Anthony Gallegos: We had 14 rigs drilling at the end of the quarter, we’ll have 16 rigs drilling at the end of November. And then obviously, we’re looking to add a 17th rig there in December.
Steve Ferazani: Okay. So the guidance of the average 14.7 rigs in 4Q is assuming probably some year-end white space with some of the rigs they finished programs a little bit early. Is that being a little bit conservative, assuming your endpoint?
Anthony Gallegos: There’s are a rig — we have moving between customers as we position rigs where there’s a couple of weeks of — there’s a little bit of white space. But there’s not any white space at the end of that. We would expect all of the 16 rigs to continue into next year.
Philip Choyce: But the rollout, they’re biased more toward–. Yeah.
Steve Ferazani: Okay. As far as the day rate trends, obviously, it held up for a while, Q3 was down, but not way off. The guidance for 4Q is down pretty — another step down. So you’re still seeing pricing pressure, you’re agreeing to short-term deals, but how differentiated is the pressure coming on pricing and to get rigs back to work? How much concessions you’re making?
Anthony Gallegos: Yeah, great question, Steve. I don’t think that’s isolated to ICD. I think the reason is kind of stands out more when we talk as Phil noted in his comments, we don’t have a lot of backlog. So certainly, everything we’re bringing out now is exposed to the spot market. And then, the fact that we’re constantly negotiating renewals with existing customers gives us added exposure towards current spot market rates are. Yeah, I’d point out that the most important metric when we talk about this is margin per day. And the things that the team’s doing around added services and stuff like that is going to be additive to margin per day. That’s what we focused on here. It is a bit softer, obviously, you see this anytime you go through a cycle: the ratcheting down of day rates as you’re moving down in rig count — you don’t feel it as much as when that incremental demand begins to appear.
Meaning, you bounced off bottom, there’s opportunities out there, it always gets a little bit more competitive, and that’s where we are right now. I pointed out in my comments that we have had missed out on some work where we were undercut. But I would say that, especially, among the big three in the industry, we’re seeing a lot of price discipline. The smaller contractors that tend to be a little bit more aggressive and where we sit is right there in the middle. And with a smaller fleet, we can be a little bit more patient. We don’t have to just go after and swing at every pitch that comes across plate. But we’re thinking about, obviously, geographic positioning, we’re thinking about commodity exposure, and we’re thinking a lot about the counterparty: who the E&P company is.
A lot of focus around multi-rig clients and making sure that we’re got a lot of exposure on that front. So when Philip talks about positioning with customers and stuff like that, those are the drivers that he’s referring to.
Steve Ferazani: Yeah, that’s really helpful. As you tried to crew up these rigs back to work, what’s the labor? Obviously, the rate kind of weighed down right now. Is it fairly easy to bring back crews and what type of costs? Because I know you hit your cost per operating day guidance is up a little bit.
Anthony Gallegos: Yeah, it’s been relatively easy. Look, it’s never easy to Steve. I’ve been really pleased with our people development group, the team, their efforts, but more importantly, the results and bringing some really good talent into the company. Cost to bring that talent in isn’t any higher today than it was in the last upcycle where we see the added cost is — we want to bring these people as, even industry experienced people in, we want to bring them in a little bit early. So they have a hitch or two with the company. They know what to do at the rig side in terms of technical skills, but they’re going to be new to our systems and processes, they’re certainly going to be new to our culture, and that’s where we see the cost inefficiencies as we were beginning the expansion of our operating rig count.
Steve Ferazani: Okay. That makes a lot of sense. Thanks, Anthony. Thanks, Philip.
Anthony Gallegos: Thanks, Steve.
Operator: Next question today comes from John Daniel with Daniel Energy.
John Daniel: Hey, guys, thanks for having me. One question on the demand outlook, — I think you say you’re at 15 rigs today and I guess — I might characterize this — as hope at this point that you’ll be at 21 in the middle of next year, that would be very impressive growth, right? And I’m curious, is this isolated to two or three of your, maybe customers you work with in the past are just coming back? Could you just walk us through that percent increase, relative to what the broader market might do? Again, I know its total speculation right now because–
Anthony Gallegos: Yeah, no, fully anticipated that question, John. I think the consensus out there is we should see in 14 to 17 rigs, go back to work over the course of 2024. I’m very confident that we’re going to end this year with 17 contracted, I think it’s probably 18. So to get back to the 21, there’s another three or four. You take the three or four and you compare that to the 14 to 17, that would imply that we would be punching our weight. We certainly did that in the last up cycle, if you recall. You’ve got to think also where we think a lot of the incremental demand is going to come from, and I think it’s going to be made more biased toward privates. That’s the same group of customer that really started to pull back a year ago.
You’ve seen the percent of rig count working for privates continue to decline, I think that starts to go the other way. I was at an industry function last week and I was talking with an investment banker on the E&P side, not on the services side, and he shared something when they and I haven’t heard this and call it a decade. But apparently, there’s a lot of money being raised, private equity money being raised to be deployed among E&P companies. And that’s very important because, if you think about the business over the last 20 or 30 years, M&A continues to accelerate. But through your career and my career, those management teams would go and raise money and do something else. And that’s not been the case in the last three, four, eight years.
It feels like, with the backdrop that’s out there today, in terms of the commodity where people think things are going, even in the face of this energy transition stop, I just think there is going to be a lot of private opportunities in 2024. And as you know, we do a lot of work for private E&P companies. And I think that growth is going to happen primarily in the south also. So think Permian, obviously, think Eagleford, and think . I just think, against that backdrop, for us to expect to put three or four more rigs out in the first two quarters of 2024, it’s not a layup, it’s never a layup. But I feel pretty good about our chances there.
John Daniel: Well, that’s all I had. I am hoping that you are correct, my friend.
Anthony Gallegos: Great. Thank you, John.
Operator: Next question today comes from Dave Strohm with Stonegate Capital Partners.
