Operator: Our next question comes from the line of Marc Bianchi from Cowen.
Marc Bianchi: I wanted to go back to the Saudi margin opportunity there because I think you previously outlined it as more than $25 million for the seven rigs, which would compute to something just below $10,000 a day. It sounds like there is a fair bit of overhead, but when I look back at the international business for H&P over time, the margins don’t seem to really get up above $10,000 a day. And I know it is different geographies and such, but you made the comment about historically Argentina operating. So I’m just curious, where do you see the opportunity in margin for Saudi? Should this ultimately look more like what we see in North America or are there just factors that we have seen with international historically that would keep this closer to $10,000 a day?
Mark Smith: Let me just say on one hand, no, the $10,000 a day that you are coming up with is not a marker for 2025 or thereafter. Having said that, there are certain details we are not going to get into for competitive reasons here as was previously stated on this call, we do expect future tenders in a competitive bid tender environment. And going forward, we have done our internal modeling for returns that get us to our IRR hurdles on the 27 million investment per rig. That is one thing to note. Another thing to note is that as you referenced to my comment on Argentina this morning, we have only recently gotten to that no U.S. expat status with our focus on cost management the last couple of years. And I will say historically in our business, not just H&P, but the onshore drilling industry for U.S. drillers moving internationally, we did not do a great job of scale.
We would go into countries with one or two rigs and we had set up an entire SG&A apparatus to support it. And we have said for a couple of years on these calls that is exactly the opposite of what we will do going forward. We started with win rig last August, we have just added seven to get 8. We will begin to see benefits of scale as we get local content, both in terms of people and supply chain and we will continue to add to that scale. We will also be leveraging more of a supply chain back office support for the corporation and are excited about the things we can do for this that are very different than that historical experience you just outlined.
John Lindsay: And this is John. And I think just to add to Mark’s comments, specifically in Saudi, obviously, it is unconventional. We have a lot of experience with unconventional. Again, our there was a question earlier about additional tenders. My assumption is over the next several years, there will be more tenders. And our expectation is that we would be successful. And we would be successful because we are going to be providing and adding value for Aramco. So that is my hope. The other factor that we haven’t really talked much about is the technology aspect of our offering, and there is some opportunity there. Again, as you think back as you think about what we are doing in the U.S. and the unconventional play and how we have been doing this work in the U.S. All these years, and yet we continue to have year-over-year improvements that in a lot of cases are driven by technology. So that is the other upside component to this with H&P.
Marc Bianchi: Mark, I wanted to ask one more on kind of the maintenance CapEx. I think previously, we go back and it was like one million a rig per year that was increased to like one million, 1.3 million and then the latest comment was it was maybe between 1.3 million and 1.5 million if I remember correctly. And now it sounds like maybe there is some upward bias to that. Can you talk about how much of that is sort of just this, hangover from the cannibalization period versus what could be sustainably a higher run rate over time?
Mark Smith: Marc, there is, if you think about fiscal 2023, so go back a year and look at our maintenance look at our CapEx, maintenance CapEx specific guidance for fiscal 2023 at the beginning of the year and when we ended 2023 September 30th, we did not spend that amount. So we had revisions downward. And we had a lot of supply chain constraints. What we have seen this year is the supply chain finally responding with more throughput so that we can do this catch up we have been talking about for quite some time. So what you see is transitory amounts here, as we have been able to nail down the supply chain. The componentry in question, it is all sorts of stuff. It is seven-year top drive. It is a five year BOP. It is engine work.
It is mud pump work, it is et cetera, et cetera, et cetera. So it is across the full stack of componentry on the rig. And I would say as I look at the list of components and work with our U.S. operations and maintenance teams, we are starting to see where we are turning the corner on some of these components. So the volume that we have had to get through should come start to tick down, I would hope, in 2025. And then but I will say we do have some inflation that will be sticky. So will we ever get to under one million I don’t see that necessarily. But I think the 1.4 million that we started this year with and one million somewhere between those two and another year or two looks to be a good zip code.
Operator: Our next question comes from the line of Waqar Syed from ATB Capital Markets.
Waqar Syed: A couple of questions here. First of all, John, with oil prices in the 80s and the Permian documentary relatively low. I know you mentioned that you are seeing kind of a flattish market, but do you see any hope of any pickup in activity in the Permian for H2 and perhaps for next year?
John Lindsay: Well, we are always hopeful and I did mention that, the longer term outlook, the fundamentals are strong. Obviously, oil prices are strong. The activity set that we are experiencing this correction in activity, as you know, is a function of natural gas, not oil. And so I do think the Permian has a lot of potential. Obviously, we are the largest driller, has most rigs running in the Permian. And quite frankly, I think the rig count we have today is essentially the same as it was when we had close to 170, 180 rigs running. So we have done very well in terms of maintaining our market share, actually growing a little bit in that basin. So I think the outlook is good. The big question as we all say is when is that opportunity to add back units. And again, our hope is we will start to see some improvement in the back half of this year. But again, at this stage, it is just hope as we don’t really have any additional information than you or anybody else does.
