Saurabh Pant: No, that’s fantastic. Okay, Andy and Andy, thank you. Thanks for those answers. I’ll turn it back.
Operator: Your next question is from the line of Ati Modak with Goldman Sachs.
Ati Modak: Hi, good morning, team. You mentioned steady outlook. But as we think about the cadence through the rest of the year, maybe sounds like fleet count is steady in 2Q and 3Q, but do you anticipate risk of larger white spaces on the calendar as customers manage activity, particularly around gas prices. How should we think about that? And do you have anything that would offset that?
Andy Hendricks: I think as we mentioned before, we’re already transitioning some horsepower from gas to liquids. And so that’s already in our Q1 projections. Maybe we could see some more softness in Q2. If the commodity prices hang in there for longer, I think we’ll just have to wait and see how that plays out. But then if you think about the end of this year going into ’25, we’ve actually been in some discussions with some operators about increasing activity at the end of this year and in 2025. So I take a longer-term view and I recognize there’s going to be some softness. It’s relatively steady longer-term.
Ati Modak: Got it. Appreciate that. And then on the repurchases, how should we think about the cadence? It sounds like it’s going to be a little bit more opportunistic, but any thoughts around that, whether it’s opportunistic or steady? And how should we think about it?
Andrew Smith: Yeah, I mean, we’ve always kind of been opportunistic around the issue, prescriptive about how we’re going to be in the market. We’re doing all this through open market purchases. We’re comfortable, given kind of that guidance for the full year, and I don’t want to be too prescriptive about quarter to quarter.
Ati Modak: Sounds good. Thank you. Appreciate you taking the questions.
Operator: Our next question comes from the line of Keith MacKey with RBC Capital Markets.
Keith MacKey: Hi, good morning. Just wanted to start out on that 40% free cash flow conversion number that we saw in the press release. Can you talk about maybe the main drivers behind impacting where you’ve set that target, assuming e-frac build-out is certainly one of them. And then a follow-up to that would be, do you see the 40%-plus as a good approximate longer-term target for the business? Or should we be thinking about that as a 35%, 40%, 45%, or 50% kind of number?
Andrew Smith: Yes. Look, I think 40% is a pretty good target for the business. And as we look, we set our capital budget. We look at the opportunity set in front of us. We think about how can we balance all the competing priorities and competing calls on our capital, and that includes return to shareholders. So as you think about our CapEx number, it’s probably roughly two-thirds or so of maintenance capital with some additional what we would call either conversion capital and likely not really growth, not really incremental horsepower coming into our fleet. It would displace older stuff, but that’s kind of how we approach it. And we kind of look at that 40% has a pretty good target, at least in the intermediate term as our fleet changes shape over the years, we’ll sort of look at and reevaluate. But right now, we feel pretty comfortable that. It’s a pretty good target going forward.
Andy Hendricks: I’d like to commend the team on the completion side for their efficient use of the capital. They’ve got a good plan in place this year to move us away from having to invest maintenance CapEx in diesel only type engines and pumps as we transition into newer technologies, whether it’s electric or other. And so yes, we’re investing in the newer technologies. We’re also moving away from having to maintain the older technology at the same time.
Keith MacKey: Got it. That’s helpful. And just an unrelated follow-up. Certainly, there are quite a large number of rigs working in the US now that are subject to E&P consolidation on one side or the other. And you mentioned you’re fairly comfortable with your positioning given the spec of your rigs. But can you talk about generally how you see that market unfolding, given the large amount of pending consolidation, do you think there will be a significant number of rigs that get reduced as part of this or do you think — do you see any notable potential impacts on pricing as potentially some of those displaced rigs have to recompete for work? Or just any thoughts on how you see that unfolding would be helpful.
Andy Hendricks: Well, I’ll start by saying there’s a lot of different rigs in the market and where we operate are the Tier 1 super-spec rigs, the highest performing type rigs that are on the market. And you saw how we performed last year in a market where the overall Baker Hughes count went down. And yet while we were down as well, not nearly as much as the overall Baker Hughes count because there’s still a large number of SCRs and mechanicals in that overall rig count. But I think you’re going to see a similar trend this year. We’re going to have some softening in the overall market. You’re going to see the overall industry rig count go down, but I think you’re going to see us in one or two other drilling contractors gain share because of the technologies that we operate, we’re not immune to the softening, but at the same time, we’re running the highest performing rigs that are out there.
So it’s going to be more about overall supply and demand. But I think that overall, you’re going to see relatively steady activity from us, even if the market softens and I do think you’re going to see the overall rig count have some downside swings with year based on commodity prices or based on some of these mergers and acquisitions and debt consolidation on the E&P side. But I think you’re going to see high grading at the same time like we’ve seen over the last few years.
Keith MacKey: Thanks very much. Appreciate it.
Operator: Next question comes from the line of Waqar Syed with ATB Capital Markets.
Waqar Syed: Thanks for taking my question, Andy, you mentioned the synergies — $100 million of synergies come from different buckets. I just wanted to drill a little deeper into that. Could you maybe quantify which of the buckets are contributing more or maybe just give some numbers to what has been achieved from the different buckets and what’s still remaining?
Andy Hendricks: Yeah. Hey, good morning, Waqar. So a month ago, we talked about three different buckets, one being revenue, one being supply chain, one being cost. I think that to the ones that went the fastest were probably related to supply chain and some savings that we picked up last year as the market softened as well. And we were able to accelerate some of those. You also had some quick wins on the revenue, but the revenue will still continue kind of a steady pace for the next four quarters. We saw some cost improvements last year, but we’ll see some further cost improvements this year. But the early ones to move probably the fastest was on supply chain. So hats off to the team to pull that off.
Andrew Smith: Yeah, I would even say on the G&A side, so there is obvious things around again to larger corporate companies coming together. So you’ve got, you know, and a lot of savings in terms of overall top-level management. Those have been achieved, obviously. But then as you go through, there’s still a lot of consolidation savings come from a lot of that some of that’s from third party services, whether it’s insurance, outside advisors, things like that. And then some of it is just over time as you continue to sort of rationalize systems and processes, things like that and you do achieve the same.
Waqar Syed: Okay, great. And then just one unrelated follow up. In terms of your pressure pumping fleet, you mentioned that it could be at 80% of natural gas power to dual fuel. Could you may be further breakdown like what proportion would be like Tier 4 DGB versus Teir 2 natural gas dual fuel?
Andy Hendricks: Because we’re just now stepping into more electric than we’ve been running in the past, the Tier 4 dual fuel is still going to make up the majority of that. But we also do some things to enhance that, especially through our power systems where with our power system, CNG systems and being able to blend CNG and fuel gas that we can enhance that. The largest portion is still going to be Tier 4 DGB this year. But you’ll see a continued transition as we move to more electric and other new 5% natural gas technologies going forward after this year.
Waqar Syed: And from a Tier 4 DGB, what kind of fuel switching — percentage switching you’re seeing from diesel to natural gas in DGB engines?
Andy Hendricks: I’m sorry, what kind of what?
Waqar Syed: The fuel switching percentage. Are you closer to 60%, 65% or higher than that from switching from diesel to gas in the Tier 4 DGB?
Andy Hendricks: That depends on what we can offer because we can offer the combination of CNG and fuel gas blending through our power solutions business. We can get anywhere from 65%, but all the way up to 80% displacement on Tier 4 dual fuel, and that’s a very popular solution. And so we also do some other things to enhance that that I think we’ll explain in future dates. But as I mentioned earlier today, we have also replaced 100% natural gas electric offerings with Tier 4 dual fuel because there are just some places that an operator can’t operate. Obviously, natural gas, it not the right fit. So Tier 4 DGB will still be a large portion of the market, but we are moving towards more electric and more new technology at a measured pace.
Waqar Syed: Thank you very much.
Operator: Your next question comes from the line of Doug Becker with Capital One.
Doug Becker: Thank you. Just wanted to quickly circle back on completion services. Is the repositioning expected to be fully completed during the first quarter or is there a chance it spills into the second quarter? And then what’s allowing you whether it’s the market or the technology that you bring to the table to really move this equipment without conceding price in an uncertain market.
Andy Hendricks: Well, first off, the oil markets are still relatively steady. Second gets into performance and how we operate with not just providing pressure pumping but also wireline trucking and logistics moving sand power solutions with natural gas for the customers that are wanting dual fuel or full electric. And so when we offer all those together, we can enhance the performance of the operation. And so that provides efficiency and savings at the end. We also have very strong customer relationships at Patterson-UTI. We’ve talked about that for years, but it does matter and we work to protect those relationships too. But we’re real excited about how well this completions team has performed, especially coming together through a merger and you saw that in the Q4 numbers, we do recognize related to with the natural gas that things are a little bit softer, but we expect the transition of the horsepower really just to happen in Q1.
