PTEN
#I think we have to go on our own track record.
The APEX rigs have done very well in overall utilization over the years.
The APEX-XK is a very high-performing rig in the basins that it works in, and we just have a solid track record when it comes to our own operations.
And we'll remain very competitive.
Yes.
That's correct.
Pretty close to it.
It is hard to say in the market today if I'm going to be able to put standby rigs back to work.
So it's ---+ there is still a lot of moving parts in there, in the overall numbers between rigs on standby, rigs on term contracts, rigs that are working at market rates.
There's just ---+ there's a mix.
Some of the standby rigs are under term contracts, which could be finishing up, too.
So, some rigs could be coming off standby because the term contracts are ending.
Today, we are just giving you the average for the year.
We just haven't called that out.
We give you what the average rig revenue per day is, the cost per day and margins, of course, but we just haven't called out what the average term contract rate is.
But what I have ---+ there is a progression in 2016 where the term contract rates go up because of the timing of when those rigs were signed.
Except for rigs that could be on standby.
No, I don't see that there is any real advantage, especially with some of the smaller companies.
I think they're trying to survive.
And one scenario that is potentially playing out right now is you have companies who are working at negative cash flow because they are still going through bank evaluations and working with bankers.
And if that equipment is not working, then the asset value goes to near zero.
But if the equipment is working, even though they are at negative cash flow, they get more valuation on the asset.
And so I think this is that part of the cycle where you have companies that are just fighting to survive in that respect as well.
I believe you would feel the labor market tightening up within the first year.
I think it is hard to know, but it is going to be in that first year or less.
Because I think a number of employees, unfortunately, we have had to release, have found work elsewhere.
And we recruit nationally.
We have people that rotate across the country.
And in their hometowns, which aren't necessarily <UNK> Texas or places where the rigs work, they found other employment in some cases, because there is a labor market around us.
So, first off, pricing, dayrates, are still very competitive.
It is going to remain very competitive in 2016 because of where activity is.
But in the scenario when we do start to get a recovery, the rigs that are going to go back to work first are going to be the 1,500 horsepower with the walking systems, 7,500 psi circulating systems, maybe three pumps on the rig, 75 ---+ or 750 [tips mast] load.
So, it's those kinds of specifications that we think the customers are going to want first.
And those are going to go back to work first.
I don't think you get immediate pricing power with a rig like that, just because utilization is low in the market, and we all have rigs like that that are stacked on the sideline.
But I do think you get some pricing power relatively quick after that, maybe relative to other segments ---+ even relative to pressure pumping.
And pressure pumping, I think it is going to take a little bit more to get the pricing back up in that market where there is a number of competitors out there.
No, not at all.
In fact, when you look at the fleet of AC rigs that are stacked on the sidelines today, if you start to dissect that fleet, you see a number of less capable rigs, whether they are 1,000 horsepower, whether they are super singles.
They are not pad-capable.
So, you have to break those out of the fleet that's stacked on the sidelines.
Any consolidation in pressure pumping is positive for that sector of the business.
Whether it is somebody else doing the consolidating or ourselves doing the consolidating, any consolidating is a plus.
There's too many companies in pressure pumping and the pricing is unsustainable.
Yes, there are so many moving parts, I don't have that number in front of me.
It is more than just the standby there.
We just don't have that with us right now.
So we did in the fourth quarter.
We did sign a couple of term contracts, very short-term, and at what we consider a reasonable market rate.
We are still margin-focused, but we did sign a couple of very short-term contracts.
They were APEX rigs, because that is pretty much all we are working right now.
And, of course, being a APEX rig, they are very good quality.
They had good performance metrics in the basins that they were working in previously, which is why we were able to get the ---+ keep the rigs working.
And the short-term contract that we signed gave us a commitment on the rigs.
So, it was mutually beneficial for both parties.
You know, <UNK>, today, we are just very focused on the businesses we are in, in drilling and pressure pumping, and just trying to maintain the margins that we have.
I think we have said before, we are open to looking at opportunities to do other things, whether it could be organic, it could be through acquisition.
We are going to look at opportunities.
But this has been a pretty challenging downturn, and we've had to really stay focused on what we do best right now.
So, in a reactivation scenario ---+ which we are hopeful that eventually we'll get to, but we are not there yet ---+ we are going to have costs associated with labor.
In drilling, it could be two to four weeks of labor costs as we get the rig back out.
In pressure pumping, I am anticipating maybe a month of crude labor to get the equipment back out.
And therefore, because of that, the cost ---+ or the pricing to get the equipment back out is higher than equipment that is already working.
So when we talk about reactivation equipment, we are talking about equipment that we expect to go out at a higher price than maybe equipment is working today.
You have the transportation to mobilize it out, but outside of that, we don't expect any major expenditures to mobilize a rig or even the pressure pumping equipment.
So, let's start with the first part.
The number of 1,500 horsepower rigs that are stacked on the sidelines is probably less than 800.
I don't have that in front of me right now, but that seems a little bit high.
The total fleet ---+ it just seems a little bit high.
But also, what I want to get to this, in the 1,500 horsepower rig category, what you don't see in a lot of the macro data that circulates is not all these 1,500 horsepower rigs have the 750,000 pound rated mast.
And so, there are some older rigs that are mixed in with that, that might have a lighter mast, that are just going to be less marketable when we get to eventual recovery and when people are looking at rigs.
So, you have really got to kind of dissect what that rig fleet looks like, more than just the horsepower.
Yes, so <UNK> just called the number and we believe there is approximately 700 1,500-horsepower AC rigs total in the industry.
And then, I don't have the number of ---+ that breaks down into what I have described before, but it's probably in the 200 to 300 range, but I don't know for sure offhand.
But the other part of your question was really about pricing and utilization.
What we have seen historically is, there was pricing power in high spec drilling rigs below 80% utilization.
We saw that in 2013 and 2014.
Well, we will have to bring people back if we are reactivating rigs.
The way that we've structured how we are operating today is we have kept as much of the experience as we can in key leadership positions.
So, when we do bring people back, we are talking about bringing back the entry level people, more the floor-hands.
And so, the training time to get people back is not as much as maybe people think.
So, I think we can put out and we can reactivate rigs within two to four weeks.
You know, there's ---+ in general, there is no limit to how many rigs we can put back to work that are stacked on the sidelines.
The equipment is in good condition; it is just a matter of putting the labor force back in place.
But that labor force is going to tighten up.
And so, it is really a labor issue more than just the equipment issue.
But that is all very market-dependent, as to how many rigs we would put back and how fast that would happen.
That's close.
That's not too far off.
Correct.
Yes.
You ---+
Q1, I think it is safe to say, because of commodity prices, got off to a very difficult start.
And that is why we are projecting that the average rig count is going to go to 70 in the US.
And your number for an exit is probably not too far off.
But I wouldn't say we had visibility on what I would call opportunities right now.
It is still a difficult market.
It is in the range of weeks to 30 days.
We just don't ---+ it is certainly not within a ---+ it's not ---+ we don't get a quarter's notice on some of these things right now.
There are customers who are reacting to commodity prices.
They pick up the phone, they call us, we have a discussion.
But some of these things are happening relatively quick.
You know, in 2015, I give a lot of credit to our operations, working with our supply chain teams, and then working with our suppliers to get our costs down, which ---+ in terms ---+ especially in terms of products like sand and chemicals, gets the cost down for our customers.
But in 2016, I am not sure how much more we can get out of this supply chain, whether it's from the mines, whether it is from the chemical suppliers ---+ we worked hard in 2015 to take cost of the system.
It is getting more challenging in 2016 to take cost out of the system.
So, we have been in Canada for a while.
We successfully put a new APEX rig up there under a term contract, and very pleased with the performance of that rig.
So, we anticipate that, long-term, we will be successful in Canada, but Canada is in a very difficult situation as an industry right now.
And their market reacts a little bit different from the US market, both in terms of magnitude and timing, just because their take-aways move in different directions, whether it is natural gas or oil in Canada.
I wouldn't say it has been a big change.
It only increased from 10 to 12 in the fourth quarter, and then we are likely to see some of those roll off in 2016.
But I wouldn't say it is a big shift.
Thanks.
