FlexRig, and active technology conversations with KNOCs and IOCs in North Africa (Algeria, Libya). He noted that these programs mature over long horizons. CEO John Lindsay provided an update on the Utica Square sale, stating the process is going well with multiple interested parties, with hopeful news by year-end 2025 or H1 2026.

Don Crist asked about the outlook for M&A in the oilfield services sector, specifically if larger competitors pivoting to power might free up attractive equipment for Patterson-UTI, potentially for accretive transactions or international expansion. He followed up by asking if acquiring a 'stranglehold on the Middle East' would be attractive.

Answer

Andy Hendricks, President and CEO, stated Patterson-UTI doesn't 'have to do any M&A' given its strong position, cash production, and technology. He sees some room for consolidation among smaller completion companies but not much in drilling, and likes the low-CapEx profile of past acquisitions like Altera. Andy Smith, CFO, added that a 'wholesale pivot' by competitors is unlikely, and any equipment sold would likely not be at the desired technology level. Mr. Smith said they would 'certainly be interested in looking at' international opportunities but placed a 'low likelihood' on core business assets being separated and offered.

Don Crist (Johnson Rice & Company L.L.C.) asked about Patterson-UTI's M&A outlook, specifically if larger competitors pivoting away from core businesses might free up attractive equipment for Patterson-UTI, potentially leading to accretive M&A, possibly overseas.

Answer

President and CEO Andy Hendricks stated that Patterson-UTI does not need M&A, being content with its current cash production and technology deployment. He sees some room for consolidation among smaller completion companies but little in drilling. He noted that the company has evaluated many opportunities but prefers profiles similar to the Altera acquisition (low CapEx, high returns). CFO Andy Smith expressed skepticism that competitors would sell high-technology equipment that Patterson-UTI would want, making such a scenario unlikely. He added that while international opportunities would be reviewed, the likelihood of attractive core business assets being separated is low.

Don Crist of Johnson Rice & Company L.L.C. asked about the potential for further asset rationalization beyond Peak Rentals, such as in trucking or chemicals, and requested an update on the progress of the Colorado water banking project.

Answer

EVP & CFO Christopher George responded that the remaining trucking assets are more strategically integrated with the infrastructure business and that the focus will be on rationalizing the overall cost structure. President, CEO & Chairman John Schmitz added that decisions are driven by what best supports infrastructure customers. Regarding Colorado, EVP of Strategy & Technology Michael Lyons reported material progress, including the completion of a landmark engineering study, and noted active engagement with stakeholders to develop a large-scale water banking program.

Don Crist of Johnson Rice & Company L.L.C. questioned the drivers behind lower per-ton production costs despite reduced volumes and asked about the potential CapEx implications of large-scale microgrid projects under discussion.

Answer

EVP & President of Sand and Logistics Chris Scholla and President and CEO John Turner attributed the cost improvements to a relentless focus on operational excellence, procurement efficiencies, and prioritizing production at their lowest-cost facilities like Kermit. SVP & President of the Power Business Unit Tim Ondrak clarified that the 40-50 megawatts of deployments planned through year-end are covered by the existing CapEx budget, and a significant portion of the 200 MW opportunity pipeline is in the C&I space.

Don Crist inquired about the potential for older diesel frac equipment to be sold overseas and whether this could help balance the domestic market. He also asked about current lead times for new solar turbines.

Answer

CEO Sam Sledge acknowledged that there is global interest in U.S. equipment and expertise, which he believes helps the domestic supply-demand balance, though the impact is hard to quantify. Regarding lead times for power generation equipment, he commented only that they are 'not getting any shorter' but expressed confidence in ProPetro's strong supplier relationships.

Don Crist of Johnson Rice & Company L.L.C. asked about the contract structure and return profile for the new ECO rigs, the primary drivers for the improved performance in the Wireline segment, and the potential for gas basin activity to offset Q4 uncertainty.

Answer

CEO Stuart Bodden explained that the ECO rigs have a similar or better return profile, with customers sharing incremental costs through down payments and higher rates. He attributed the Wireline improvement primarily to internal cost management and a seasonal activity pickup, noting it's too early to see benefits from market consolidation. Regarding Q4, Bodden expressed hope that a strengthening gas market could help but stated it's too early to predict, as customer budgets will be key factors.