Patterson-UTI Energy Inc (PTEN) 2006 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the Patterson-UTI Energy first quarter 2006. [OPERATOR INSTRUCTIONS] And on behalf of Patterson-UTI Energy, I'd like to turn our conference over to Jeff Lloyd for opening remarks. Please go ahead sir.

Thank you. Good morning and on behalf of Patterson-UTI Energy, I'd like to welcome you to today's conference call to discuss the results for the three months ended March 31, 2006. Participating in the call will be Mark Siegel, Chairman, Cloyce Talbott, Chief Executive Officer and President, and John Vollmer, Chief Financial Officer.

Just a brief reminder that statements made in this conference call which states the Company's or management's, intentions, beliefs, expectations or predictions for the future are forward-looking statements. It's important to note that actual results could differ materially from those discussed in such forward-looking statements. Important factors that could cause actual results to differ materially include but are not limited; to declines in oil and natural gas prices that could adversely affect demand for the Company's services and their associated affect on day rates, rig utilization and planned capital expenditures, adverse industry conditions, difficulty in integrating acquisitions, demand for oil and natural gas, and ability to retain management and fuel personnel.

Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained from time to time in the Company's SEC filings. Copies of these filings maybe obtained by contacting the Company or the SEC. And now, it's my pleasure to turn the call over to Mark Siegel for some opening remarks to be followed by questions and answer. Mark?

Thanks Jeff. Good morning and thank you for joining us today. I hope that by now all of you have had an opportunity to read our earnings release, which was issued earlier this morning. Before responding to your questions, we would like to take a few minutes to review briefly some of the highlights from the just completed quarter and to add some context to the results.

I would like to cover five points this morning. Number one, continuing record financial results in the first quarter. Number two, record operating results for the quarter. Number three, return of capital to shareholders. Number four, Glenn Patterson's decision to step down. And number five, our outlook for land drilling.

Turning to the first point, continuing record financial results. I'm pleased to report that total revenues, net income, and net income per common share all set new records in the first quarter of 2006. To summarize briefly, net income for the quarter increased by 174% to $159 million or $0.91 per share, from 58 million or $0.34 per share for the first quarter March 31, 2005. Revenues for the quarter were up by 70% to 598 million, compared to 351 million for the first quarter of 2005.

Once again, the results demonstrate the earnings leverage we are able to achieve at high levels of rig utilization, as a 70% increase in revenue generated nearly a 174% increase in net income. We continue to maintain a strong balance sheet. As of March 31, 2006, we had approximately $253 million in cash and cash equivalents, 475 million in working capital and no long-term debt.

Second point, continuing record operating results. We achieved our 13th consecutive quarter of increases in average revenue per operating day and the average margin per day, reflecting the continuing demand for our services along with the ongoing scarcity of land based drilling rigs. Compared to the fourth quarter of 2005, average revenue per operating day increased by $1,710 to a record $18,840. And our average margins per operating day grew by $1,160 to $10,180.

Our rig count also increased sequentially from the fourth quarter of 2005. During the just completed quarter, we had an average of 300 rigs operating, including 282 in the United States and 18 in Canada. This compares to an average of 292 rigs, including 275 in the United States and 17 in Canada for the fourth quarter of 2005. As announced last night, our rig count in the U.S. increased in the month of April 2006 to an average of 283 rigs operating. While our average rigs operating in Canada decreased to six rigs, reflecting a decline in drilling activity resulting from the annual spring breakup.

In addition, our pressure pumping and fluids businesses again performed strongly in the quarter. We salute and thank our colleagues in all of our business units. Point number three, return of capital to shareholders. We also announced today that the Board of Directors has approved a doubling of the quarterly cash dividend to $0.08 per share or $0.32 per share on an annualized basis. The decision to increase the cash dividend, along with our recently announced stock buyback program, demonstrates the continued confidence in the Company's strong cash flow.

We believe that cash flow from operations is sufficient to fund current operations and for capital expenditures needed for sustaining and further growing our business, while allowing us to return capital to our shareholders. In conjunction with the Company's expanded stock buyback program, the Company purchased 1.25 million shares of the Company's common stock during April 2006 at a cost of approximately $41 million.

Point number four, Glenn Patterson's decision to step down. We also announced this morning that the Board as accepted Glenn Patterson's decision to step down as President and Chief Operating Officer in connection with his desire to relinquish his day to day responsibilities. Glenn will continued to be employed by Patterson-UTI Energy as an adviser. Cloyce Talbott, who currently serves as Chief Executive Officer, will assume the added duties of President.

As the number of operating rigs has increased dramatically over the past four years and as we became aware that Glenn was considering stepping back, we have been working closely with the operations personnel for a quite awhile, so as to make this a seamless transition when I occurred. Glenn's responsibilities for drilling operations, refurbishment of rigs and safety and trucking have been divided among a group of individuals with many years of experience, both in the industry and with our Company. These individuals who have responsibility for our drilling operations will report directly to Cloyce Talbott.

We will all miss Glenn's involvement in day-to-day activities. And we are pleased that he has agreed to continue as an adviser to the Company, allowing us to further benefit from his judgment and experience. As one of the original founders, he has played an enormous role in our success. Glenn built an outstanding team that is well prepared to take the Company forward.

Point number five, outlook. As commodity prices have moved in both directions during the last four months, we have not seen any impact on our service business units and in the drilling business in particular. Moreover, we have not seen any change in demand for our rigs in light of the changing natural gas prices. Furthermore, we continue to see increased demand for long-term contracts and our rigs under term contract are now approximately 20% of the operating rigs. This consistent activity at higher day rates, coupled with an increase in demand for long-term contracts, supports our view that the drilling activity will continue to demonstrate sustained, long-term growth, so long as commodity prices are at an acceptably high level in historical terms.

We continue to see a land drilling market characterized by strong demand and a scarcity of rigs. Based on what we are seeing from our customers, we are maintaining our program of activating approximately 30 drilling rigs during 2006, including seven that have been activated so far. We expect that average revenue per day will increase by approximately $1,000 per day, and that average expenses per day will increase by a couple of hundreds of dollars per day. At this point, I'd like to open the call for questions.

Thank you, sir. [OPERATOR INSTRUCTIONS] Our first question comes from Marshall Adkins from Raymond James.

Hi, guys. A couple of quick ones here. The pressure pumping and fluids business, I think I've got my handle on the land drilling side, and you guys obviously kicking butt there. But you really blew things away versus my model in the pressure pumping and fluids business. Can you give me -- is the trends that we saw in this quarter, are those sustainable? And give me some help modeling that going forward, because you guys just knocked the cover off the ball there.

Yes, I think we believe they are sustainable. Second quarter, you typically have a drop that's --.

In the pumping, the seasonality part?

A little bit of seasonality in the spring. Their business continues to be strong, though. And we think that seasonally adjusted, the trends will continue and it will continue up. We've been investing in that business every year for the last five years, putting the cash flow that we earn back into the business. And they've expanded their footprint and they've been able to continue to expand well this year.

I think that's exactly right. We see continued growth in that business and we've been really pleased with the fluids business. It seemed like after the hurricanes, things improved for us in the fluids business. And we really are proud of what our people have done in the fluids area.

What percent of CapEx is that consuming, those two businesses? I know they're pretty small businesses but is it a meaningful component?

Well, we'll spend probably about $30 million this year in pressure pumping. On the fluids side, it's not as capital intensive.

Sure.

And probably spend something around $5 million.

Okay, good. That's good to hear. All right, the other question I had, had to do with the -- just kind of housekeeping on the model here. Your SG&A and depreciation numbers are kind of bouncing all around, a lot of it having to do with the embezzlement stuff. Can you give me a hand going forward the next couple of quarters, are we still going to see more embezzlement charges here? And on the depreciation, can you give us some guidance there on what we ought to be looking for?

Yes, in terms of looking at G&A, and I'm going to speak to it excluding anything embezzlement related first. The fourth quarter, as we mentioned at the time of our fourth quarter call, was a bit unusual because with the departure of Jonathan Nelson, we had some bonus accruals that reversed. And under the accounting treatment that was applicable last year, we also had some restricted to become that went away. And that made our G&A in the fourth quarter last year a bit unusual. So, I would use the third quarter of '05 as a base of comparison. And that was about 10.5 million off the top of my head.

With the combination of the Company's use of restricted stock over the last several of years and the implementation of 123R, our G&A expenses will run at a higher level, as we mentioned back in March. And the impact was about $2 million for the quarter. Taking you up to -- the 10.5 up to about 12.5. The other $0.5 million is just miscellaneous costs associated with our higher level of operating activity. Assuming that our Board continues to use stock as an incentive compensation, I would suspect that we'll see another bump in G&A, excluding the embezzlement, up to somewhere around $14 million in the second quarter. And then from there to ramp at, if I had to guess, I say maybe 0.5 million a quarter, $300,000 a quarter, something like that.

Embezzlement-wise, that investigation is completed. We classify everything related to the Nelson matters as embezzlement related, whether it's related to our internal investigation, whether it's related to recovery of assets. And the thing that is ongoing there is the recovery of assets. And we have a derivative suit out there that's not a lot of dollars involved with that. If I had to guess for the second quarter, we'll incur another $1 million to $1.5 million on those matters and I would expect it to decline quarters after that.

Okay. And the depreciation must have written off some assets associated with that as well, that number is a lot lower than we had thought.

I believe that's more E&P driven than anything. I think over the next couple of quarters, I would guess that depreciation for second quarter is probably somewhere around 47 million.

Okay, that's great, guys. Good job.

Thank you. Our next question comes from Ian Macpherson.

Yes, good morning. I'm just -- I want to touch on the reactivation program. I know Cloyce, you mentioned last quarter you were going to hope to catch up this year with two or three rigs that you were kind of behind schedule with last year. Is that still the aspiration, or are we looking really more at 23 rigs to be activated for the balance of the year?

We still think we're going to catch up the two or three that we missed last year. And still our intention to do the 30 that we're telling everybody we're going to get out.

Okay. As you look at those reactivated rigs, is there any skew with respect to these rigs' size and capability that could affect -- or bias your incremental margin going forward as opposed to what they would be with your current fleet?

The rigs that are going out the this year are a bit higher horsepower than the rigs that went out last year, but again it all falls within the mid-depth range. So, I don't think that it would skew the margin one way or another. They're certainly all rigs that fall in the category that have been in very high demand.

Okay, the 20% of your fleet that you cite as being on term contracts, is that percentage also representative for the reactivated rigs, or are more or less of those going out on term contracts than 20%?

I think it's a little higher than the 20%. Some of the items that are in there are very specific requests to customers, so I think it would actually be a bit higher as a percentage. On the other hand, we have some contracts that have been if place for a year and it will start to roll off. So but percentage may trend higher over time, but there's nothing in the information right now that would suggest it's going to move up dramatically, maybe move up into the mid-20% range.

Okay, thank you.

Thank you. Our next question comes from Mike Urban from Deutsche Bank.

Thanks, good morning. I also wanted to talk about the term contracts a little bit. The percentage or the number of rigs that you've had under term has been creeping up and you've certainly made reference to the desire to sign those term contracts. That's, I think, a little bit of a change versus your position in the past. Is it just that the terms are that much better? And also, if you do into the down cycle at some point, do you feel like those contracts are going to be firmer than what you've seen in the past? Again, that's been a rationale historically for not entering into the contracts, when the customer just breaks them when the downturn comes anyway. So just interested in your thought process there and if you expected to see it continue to go up as a percentage of your fleet?

Mike, this is Mark Siegel. I think what's happened to us is that we started out saying that we were perfectly content to, in effect, take spot market pricing when each well turned over, effectively, each individual contract. And occasionally, as you know the contract is for a couple of wells, so they're not per well. But what's happened to us and this really commenced more than 12 months ago, our customers started to ask us for long-term contracts because they were looking to guarantee rig availability, I think primarily. And secondarily, they were looking to guarantee what their costs would be for a 12 or 18 or 24 month period. And in effect, I think we responded to that request by customers for these contracts and have entered into these contracts largely in response to customer demand. Yes, I think they may be helpful on the -- if there were a turn down. I also think they're potentially helpful in securing your customers and securing your deal. But fundamentally, we feel like we're doing this as a result of what our customers want.

Okay. And that's helpful. And one of your competitors recently said they'd seen a little bit of a change in the demand mix out there. Whereas we've, throughout this cycle, have just seen primarily the bulk of the demand growth in kind of the middle of the range, 1,000, 1500 horsepower rigs. They had of late seen that shift more toward the high end of the fleet. Not necessarily saying that the 1,000 and 1,500's were getting worse by any stretch of the imagination. But at the margin, that's where the incremental demand was. Is there any -- do you have any sense for that, or any comment on that?

I think each of us may want to give a comment on it. I'll give you one. I think the demand for rigs across our entire fleet has stayed strong. One of the nice things that we're seeing is also demand among some of the smaller of our rigs by customers for whom we have a unique availability to provide a certain kind of a piece of equipment. And I think to generate very, very acceptable if not wonderful margins from doing that kind of work. So, I think that the demand is pretty much across the entire fleet. I don't think there's a real change in that. We, as I said, did see some increased demand for some of our smaller rigs. We're also seeing strong demand for our 1,500 horsepower rigs and our 1,000 horsepower rigs. So, it's what we've always said, from in effect 500 horsepower up to 2,000 horsepower.

I still think that the majority of the wells that are drilled are drilled in the United States, are drilled in what we call mid-depth range. And that is the horsepower ready from 750 to 1,500 horsepower rigs. There have been a few more requests for our few deep rigs. But maybe on a percentage basis of the number of deeper rigs that are being asked for, it may have gone up in some areas. But the majority of our customers are still asking for 1,000 to 1,500 horsepower rigs.

Thank you.

Our next question comes from [Evan Denali] from John Hancock Advisers.

Thank you. I just wanted to ask a question on your customer mix. If you could tell us sort of the split between the majors, the E&Ps, and the small independents?

Well --.

If that's possible.

What's happened to us in the industry is some of the large, publicly traded independents have really become kind of the majors in the industry. We are picking up a little bit of work for majors. Percentage-wise it's still a very, very small percent. And I assume when you're saying majors, you're talking about the integrated major oil companies?

Yes, yes.

It's still a very, very small percentage of our overall fleet. I know it's less than 2% to 5%, I don't know exactly the percentage. But we are working 45% for the mini-majors, as we call them, or the large publicly traded independents. And then 55% for what we kind of call the no-name independents, because they're not publicly traded. And it's a huge part of our business, it's a huge part of the oil and gas business in the United States. And it always will be. And that's where we do most -- the majority of our work. Always has been.

Yes, no, thanks. And maybe another question on the uses of cash. You've raised your dividend. And I'm curious if you can comment maybe on what you're seeing out there in the market in terms of acquisition price versus new build cost?

Well, certainly the acquisition cost is getting closer to new build all the time. We have not gone to that level yet, where we're going to pay new build cost for acquisitions. It's certainly higher than it's been in the past. And there's a limited amount of opportunities and we feel -- to buy companies. And we feel real fortunate we still have -- we've got 45 rigs we're working on our pipeline of rigs to be refurbed. And that will be 30 -- we're planning on 30 this year and 15 into '07. So, we're going to grow our Company through refurb before we pay extremely high prices for the older rigs that are already in operation.

This is John. I'd like to add to this that. You might recall if you were on our call last July, we went through an analysis, which frankly I haven't updated today. But looking at the best use of the money for Patterson-UTI to benefit its shareholders, and what we concluded at the time is to buy non-public companies at good prices was the most accretive thing we could do. The second most accretive thing we could do was buy in affect our own rigs by buying back stock. And with some of the prices we have seen in some of the recent transactions, given where our stock is trading relative to our cash flow, we think that it's very cheap. And as was mentioned in the opening comments and the press release, we spent a little over $40 million in April buying back that stock. So in effect, we would maintain that that's also buying rigs, it's buying Patterson rigs.

Yes, and I think I might have missed that at the beginning when you discussed stock buyback. Is there a stated program that has been approved and sort of how far along are you in the execution of that program?

Yes, we had a long standing program that was increased to $200 million in March. Of the 200 million, we spent about $41 million the week following that authorization. Then we entered a period in which we don't purchase our own stock back during -- once we get close to earnings time. And so we've been blocked from doing that. But again, we would be able to do it again here starting in a few days.

Yes. All right, well, thank you very much, and good job on the quarter. Thanks.

Thank you, our next question comes from Geoff Kieburtz from Citigroup.

Good morning. A couple of questions, first, given how strong the market is, why -- obviously you're catching up on your refurbishment program. But why wouldn't you refurbish even more rigs and get them out this year?

Well, we've been asked that question many times. And I can tell you that we are -- we have over 200 welders working for us throughout our Company and that's a lot of welders. And really, we're at a maximum of what we can do in our yards and we were that way last year. And we just feel like it's more beneficial to the shareholders for us to rebuild our rigs and rebuild them the way we want to rebuild them, rather than going out to outside yards and all the outside yards are pretty much booked too. So, we're really pretty much at capacity of what we can put out during the time frame. And we're just going to continue to do it that way because we think it's the best for the shareholders at the end of the day.

Okay. And are you -- what I'm hearing you say it's really the labor, the in-house, specifically welding labor that is your capacity constraint. Your not having difficulty getting access to the necessary equipment to refurbish?

Geoff, I don't think that's what we're meaning to say. I think it's a capacity constraint in the entire industry. We have a lot of that capacity internally amongst a couple of drillers, we have a lot of capacity. And it's a few outside yards that do these type things. But I think it's everything from availability of pumps, engines, qualified labor to put a rig together. These are big pieces of equipment and they need to be put together right and safely.

Right.

And certainly the wait time on equipment has gotten much longer than it was a year ago. But we've had this plan going on for quite some time and we've been ordering stuff, parts to put on these rigs months in advance. So, we're pretty much on schedule. And as I said earlier, we think we're going to get -- we missed a couple of rigs last year on our estimate, we think we're going to catch up with those. and we feel like we're on schedule to quite handily get our 30 out this year. But you don't just plan that today and think you're going to it tomorrow. We've been planning on it for now a year.

Now, you mentioned also Cloyce that 30 this year and a plan for 15 into '07. Does that complete your inventory of available refurb, or were you just saying you've got already visibility to 15 into '07, but there could be more?

We certainly have a visibility to 15 in '07. The remaining horsepower of our rigs, our smaller rigs that we have available and certainly a portion of them can be refurbed is the demand is there. We've within refurbing rigs basically between the 750 and the 1,500 horsepower category. We have some below that and we have some above 1,500 horsepower, we have 2,000, 2,500 and 3,000 horsepower rigs. But very few of them. The majority of the rigs were refurbished between 750 and 1,500.

Okay. And on the term contracts, as you see that become an increasing percentage of your fleet, are you getting, when you go out beyond a year, any cost adjustment clauses in those contracts?

All labor increases are pass-throughs.

Okay, fine.

And Geoff, typically the longer the contract, the more there are adjustments in the contract over a period of term.

Okay. And just an accounting question, to the extend that you are successful in recovering moneys associated with the embezzlement, how is that going to show up in the income statement, if at all?

It would show up in the income -- we have nothing on the balance sheet related to it. It would show up as income recovered from the embezzlement. Similar to the way that the costs of the embezzlement have gone through the income statement.

Great, thanks very much.

Thank you. Our next question comes from Alan Laws from Merrill Lynch.

Good morning, I had a couple follow-up questions to the repurchase. Did you say you were only in the market for one week when you bought back the 41 million?

That's correct.

That's pretty aggressive. Do you have any thoughts on increasing your buyback beyond the 200 million? ?

It's certainly been discussed. We feel that the thing that the market and our shareholders would most respect is for us to in effect do what we said we're going to do. We've in effect, put a $200 million buyback on the table. As John mentioned, used 41 of that. And we'llcontinue to look at the opportunity and try to make good judgments about what to do with the rest of the $159 million remaining.

Will you be back in the market then later this week?

We're not going to be that specific about when we're going to be buying or selling.

Okay. The next question from that would be, with such a good long-term backdrop, the outlying constraints that you have on ramping up your refurbishes, would you consider a more formalized repurchase program and/or borrowing to accelerate it?

In terms of borrowing to accelerate it, Alan, I think you probably have projections that would indicate that we will generate a lot of free cash flow over the coming quarters. And we started this quarter with more than $200 million of cash. So in terms of borrowing, that would be premature at this time with the $200 million buyback, in terms of a formalized buyback.

At 41 in a week, though, you could pretty much go through that before the end of June, is that fair?

That would be possible at a similar purchase rate.

All right. My other question I had was on the drilling and completion fluids. Did it surge for any one-time items or one-time orders, or is this kind of the new run rate for that part of your business?

Kind of the run rate, we'd hope it would remain that high. But frankly, that is probably a little bit unrealistic. There were some big -- we have a small fluids business and they get a few big jobs and that can really move the needle on revenue. That's the best quarter they've ever had. I would think a run rate more like $35 million a quarter, maybe a little less than that would probably make more sense from a projecting point of view. But again, unlike our drilling business, it's such a small business that a single job can make a big impact for the quarter.

Thanks, I'll leave it at that.

Thank you. Our next question comes from Kevin Pollard from J.P. Morgan.

Thanks, good morning. Yesterday one of your competitors talked about a wage increase in May that is effectively going to add roughly $500 a day to the cost structure of their business. I was wondering if, A) you had decided to match that increase? And if so, was that included in the $200 to $300 of sequential cost increase you were referring to? Or is this something that would be additive in the future?

I think, as you know Kevin, in the drilling business, if one driller raises wages, all the drillers raise wages in an area. No driller can let another driller have an advantage on labor based on they're paying them that day. So if another driller did, that I would expect that we would promptly respond. And if you think about a wage increase in the middle of May of $500 impact, that'd get you $250 of impact for the quarter. So, I think that we have anticipated any labor increases in the numbers that we gave.

So roughly, 200 to 300 in this quarter and maybe another 200 in the third quarter would be a good way to think about that?

If there's a $500 wage increase, that would be a good way to think about that.

That's all I had.

[OPERATOR INSTRUCTIONS] Our next question comes from Rob Mackenzie from FBR.

Morning, guys. I wanted to revisit a question you guys have answered in the past, but if one truly believes that we are in a longer-term up cycle, why wouldn't Patterson at some point start building new rigs once its refurbs start winding down?

We have not ruled that out in any way. We consider that. We think we've had this significant advantage, in effect, over our competitors by virtue of this fleet of rigs, which we could refurbish. And we've been able to refurbish them and get them into the market at a lower cost and a lot quicker than we would have we had put an order in for a new rig.

Sure.

Looking down the future, we wouldn't -- looking out at the future, we wouldn't rule out doing that. We think that that's an opportunity that we would have to consider. But we feel that we've had this opportunity of these 45 rigs, which Cloyce mentioned, that we're in the process of refurbishing now.

And in that regard, at your current pace of refurb, you're going to be done basically the 45 you talked about, likely by mid-2007. With lead times being what they are for equipment, wouldn't it be prudent to start looking at and perhaps announcing new builds fairly shortly?

Well, let me say that you're seeming that we've not looked. We do look from time to time at all the market and consider all the possibilities. So, we're always trying to do that. And looking at all the opportunity set is. So, we always are doing that. In terms of the deadlines and so on and so forth, I think we've got a pretty good handle on what we need to act and what we need to do with respect to that. And we've got that as one of our considerations from time to time. And lastly, I don't think we'll be putting out an announcement of a new build purchase, per se. Because we're always, in effect, refurbishing rigs in part of our program.

Fair enough. So then, would it be somewhat likely to perhaps see some new big rigs adding to Patterson's fleet late next year?

I think I've said about as much as I'm going to say.

Okay. One final housekeeping question. There was a comment right at the end of prepared remarks about guidance for day rates in the second quarter. Would you mind repeating that?

$1,000 a day on revenue and a $200 increase in cost.

Great, thanks, John.

Thank you. Our next question comes from Todd Garman from Peters and Company.

Just wondering if you're seeing demand for rigs increase in any specific area of the U.S.?

We are continuing to see demand in all areas very similar to what we've seen now for several quarters. And I can't say that -- if I had to pick one area, maybe I'd say that the one area might be the Rockies. It's just such a large area. We actually consider the Rockies from the four corners to North Dakota. So, it's a huge geographical area. And we might be seeing a little bit more demand percentage-wise in that area, but the demand is in all areas of our operations.

Okay. So, the demand isn't necessarily decreasing any particular area than, either, is that right?

That's the way we see it.

Okay. Just a small question. Regarding the contracts, is fuel also passed-through to clients?

Yes.

Okay, thanks.

Thank you, we have a follow-up question from Marshall Adkins.

Hi. Just a quick one here. Cloyce, what are the latest contracts you've been signing? Can you give us what those daily margins have been? Just on the most recent ones, and also the durations?

Sorry, what was the question.

The question is what are the margins on the most latest term contracts.

Just ballpark, nothing specific.

I would say --

It's well north of the $10,000. It's going to vary. And it doesn't vary necessarily, frankly, with the size of the equipment. It varies with how effective the equipment is for the customer. Smaller equipment that could drill and move really fast gets extraordinary margins relative to the cost of that equipment. And big equipment that drills efficiently gets really great margins, too. So, they're well north of the average margins that we're seeing here. But I frankly don't have anything here with me where I could define it for the most recent term contract.

Would I be far off in assuming 14, 15 a day?

I think the range could be anywhere from 12 at the low end to as high as $18,000 in a handful of cases.

Wow, wow. And duration? Year, two years.

Vary all over the place. We've got some as much as three years and we have some contracts that are less than three years, 30 months. And we have several that are 24 months. So, vary all over the place. One year to three years.

The majority would be a one-year.

I think most would be on the lower end of that.

Okay. And Cloyce, what is Ed going to do every day if he doesn't go to work?

That's a good question. I imagine he'll get a lot of phone calls from a lot of people. Because he's going to continue to work for us, he just got tired of the day-to-day operations. And he's got all these people that he's been involved with all these years, that have been helping him run the operations. And I'm sure he's going to go to a lot of golf tournaments and represent us at golf tournaments, where all our customers go. And he's going to go out to his farm and play with his toys. So, he will be doing a lot, and he's going to be a lot for us.

Good, thanks, guys.

Thank you. And gentleman, there are no further audio questions at this time. Do you have any concluding comments?

Yes. I'd like to say a couple of things about Glenn leaving in the sense of Marshall brought it up. I'll tell you this, that Glenn is known as a great operational person. Has been for 20-odd years and probably one of the better operational people in the industry. If he has one other great talent, it's his ability to pick people that can perform the type of operations that he wants in our Company. And he spent years doing that. And we have exceptional people in all areas that Glenn has put these people together to move our Company forward.

And I think it's rather unusual to lose somebody day to day of Glenn's ability, but to have the people that he's put together to step up to the plate. And I don't think we're going to miss a beat. I think these guys are just -- they're just quality, quality individuals that have many, many years of industry experience as well as the majority of them have many years with Patterson. So, we're really lucky to have all the people that Glenn has put together and our Company is going to do really, really well going forward.

And we're looking forward to Glenn helping us, too, as we go forward, particularly continue to keep these theme, that he got us in the past and keep them for us in the future.

Thanks, Cloyce, thanks to all of our investors and analysts for participating in today's conversation. Thank you very much, everyone.

Thank you. Ladies and gentlemen, this concludes the Patterson-UTI Energy first quarter 2006 teleconference. If you would like to listen to a replay of today's conference call, please dial 1-800-405-2236. With the access code of 11058642. Once again, that number is 1-800-405-2236. And the access code is 11058642. Thank you and have a great day. You may now disconnect.