About William Hendricks
William Hendricks, CEO of Patterson-UTI, has discussed the company's operations and industry outlook in several CNBC interviews. In September 2021, he noted that during the COVID-19 downturn the company's operating rigs fell from 126 to 34, and had since recovered to 73, with expectations to reach 80 by July. Hendricks stated that even if WTI oil prices pulled back from $70 to the mid-to-low $60s, activity growth would continue, and he expressed encouragement from discussions with customers. He said the company could provide new engines that burn 100% natural gas and battery storage solutions to reduce emissions, and described sustainability and ESG as watchwords in the industry. Hendricks also said that capital discipline remained important to investors, with room to grow activity relative to budgets set at lower oil prices.
In earlier appearances, Hendricks addressed the severe down cycle in oil and gas during 2020, stating that lower oil prices eventually cure low oil prices as customers shut in wells. He said that coordinating production throttling across states would be difficult and likely ineffective given the rapid drop in global demand. Hendricks emphasized that Patterson-UTI had strong liquidity, a good balance sheet, and low debt, positioning the company to survive the cycle and potentially gain market share. In 2018, Executive Chairman Mark Siegel discussed the company's acquisition of MMS Energy, a directional drilling firm, and noted that the U.S. had become the world's marginal producer of oil and gas. Siegel said the company emphasized a strong balance sheet and that fewer rigs could achieve more due to efficiency gains.
Source: AI-verified profile updated from William Hendricks's recent appearances.
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Transcript (6 segments)
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Interviewer0:00
Very unprecedented time for oil and gas. It's a challenging time for our industry. Today we're going to go through a severe down cycle. I think if there's any positive right now, it's that the old saying goes lower oil prices cure low oil prices. A number of our customers are shutting in their wells, so this is going to bring down production in the US, and that's what has to happen. We all know about the demand collapse that we've seen. Right, product come down as well. I think you're going to see production in the US start to come down as the network gathering race comes down. Activity slows, but on top of that, we've got E&Ps shutting in wells. You're a real expert in this. I read here you even got your bachelor's in petroleum engineering from Texas A&M way back when. The reason I ask all this is because could you explain to us a little bit about the process of shutting in wells? How expensive is it? How risky is it? And why are companies still reluctant to do this more quickly?
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William Hendricks0:57
Well, there's a number of reasons. All of our different E&P customers have different economics on how they make decisions on when to shut in wells. When you do shut in wells, you have to take a number of precautions, and it's preparing for the well's eventual restart. So there's a number of technical things that have to happen just to be able to shut in a well. But we've had a number of our customers make that decision. I've got a few that have shut in all our wells. I've got some that are shutting in about half. But at the same time, I've got some that are continuing to produce because they have agreements with the pipelines and their agreements allow them to continue to get takeaway.
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Interviewer1:34
Yeah, that's what we're trying to understand. Texas is out. We've spoken with the railroad commissioners quite a bit in the last couple of weeks about whether they would try to prorate production. They seem to be wanting to do something like that, but then say well maybe they need to coordinate with other states. It's not clear whether they legally can. And then the American Petroleum Institute isn't even in favor of something like that. What would you like to see? Obviously your company would benefit very much from a higher oil price. Would you like to see regulators try to throttle back production?
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William Hendricks2:02
Well, that's a difficult question. As you mentioned, there's a number of different players in the E&P. You've got small independents, you've got the large majors that work around the world, and you've got different states in the US. I think it's actually very difficult to coordinate, especially for something that's happening so quickly in terms of the drop in global demand. Just trying to meet that by coordinating states would take a fair amount of time and probably not be as effective. It's just the overall economics that we're seeing right now. Frankly, Texas oil production, if you go to zero, the oil price would barely recover. I mean, that's how big a demand hit we're talking about.
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Interviewer2:41
Are you concerned that the industry in your company might lose market share longer term, or is this simply a question of survival right now?
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William Hendricks2:48
In our particular case, we posted our earnings this morning and we posted a solid first quarter, unfortunately going into this down cycle. But the important part for us at Patterson-UTI Energy is we have strong liquidity, we have a good balance sheet, we don't carry a lot of debt. We're going to be one of the survivors in this cycle, and we have a history of going through these cycles and coming out stronger. We'll probably actually gain a little bit of share as the cycle gets to the bottom, but will typically come out stronger in these cycles because our balance sheet.
