Saurabh Pant: And then John, maybe one for you, just the narrative over the past three months internationally, particularly in the Saudi market seems to be there is a lot more emphasis on gas and clearly that is where you are going with your rigs. And just based on discussing with market participants there, it seems like there might be more tenders coming from more rigs in the Saudi market for unconventional gas. Is there something you can share with us, John, in terms of what you are seeing out there in terms of opportunity from growth and further re conditions for Helmerich & Payne?
John Lindsay: It is a great question and really, I can’t add anything more than what you probably already read out there in the market. We have read the same thing and heard similar rumors about the potential for additional tenders for unconventional gas going forward. We are hopeful that, that is in fact the case. But like you, we will be standing by and waiting to see if that is in fact the case, because we don’t have any direct information on that.
Operator: Our next question comes from the line of Keith Mackey from RBC Capital Market.
Keith Mackey: Just like to start with your comments there about increasing service intensity. Can you just expand a little bit on what that means for Helmerich & Paynein terms of specific revenue or cost opportunities? And secondarily, is it leading customers to want to use the performance based model more or want to use the day rate model more or are there just other factors in there that are driving whatever decision might happen?
John Lindsay: I think try to summarize, when we think about service intensity, we talked about, I think, on our last call that laterals are have more than doubled over the last five to seven years. And we are drilling those wells in far fewer days. And of course, the end result is more exposure to the resource, better outcomes, better returns for our customers. At the same time, our equipment continues to work harder. You just heard Mark talking about maintenance CapEx. And so maintenance CapEx continues to go up on a per rig basis. And that is largely and a large part of that is has to do with that service intensity. So what we are doing is, yes, the performance based contracts are important because it helps you align with the outcomes that your customer is wanting to achieve and you are creating a value proposition that you are getting paid for in the process.
So without going into great detail, that is really the concept behind it. And it is not just drilling rigs. I mean, it is pressure pumping. It is across the board. All of the equipment in OFS is really working harder in these more challenging well designs, longer laterals and much, much faster cycle times.
Keith Mackey: Can we just talk a little bit more about the Saudi rigs? It looks like there is a batching process of them being sent over. Once the OpEx portion or the start-up costs are spent that Mark outlined, do you expect there to be more costs similar costs in fiscal 2025 or should that be it? And then when roughly do you think that these rigs will get up to their appropriate run rate for revenue and margin profile?
John Lindsay: Most of this recommissioning expense will be largely incurred in the fiscal 2024 that we are in. As I mentioned in the prepared remarks, 10 million to 12 million is expected in fiscal Q3 and then another five million for that recommissioning in fiscal Q4 and then they start being readied to put on boats and mobilize to the Middle East. And when that happens, there will be a cash expenditure of $2 million for mobilization per rig, which will be deferred and recognized over the contract term together with the corresponding mobilization revenue once the operations commence. So that stuff is largely at 2025 and then through the life of the contract is the recognition. We think that these rigs will mostly be exported through this calendar year and commence turning to the right in operations and spudding in the beginning of calendar 2025.
Operator: Our next question comes from the line of Scott Gruber from Citigroup.
Scott Gruber: Want to, stay on the Saudi rig topic. I want to ask about the cost structure in country. How do you think about your ability to lessen that over time as you gain experience operating in the country?
Mark Smith: I will take a stab at that, John, and then please add in. There are several different things and obviously, most of our daily costs are related to the labor. We are certainly starting with what will be we have some costs that we are incurring in country now as we have set up an office and are beginning to hire people. And we will be starting with a large complement from our North America Solutions segment so that we ensure safe and efficient and effective startups. But through time, we will begin to have local crews and transfer knowledge. I think a prime example of demonstrates how we can do that is Argentina. Today and for some time, there is not been a single U.S. expat in that country, lower operating eight or nine super spec rigs and have a similar market share position in the block and more to what we have in the U.S., albeit a smaller scale.
There is also supply chain benefits through time that we will get. We have obviously are doing all this work in at our facility in Galena Park to do the equipment recertification, recommissioning, et cetera. But once we are in country, we will have a couple of things that will be helpful. One, because these rigs are like new in their five year contractor, and we expect minimal maintenance CapEx through the through the initial five-years. Two, we will be developing through that time our supply chain apparatus in the country as we look to have in country, in Kingdom value spend and that will also make us more efficient, we believe locally with not only maintenance CapEx, but materials and supplies inventory consumption as well. So we are working on a lot of these efforts and we are excited about the opportunity to put all these ideas to work.
Scott Gruber: And then turning back to the U.S., the customer consolidation in H&Ps obviously should be beneficial for HP. You guys have highlighted that. I’m just wondering, now that we are starting to see some deals close at least from the recent wave. Are you having conversations that suggest some consolidation driven share pickup is a distinct possibility for HP in the near future?
John Lindsay: Scott, I really don’t want to get into those details. I mean, again, I think when you look at consolidation over time, I think when I look back at H&P, and we have been we have come out on the good end on many of the consolidations over the years, and our expectation is that we will continue. I mean, at the end of the day, it comes back to no surprise what we have said before, and that is the ability to deliver safe, efficient and reliable performance. And I think as long as we can continue to do that and have strong partnerships with our customers, it will come out in a great place over time.
