Hello, thank you for standing by. Welcome to today's conference call to discuss the combination of Patterson-UTI Energy and NexTier Oilfield Solutions. At this time, all participants have been placed in a listen-only mode. The call will be open for your questions following the prepared remarks. As a reminder, this conference call is being recorded, and the press release and slide presentation regarding the transaction are available at the investor relations sections of each company's website. The archive replay can be accessed there following the call. I would now like to hand the conference over to Mike Drickamer, Vice President, Investor Relations at Patterson-UTI Energy. Sir, you may begin. Thank you, Todd. Welcome, everybody. This morning, we'll discuss the combination of Patterson-UTI Energy and NexTier Oilfield Solutions. Our remarks that follow, including answers to your questions, contain statements that we believe to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These forward-looking statements are subject to risks and uncertainties that could cause actual results to be materially different from those expressed or implied by such forward-looking statements. These risks include, among others, matters that we described in our press release, announcing this transaction and our SEC filings. We disclaim any obligation to update these forward-looking statements. Our participants today include Patterson-UTI CEO, Andy Hendricks, and CFO, Andy Smith, as well as NexTier CEO, Robert Drummond, and CFO, Kenny Pucheu. After prepared remarks, we'll open it up for Q&A. Let me turn it over to Andy Hendricks. Thanks, Mike. Welcome, everyone, and thank you for joining us today. We're excited to discuss the merger of Patterson-UTI and NexTier Oilfield Solutions. Robert and I will take you through the key highlights of this merger of equals, as well as the transaction terms and strategic benefits. Andy Smith will discuss the financials in a bit more detail. This merger will create a comprehensive drilling and completions franchise with leadership positions in contract drilling, pressure pumping, and directional drilling. We believe our combined ability to serve our customers with a strong synergy potential from this transaction will create significant value for shareholders of both companies. Additionally, we believe the combined company will be an attractive investment platform with greater size and scale, facilitating improved free cash flow, increased share flow and liquidity, making it more appealing to a larger number of long-term shareholders. Patterson-UTI NexTier have each committed to target the return of 50% of free cash flow to shareholders. This will remain the case for the new company. Moving on to the terms of the transaction, NexTier shareholders will receive 0.7520 shares of Patterson-UTI common stock for each share of NexTier common stock owned. The transaction has implied enterprise value on a combined basis of approximately $5.4 billion, and we expect the merger to be tax-free to shareholders of both companies. Upon closing, Patterson-UTI shareholders will own approximately 55%, and NexTier shareholders will own approximately 45% of the combined company on a fully diluted basis. As for leadership, close, I will serve as President and CEO. Robert will become Vice Chair of the Board. Curtis Huff, Patterson-UTI's current chair, will continue to serve in that role. We'll have an 11-director board that will comprise six directors from Patterson-UTI and five from NexTier. We'll be headquartered here in Houston, and Patterson-UTI Energy will be the combined company name. Representing the strength of NexTier's platform, our well completion segment will operate under the NexTier Completions brand. Finally, we expect to close the transaction in the fourth quarter of this year, subject to the receipt of Patterson-UTI and NexTier shareholder approvals, regulatory approvals, and other customary closing conditions. We believe this combination represents a unique opportunity for both companies to deliver value to shareholders, employees, customers, and communities alike. Both companies have evolved over the last several years to meet the increasing challenges of drilling and completing more complex wells. Our customers' technical and operational challenges continue to increase, continue to grow, and both Patterson-UTI and NexTier have stayed ahead of the curve to ensure we are delivering solid execution and innovative solutions to our customers, while also providing improving financial returns for our shareholders. Among the many important benefits we expect to realize, the combined company will have a diversified suite of offerings across the oilfield services value chain to better serve our customers with leading positions in contract drilling, pressure pumping, and directional drilling. These offerings will be bolstered by best-in-class operational execution and a strong technology portfolio. Let me turn it over to Andy Smith, Patterson-UTI CFO, to review the financial benefits of this merger. Thank you. Good morning. The transaction is expected to be accretive to both earnings and free cash flow per share in 2024. It will also have an outstanding balance sheet with trailing 12-month net debt to adjusted EBITDA of 0.5 times. Together, we'll be a financially stronger company positioned to deliver significant returns for our shareholders. We will maintain strong capital discipline with a focus on high free cash flow conversion and intend to continue the practices of both companies of distributing at least 50% of free cash flow to shareholders. The merged company will be one of the largest North American oilfield services provider in terms of revenue, having generated approximately $6.9 billion in combined annualized revenue in the first quarter of 2023. Both companies have strong track records of executing and realizing synergy opportunities with prior transactions, we are confident in our ability to build on that. We expect to realize annual cost savings and operational synergies of approximately $200 million within 18 months following the close. Synergies will be achieved in three distinct areas. First, we expect to benefit by utilizing NexTier's integrated completions offering, including wireline power solutions and the NexHub Digital Center, across the existing Patterson-UTI frac fleets. Our expectation is that we will see revenue uplift from the additional service offering, as well as a reduction in maintenance CapEx and a corresponding increase in equipment uptime based on NexTier's digital equipment monitoring platform. Second, by sharing best practices and preferred vendor arrangements, we expect to secure cost savings across our supply chain. With over $3.3 billion of non-payroll addressable spend, including CapEx, even small improvements in this area will result in meaningful dollar savings. With any merger, there will be some organizational overlap. While both companies have historically been pretty lean, we will see savings as we streamline the combined organization. Across these three areas, we believe $200 million in benefit is not only achievable, but over time, potentially beatable. One-time costs expected to be incurred to achieve the synergies are approximately $80 million, of which about $65 million will be expense and $15 million will be CapEx. I'll turn the call back over to Andy Hendricks. Thanks, Andy. The combined company will remain the drilling leader that Patterson-UTI is today. Our drilling business continues to outperform with 126 active rigs, and is benefiting from the continued strong demand for Tier 1 super-spec rigs. In total, we have 172 super-spec drilling rigs in our fleet, of which 120 are what we refer to as Tier 1 super-spec, having all the capabilities that are most demanded by our customers. In addition to contract drilling, the combined company will also be a leader in directional drilling with Patterson-UTI's MS Directional business. MS Directional is differentiating itself in the directional drilling business through service quality and fleet of high-quality impact mud motors. This combination has made MS a leader in terms of drilling some of the most complex wells, including conventionally drilling horseshoe wells, which involves utilizing a high-performance mud motor to drill 10,000 foot laterals within a single 5,000 foot section. Building upon the technology offered in our PTEN Digital Performance Center, MS has been able to offer remote MWD operations, taking a person off the rig and allowing a person to monitor multiple MWD jobs across several rigs from our NexHub Digital Center here in Houston. As the drilling and completion industries continue to generate more data analytics are becoming increasingly important. Patterson-UTI has a leading position with our Superior QC division in using data analytics for well bore placement, utilizing spaceflight navigation algorithms to better understand where the bit is located during drilling operations and what adjustments need to be made to keep the well on path. Better understanding the placement of wellbores on a pad also helps to better design frac jobs. With that, I'll hand it over to Robert Drummond. Well, thank you, Andy, and thank everyone for joining us today on this call. I echo Andy's enthusiasm about this transaction and the excitement for the value we can unlock together. I want to use my time today to explain why we have such a strong conviction that this transaction is the right step forward for NexTier to build on our momentum in an evolving energy market. NexTier has an extensive track record of participating in successful value-creating M&A that has allowed us and our counterparties to expand our capabilities, accelerate innovation, better serve customers, and drive value for shareholders. This desire to grow and strengthen our leadership position is what brought C&J and Keane together back in 2019, and it's what brings NexTier and Patterson-UTI together today. As we consider the future of the North American energy market, we believe diversification will be a key competitive differentiator for our company. Combining with Patterson-UTI provides a unique opportunity to expand our capabilities while showing the excitement that we have for the future of the U.S. onshore market. Together, we will have a comprehensive portfolio of leading solutions across the well life cycle, with an expanded footprint across most of the active U.S. basins. We believe the combination creates the new premier North American pure-play leader, with potential to create significant value for our shareholders. Andy provided an overview of the breadth of the completions portfolio we are creating. Our integrated platform is what will tie these capabilities together and unlock considerable value for our shareholders. At NexTier, we work diligently to develop a strategy that combines the complementary services around our frac fleet, with each of these services having the potential to add value to the process, either through cost reduction or efficiency gains. The focus is on helping our customers maximize their returns while also maximizing our own returns. By creating value for our customers, we create value for our shareholders. We call this our well site integration strategy, which differs from a bundling strategy of unaligned services. This integration is enabled by our NexHub Digital Center that allows our last-mile logistics, power solutions, and wireline solutions to work seamlessly together. By doing so, we drive significant efficiencies, lower total cost, and reduce the carbon footprint of projects for our customers. As I said previously, this value-creating strategy has helped both NexTier and our customers grow their returns. A fully integrated frac completion fleet can drive an additional $7 million in annual cash value for us, while also improving our customers' well economics. With Patterson-UTI, we will be able to amplify this model over a scaled fleet, driving cost savings and sustainability for our newly combined business. We're also excited about the potential of integrating the NexTier wireline portfolio, which plays an important role in raising frac efficiency. We've demonstrated this unique ability to integrate the wireline operations into the frac workflow in a manner that delivers low, non-productive time for all of our assets. Our NexMile Logistics platform is another key element to our strategy. We've built a leading portfolio of last-mile logistic capabilities that is aligned with our frac efficiency objectives. By impacting more of the frac supply chain, we can lower total costs and drive sustainability at the well site. Optimizing the logistics of sand transportation around the completion well site, where thousands of truckloads are delivered to each pad, is a massive opportunity for value creation, and key component of the NexTier well site integration strategy. We believe that we're creating the lowest cost and carbon footprint transportation system in this space, and are excited to execute our strategy across a larger platform. One of the most exciting benefits of this merger is the increasing potential of our rapidly growing power solutions and natural gas fueling division. The increased frac capacity created by this transaction will enable this organic growth to continue as we add capacity to service the combined fleet. Universal's newly upgraded natural gas frac fleet provides additional runway for this growing division of the company. The power solutions platform allows us to maximize the benefits of the fuel cost arbitrage between diesel and natural gas prices. The value potential here can be more than $10 million per fleet per year, and the fuel cost arbitrage increases as diesel displacement moves higher. NexTier's frac fleet performance in this fuel cost-saving arena has been excellent, thanks in part to the integration of power solutions with our natural gas-capable frac fleets, which also raises the marketability of natural gas-powered assets. For NexTier, our entire operational strategy is enabled by our NexHub Digital Center, which is the backbone of our organization, and is critical to value creation through the process of efficiency and waste elimination. Directly, our digital equipment health management program has been responsible for reducing the maintenance CapEx burden by an estimated $9.5 million per year, per fleet. Our robust asset tracking program has significantly lengthened the life cycle of major components through predictive analytics and reduced catastrophic failures, with mounting evidence supporting the program's success. Additionally, the Digital Center unlocks the full capability of our wellsite integration strategy. Process coordination is paramount to value creation across our suite of services, with NexHub allowing us to realize the full potential from our investments. We've used our digital strategy to elevate the capital efficiency in our business, resulting in significant process improvement and cost reduction, maximizing our returns while delivering the highest level of service quality to our customers. As the return on capital focus further entrenches itself in our industry, we strongly believe that asset efficiency will be key to winning the future. Our digital strategy will be front and center through the cycle. As we started this discussion on this merger, the complementary digital strategies were one of the most exciting aspects of the potential new company to me. We came away highly impressed by what Patterson is doing, and as we moved deeper into the process, we became even more excited about the upside potential as these two enterprises combine these complementary strategies to create a new best-in-class digital environment to drive further returns to our shareholders. With that, I'd gladly turn the call back over to Andy. Thanks, Robert. Additionally, the technology that NexTier has developed with their NexHub Digital Center is very complementary to Patterson-UTI's PTEN Digital Performance Center, which allows for the real-time collection, aggregation, analysis, and visualization of data from drilling rigs and frac spreads. A critical piece of the innovation of both companies centers around sustainable operations. The combined company will have a leading position in low-carbon, alternative fuel sources for wellsite drilling and completions operations, including 78 drilling rigs capable of using natural gas, high-line power, or our EcoCell lithium battery hybrid energy management system. As our two teams held discussions leading to the merger, it was clear that we had a strong cultural alignment. One way that really stands out is around the talent of our teams and shared commitment to investing in and developing employees. Safety, leadership training, performance management, career development, diversity and inclusion, and recruitment are all core to how the two companies operate, and they will be the key to how we operate the go-forward company. As a result, we are confident that the combined company will be an employer of choice in the energy industry. We're excited to bring our teams together to learn from one another and build on our collective strengths. Before we begin the Q&A session, I wanna highlight the key reasons to own the combined company and why we're so excited about this merger. First, we'll have a diversified offering across the drilling and well completion value chain to deliver for our customers. These offerings are backed by leading technology and innovation platforms. Second, we are well positioned to meet growing customer needs for low carbon fuel operations. Third, we have a track record of delivering on synergies and a significant opportunity to further enhance the value of the merger. Finally, each of these benefits accelerates our opportunity to return free cash flow to shareholders. We couldn't be more excited about what the future holds for both of us. Todd, we can now begin the Q&A session. Thank you. At this time, if you would like to ask a question, please press star one on your telephone keypad. If you wish to remove yourself from the queue, please press star two. To get to as many questions as time permits, we ask that you please limit yourself to one question and one follow-up. When posing your question, we ask that you pick up your handset to allow for optimal sound quality. Once again, that's star one to ask a question. Our first question comes from Scott Gruber with Citigroup. Please go ahead. Yes, good morning, and congrats on the transaction. Morning, Scott. Thank you, Scott. Andy, you've always been, you know, a bit different in operating, you know, both a rig fleet and a frac fleet, and now you have much improved scale and integration capability on the completion side. Can you just speak a bit more to, you know, how you think about the operational advantage of having scale, you know, on both sides of the ledger and, you know, obviously, how that compares to peers, which tend to specialize in just in drilling or completion? Hey, Scott. Yeah, we're really excited about the potential of this combination and having such leading positions in both contract drilling and well completions and directional, et cetera, you know, and all the service lines that we do, and the ability to do more across those together. We have really strong relationships with a lot of customers in this industry, and, you know, these relationships prove beneficial, especially when you start to enhance what you can do across your portfolio. So, you know, really excited about the opportunities from that standpoint. You know, I can't say enough about, you know, what NexTier's done over the years, and, you know, I also wanna thank our team at Universal. Combining these two together, you know, makes a solid force on the well completion side, and, you know, we're just excited about the potential here. Robert? Yeah, if I could add, too, I think that the digital programs that we both have, the ability to utilize the analytics that are being created on both sides, I think it can get to the point where, you know, how wells are drilled impacts how they're fracked and how they ultimately produce. You hear some of our big customers talking about that. More and more focus, I think, is coming on ultimate well recovery, and I think having a company to have both of those and those digital capabilities bring all that together much more, much more efficiently than could be done independently. I don't think you can underestimate the benefits of the scale around the technology development that can occur. You know, Patrick, you see I've got a great engineering outfit, you know, and I think that the benefits of being able to use that across the whole, you know, pure play shale development is something that's gonna be definitely differentiating for us. That's where I was, gonna follow up, because, you know, one of the great differentiators of, you know, companies with scale in the industry is that technology development. You know, is the kind of incremental focus, you know, in terms of, you know, R&D and technology development gonna be on that, you know, digital side and, you know, drilling completion optimization side, or do you think it's more on the kind of next gen, equipment? I think you're gonna see it across the board. You know, we have this potential to pull together, you know, these data analytic systems in a way where they can share data better, not that they would necessarily merge, but, you know, the way it is in digital systems today, you can share across multiple platforms in ways you never could before. You know, it allows us to enhance our operations, understand better what's going on, and, you know, not just what's happening at surface, but also potentially subsurface, and, you know, provide stronger value to our customers. You know, so there's lots of opportunity there on the digital side, as Robert said. You know, when it comes to R&D and engineering, you know, it's early days into discussions from that standpoint, but we've both got strong track records, you know, in developing new technology and bringing it to the market. You know, over time, combining those elements and those skill sets and, you know, the brainpower we have in engineering of both companies has exciting potential. Scott, I don't think it could be underestimated from the investor perspective, is having a pure play investment in shale is not something that is relatively available in the market today. That's something that's, you know, has the scale to be investable by big, sizable investments. Understood. Appreciate it, and looking forward to the output. Congrats again. Thanks. Thank you. Our next question comes from Marc Bianchi with TD Cowen. Please go ahead. Hey, thank you. I'm curious if you could talk a little bit about how you came to the respective valuations for the deal. It seems like mostly using sort of trailing figures. Could you comment on that first? The second question is if you could offer any kind of a forward outlook that might help us think about the valuations as well. I'll go first, then I'll hand it over to, you know, our guys that understand the finances much better than I do. As we looked at the deal, we certainly had to, you know, work up some potential projections between the two companies. In explaining the deal, we thought it best to just anchor on data that's already public. That way, you know, people can just judge for themselves based on what their, you know, outlook is, based on what your opinion is of what's happening in the industry. The numbers that we're presenting today are anchored on, you know, Q1 2023 annualized, just because it's an easy way to take public figures and look at the two companies together. Anybody else want to follow up on that? Yeah, I'd just say, as a merger of equals, you know, you can let the market be your guide on that a bit. You know, this is a trade, you know, right at the market currently. Yeah, I mean, that's exactly right. I mean, we're for sale every day in the marketplace, you know, you can look at the valuations over time and how they've compared. You know, while on a results basis, we might be pretty similar, you know, the valuation in the market sort of spoke for itself, since that's where the ultimate trade came out. Yep, makes sense. Maybe we've got you guys on a very public call here. I'd be curious if you could offer any commentary on the forward outlook. Yeah, I'm just gonna say one thing on the forward. This is just a softening in the market that we're going through. You know, OPEC's out there trying to keep a floor on oil prices, and if you look at natural gas, I just checked yesterday, it looked like the forward strip in December is at three dollars and forty some odd cents. That's very positive for our customers who are drilling for natural gas. You know, I'm really upbeat as we move toward the end of the year, just based on that, and I just see this as a temporary softening where we are today in the year. I echo that, and also add that, I mean, I'm very bullish on U.S. shale. I mean, I have been for a while. I think that we have technology that's gonna continue to make more and more wells economical and efficiencies that are coming to make more and more Tier 2, Tier 1, and so forth as we go forward. You know, that's an oil price question, very difficult to answer otherwise. Yep. Thanks very much. I'll turn it back. Thanks. Thank you. Our next question comes from Keith Mackey with RBC Capital Markets. Hi, good morning, thanks for taking the questions. Maybe just wanted to start out with maybe a philosophical kind of question on valuation. You know, got the question already, you know, who are the peers for this company? Admittedly, my mind went to the companies that Patterson would've already been comped to. What do you guys generally think is really the driver of valuation from here? Is it the increased scale? Is it fewer competitors in the pumping marketplace? Maybe just help us investors think about that, think about that as clearly as we can. You know, Keith, thanks for the question. I think the way you have to look at this is, you know, a company that's focused primarily on U.S. conventional and producing strong free cash flow, and who are the real peers that are producing similar free cash flow yields that this combination can produce? It's not necessarily about what we do operationally, but what are we doing financially? You know, this is a great combination of two companies that have a great track record of returning cash to shareholders and with a strong, you know, outlook on free cash flow. You know, we're doing a number of different things across the value chain for the customers in unconventionals and we're staying focused on shareholders at the same time. Yeah, I would echo that. I mean, plus there's $200 million in synergies supporting that deal, and the scale of being able to invest in a $5 billion-$5.5 billion enterprise value company is something many of our investors have expressed interest in. Thank you. Appreciate the color. Maybe in that free cash flow context, Andy, why is, you know, NexTier, do you think, the right partner to do this transaction with versus, say, a different, you know, pressure pumping-focused company or trying to get larger in the drilling side? Well, you know, we've done a number of at Patterson-UTI, we've done a number of transactions, mergers and acquisitions over the decade plus to grow into the drilling space. We're a formidable force with a strong 45-year franchise in drilling, and our team in that area just does a fantastic job. You know, hats off to what we've done in pressure pumping over the decades. You know, we were the first at Universal to fracture the Marcellus horizontal and helped bring that in the Northeast and got a great history there. As we watch, you know, NexTier and, you know, the companies that they've put together and then the culture that they've combined, we think that, it's just very similar to how that we've run our business and the philosophy we've had over the years. We looked at their performance and their free cash flow and how they're returning cash to shareholders and how we've been doing it for over a decade. We just think it's a great match. Perfect. That's it for me. Thank you for the color. Thank you. Our next question comes from John Daniel with Daniel Energy Partners. Hey, guys, I echo my congratulations. I guess the impressive thing that for me was just the magnitude of the synergies. I mean, obviously, some of that is clearly gonna be G&A, but could you bucket for us what some of the, what% is not G&A, and just some of the key things where you're gonna be laser focused right out of the gates? Okay. Morning, John, this is Kenny. Look, before I jump into the synergy question, I just wanna mention something I believe is important on the integration of the two companies. Both companies are executing at a very high level today on both the drilling and completion sides of the business, our focus will be to maintain that execution with zero disruption as we go through our integration planning. On your question, a little less than 2/3 of the synergies will come from the combination of the completions business. These two pillars are focused on operations integration, secondly, as Andy Smith mentioned, supply chain management. I do wanna highlight on the operations integration side, we will be focused on capturing the best from both companies, and we will have further runway to deploy our current well site integration strategy, as Robert mentioned. Finally, the remaining synergies will come from SG&A. It's about a third of that. We have high conviction that these synergies are achievable, and we'll get started with our integration plan very soon. Just one for Robert, because you called out the benefits that you have experienced with the fully integrated wireline frac package. As you look at the, you know, integrating that with the Patterson fleet, do you have available capacity now to meet that? Do you buy new wireline units, or how will that evolve? I appreciate that question, John. You know, when I think about the benefits, Universal's done a great job of investing in the fleet over the last few years, something we've been really watching as they've converted, I think, up to three-quarters of the fleet by this year, to natural gas capabilities. The power solutions integration aspect is something that we believe it's made a big difference for us, and we think it can make a big difference as we, you know, add additional capacity. The thing about power solutions is we've been able to sell it as fast as we've been building it, and we have been making multitudes of gain there. That will require some additional investment to capture, and that investment is already in the works. From a wireline perspective, we, you know, have a big franchise in wireline that we picked up from Cased-Hole Solutions through the C&J merger. A lot of capacity that we have there would be very low cost increase of capacity to take advantage of that. I don't want to underestimate the focus that we have on last-mile logistics. When you have as many trucks as you know that are moving, you know, around the location, being able to optimize that more and more is a big deal. That focus of the strategy, I think, just very easily bolts together with Universal's excellent moves. I think that, I'm glad you picked up on it, is an opportunity for us to have upside to these numbers that Kenny referred to. I'd like to follow up on that. You know, we believe that there are benefits to bringing in wireline and integrating into what we do in completion, to the point where, you know, not many people know this, but our Universal team brought in expertise and actually acquired some assets in early 2020 to start our own wireline operations. Other things happened in 2020 that caused us to have to make some changes to those plans, but that's how strongly we believe that, you know, wireline can successfully add value to these completion businesses. The other part is the, you know, NexTier's power business. You know, I think that's just hugely underappreciated. When you look at, you know, the expertise we have across all our business lines at Patterson-UTI and our understanding of how to use natural gas in 100% natural gas engines or dual fuel on rigs or dual fuel on frac spreads, and you look at what NexTier's done in developing technology organically on their own and deploying that can combine both, you know, CNG and pipeline gas at the well site and be able to use that and capture some of that arbitrage, you know, that's just huge, you know, across the value chain, and that plays into how, you know, Andy Smith and Kenny are looking at, you know, synergies and what the potential upside is as well. Okay. Thank you all very much for including me, and good luck as you integrate. Thanks, John. Thank you. Our next question comes from Kurt Hallead with The Benchmark Company. Hey, good morning. Might as well continue the congratulations parade. Well done, guys. Thanks, Kurt. Thanks, Kurt. Hey, I guess the focus of my question here, like, when we look at the combined operation, clearly the biggest impact is on the U.S. frac-related business, given that NexTier doesn't have any land drilling operations. We'll be stating the obvious on that. You know, from my dynamic, I'm kind of curious as, you know, with the combination, with the scale you're gonna get, how does this accelerate the scrapping of Tier 2 frac fleet? Look, I think that when you look at the balance of supply and demand and frac capacity in the market, and you look at the outlook that the E&Ps put out for future growth in the sector, that we're in a space that's been unique for a long time, is that the investment that goes into CapEx outside of maintenance and pure frac will be transitioning to equipment that uses natural gas in one shape or form, all the way up into including electric. I think that process will continue, and at the same time, because of the macro balance, that the Tier 2 diesel equipment that uses the higher cost fuel source will be retired. Some of the material that we've put out before showed that when you get to about the 3rd rebuild cycle of a Tier 2, practically, the return on investment becomes better to go to a new, to a new source, and that's where the market's kind of at. That transition will continue, and I think the strength that the combined company's balance sheet has here, the great options that we'll have for capital deployment between the speed of that transition and frac balance with all the speed of transition that Patterson's been doing with these great, you know, high-spec Tier 1 rigs, is a good challenge to have. Both which will drive high return on capital Thanks, Robert. I just, you know, some of the context, I know you guys have said independently that, you know, both of you have indicated that the frac fleet in total for the U.S. market would probably remain flat as you do get some scrapping of assets. I guess just by the answer to your question, you guys will kind of ease into this and then determine how you're gonna handle your Tier 2 assets from here. Is that fair? Right now, at Patterson-UTI, we have almost all of our horsepower deployed. You know, through our maintenance CapEx program, we've been swapping out older Tier 2 engines for newer Tier 4 engines, and that continues today. You know, The engine's just one component on the trailer, but as the engine ages out, you know, there's a benefit to switch out to Tier 4 and go to Tier 4 dual-fuel, where we get paid even more for that. You know, even on the Patterson-UTI side, we're gonna continue that process. Okay. That's great. Maybe what my follow-up here would be, kind of staying on the frac side of the business, does this combination enable the companies to accelerate the deployment of electric frac fleets? Is the deployment of the electric frac fleets really just a function of the adaptation of, you know, by the oil and gas companies in the market? Look, I think the way that we've been doing it, and I think the way Andy does it, is very similar when it comes to CapEx and return on focused investments. I think the transition to electric will be at a pace that is balanced with return on capital, and I think that we would have the capabilities to go faster if we wanted to, but you might not want to, depending on if the return on capital investments with CapEx have a better path. Look, many customers wanna go electric, but most all the customers wanna go towards the best solution that moves toward natural gas as a fuel source, and that, this is an equation that's still evolving. I would just look roll it up by saying, the newco, a lot stronger than us independently, gives us the ability to move at a pace that is suitable for a return on investment for our investors, as well as addressing, you know, the needs of our customers. You know, while we both continue to operate independently until we get to close, you know, there has been a not a shared philosophy, but we have similar philosophies because. That's what makes the merger, you know, so interesting. You know, as Robert said, it's all about capital discipline at the end of the day, and, you know, we're gonna do what's right in balancing, you know, customer needs and shareholder needs at the same time. Great. Thank you. Thank you. Thank you. Our next question comes from Stephen Gengaro with Stifel. Thanks, good morning, gentlemen. Two from me. one, when you think about capital allocation, and maybe this is for, more from a Patterson perspective, but historically, how do you think about allocating capital between the frac side and the drilling side? Yeah. Hi, Stephen, this is Andy Smith. You know, historically, again, as we, you know, looked at our business, certainly throughout the cycle, you know, we always view drilling as being a little bit more stable, just kind of given the commercial nature of it, and so we tended to allocate more towards drilling. Now, with this transaction, obviously, pressure pumping will be a much larger, you know, piece of our business, and so the allocation will balance somewhat. You know, again, I think that the combination of these two businesses provides for a through-cycle, more sustainable or durable, maybe, cash flow. I think that as we, you know, continue on with these two businesses, we'll have plenty of capital to allocate to both, to make sure that we keep and protect both franchises. Thanks. I'm not sure if you can comment on this or not. Was there any thought in this process of simply selling frac assets NexTier and having two separate entities? Look, we're really excited about the combination of the two, the breadth of the offering, that we can, you know, offer to the market and the potential for cash flow. We just think that this becomes a new leader in unconventionals in the market and, you know, an exciting opportunity for investors. We think that this, you know, combination just has a lot of potential in all those respects, so that's the path we're going down. We just, you know, have a firm belief in that this is gonna be a great vehicle for investors when you're looking at energy in the U.S. today. Stephen, I would add, going back to the original comments about the whole idea about taking technology to the next level and the next step in the shale evolution as far as making more and more wells economical, I don't think another combination of two frac companies address that the way this combination can do it. That's not to be. It's not a light comment about being able to drill wells that are focused on higher production and how they're fracked. I think that's something that the operators are constantly kind of looking at, and we'll be very well positioned combined to be able to do more in that arena. Two frac companies. Thanks. Thanks, yeah. Thanks, y'all. I appreciate the call. Just one quick one. I know NexTier's approach has been balanced between dividends and buying back stock. Do you think the combined entity continues down that path where you're returning free cash, which seems to be significant free cash, to shareholders through both avenues? You know, going forward, you know, once we get to closing, we'll work with the new combined board to determine what's the right answer for return to shareholders. We will continue the same velocity of returning at least 50% of our free cash flow to shareholders. Great. Thank you, and again, congrats. Thank you. Thank you. Our next question comes from Derek Podhaizer with Barclays. Hey, Good morning, Andy and Robert. Congrats on the deal again. [crosstalk] Thanks, Derek. Good morning. I guess just going back to Kurt's question around the Tier 2 diesel fleets and transitioning over to more of the next-gen stuff. I know you're fully deployed, Andy, like you said, but investors will still point to the stated horsepower you have and can make an assumption depending on the fleet sizes. You got five, six, or seven fleets on the sideline, technically, even though you're fully deployed. Just how should we think about that? Should we expect some impairments to start coming through from the combined companies to rationalize that horsepower, or would this help beef up your maintenance swing program? 'Cause I know fleets have been pretty thin, and NexTier's showing they've been able to pepper fleets along different fleets. I just want some more help around the Tier 2 stuff that's sidelined and just thinking about the rationalization of legacy Patterson fleets. First off, I think there's an underappreciation in the market for the size of frac spread on location today. You know, in almost all of our cases, certainly for Patterson-UTI, the intensity of what we do, higher pressures, you know, much increased flow rates, we just have, you know, a lot more pumps at the well site than we did in the past, you know, say, three or four years ago. Just about everything we have is deployed. We certainly don't have, you know, a frac spread on the sideline. Between what sits at the well site and what's cycling through the maintenance systems, you know, just about everything we have today is fully deployed. you know, we're gonna continue on our program at Patterson-UTI, you know, swapping out the older Tier 2s for the new Tier 4 engines and dual-fuel. you know, in terms of, you know, overall asset write-down, I wouldn't say anything's imminent, and we won't be able to, you know, investigate further till we get to close. you know, on our side, we're just about fully utilized. Yeah, Derek, this is Andy Smith. I would say that, you know, as we look at our equipment and especially the book values of our equipment, I would expect that you'll see those values, I mean, again, over time, they'll come down, but I think you'll see all of that equipment reach the end of its useful life. I don't think you'll see any significant impairments down the road. Got it. I don't think it matters if we were operating independently or together when it comes to that question. You know, fleet configuration, that Andy points out, is something that most every fleet that's out there, I believe, is probably running a little bit shorter than the kind of horsepower they'd like to have with that fleet. The fleet's running more harder than they have ever been run, and that has attrition that's built into it. It's just then you quit supporting maintenance CapEx and transition into new build, I think that continues to occur. You know, at NexTier, we had already committed to taking 150,000 horsepower out, and we're on that path to do so. That's not just taking an operating fleet and shutting it down, it's just a transition to Tier 4 dual-fuel or electric that allows you to capture that return on investment I was referring to, that's better than continuing to support maintenance CapEx. I would just say that that would be the way I would say it, yeah. Got it. No, that's very helpful. Appreciate the color. Just my next question, just wondering if you could maybe expand on some of the cross-selling synergies you can see here with your customer base. Just how much you have an overlapping customer base? What could be new customer bases for the combined companies? Just thinking about existing competitors that are on both sides of the deal, that you may be expanding that wallet, or separately, one customer that has maybe a Patterson drilling rig, but not NexTier completion and what it can mean for them. Just any comments of the value creation now on your bigger customer base and what that overlap looks like? You know, today, we're still two separate companies, and we have to continue to operate that way. We'll dig more into that when we get to closing, but we really can't discuss, you know, customers and overlap at this point in this process. But appreciate the question. We do see a lot of, you know, on each side separately, we see a lot of upside here on how we can combine some things, but we're not at a point where we can really go into those discussions yet. Okay, fair enough. I'll turn it back. Thanks, guys. Thanks, Derek. Thank you. Our next question comes from Saurabh Pant with Bank of America. Hi, good morning, guys. Good morning, Andy, Robert. Morning. I think I want to go back to Scott's question up front. He asked about drilling and completion, right? Just want to go back to that and think about the value in offering both, right? Clearly, you've done this, Andy, for a long time. There was another competitor of yours on the drilling side, which took that same approach. It didn't work out for them, and the assets actually ended up in NexTier's, right? You're getting some of it to you, right? I'm just trying to think, how do you make it work, and what are the risks that the opportunities that you see might not be realized three or five years from now? Well, these are, you know, I'll start by saying, you know, these are well-established companies with great franchises, and through their histories, you know, lots of success. You know, we're bringing together two strong companies with strong balance sheets, strong cash flow, and just really excited about the potential for, you know, the investment thesis here. You know, it's there's not an operational concern to worry about. You know, our companies are both hitting it out of the park on all levels from an operations standpoint. Can't say enough about the teams on each side, and, you know, I don't get to see, you know, much about the NexTier team at this point, but I can certainly talk from the Patterson-UTI side, the Universal Pressure Pumping side, you know, how well the operations are running. You know, there's no question in my mind that that's gonna continue the way it is, and I'm just excited about the potential for the combined entities, but, you know, more so just from the financial health and strength that this combination provides. I would add on the culture side, you know, it has a lot to do with everything. When we look at these two companies, this is two companies coming together, partners of choice. I mean, strong leadership was very attractive to NexTier to go get involved, we're creating a great place to work. You got a bunch of people who have more career opportunities than they ever gonna have before, and we're building a company that's big enough to create a lot of opportunities. I think it's a completely different equation than the one you referred to. Okay. Okay. No, thank you for that perspective. Really appreciate that. A quick follow-up. I know, just a couple of people asked on capital allocation, or how do you think about that with the drilling and completion? Again, just thinking about the completion side of things, Robert, I know on your side, you talked about CapEx being, 8%-9% of revenue going forward, right? That obviously, there's been a certain cadence of high grading, right? Now that we think about the combined company, how should we think about that upgrading, high grading cadence and maybe CapEx requirements as a result of that? I like that question because I think it goes back to what Andy said around both companies being committed to returning 50% of our free cash flow back to our shareholders. In that math for the frac franchise has been that we can operate within 8%-9% of revenue and continue to do that while also transitioning the fleet from diesel, all the way to natural gas being the power source. It fits very well. We've described that numerous times in the NexTier portfolio. This is exactly the same math when you put the two together. That's what I like. It's why we like this combination so much. It gives us even more sustainability to do that from a financial perspective. Yeah, I would say that both companies have kind of been on a similar path on that front. If you look at the combined guidance that's been put out around CapEx, I think you've got a pretty good idea of what it looks like going forward. Okay. Okay, guys. Thank you. Appreciate those answers. Thank you. Our next question comes from Dan Kutz with Morgan Stanley. Hey, thanks. Good morning. Congratulations on the deal. I guess I just wanted to ask a question about capital structure. It's good to see that the way that the deal is structured kind of allows the combined entity to maintain low leverage. I'm just wondering if there would be any appetite or if you guys would be looking at, Patterson has a pretty long duration maturity schedule. NexTier still has a couple of years before it has a major maturity. I'm just wondering if, you know, there would be consideration around any debt restructuring once the company is combined. Thanks. Yeah, so appreciate the question. You know, I think with, again, as we look at the cash flow characteristics of both companies, I don't know that there'd necessarily be a requirement for a debt restructuring. Certainly, there's no need with the Patterson debt that's outstanding today. You know, and again, we have a lot of liquidity available to us, you know, on our balance sheet. But as we go through the process between signing and closing, we'll take a look at all of that and decide kind of what the best and most efficient way is to move forward. You know, potentially there will be, but I can't say today that I know exactly what that looks like. Got it. That's helpful. Maybe just, so going back to Derek's question about the size of the fleets, I think both NexTier and Patterson have done a good job of communicating that fleet sizes are getting bigger. I had also kind of read into that maybe both companies were a little bit more involved in simulfrac operations than maybe the broader industry. I wanted to see if that's the case, and see if you, if you kind of view, you know, the, the knowledge sharing in that area of the market as a potential tailwind to the operations of the combined business. Thanks. Look, I like that question. I appreciate that you've been listening to us about the fleet configuration changes. Definitely migrating larger. simulfrac is a part of that, but in frac, the commercial model has been evolving, you know, more towards the economics being around the pump, the individual pump, instead of the fleet. Because of that, when you configure into a larger fleet, you can make more profitability and more revenue per fleet, and that's the way it should be. You're delivering more, you know, you get more. Fleet configuration, how many fleets you have with the same amount of horsepower, is gonna always be in flux, I think. You know, simulfrac works in some cases where the well pads are established in the right way, but the commercial model of frac has evolved to make that work very well for us. We've had some of that transition that's occurred, lately, that it works better to be simulfrac. It used to be, in the very beginning, maybe that wasn't the case. Call it getting smarter over time. Got it. That's really helpful. Thanks a lot. I'll turn it back, and congrats again. Thank you. Thank you. Our next question comes from Doug Becker with Capital One. Thanks. It's been touched on a couple of times, one of the compelling aspects of this deal really seems to be that large size of synergies relative to the size of the combined company. How would you characterize how much of those are in the hands, the operational synergies are in the hands of the combined company versus relying on external factors like customer acceptance? I'm really just trying to get a sense that the operational synergies are likely to materialize, when, you know, some deals it's been hasn't or at least it's tough to see from the outside looking in. Look, I would say that we're very confident about the number because we did both companies have a track record of doing integration, and the track record includes capturing the guided synergies. That's number one. Number two, I'd say I couldn't have any more confidence that that process works under the leadership of Andy and Kenny, and both Andys and Kenny. I think that doesn't require. I mean, I think there's upside to the synergies, is what I'm trying to say. I just think the $200 million is a number that we've been carefully thinking through and does include components around supply chain that doesn't require a customer decision, and some of them do, but we've been conservative about that. That makes sense. Then any skew to the timing? I know you've laid out an 18-month window. Do we see more of the cost savings early in the process and maybe some of the completions integration benefits later in the period? Look, I think you probably will see the majority of it kind of come through in the first nine months of 2024. You'll see a little bit maybe towards the end of this, depending on when we close, you'll see a little towards the end of this year. The meat of it, probably in the first nine months of 2024, and then rounding it out sort of towards the end of 2024, you know, even if it goes that long, beginning of 2025. Thank you, congratulations. Thank you. Our next question comes from Don Crist with Johnson Rice. Morning, gentlemen. Thanks for letting me in here. Andy, I wanted to ask a more macro question, since most of the details have already been asked. You know, over the years, there's been a lot of discussion about the pricing model. Now that you're creating a true company at scale that has the capabilities to both drill and frack a well, do you think it reopens those discussions with customers to where you can more move away from the day rate pricing model towards more of a performance-based model and/or a kind of turnkey pricing model for wells? Just any thoughts there, because this is the first company that's really had the capabilities to do, you know, all aspects of drilling and completing a well. You know, I'm gonna start by saying that there may be some potential to do that in the future, but, you know, what we're gonna be focused is on, you know, value creation, returning cash to shareholders, and, you know, that starts with, you know, how we work with our customers. What we don't want to do is have to take more risk where we don't need to take more risk operationally. We want to work to bring value to the customers, but at the same time, you know, we want to manage the risk profile. You know, drilling and completing horizontal wells is, you know, a complicated process. I realize, you know, thousands of them get done every week, but it is a complicated process. Today, a lot of the risk is still bared, you know, out by our customers. We have to be careful in how much of that risk we want to transfer over to our side and how we get compensated for that if we do. I would say that if you look at the track record, especially over the last two years, both companies have done a great job in capturing value, even with the business models that we work today. We've, you know, been able to, you know, layer in strong returns to shareholders at the same time that we're doing that. You know, there may be some potential down the road where we look at, you know, turning keys and drilling operations down to a certain point at the well, maybe the kickoff point, maybe the landing, you know, before we get into the horizontal. You know, we're not going to do things where we accept subsurface risk. You know, there may be some opportunity down the road to combine some of the things we do, both on drilling and frac, but it's not something we're going to delve into right away. Our, you know, like I said, our teams are doing a great job today, doing what they're doing, working with our customers, solving technical and operational challenges, creating value at the well site, and then that all flows through to the shareholders at the end of the day. You know, it's been mentioned on this call, you know, earlier, we're not going to do anything that interrupts what these great operational teams are doing today. I appreciate the color. Thank you. Thank you. This concludes our question and answer session. I'll turn it back to Mr. Hendricks for closing remarks. Thanks, Todd. Listen, as we close, let me just say that I want to thank everybody for participating on this call. This is a historic day for both companies, and we're excited to create a new industry leader. That concludes today's call. Thank you. Ladies and gentlemen, this indeed does conclude today's conference call. We thank you for your participation. You may disconnect at any time.