Good morning. My name is Rob. I'll be your conference operator today. At this time, I would like to welcome everyone to the Patterson-UTI Energy Conference Call to discuss the agreement to acquire Ulterra Drilling Technologies. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a Q&A session. If you would like to ask a question during this time, simply press star followed by one on your telephone keypad. If you would like to withdraw your question, again, press the star one. Thank you. Mike Drickamer, Vice President, Investor Relations, you may begin your conference. Thank you, Rob. Good morning, and on behalf of Patterson-UTI Energy, I'd like to welcome you to today's conference call to discuss the acquisition of Ulterra Drilling Technologies. Participating in today's call will be Andy Hendricks, Chief Executive Officer, Andy Smith, Chief Financial Officer, and Mike Holcomb, Chief Operating Officer. 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 describe in our press release announcing this transaction and our SEC filings. We disclaim any obligation to update these forward-looking statements. Now, it's my pleasure to turn the call over to Andy Hendricks for some opening remarks. Andy? Thanks, Mike. Good morning, and thank you for joining us today to discuss our acquisition of Ulterra Drilling Technologies, a leading provider of specialized drill bit solutions. Mike Holcomb and I will discuss some of the key highlights for this acquisition, and then Andy Smith will discuss the terms of the transaction in a bit more detail. Let me just start by saying how excited we are to announce this acquisition. Ulterra is a high-quality company that we know well, and we've had our eyes on it for years. Ulterra designs, manufactures, sells, and rents polycrystalline diamond compact drill bits, also known as PDC drill bits. They are the market leader for PDC bits in North America and have a global footprint with a strong potential for growth in the Middle East and other international markets. Their experienced engineering and manufacturing teams, along with their customer focus, have made them a leader in drill bit technology innovation. The addition of Ulterra to our drilling offering and our recent announcement to merge with NexTier Oilfield Solutions advances our strategy to enhance our positions in both drilling and completions, areas where Patterson-UTI has a strong 45-year history of operations and innovation. For Patterson-UTI, this transaction strengthens our position as a leading provider of drilling services in the U.S. It also broadens our geographic footprint, providing strong relationships with key international customers, especially in the Middle East. It expands our data portfolio, providing what we believe to be the broadest set of drilling and completions data across the entire U.S. With that, I'll now turn the call over to Mike Holcomb. Thanks, Andy. First, I'd like to say how excited we are for the great team at Ulterra to be joining our team at Patterson-UTI. In North America, Ulterra is the leading provider of PDC drill bits in both the U.S. and Canada. A recent market report from Kimberlite names Ulterra as the market leader in PDC bits in both the U.S., with the best overall value and the highest customer loyalty. Ulterra designs and manufactures its drill bits and then rents them directly to E&P companies to drill wells. After the bits are used, they are returned to Ulterra to be refurbished before being sent out to the next well. This new product line for us is complementary to both contract drilling and our directional drilling businesses and increases our ability to serve our customers. We believe that the addition of the leading provider of PDC drill bits in the U.S. enhances our market-leading positions in contract drilling and directional drilling, and what will be a market-leading position in pressure pumping once we complete our planned merger with NexTier. Internationally, Ulterra's global footprint and strong relationships with key customers improves our opportunities for international growth and diversification. Ulterra has levered their reputation for innovation and service quality to grow throughout the Middle East, Latin America, and Asia, and their global footprint now covers more than 30 countries. Ulterra's international revenue outside of North America represents a significant growth opportunity. For example, in Saudi Arabia, they continue to improve their competitive positions with increased Saudization targets and are in the process of completing a new state-of-the-art manufacturing facility at the King Salman Energy Park that is planned to open in 2025. The final key aspect of this transaction is data. Data is becoming increasingly valuable all around us, and the oilfield is no exception. As a market leader, Ulterra's bit sales engineers collect data on bit runs from the vast majority of rigs in the U.S. With this transaction, we will be able to add Ulterra's bit data to our real-time drilling and completion data, giving us what we believe to be the broadest set of drilling and completions data in the U.S. Ulterra utilizes their proprietary BitHub data analysis platform to help manage their supply chain and inventory, and they've done a great job leveraging their drill bit data to constantly innovate their bit designs to help customers choose which drill bit design can help optimize performance in their application. Ulterra's BitHub platform is complementary to our PTEN+ platform. The addition of drill bit data to our real-time drilling and completions data will drive further insights to performance. In the near future, we will be able to perform analytics across this data to help improve our customers' operational efficiency and well productivity. For full year 2023, we expect Ulterra to generate between $160 million and $180 million of EBITDA. We also expect to begin generating revenue synergies within the first year of acquisition. With that, I will now turn the call over to Andy Smith, who will review the terms of the transaction in more detail. Thank you, Mike. Under the terms of the transaction, we plan to acquire Ulterra for $370 million cash and 34.9 million shares of Patterson-UTI common stock. The cash consideration paid to the seller will be primarily used to repay the outstanding debt at Ulterra, and as such, we will not assume any debt of Ulterra. We plan to fund the cash consideration for this transaction using a combination of our cash on hand and our revolving line of credit. We expect this transaction will close in the third quarter, subject to customary closing conditions and receipt of required regulatory approvals, including the expiration or termination of the waiting period under the Hart-Scott Review Act. With that, I'll now turn the call back to Andy Hendricks. Thanks, Andy. To summarize, this transaction is complementary to our contract drilling and directional drilling businesses. We believe adding the leading provider of PDC drill bits in the U.S. improves our ability to help our customers optimize their drilling efficiency and productivity while creating long-term value for our shareholders. Ulterra's international growth, through increasing market penetration, provides strong relationships with key international customers, supporting our own opportunities for international growth and diversification. We believe the enhanced ability to serve our customers through this transaction will create significant value for our shareholders, and that our enhanced drilling portfolio will make Patterson-UTI an even more attractive investment platform. Lastly, I would like to thank the hardworking, dedicated employees of both Patterson-UTI and Ulterra, and I would like to recognize the employees of Ulterra for creating such an attractive company that is respected for their focus on innovation and customer service. I look forward to welcoming the Ulterra employees to the Patterson-UTI family. Rob, we'd like to now open the call for questions. At this time, I would like to remind everyone, in order to ask a question, press star, then the one on your telephone keypad. Your first question comes from the line of Jim Rollyson from Raymond James. Your line is open. Good morning, gentlemen. Continuing the fireworks from last night, I see. Yes. Andy, this kind of is interesting, like on slide 13, you guys referenced obviously the data collection and usage from both Patterson-UTI NexTier and now Ulterra. I'm curious how you think about the evolution of that. Like, how easy is it to integrate these three databases you have and continue to collect the data? I guess more importantly, how, you know, how long of a timeframe can we think about when using that to become, you know, a revenue generator to maybe enhance well designs, et cetera, based on all the data you now collect? Is it, you know, that's kind of an interesting angle for this. I'll first start by saying I'm not a data scientist. We do have data scientists on our team, and they could probably answer this question better than me, but, you know, in the data world today, you don't necessarily have to fully integrate databases and data systems to be able to use data out of all those systems. We do it today. We have data analytic systems that can pull data from various databases without having to integrate the databases. I don't necessarily see an integration of databases as the hurdle. We are excited about the potential for, you know, what we can do with all this data, how we can use this data. You know, our machines produce a lot of data at the well sites when we're running operations. You know, we can use this data across the full spectrum now to help our customers improve their efficiencies and eventually, well, productivity. Okay. Just as a follow-up, when I think about you mentioned a couple different spots. The EBITDA for this year is $160 million-$180 million. I think in one of the early slides, it mentioned, you know, it's been up 30% over the past four years. As we think just about Ulterra to start with and kind of the growth rate trajectory over the next few years, sounds like this Saudi facility that opens in 2025 is gonna be a pretty big deal, but maybe help frame up how you think about the growth trajectory, you know, the next two, three years, whatever, for Ulterra, and then how the combination of Patterson and Ulterra might actually enhance that. You know, Ulterra's got a great history of growth, not just over the last few years, but long term. What they've done to become the leader in both U.S. and Canada is really incredible. You know, we think that, you know, working with our teams together, between our team and the Ulterra team, we can even enhance their position a little bit more in the US markets, but really excited about their potential for growth international, and not just onshore, but offshore as well. Those are areas where they've started to make inroads, but, you know, as we put out in some of the data, that's only about 20% of their business today. That, for us, we still see as a significant upside. They have the teams in place to be able to manage that, to be able to, you know, attack those growth markets. You know, mentioning the Saudi facility, it's planned to be complete in 2025, but they're already working in Saudi and selling drill bits there. This will just enhance their position in Saudi with Aramco. Mike, you wanna add anything on that? No, I think they've been. ... very innovative with their designs. I agree with Andy, I think the international opportunity is probably where you'll see the majority of the growth come from. Is there any rig opportunities that tie into this longer term, given the relationships that they have in Saudi, for example? Well, you know, we have some relationships in Saudi as well, but there's no question that this will further, you know, enhance our relationships in various markets where we don't work today, and we'll see how that works out going forward. Great. Thank you. Thanks. Your next question comes from the line of Keith Mackey from RBC Capital Markets. Your line is open. Hi, good morning, and thanks for taking my questions. You talked a little bit about potential revenue synergies between Ulterra and Patterson-UTI. Can you just detail a little bit more about what those are, and any, you know, potential numbers you could give around that would be helpful as well? I don't wanna go into any particular numbers, but I will say that, you know, we do see some revenue synergy potential in the U.S. While they are, you know, the leading provider of drill bits already, there are a few basins where they may be able to do a little bit more, and, you know, we've got some good, strong customer relationships in some of those places as well with our broad customer base. I think that, working together, you know, we can enhance some of that. That's, that's really kind of the focus for the U.S. market. Like Mike said earlier, you know, majority of the growth is really gonna be on the international side. Got it. Makes sense. How should we be thinking about, you know, Patterson's total capital spend for 2023 now? I think you've got a $510 million guidance out there. Should we be modeling something much different from that, given this will close in the third quarter, you think? Hi, Keith, this is Andy Smith. you know, we'll give more guidance, certainly as we kind of progress through to closing. You can imagine sort of on there, if you look at sort of that number for the full year of 2023 as being $160 million-$180 million of EBITDA, you know, that probably that associates with a CapEx requirement for them. Remember that they rent these drill bits, so there's a kind of a constant maintenance capital requirement here. That sort of equates to about a $60 million-$80 million type capital number. If that gives you any kind of an indication, kind of go forward based on when you expect us to close, kind of what our additional capital would look like. Okay, perfect. That's helpful. Thanks very much. Your next question comes from the line of Stephen Gengaro from Stifel. Your line is open. Thanks. Good morning, everybody. Can you talk about the kind of what the balance sheet ultimately looks like, pro forma for this deal and NexTier, and how you think about leverage and the ability to return capital? You know, if you look at where we stood at the end of the first quarter, we had, you know, numbers, $150 million or so of cash on the balance sheet, you know, $600 million untapped revolver. You know, we will use cash both on the balance sheet as well as some revolver capacity on this deal, probably looking at net debt, kind of in the, you know, $200 million-$225 million range. Then, you know, net debt coming over for the next year deal, probably somewhere also in that $200 million range. You're looking at probably adding between those two deals, you know, somewhere in the neighborhood of $400 million-$450 million of debt to the balance sheet. How we look at that long term, you know, we will as we close these transactions, we'll look at our options in terms of financing that maybe on something more of a long-term basis, rather than just using the ability to do it under the revolver. Okay. That helps. Thank you. Just one other quick one for me. Just remind us the main buyers of the drill bits, and how that plays into the customers who are buying drill bits, and any concern over people buying drill bits from you guys, given your rig ownership? No, I think the customers are very much, there's some overlap there. Obviously, Ulterra has a very broad customer base. They basically work for everyone that's drilling into U.S. and Canada, and then, obviously, you're gaining market share internationally. I'd say their customer base is probably broader than what we would see at a Patterson-UTI. I think there's some potential opportunities. I think both companies are very strong when it comes to managing customer relationships. I think potentially drilling, our directional drilling company and Ulterra could benefit from some of those relationships. Don't have any concerns with, you know, customers having concerns that we have other businesses along with bits. Very good. Thanks for the color, gentlemen. Thanks. Your next question comes from the line of Derek Podhaizer from Barclays. Your line is open. Hey, good morning, guys. Can you maybe go into some of the details? ... what we can expect as far as, like, a margin profile from Ulterra? Margins, capital intensity, their free cash flow profile, just a little more detail around what they're generating right now, where you think margins can go over the next few years? Yeah. If you look at it kind of on an EBITDA margin, they're running about, call it, again, because it's kind of a rental model, you know, they run somewhere in the neighborhood of sort of 55%-60% at that level. Again, like I talked about the CapEx earlier, it's pretty high CapEx requirement in this business because you're constantly reloading your rental fleet. Again, if you look at that sort of $160 million-$180 million, you know, again, that kind of equates to, you know, something in the $350 million-$400 million type revenue number, with a capital requirement of sort of that $60 million-$80 million annually. Got it. Okay, that's helpful. Just to follow up, I know there's some open litigation going on as far as the leaching process from NOV with the PDC and bit drill bits. Just curious where Ulterra stands with that, if they're paying the royalty, if that provides any sort of uplift to your free cash flow profile over the next couple of years? Just any updates around that you can provide us that you've got from Ulterra. Yeah. First off, we're fully aware of that, and, you know, I've been around drill bits for a long time and remember when the leaching process first started. We went into, you know, these negotiations fully understanding where it is, and we took that into account, you know, in our valuation and in the process. I think it's best right now if we don't comment on any of that. Okay, fair enough. Appreciate it, guys. I'll send it back. Your next question comes from the line of Saurabh Pant from Bank of America. Your line is open. Hi, good morning, Andy. Good morning. Andy, maybe, I think you and Mike both talked about the growth opportunity over the next few years, perhaps coming more from international than North America, because Ulterra is already the leader in North America, like you said, right? Can you compare and contrast the two markets, North America and international, from a size perspective? Like you said, the North America market is primarily a rental model, but if I'm not mistaken, the international market is a outright sale model. If you can compare and contrast the two markets and just help us think about the potential growth runway. I, you know, I think that, you know, the US market is gonna stay strong, you know, as it is today. We're certainly excited about, you know, the amount of business that they're doing. Like, as we talked about earlier, we think there's potential for us with the two teams working together to even enhance their position in a few of the basins in the U.S. The international, you know, has more growth. You know, we're still gonna see rig count growth in Middle East. We're gonna see rig count growth offshore. I think Ulterra is gonna have a lot of opportunities, you know, whether it's, you know, on land international or offshore international, as those markets continue to grow over the next few years. Okay. Okay. Andy, can you clarify for that, for me, whether am I right in assuming that the international market is primarily an outright sale market versus a rental market? Yeah, correct. The US market is a rental model. Mm-hmm. you know, they rent the drill bits directly to the E&Ps, to the operators, and then, they do, you know, repair and refurbish in their facilities here. In the international markets, they're just making straight sales. Got it. Although the Saudi facility will be able to do repairs, if they're needed to. Okay. Okay, okay, perfect. Yep. One quick one for Mike Holcomb. Mike, if you don't mind, now that on the drilling side, you would control more of the bottom hole assembly, and obviously, you've got the rigs. Do you feel more comfortable saying that, "Look, I now control more of the bottom hole assembly. I know what I'm doing. Let me start pushing the performance model more based on that"? How do you think about that aspect? Well, I think that does. It is an interesting avenue for us to consider. I mean, obviously, the performance contracts, you know, create some value. We participate in some today. You know, it's interesting when you look at the data that we have in the rig business, really what's going on with the software on the rig, the auto driller, with our drillers being in the driller cabin, what's going on? Can you connect that data and link it with bit designs, this will be something new that Ulterra and other manufacturers have not had access to in the past. I think there's some opportunities for us to really assist Ulterra in their bit designs. Obviously, we think that will give them an advantage, to continue pushing their technology. I do think it will potentially open in different commercial models for the rig side, to benefit from that one. Got it. You know, I mentioned it earlier, I just can't say enough of what the team at Ulterra has accomplished over all these years, you know, both from, you know, technical success and market penetration success, and, you know, we're looking forward to seeing what we can do with the data analytics across all the datasets that we'll have access to. No, all of that makes sense. Okay, perfect. Andy and Mike, send it back. Thank you. Our next question comes from the line of Scott Gruber from Citigroup. Your line is open. Yes, good morning, and I'll echo the congrats on another deal here. Good morning. To follow up on the offshore exposure for Ulterra, you know, where does that fit today? And as you think about the growth opportunity ahead, is it, you know, mainly international onshore that we should be thinking about, or is offshore gonna be a material component to the growth over the next 3 to 5 years? You know, I think when you think about the international markets, I think you're gonna see more rig growth and more drill bit use, you know, in the onshore. You know, the offshore is a market that they've just, you know, only started to touch, say, over the last few years and, you know, have some success and show what they can do. So I think that, you know, there's still upside in the offshore, but you just... market. When you think about the Middle East, I mean, think about it as a large carbonate structure, which is not too different from what we drill in the Permian and where they've had a lot of success. I think, you know, you're gonna see, you know, bit designs that were used in the Permian, you know, with slight modifications or engineering changes, you know, find great success over in carbonates on the other side of the world. Got it. Just thinking about, you know, the potential for you to leverage Ulterra's position internationally to pull through other drilling and completion services, what's gonna be required to make that happen? You know, I know you guys investigated a Middle East entry, and I think you did a lot of homework there. At this juncture, you know, with a bit of an established footprint, you know, what would be required to see that pull through? You know, we take each business line on its own financials. You know, we've looked for years at various opportunities to enter the Middle East market, especially in the contract drilling business. You know, I'll let Mike explain more, but, you know, there's just some differences in the rigs and how they've evolved in the US versus what they run in the Middle East. You know, having a, having a direct entry with the size rig that we use here, you know, didn't make the most sense for a long time. There may be some opportunities in the future, but we take each business on its own financials. Mike, you wanna add anything? Yeah. I think the biggest challenge, it always comes back to the financial opportunity. You know, there's a lot of capital required to go into those markets. We continue to look for opportunities. We will continue to do so, but at the end of the day, it comes back. If we can make good returns for our shareholders, then we'll be there. Got it. appreciate the call. Thank you. Thanks. Your next question comes from the line of Ben Briggs from StoneX Financial Inc. Your line is open. Hey, guys. Thank you for taking the questions, and congratulations to both teams on the pending transaction. Quick one here. I know it's kind of implied, but I wanted to get more of an explicit statement. Is the currently outstanding Ulterra term loan being repaid as a part of this transaction? Yes. Okay, great. Thanks very much. I appreciate that. That was my primary question. Again, congratulations on the transaction. Sure. Thank you. Your next question comes from the line of Waqar Syed from ATB Capital Markets. Your line is open. Thank you, Andy, looks like you've been pretty busy last couple of weeks. My question relates around the CapEx number for Ulterra, $60 million-$80 million. Does that also include funding for the Saudi facilities, or that would be on top of that? If so, you know, what would the magnitude be in building that facility through 2025? Yeah, that's included in that number. We know that facility, I think that facility is about $9 million. It's already in progress, you know, it'll be finished up here, you know, over the next year or so. Okay. Andy, in the international markets, you know, it's a little bit of a different type of market. You said it's sales, and then you're certainly also competing with some of the, you know, very large competitors that are very entrenched in those markets. What is the value proposition from Ulterra in the international markets that would, you think, make them successful? You know, I think it's gonna be similar to the value proposition they offer in the U.S. You know, they build a bespoke solution, they're able to move quickly and, you know, respond in a fast way with both engineering and manufacturing to the customer's needs. I think, you know, we'll see similar over there, and that's why they're already making inroads in these international markets. Yeah, I just wanna clarify one thing, and I probably should have clarified earlier, but on their international market, it's not all sales. It's probably about 50/50 between sales and rentals, it's really customer driven. Not that that changes- Okay ... your question, but I just wanted to clarify that international, it does have rental in the market as well. Sure, sure. Then, Andy, just final question. You know, one of the issues with acquisitions always is, you know, executing. You do have two large-sized, you know, acquisitions that you go to all to absorb. You know, some of these businesses you are, Patterson originally is a small player or absent from those markets, so there's a certain learning involved as well. How would the management practices change to make this seamless, and would there be some added costs in doing so? To begin with, you know, we look at the NexTier integration and the Ulterra integration differently. NexTier is gonna be, you know, a large integration that because these are two large businesses that are coming together, and so we're gonna take our time to work on that. And, you know, that will be one way of, you know... It, It, it's gonna be a large integration process. But with Ulterra, you know, Ulterra is a standalone business, and we look at it more as a, you know, a tuck-in type, integration, where really nothing changes, especially for the Ulterra team. They're just gonna keep executing, you know, the way they have been, and we're gonna do our best to stay out of their way and then work with them on the technical solutions where we can. They're already running a great business, they don't need a lot of help from us, but there are some areas that we can help them. It's gonna be a different kind of integration versus the NexTier integration. Great. Thank you very much. Best of luck. Thanks. Again, if you would like to ask a question, press star, then the one on your telephone keypad. Your next question comes from the line of Sean Mitchell from Daniel Energy Partners. Your line is open. Good morning, guys. Congrats on the transaction here. Just maybe a follow-up on the international business. I think you mentioned some are rental, some are sales. What is Saudi in terms of in that market? Is that a rental market or is it a sales market? It, it's a sales market. Okay. Then you also mentioned just margins. Andy Smith, you talked about 55%-60%, EBITDA-type margins. Is how are the margins on the sales side internationally relative to this rental market? Yeah. I'm assuming they're lower, but... They're pretty similar, to be honest. Okay. Those are more gross margin numbers that I'm quoting there. At the EBITDA line, it's about 50%. Okay. Yeah, you know, when we... All right. Thanks, guys. I'll add one other thing. You know, when we talk about EBITDA in the U.S., you know, it's, you know, the U.S. market's going through a period of softness right now, mostly because of what's happening in natural gas. We do expect that to improve going into next year. You know, we expect some growth from the business in the U.S. just from the improvement, you know, based on where we are on the forward strip on natural gas. You know, what we see is potential for increased activity going into 2024. Got it. You guys need to go have a summer vacation. There are no further questions at this time. Mr. Andy Hendricks, I will turn the call back over to you for some final closing remarks. Listen, I wanna thank the teams on both sides. It's been a lot of work with everything that we've been doing over the last few months. I want to thank the team at Ulterra for everything they've done to create such a great business, and we look forward to having them as part of the team at Patterson-UTI. Thanks a lot. This concludes today's conference call. Thank you for your participation. You may now disconnect.