Keith MacKey

Keith Mackey asked about the company's free cash flow conversion, particularly for the full fiscal year, given the strong Q1 performance and existing guidance components.

Answer

President Trey Adams and CFO Kevin Vann expressed optimism about free cash flow generation, confirming the ability to organically pay down the remaining $140 million term loan by the end of Q3 or fiscal year-end. Kevin Vann also mentioned $100 million in portfolio optimization divestments expected by year-end, further contributing to cash flow.

Keith Mackey asked for insights into Helmerich & Payne's projected free cash flow conversion for the full fiscal year, following a strong performance in Q1.

Answer

CFO Kevin Vann expressed optimism about generating sufficient organic cash flow to repay the remaining $140 million of the term loan by the end of fiscal Q3 or Q4. He reiterated the primary importance of the dividend and noted a slight reduction in capital guidance. Kevin also highlighted $100 million in clarity regarding portfolio optimization from the KCA Deutag acquisition, expected to be executed by year-end, further contributing to free cash flow.

Keith Mackey of RBC Capital Markets asked whether achieving the high end of the Q4 rig count guidance would stem from better churn management or net new rigs, and also inquired about the competitive pricing landscape in the Lower 48.

Answer

SVP Trey Adams explained that hitting the upper end of the guidance would require a combination of both strong churn management and a handful of incremental rig additions. Regarding pricing, SVP Michael Lennox and CEO John Lindsay emphasized that while not immune to pressure, H&P prices based on the value it delivers, supported by a constrained market for top-tier super-spec rigs where utilization remains above 80%.

Keith MacKey of RBC Capital Markets inquired about the current state of the Saudi Arabian market, asking if the rig suspension cycle is complete and seeking clarity on the expected margin inflection for the International Solutions segment in fiscal Q4.

Answer

President and CEO John Lindsay stated there's no clear insight into whether Saudi rig suspensions are finished but noted a historical track record of rigs returning to work after suspensions. SVP and CFO Kevin Vann added that the full positive impact of the 8 legacy H&P rigs won't be seen until Q4, which should create a positive margin inflection, while also noting that cost integration efforts with KCAD are gaining traction and will also benefit Q4 results.

Keith MacKey requested more context on the start-up costs for legacy H&P international operations and the timeline to breakeven, and also asked for an outlook on U.S. natural gas activity and its potential impact on rig counts in 2025 and 2026.

Answer

SVP and CFO Kevin Vann identified labor and rentals as the primary start-up costs, with President and CEO John Lindsay noting a steep learning curve. On the U.S. market, both executives expressed long-term bullishness for natural gas but see a significant activity increase as more likely in 2026 or 2027, not 2025. Lindsay added that the long-idled status of competitor rigs supports current pricing discipline.

Keith Mackey asked about Patterson-UTI's rig technology offerings, how they've evolved, the revenue/net benefit uplift from these technologies, and the company's view on robotics on the rig floor. He also sought clarification on why Q4 activity was more resilient than expected, with less seasonality.

Answer

Andy Hendricks, President and CEO, detailed Cortex automation applications that enhance control systems and automate drilling functions, developed in partnership with customers, generating revenue, and making Patterson-UTI more integral to operations. He noted that teams are evaluating robotics, acknowledging both advantages and significant costs, with groundwork laid for future deployment based on customer requests. Mr. Hendricks attributed Q4 resilience to their large, stable customer base and the teams' ability to efficiently re-deploy equipment, not pricing concessions.

Keith Mackey from RBC Capital Markets asked about Patterson-UTI's technology offerings on its rigs, including Cortex automation and APEX rigs, their revenue/benefit uplift, and the company's view on robotics on the rig floor. He also sought insight into why Q4 2025 activity was more resilient and experienced less seasonality than expected.

Answer

Andy Hendricks, President and CEO, explained that Cortex automation applications enhance control systems and automate drilling functions, generating revenue and strengthening customer relationships through tailored procedures. He noted that while robotics are being explored, they involve significant costs. Regarding Q4 resilience, Mr. Hendricks attributed it to the strong customer base of large E&Ps who maintained activity, and the team's ability to efficiently re-deploy equipment for customers who slowed down, rather than pricing concessions.

Keith Mackey asked about the drivers for the expected 5% decline in drilling services adjusted gross profit in Q4, despite steady activity levels. He also inquired about specific examples of rig technology and incremental capacity requests from E&Ps for drilling longer wells.

Answer

Andy Hendricks, President and CEO, attributed the decline to a slight softening in pricing and the overall industry rig count decline since the beginning of the year, despite relatively steady activity from current levels. He expects activity to be relatively steady after Q4, outside of Q1 seasonal factors. Mr. Hendricks cited structural upgrades to 1 million-pound capacity rigs for deeper wells and longer laterals in Western Haynesville and Delaware, to handle larger casing loads and rack more drill pipe for efficiency. He also highlighted automation and artificial intelligence projects, using machine learning and data science to improve drilling and completion efficiency, reliability, and equipment longevity, noting these are not capital-intensive software investments.

Keith Mackey (RBC Capital Markets) asked for more color on the drivers behind the expected 5% decline in drilling services adjusted gross profit for Q4, despite steady activity levels. He also inquired about specific examples of rig technology and incremental capacity that E&Ps are requesting for drilling longer wells across the U.S.

Answer

President and CEO Andy Hendricks attributed the Q4 drilling services gross profit decline to a slight general decline in pricing, reflecting a softening market, though activity remains relatively steady. He expects stability after Q4, excluding Q1 seasonality. For rig technology, Mr. Hendricks cited structural upgrades (e.g., 750,000-pound to 1 million-pound capacity) for deeper wells and longer laterals in areas like the Western Haynesville and Delaware. He also highlighted automation and artificial intelligence/machine learning applications, which leverage data science to improve drilling efficiency, equipment reliability, and longevity.

Keith Mackey of RBC Capital Markets asked for more detail on the Emerald completions fleet, specifically the capital efficiency of direct-drive reciprocating engines versus other technologies like electric frac. He also inquired about the expected run-rate of investment in the Emerald fleet.

Answer

President & CEO William Hendricks provided a detailed explanation, stating that natural gas reciprocating engines are proving more capital-efficient than electric frac systems, which require expensive turbines and extensive power handling equipment. He noted the company is excited about this technology's potential. Regarding future investment, he said it would be evaluated on a year-by-year basis to match demand and ensure strong returns.

Keith MacKey inquired about the adoption rate and financial uplift of performance-based contracts, how to assess their success now that revenue-per-day metrics are no longer reported, and asked for a more precise definition of the 'down slightly' Q2 guidance.

Answer

CEO William Hendricks stated that integrated, performance-based work now constitutes about 10% of the business and is expected to grow over a multiyear period, with success measured by improved market share and margins driven by technology and efficiency gains for customers. CFO C. Smith clarified that the 'down slightly' guidance for Q2 drilling and completion gross profit approximates a 'low to mid-single-digit' percentage decline.

Keith MacKey asked for a comparative outlook on the performance of the drilling versus completion segments throughout the year and questioned the potential market size for integrated and performance-based contracts.

Answer

CEO William Hendricks and CFO C. Smith both indicated that the drilling segment is expected to remain relatively stable, while the completions segment has more potential for upside torque due to market dynamics. Hendricks estimated that integrated, performance-based contracts could grow to represent 10% to 20% of the business over the next few years, making it a material contributor to profitability.

Keith MacKey asked for the framework for shareholder returns in 2025, questioning if it would be a percentage of free cash flow or a fixed target, and whether using debt for buybacks was possible. He also asked for lessons learned from the first integrated drilling and completion job.

Answer

CFO C. Smith confirmed the long-term commitment of returning 50% of free cash flow but noted it was too early for a specific 2025 target. He explicitly ruled out using debt for buybacks to protect the company's investment-grade rating. CEO William Hendricks added that the biggest win from the integrated job was running more of their own services on the pad than they would have otherwise, creating a performance-based bonus opportunity.

Keith Mackey with RBC Capital Markets inquired about the composition of the 3 GW deployment by 2029, specifically if it would involve more deals with multiple customers or exponential add-on capacity from existing agreements.

Answer

CEO Ron Gusek stated that the 3 GW target would be achieved through a combination of both, expecting growth opportunities with current customers (initial and additional facilities) and adding new customers, with ongoing conversations with various partners.

Keith MacKey inquired about the progress of equipment delivery and packaging for Liberty Energy's LPI power projects, and the confidence in meeting committed timelines. He also asked about the composition of the 3 GW deployment by 2029, specifically if it would involve more deals with multiple new customers or exponential add-on capacity from existing deals.

Answer

CFO Michael Stock detailed the expansion of deep supply chain relationships with engine manufacturers, securing delivery schedules through 2029. CEO Ron Gusek clarified that the 3 GW deployment would be a combination of growing opportunities with current customers and adding new customers, with ongoing conversations with various partners.

Keith MacKey asked about the drivers behind the increase in CapEx per megawatt ($1.5M-$1.6M vs. previous $1.3M-$1.4M), including scope and pricing, and the confidence level in these cost estimates. He also sought further clarification on Q4 seasonality and expected revenue decline.

Answer

CFO Michael Stock attributed the CapEx increase to varying scope (e.g., stepping up generation, gas delivery to fence line) and price increases due to high demand and international manufacturing. He emphasized the compelling economic solution for customers despite cost increases. For Q4, Michael Stock suggested that the 12-17% revenue decline from prior years would likely be the 'top end' of what to model for normal seasonality, with activity-based decrementals.

Keith Mackey of RBC Capital Markets asked about the operational advantages and cost differentials of Liberty's new last-mile sand slurry pipe system. He also inquired how consolidating horsepower into fewer, more efficient simul-frac fleets would impact the business's earnings power.

Answer

CEO Ron Gusek explained the sand slurry system can eliminate truck traffic for the last mile, reducing road maintenance costs, dust, and emissions while improving logistics efficiency. CFO Michael Stock stated that while consolidating into larger simul-frac fleets results in slightly more profitable fleets on a per-fleet basis, the earnings power on a per-horsepower basis remains similar, creating a 'win-win' by lowering costs for the client.

Keith MacKey asked for confirmation that the full-year EBITDA guidance would hold in a low-$60s WTI environment and questioned if the Q1 share buyback pace was indicative of plans for the rest of the year.

Answer

CEO Ron Gusek agreed it was fair to assume the guidance would hold in a low-$60s oil price scenario. CFO Michael Stock clarified that while the original buyback plan assumed higher prices, the company will now take a very prudent approach to capital returns, prioritizing the balance sheet given the macroeconomic uncertainty.

Keith MacKey of RBC Capital Markets asked about the five-year growth potential for the power business and how average frac fleet sizes have been changing.

Answer

CEO Ron Gusek expressed a highly bullish five-to-eight-year outlook, suggesting the power business has the potential to rival the scale of Liberty's entire existing oilfield services business. He also confirmed that average frac fleet sizes are increasing as customers move to simul-frac and tri-mol-frac operations, which can require 30% to 100% more horsepower per fleet on location.

Keith MacKey asked for a breakdown of the estimated $650 million 2024 CapEx into its frac and maintenance components. He then sought to validate a 2025 frac CapEx estimate of $400-$450 million and a Q4 EBITDA forecast between $170-$180 million.

Answer

CFO Michael Stock confirmed the figures. He stated that 2024 maintenance CapEx is approximately $175 million, with the remainder being growth and technology investments. He agreed that a 2025 frac CapEx range of $400-$450 million was in the 'general realm of sensibility' and that a Q4 EBITDA of $170-$180 million was a 'reasonable estimation.'

Keith MacKey from RBC Capital Markets asked President and CEO Carey Ford about his strategic priorities and potential adjustments to the company's direction as he assumes the CEO role. He also inquired about the expected mobilization and activation costs impacting daily operating margins in Canada and the U.S. for Q4, following a $502/day impact in the U.S. during Q3.

Answer

President and CEO Carey Ford stated that his strategic focus would build on existing strengths, emphasizing enhanced support for field operations and demonstrating industry-leading performance to customers, while maintaining core strategies around cost control, capital allocation, and shareholder returns. CFO Dustin Honing indicated that Q4 mobilization costs in Canada would be minor, while U.S. costs are expected to maintain a constant run rate similar to Q3, reflecting ongoing rig reactivations and contract churn.

Keith Mackey of RBC Capital Markets asked for clarification on the spending timeline for the incremental $40 million in rig upgrade capital. He also inquired about how Precision Drilling's capital allocation strategy might evolve after achieving its long-term debt reduction goals.

Answer

CFO Carey Ford confirmed the capital spend is for rigs to be delivered in 2025, though some may arrive late in the year. President and CEO Kevin Neveu added that the number of planned upgrades has increased since the start of the year. Regarding future capital allocation, Neveu emphasized that high-return rig investments remain a top priority alongside debt repayment and shareholder returns. Ford noted the flexibility they have with their remaining debt reduction target over the next 2.5 years.

Keith MacKey from RBC Capital Markets asked for clarification on the $25 million capital reduction's impact on free cash flow and questioned why U.S. margins are guided lower for Q2 despite recent restructuring efforts.

Answer

CEO Kevin Neveu stated the capital reduction reflects disciplined spending rather than a need to meet guidance. CFO Carey Ford explained that while restructuring lowers overall fixed costs, near-term margins will be impacted by the 'lumpy' costs of rig reactivations and mobilizations as activity increases. Margins are expected to improve as activity reaches an appropriate scale, which will lower the fixed cost burden per rig.

Keith MacKey asked for more details on Precision's strategy for tuck-in acquisitions in the U.S., particularly if the valuation gap between buyers and sellers has narrowed. He also requested specifics on the $30 million U.S. upgrade CapEx, including the number of rigs it would cover and deployment timing.

Answer

CFO Carey Ford stated that while Precision's balance sheet is now positioned for growth opportunities, valuation remains the primary obstacle to M&A, emphasizing they are 'hypersensitive on price'. Ford explained the $30 million in upgrade CapEx would cover 6-10 rigs and be spent as needed against firm customer contracts. CEO Kevin Neveu added that their rigs' modular design makes these upgrades more capital-efficient.

Keith Mackey sought clarification on Halliburton's 2026 CapEx guidance, specifically whether the 5-6% of revenue target remains valid or has changed, and asked how the drilling versus completion upswing might unfold in North America when the market cycle turns upward.

Answer

Eric Carre, Executive Vice President and CFO, clarified that the $1 billion CapEx guidance for 2026 should be viewed as a dollar amount, not a percentage of revenue, reflecting disciplined spending while supporting strategic initiatives. Jeffrey Miller, Chairman, President, and CEO, believes the North American supply chain is better integrated, suggesting that rig count and frac count would likely recover 'generally together' during an upswing.

Keith Mackey asked for clarification on Halliburton's CapEx guidance for next year, specifically whether the $1 billion target still aligns with the historical 5-6% of revenue target, or if market changes have altered this approach. He also inquired about Halliburton's expectations for how the drilling versus completion upswing might unfold in North America when the cycle eventually turns upward.

Answer

Eric Carre, Executive Vice President and CFO, clarified that the $1 billion CapEx guidance for next year is a dollar number, not a percentage of revenue. He explained that significant investments in electric frac and directional drilling technology have matured, reducing the need for the same level of capital spend in these areas, reflecting a disciplined approach while still supporting growth. Jeffrey Miller, Chairman, President, and CEO, believes the North America supply chain is now better integrated, suggesting that rig count and frac count would likely recover 'generally together' rather than one significantly preceding the other when the cycle turns.

Keith Mackey of RBC Capital Markets inquired about the key factors driving the high utilization in U.S. contract compression, its sustainability, and the rationale for increasing investment in the division. He also asked for an outlook on the division's growth over the next several quarters.

Answer

Jeff Fetterly, VP of Corporate Development and IR, explained that the market tightness is due to a favorable supply-demand balance, disciplined competition, and rising U.S. natural gas production. He noted that longer contract durations de-risk new investments. Fetterly confirmed the U.S. fleet is expected to exceed 475,000 horsepower by year-end, with additions weighted to Q4, and that financial performance will grow concurrently with the fleet.

Keith Mackey of RBC Capital Markets inquired about the key drivers for the high utilization in U.S. contract compression, its sustainability, and the rationale for increasing investment in the division, as well as its expected growth trajectory.

Answer

Jeff Fetterly, VP of Corporate Development and IR, explained that the market tightness is due to a favorable supply-demand balance, competitor discipline, and strong U.S. natural gas production growth. He noted that longer contract durations de-risk new investments, justifying the increased capital. Fetterly projected the fleet would grow from 456,000 horsepower to over 475,000 by year-end, with financial performance expected to grow concurrently.

Keith MacKey of RBC Capital Markets questioned if the market is heading into a low-booking cycle and asked about demand visibility for contract compression, particularly given rig count reductions in the Permian.

Answer

Executive Jeff Fetterly responded that while there's precedent for weakness, the current market for Engineered Systems still shows a good depth of opportunities, with the main uncertainty being the timing of customer execution. On contract compression, Fetterly noted that fundamentals remain strong, supported by high utilization and constructive commentary from peers. He confirmed Enerflex remains committed to its 2025 capital program for fleet expansion, supported by multiyear contracts for new assets.

Keith MacKey asked for context on how Enerflex's free cash flow profile matches its underlying business risk profile, inquired about the opportunity in Engineered Systems from rising US natural gas demand, and sought clarification on the force majeure trigger.

Answer

President and CEO Marc Rossiter explained that free cash flow is generated by two low-risk business lines: the US contract compression fleet and the international Energy Infrastructure business, which has $1.5 billion in revenue under long-term contracts in core countries. He added that the Engineered Systems backlog is primarily for products built in North American shops, minimizing execution risk. Rossiter expressed a positive long-term view on North American natural gas fundamentals. SVP and CFO Preet Dhindsa confirmed the force majeure was declared solely due to the security situation.

Keith Mackey of RBC Capital Markets inquired about the key drivers for the 2026 capital expenditure budget and how it might compare to 2025 levels. He also asked for more details on the receivables collection process in Mexico and any actions Nabors could take to accelerate payments.

Answer

CFO William Restrepo explained that 2026 CapEx will likely be higher than 2025, driven by a larger fleet and SANAD newbuild milestone payments in the mid-$300 million range. Regarding Mexico, CEO Anthony Petrello emphasized that their rigs are core to the customer's operations. William Restrepo added that the government has initiated a $12 billion program to clear vendor invoices, and Nabors anticipates collecting over $40 million in Q3.

Keith Mackey of RBC Capital Markets inquired about the key drivers for the 2026 capital expenditure budget and how it might compare to 2025 levels. He also asked for more details on the receivables collection process in Mexico and what actions Nabors can take to accelerate payments.

Answer

CFO William Restrepo outlined the 2026 CapEx build-up, noting that SANAD newbuilds will be in the mid-$300 million range, supplemented by sustaining CapEx for a larger fleet and recertification costs, likely resulting in a higher total than 2025. Regarding Mexico, CEO Anthony Petrello emphasized the strategic importance of their rigs to the customer. William Restrepo added that a new government-led financing initiative of up to $12 billion is expected to clear overdue vendor invoices, and Nabors anticipates collecting over $40 million in Q3.

Keith Mackey requested insight into the drivers for Nabors' potential 2026 CapEx budget. He also asked for more details on the collections process for overdue receivables in Mexico and what actions the company can take.

Answer

CFO William Restrepo outlined the 2026 CapEx build-up, noting it would likely be higher than 2025 due to a larger fleet, with SANAD newbuilds in the mid-$300M range. Regarding Mexico, CEO Anthony Petrello highlighted their strong customer relationship, while Mr. Restrepo explained that a new government financing facility is expected to clear overdue invoices, with Nabors anticipating collections of over $40 million in Q3.

Keith Mackey of RBC Capital Markets inquired about the primary drivers for the potential 2026 capital expenditure budget. He also asked for more details on the receivables collection process in Mexico and what actions Nabors can take to accelerate payments.

Answer

CFO William Restrepo detailed the 2026 CapEx outlook, stating it will likely be higher than 2025. Key drivers include SANAD newbuild milestone payments (estimated in the mid-$300 million range), higher sustaining CapEx for a larger fleet, and specific recertification costs. Regarding Mexico, CEO Anthony Petrello emphasized the strategic importance of Nabors' rigs to Pemex. William Restrepo added that a new government-led financing initiative of up to $12 billion is expected to clear overdue invoices, with Nabors anticipating substantial collections of over $40 million in Q3.

Keith MacKey asked if the customer survey showing a 4% rig count decline was conducted after the tariff announcements, questioned the drivers of international margin strength, and inquired about the lead time for SANAD newbuilds from award to delivery.

Answer

Chairman, President & CEO Anthony Petrello confirmed the survey was conducted after the tariff news. He also explained that international margins are accretive as new, higher-margin SANAD and Kuwait rigs come online, and stated the timeline from award to delivery for a SANAD newbuild is about one year. CFO William Restrepo added that low-margin rigs in Russia and PNG are rolling off, further helping the average margin.

Keith MacKey of RBC Capital Markets asked about the assumptions for the SANAD joint venture to reach free cash flow breakeven in 2027-2028, the timing of future rig awards, and the number of rigs currently operating in Mexico.

Answer

CFO William Restrepo confirmed that the 2027-2028 breakeven forecast for SANAD assumes the continuation of the five-rig-per-year newbuild cadence. He also mentioned that awards for the next batch of rigs are anticipated in the first half of 2025. CEO Anthony Petrello disclosed that Nabors has four large rigs operating in Mexico and has factored a potential $13 million EBITDA reduction into its 2025 forecast to account for possible activity slowdowns.

Keith MacKey asked for an outlook on international rig margins through 2025, considering new rig deployments and suspensions. He also requested commentary on the international supply-demand balance compared to the U.S. and an early look at expected 2025 capital expenditures.

Answer

CFO William Restrepo indicated that while Q3 international margins were exceptionally strong, he expects them to remain around the $17,000/day level in Q4, with potential for increases in 2025 as more high-margin SANAD rigs are deployed. Chairman, President & CEO Anthony Petrello described the international market as bullish, with roughly 40 rig opportunities across MENA, Latin America, and Asia. Mr. Restrepo projected that 2025 CapEx would likely be higher than 2024, driven by an increased number of SANAD newbuilds.

Keith MacKey asked about SLB's margin strategy in the current later-cycle environment and how the different business segments contribute. He also sought clarification on whether the company's financial guidance assumes the continuation of existing trade tariffs.

Answer

CEO Olivier Le Peuch outlined a strategy focused on leveraging SLB's diverse global footprint, digital offerings, and production-focused businesses to maintain resilience. He confirmed that cost actions would be used to protect margins in segments more exposed to activity declines, like drilling. CFO Stephane Biguet clarified that the Q2 guidance of 50-100 basis points of sequential margin expansion assumes the current tariff framework remains in place, but the second-half outlook is subject to change as the tariff situation is fluid.

Keith MacKey inquired about the operational ramp-up of the Dune Express, asking for volumes moved since its January launch and the key factors needed to reach full utilization by mid-year. He also asked about the company's capital allocation strategy, specifically how it balances organic growth opportunities with shareholder returns.

Answer

COO Chris Scholla explained that the Dune Express is already running at 50-60% capacity and the ramp is proceeding as expected despite minor startup issues. An executive added that the full financial impact will be a steady tailwind through H1, with Q3 being the first quarter of full impact. President and CEO John Turner addressed capital allocation, stating the goal is a reliable base dividend, with the new term loan freeing up cash for high-return growth projects, like Moser, and other shareholder returns such as buybacks.

Keith MacKey inquired about the 2025 CapEx outlook following the Dune Express completion, the planned utilization of the new share buyback program, and the dynamics of the sand market heading into 2025, specifically whether supply reduction or demand increase would drive recovery.

Answer

CFO Blake McCarthy indicated that 2025 CapEx will be 'down meaningfully' and detailed a capital allocation strategy prioritizing a strong balance sheet, maintenance CapEx, and then balancing growth projects with shareholder returns. Executive Chris Scholla predicted that after RFP season, competitors facing breakeven margins will likely reduce capacity in early 2025, providing fundamental support for higher prices.