President, Chief Executive Officer & Director, PATTERSON-UTI ENERGY INC
Patterson-UTI Energy Chairman: Marginal Production | Mad Money | CNBC
With oil prices rising on news that OPEC may reach a deal, what should you do with your energy investments? Jim Cramer took a ...
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.
Transcript (15 segments)
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Jim Cramer0:05
For the last six weeks or so, the whole oil patch has started to rebound. Partly because the price of crude jumped nearly 10% in September, now trading at more than $50 a barrel, and partly because this group was so beaten down that it was due for a bounce. It's not just the producers that are rallying; strength also extends to the drillers, some of which are totally on fire. Take Patterson-UTI, that's PTEN for you home gamers. They have one of the largest fleets of land-based drilling rigs in the US, as well as providing pressure pumping services central for fracking. These guys have some of the best technology in the space, and they've clearly been pretty bullish about the prospects of their part of the industry. Since last month, Patterson announced buying MS Energy Services, a directional drilling play, for roughly $260 million in cash and stock. So, is the worst really over here, or has this top possibly gotten ahead of itself? Gotta ask these stuff. Remember, for over a year now, every time oil goes above $50, producers have regrets that we sold futures, and crude comes right back down. Question: Will the investors who let themselves get too optimistic? Could this time be different? Let's take a closer look with Mark Siegel, the Executive Chairman and CEO of Patterson-UTI Energy. You find out more about how US companies do and where it's headed. Mr. Siegel, welcome back to my show. Good to see you, sir. How are you?
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Mark Siegel1:15
I'm doing well, Jim. Thank you.
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Jim Cramer1:18
You have taken a company over a period where there's been lots of ups and downs, and yet it's been the most consistent of many of the ones I follow. And you are now, I think this is very interesting, your financial flexibility. Is that because you were one of the few companies that actually didn't get overextended during the great boom?
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Mark Siegel1:35
Jim, I'd like to think so. We've consistently been a company that emphasized having a strong balance sheet. I've called it before a fortress-like balance sheet. We think that's really important. There's no business with better operational leverage, we think. In this business, you don't need to put financial leverage on top of it. But one of the things that's amazing is that there clearly have been opportunities for people to buy other oil companies up, and almost no one's been able to because they did go overboard.
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Jim Cramer1:58
You just made an acquisition that to me just sounds like a bargain, and you got the team and they're staying with you, and it looks like it's gonna be really good for you.
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Mark Siegel2:08
We are so excited about this new acquisition of MS Energy. Directional drilling frankly has been part of our strategic plan for more than 10 years, but it was finding the right opportunity. People don't recognize that MS is actually the number two ranked directional driller in the United States.
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Jim Cramer2:23
Just for our viewers at home, they don't know directional drilling. How important is directional drilling?
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Mark Siegel2:28
Easy, Jim. When the well goes down vertically, then it makes a right or a left turn and the well goes two miles having gone one mile down in one direction or another direction. And nowadays we're going multiple directions off of one path. So the ability to manage that directional drilling is critically important. There's a directional driller that comes on the rig and does that. It's a very logical extension of our business. The sellers were private equity firms that had run out of time and they needed to sell, and in fact the management wanted to go with us. It's a perfectly logical extension for us.
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Jim Cramer3:02
Well, let's not bet there. There was an article I read that said, listen, all the great wells have been found, so there really isn't going to be a great demand out there. And yet I see tremendous demand for your products. So what's the disconnect?
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Mark Siegel3:15
Well, I think everybody starts to think that there's an abundance whenever somebody's starting to do well. Quite frankly, you also know today I think we reached the highest US export level of oil that I've ever seen. The United States has become the marginal producer in the world, and so we're very excited about our prospects. Plenty of oil for you to be able to drill, plenty of oil and plenty of natural gas.
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Jim Cramer3:38
Right. I want to talk about that because you're also in the Northeast. I mean, you're everywhere that there's good selection. Our natural gas is incredibly cheap. How can these guys hire you and still make money?
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Mark Siegel3:48
Well, it's interesting. A lot of the natural gas is being used for manufacturing and for particular uses where it's already set in motion, or for electrical generation. So there's quite a market for us. And then, you know what's happened? Natural gas has displaced coal this year, and that's really a long-term trend. We think in the United States it's environmentally sound and it's cheaper.
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Jim Cramer4:10
And I would be remiss not to say that people used to think that this is a commodity business. You have technology that has made you a differentiator and also made it so maybe the rig count isn't a really good accurate picture of things because of how much you get out of the rig.
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Mark Siegel4:22
Well, as you say, each well has been drilled more efficiently. You know, fewer rigs can achieve more and more success. But quite frankly, we think that that's a very positive trend because it allows for very great efficiency on the part of our customers, and that efficiency allows them to be productive. You know, last time I was with you, I told you that 50 is the new 80. Yes, and our rig count has stayed very, very flat, and that's all about the fact that people can make money now with these kind of energy prices.
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Jim Cramer4:52
Well, you're one of the few that thought about the idea that you could be opportunistic. Most people didn't. It's why you've got a great company. It's a terrific way to play what we're doing in this country. Tremendous innovation, financial flexibility. Congratulations to you. That's Mark Siegel, the Chairman of Patterson-UTI Energy, which has been a real winner for us. So stick with Cramer. Booyah! Jim Cramer here from there, buddy. Thanks for watching. You see me, see you on YouTube. Click here to subscribe and get the jump on my exclusives with CEOs, plus market news, investing advice, and a whole lot more.