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Patterson-Uti Action Inc  (NASDAQ: PTEN)

Untitled - 4 1 practice congruent figures form k answers
Untitled – 4 1 practice congruent figures form k answers | 4 1 practice congruent figures form k answers

Q3 2018 Balance Appointment Call

Oct. 25, 2018, 10:00 a.m. ET

Operator

Good morning, my name is Emily, and I will be your appointment abettor today. At this time, I would like to acceptable anybody to the Patterson-UTI Action Incorporated Third Division 2018 Balance Appointment Call. All curve accept been placed on aphasiac to advanced any accomplishments noise. Afterwards the speakers’ remarks, there will be a question-and-answer. (Operator instruction) Acknowledge you.

Mike Drickamer, Vice President, Investor Relations. You may actuate your conference.

Mike Drickamer — Vice President-Investor Relations

Good morning. And on account of Patterson-UTI Energy, I’d like to acceptable you to today’s alarm to altercate the after-effects of the three and nine months concluded September 30, 2018. Participating in today’s alarm will be Mark Siegel, Chairman; Andy Hendricks; Chief Executive Officer; and Andy Smith, Chief Banking Officer.

A quick admonition that statements fabricated in this appointment alarm that accompaniment the company’s or management’s plans, intentions, beliefs, expectations or predictions for the approaching are advanced statements aural the acceptation of the U.S. Private Securities Litigation Reform Act of 1995, the Securities Act of 1933 and the Securities Exchange Act of 1934.

These advanced statements are accountable to risks and uncertainties as appear in the company’s Annual Address on Form 10-K and added filings with the SEC. These risks and uncertainties could account the company’s absolute after-effects to alter materially from those appropriate in such advanced statements or what the aggregation expects. The aggregation undertakes no obligation to about amend or alter any advanced statement.

The company’s SEC filings may be acquired by contacting the aggregation or the SEC and are accessible through the company’s website and through the SEC’s EDGAR system. Statements fabricated in this appointment alarm accommodate non-GAAP banking measures. The appropriate reconciliations to GAAP banking measures are included on our website, www.patenergy.com and in the company’s columnist absolution issued above-mentioned to this appointment call.

And now it’s my amusement to about-face the alarm over to Mark Siegel for some aperture remarks. Mark?

Mark Steven Siegel — Chairman of the Board

Thanks, Mike. Acceptable morning, and acceptable to Patterson-UTI’s appointment alarm for third division of 2018. We are admiring that you are able to accompany us today. This morning, I will about-face the alarm over to Andrew Smith, who will analysis the banking after-effects for the division concluded September 30. He will afresh about-face the alarm over to Andy Hendricks, who will allotment some comments on our operational highlights, as able-bodied as our outlook.

After Andy’s comments, I will accommodate some closing animadversion afore axis the alarm over to questions. Andy.

Thanks, Mark, and acceptable morning. As set alternating in our balance columnist absolution issued this morning for the third quarter, we appear a net accident of $75 actor or $0.34 per allotment on revenues of $867 million. Included in our net accident of $65.9 actor of non-cash pre-tax crime charges. Excluding these charges, our net accident for the third division would accept been $21.1 actor or $0.10 per share. These crime accuse accommodate $48.4 actor accompanying to the retirement of 42 bequest non-APEX conduct rigs and accompanying equipment, and $17.4 actor for burden pumping equipment.

As chump alternative aloft the industry continues to about-face to super-spec conduct rigs. These 42 rigs accept bound and abbreviating bartering opportunity. In burden pumping the crime was primarily accompanying to anachronistic beach administration accessories that has been replaced with added able solutions. Consolidated adapted EBITDA for the third division was $202 million. During the quarter, we repurchased an added 2.9 actor shares of our accepted banal at the absolute bulk of $50 million. This brings our absolute repurchases for the year to up to $100 actor or 5.5 actor shares or 2.5% of the company’s outstanding shares at the alpha of 2018.

In accession to the buybacks, we paid our approved annual allotment of $0.4 per share, which resulted in an added $8.7 actor acknowledgment shareholders during the quarter. We will abide to appraise buybacks accustomed our accepted akin of chargeless banknote breeze and aggressive basal needs. At September 30, 2018, we had about $200 actor actual beneath our allotment repurchase authorization.

During the quarter, we connected our convenance of advisable use of banking advantage and concluded the division with net debt to basal of 19.5%. Projected basal expenditures for 2018 remained banausic at about $675 million. However, as we discussed aftermost quarter, we’ve redirected some of our planned basal spending from burden pumping to conduct absorption the near-term befalling set for both businesses. For the fourth quarter, abrasion bulk is accepted to be about $212 million, SG&A is accepted to be $34 million, and our able tax bulk is accepted to be about 17%.

With that, I’ll now about-face the alarm over to Andy Hendricks.

William Andrew Hendricks — President, Chief Executive Officer

Thanks, Andy. In arrangement drilling, our rig adding during the third division averaged 178 rigs compared to 176 in the added quarter. The two rig’s consecutive access was beneath than we accepted as opportunities to access our Canadian rig adding did not materialize. Our US rig adding during the third division akin our expectations, and the US bazaar for super-spec rigs remained strong. The able appeal for super-spec rigs, boilerplate rig acquirement per day for the third division was college than we expected, with the $410 sequentially added to $22,280. Boilerplate rig operating bulk per day was in band with our apprehension at $13,810.

Accordingly, boilerplate rig allowance per day added during the third division by $200 to $8,470. At September 30th, we had appellation affairs for conduct rigs accouterment for about $825 actor of approaching day-rate conduct revenue. This was a consecutive access of added than 20% in one quarter, compared to our excess at June 30th of about $680 million. Based on affairs currently in place, we apprehend an boilerplate of 127 rigs operating beneath appellation affairs during the fourth division at an boilerplate of 81 rigs operating beneath appellation affairs during the 12 months in the September 30, 2019.

Since the alpha of this year, we accept completed 12 aloft rig upgrades, including one appropriately far in the fourth quarter. We accept chump affairs to bear two added rigs with aloft upgrades afterwards in the fourth division and two in aboriginal 2019. I’d like to agenda that while we use the appellation aloft upgrade, these rigs are about actuality congenital to like new condition. The rigs accepting the aloft upgrades are primarily lower accommodation rigs that were congenital for conduct bank wells, such as in the Barnett Shale. These rigs are undersized in the accepted bazaar accustomed the movement in the industry against conduct added wells with best laterals.

By replacing the aboriginal mast and basement which collectively or frequently referred to at the centermost area of the rig, aback the new centermost area for 750,000 batter hookload. We can advancement these rigs to the blueprint of the super-spec rig and accommodate our barter with the assignment aqueduct setback accommodation they require. Additionally, for our aloft upgrades, we either refurbish or alter every aloft conduct arrangement on the rig, constant in an upgraded rig with agnate basal blueprint and an accepted advantageous action as a new body rig, but at a about lower basal investment.

Turning now to our arrangement conduct outlook, we appraisal the accepted accessible accumulation of super-spec rigs in the US is about 625 rigs. Patterson-UTI is one of the bazaar leaders with 145 super-spec rigs in our agile as able-bodied as 53 APEX rigs that can still be upgraded to super-spec capabilities. However, these upgrades would be codicillary aloft chump affairs at astute economics. We accept super-spec rigs aloft the industry are abundantly awash out and operators realize, they allegation to plan added advanced and accede college price, best appellation affairs in adjustment to get in the chain for an incremental upgrade.

We are already accepting chump conversations about incremental super-spec rigs in 2019. This afterimage gives us aplomb the super-spec conduct action will abide to grow. Ante will abide to dispatch and boilerplate arrangement durations will articulation that. For the fourth quarter, we apprehend our rig adding will boilerplate 182 rigs, based primarily on accretion day rates, we apprehend our boilerplate rig allowance per day to access by about $500 actor during the fourth quarter. We abide actual admiring with our conduct business and are optimistic about its continuing prospects.

Turning now to burden pumping, during the third quarter, we responded to the crowd in the bazaar by abbreviation the cardinal of marketed spreads, and accumulation the assignment amid the actual spreads to abate the white amplitude in the calendar. We concluded the third division with 21 marketed spread. Despite breakable bazaar altitude during the third division revenues and gross accumulation were both bigger than we expected, as we body some of the white amplitude accepted during the quarter. Burden pumping revenues for the third division were $422 actor compared to $425 actor in the added quarter, and burden pumping gross accumulation was $79.1 actor compared to $82.4 actor in the added quarter.

For the fourth quarter, barter accept been alteration their affairs on a approved basis, authoritative it difficult to appraise action levels in white amplitude on the agenda for the fourth quarter. With this uncertainty, we plan to administer our headcount for fourth division to beforehand an able akin of accomplished personnel. Additionally, we will use this acting arrest in action to accomplish aliment on our equipment, to be able-bodied positioned to acknowledge to incremental burden pumping appeal in 2019.

For the fourth quarter, we currently apprehend burden pumping revenues of about $330 actor to $340 actor with a gross accumulation of about $55 actor to $60 million. The year end arrest in burden pumping is accepted to be acting with action accretion in 2019 as operators brace their budgets. We are absolute on the angle for 2019, as access in super-spec conduct rig action continues to drive the drilled, but fractional able-bodied count, with the DUC counts higher.

The access in the DUC adding should beforehand over the advancing months accustomed the year end arrest and achievement action as abettor apathetic their assignment to abide aural budget. A drawdown in the DUC adding in 2019, as operators complete wells to ample incremental action capacity, will accept a cogent absolute appulse on burden pumping demand. We angle accessible to bound clean spreads, but accept no ambition of accomplishing so until we see bazaar altitude improve. While the action arrest of burden pumping is creating a arduous market, in the abbreviate term, we accept that we are able-bodied positioned for an uptick in demand, which we apprehend in 2019.

Turning now to directional drilling, revenues were $51.6 actor for the fourth division compared to $52.7 actor for the added quarter. Directional conduct gross allowance is a allotment of revenues was 13.2% for the third division compared to 17.1% for the added quarter. During the third quarter, we reclassified assertive items from SG&A to absolute operating costs, which abnormally impacted gross margin, but do not accept an appulse on the articulation basal line. Additionally, operating costs in the third division were impacted by increases in costs for both cadre and aliment and maintenance.

We accept the accretion aliment and aliment bulk is a accustomed challenges aloft the directional conduct industry today. The accretion abrasion and bank from college conduct intensity, including high-pressure systems of avant-garde super-spec conduct rigs is harder on down-hole directional conduct accessories abrogation to added accepted repairs. We accept over the abiding directional conduct appraisement needs to access in adjustment to account these college expenses. For the fourth quarter, we apprehend directional conduct after-effects to be agnate to the third quarter.

Turning now to added operations which accommodate Abundant Plains Oilfield Rental, Warrior Rig Technologies in our E&P business. Revenues during the third division added sequentially to $29 actor and the gross allowance as a allotment of revenues was 29.6%. For the fourth quarter, we apprehend agnate after-effects to the third quarter.

With that, I will now about-face the alarm aback to Mark for his absolute remarks.

Mark Steven Siegel — Chairman of the Board

Thanks, Andy. Fundamentals remained able for US onshore conduct and achievement activity. Connected beforehand in super-spec conduct action has been alive beforehand in the cardinal of DUCs. The accepted fourth division arrest in achievement action accumulated with accretion conduct action should cantankerous the beforehand bulk in the DUC adding to accelerate. This access in the DUC adding bodes able-bodied for an access in approaching burden pumping demand. We apprehend this appeal will actuate to actualize aboriginal in 2019, as E&P basal budgets displace based on college accepted commodity prices than in the above-mentioned year.

This accepted access in burden pumping appeal in 2019 is additionally accurate by favorable macro accomplishments for the action sector. Global bread-and-er beforehand continues to drive accretion appeal for oil, while accumulation beforehand is actuality abnormally impacted by geopolitical issues and several years of under-investment in new large-scale, oil and gas projects. Additionally, the bulk of added oil assembly accommodation accessible to account accumulation disruptions is both abbreviating and unproven.

The favorable macro ambiance is already credible in arrangement drilling, which accounted for about two-thirds of our EBITDA. We see abundant bulk in our position as a arch provider of super-spec rigs. Let me reiterate Andy’s comments that super-spec rigs are abundantly awash out, astute operators to get in the chain and adjournment for an upgrade, if they would like to add an incremental super-spec rig. This queue, and the constant conversations about longer-term conduct affairs is acceptance us able afterimage into approaching super-spec rig demand.

Additionally chump appetite, for appellation affairs in a ascent day bulk ambiance confirms the super-spec conduct action should abide strong. I’m admiring to advertise today that the aggregation declared a annual banknote allotment on its accepted banal of $0.04 per allotment to be paid on December 20, 2018 to holders of almanac as of December 6, 2018.

With that, I would like to both acclaim and acknowledge the accomplished men and women who accomplish up this company. We acknowledge your continuing efforts.

Operator, Emily, we would now like to accessible the alarm to questions.

Operator

(Operator Instructions) And your aboriginal catechism comes from the band of Marshall Adkins with Raymond James. Your band is open. Please go ahead.

Marshall Adkins — Raymond James & Associates, Inc. — Analyst

Good morning, guys. Your frac business of this division is advisedly outperforming best all the aeon that accept reported. Two questions I accept on that. Cardinal one, could you accord us added blush on how you were able to accomplish that? And apperceive you brought the adding bottomward a little bit, would apparently advice margins, but aloof accord us a broader account of how you’ve remained added aggressive than average, cardinal one. And afresh cardinal two, you gave us abundant advice on Q4, acknowledge you for that. I’m additionally analytical as to some belief on how you see the bazaar beforehand aing year. Is it a added bisected of the ’19 accretion for burden pumping? Or do you advanced it happens sooner? So, those are my two questions.

William Andrew Hendricks — President, Chief Executive Officer

Good Morning, Marshall. So, acknowledgment for the question. In acceding of burden pumping and what we’re seeing in the market, if you go aback to our added division balance call, we were adage that we are already seeing that the bazaar was oversupplied, the third division had ambiguity with a fair bulk of white amplitude in the calendar, it was affectionate of a claiming to absolutely accept how abundant white amplitude we’re action to see and as we assignment through the quarter, our teams did a abundant job aggravating to acknowledge to what was accident in the third division and accomplish abiding that we were appropriate size, as things materialize.

Our teams additionally did a abundant job bushing some of that white amplitude in the calendar, in the third division as well, which accustomed us to do little added acquirement than we anticipation we were action to do the projections that we gave you on that July alarm and — for the added quarter. So, that’s absolutely what it was, there was a lot of basal blocking and arrest in the burden pumping business aloof to try to accomplish abiding that we are right-sized as we assignment through that division and so we brought the cardinal of spreads bottomward from 25 at the alpha of the quarter, bottomward to 21 spreads at the end of the third quarter.

Marshall Adkins — Raymond James & Associates, Inc. — Analyst

(inaudible) with those. Aloof a quick aftereffect there. Were those atom or committed fleets you were absolutely able to ample the white space? I accept its atom market, but aloof out of curiosity.

William Andrew Hendricks — President, Chief Executive Officer

Yeah, bushing white amplitude appropriate now is basically aloof acrimonious up atom assignment in inserting it area you may accept delays or break in your accepted schedule. And those delays of ante could be on atom or on committed agreements. The majority of our spreads do assignment on committed agreements, but we do see barter slowing bottomward and affairs aback on spending appropriate now, abnormally in the fourth quarter.

Marshall Adkins — Raymond James & Associates, Inc. — Analyst

Okay. Sorry, go ahead, Mark —

Mark Steven Siegel — Chairman of the Board

Yeah, no problem. I aloof anticipation I would jump in a little bit. We’ve apparent as you able-bodied know, an access in the DUC adding of about 25% from January through the end of the third division and DUC adding — is apparently action to access during the fourth division as E&P adjournment completions for assorted reasons. We feel that they’re action to appetite to complete those wells aboriginal in 2019 and so absolutely timing the accurate day, month, year they do that is hard, but we advanced it’s absolutely a aboriginal bisected 2019 affectionate of prospect.

Marshall Adkins — Raymond James & Associates, Inc. — Analyst

Untitled - 4 1 practice congruent figures form k answers
Untitled – 4 1 practice congruent figures form k answers | 4 1 practice congruent figures form k answers

Perfect. That’s accessible guys. And I’ll about-face it aback over. Acknowledge you all.

William Andrew Hendricks — President, Chief Executive Officer

Thanks.

Operator

Your aing catechism comes from the band of Sean Meakim with JPMorgan. Your band is open. Please go ahead.

William Andrew Hendricks — President, Chief Executive Officer

Thank you. Hi, acceptable morning.

Sean Meakim — JPMorgan Securities LLC — Analyst

I advanced investors are action to acclaim that accommodation to assemblage accessories rather than action for assignment in the year-end. But absolutely as you attending advanced to 2019, what would be your best assumption — maybe a agnate catechism but asked in a altered way. How continued you advanced it takes for activity, for pumping action to get aback to 2Q, 3Q blazon of levels? And aback it does, is it fair to say that accustomed some the operational challenges you all had beforehand in the year, that you apprehend to be able to get your advantage college or in accustomed ambiance compared to what you delivered say in 2Q, ’18 ?

William Andrew Hendricks — President, Chief Executive Officer

So the timing of some of how this is action to actualize is still yet to disentangle in 2019, but we’re actual upbeat on 2019 in acceding of achievement action aloof based on what we’re seeing in conduct activity. Our conduct business gives us a lot of anticipation and business ability on what’s accident in the industry. So, we absolutely feel like there’s action to be an dispatch in the account of the drilled, but fractional wells in the fourth division and action into the alpha of 2019. We do accept some barter that say they’re action to be starting in aboriginal 2019 on the achievement ancillary appropriate afterwards the year starts and the budgets reset.

So, we’re already accepting some of that altercation with some of the barter now, how abundant and how fast, I advanced it’s difficult to predict. There’s several things accident in 2019, you accept the budgets resetting at college commodity prices we discussed, you additionally accept some of the takeaway accommodation in the Permian continuing to beforehand and in the account issues aren’t bound to the Permian, that’s aloft the US onshore. But of course, the takeaway accommodation improves as well, you’re action to accord abundant to lift achievement as operators adapt for that added takeaway in advance.

Sean Meakim — JPMorgan Securities LLC — Analyst

And afresh any added comments on how you apprehend your advantage to appearance up in that blazon of environment, whenever that does actualize about to you did this year?

William Andrew Hendricks — President, Chief Executive Officer

Yeah, as I said, we’ve been actual focused, all through 2018 on aggravating to beforehand our advantage in burden pumping, and we’re action to abide focused on that. We don’t advanced it’s about bazaar allotment and we do advanced it’s about aggravating to beforehand the advantage per beforehand and burden pumping.

Sean Meakim — JPMorgan Securities LLC — Analyst

Thank you for that. And afresh aloof cerebration about basal allocation for aing year. Can you maybe aloof airing us through how do you advanced about prioritization of banknote uses, directionally, do you advanced CapEx will be college or lower? You got of beforehand advancement abeyant you see continuing to unfold, but afresh conceivably reactivation is commodity that CapEx on the pumping, you end up actuality beneath than what you accomplished in ’18. Aloof maybe affectionate of area you see things based on what you apperceive today?

William Andrew Hendricks — President, Chief Executive Officer

I assumption the — acknowledgment that I’d like to accord you is that we said our basal budgets in Backward December, array of operating and basal budgets in backward December, and we feel that by accomplishing so at that time we accept some best afterimage into #### that aggregation could have. We about accept followed the aphorism of announcement our affairs for basal expenditures in our alarm in February, as we’ve appear fourth division results.

So, I apprehend that we’re action to abide to chase that aforementioned access this year, with that said, I advanced that we’re actual focused on allotment and that acknowledgment focus is absolutely causing us to advanced actively about every dollar we spend, as we consistently have. I’d additionally point out, the actuality that we accept alternate abundant amounts of basal to the investors already two, three abode of this year in the forms of a abundant bulk of acknowledgment as able-bodied as dividends. And absolutely frankly, that buybacks and assets and that acknowledgment of basal seems to accept gone almost disregarded by our shareholders and the — analysts association and I aloof appetite to alarm that out as actuality a actual important allotment of the story, I advanced for this year.

Sean Meakim — JPMorgan Securities LLC — Analyst

Fair enough. Acknowledge you, guys.

Operator

Your aing catechism comes from the band of James Wicklund with Acclaim Suisse. Your band is open. Please go ahead.

James Wicklund — Acclaim Suisse Securities — Analyst

Good morning guys. Mark on the statement, on the animadversion of abiding banknote to shareholders. You guys acutely aren’t in a bigger time in the bazaar afresh we are. So I abiding can’t criticize. But if you attending at area you bought banal this year, it was higher. Accept you guys advised aloof accepting a connected acknowledgment instead of an anecdotal buyback? Or do you aloof buy it aback aback it’s bargain and you accumulate affairs aback as it gets cheap? What’s the alignment that you guys accept for chief to buy stock, buy stock.

William Andrew Hendricks — President, Chief Executive Officer

Well I guess, I would quarrel, Jim, with your abstraction that we are accomplishing it episodically and that we’re accomplishing it at the top, what we’ve done historically is buy banal during anniversary of the three abode so far during this year. And we’ve done so affectionate of in a approved affairs that has been actual alike aloft the days, months or aeon of time area the bazaar is accessible for the company. So, absolutely honestly, I advanced it’s been appealing cardinal in a bazaar such as the one we are adverse in which the banal bulk has trended lower the accomplished year it abstracts that the banal you bought in the aboriginal allotment of the year is added big-ticket than the banal you bought in the afterwards bisected of the year. The about-face would accept been true, if we were in an uptick, a ascent market. And so it’s one of those things area I don’t see that anybody who’s complex in a acknowledgment affairs can consistently time the market.

James Wicklund — Acclaim Suisse Securities — Analyst

No, no. I’m not arguing. Like I say companies don’t do it any bigger than us. And it’s not that it’s been episodic. I’m aloof adage that there is several altered options, one is approved a declared one is anecdotal and one is aloof you adjudge to buy it aback and it seems to be the latter, you bought aback banal three abode in a row. I’m aloof apprehensive what alignment you guys use afresh to adjudge this quarter, the banal bulk is x, and our alarm arena is on Y. What’s Y? What do you attending at to adjudge whether to buy the banal tomorrow.

William Andrew Hendricks — President, Chief Executive Officer

Jim, I assumption I ambition it was aloof a two agency decision, but it’s a assorted agency decisions we are cerebration about what is our chargeless banknote generation. We’re cerebration about what is our accepted basal expenditures, we’re cerebration about accessible M&A opportunities, we’re cerebration about all kinds of added variables not a banknote accessible to us, curve of credit, situations of that sort, all kinds of variables, as able-bodied as banal price. And so at anniversary accustomed point our Board and administration achieve what they think, or what we collectively advanced is the appropriate access for the aing division and afresh assassinate it.

Mark Steven Siegel — Chairman of the Board

Jim, I will add, you apperceive aback it comes to alive the business, we’re absolutely focused on aggravating to beforehand basal conduct abnormally about basal expenditures whether its aliment in aggravating to be astute about how we absorb on aliment or on the beforehand ancillary area we’re aggravating to derisk the dollars that we’re advance in the beforehand CapEx and aspersing that in the history of the aggregation has alternate banknote to shareholders as you able-bodied apperceive and so it’s allotment of my job to accomplish abiding that we abbreviate any basal expenditures and advice accomplish chargeless banknote breeze and so we can acknowledgment banknote to shareholders and afresh we accept to acquisition the best apparatus to do that afterwards that.

James Wicklund — Acclaim Suisse Securities — Analyst

And you’ve done a abundant job of allocating basal to your altered genitalia of the business and absorption on returns. It aloof articulate added like it was availability of basal and area the banal bulk was as against to some metric of acknowledgment based on the banal price. That was absolutely my alone point. My follow-up, if I could — I’m apologetic go ahead.

William Andrew Hendricks — President, Chief Executive Officer

It’s absolutely a action of what we accept our chargeless banknote breeze is afterwards CapEx during a accustomed division as well.

James Wicklund — Acclaim Suisse Securities — Analyst

Okay. My followup if I could, is absolutely on Directional Drilling. Aback you guys aboriginal bought this, the advice was we can get this affair to 30% margins. And I apperceive that you reallocated some bulk this division and that puts it 13, but it aloof aback of the envelope it was adapted if you wouldn’t accept done that, I assumption it was afterpiece to 16. It affectionate of isn’t alive up to your expectations you agenda that you allegation pricing. Has that been — are you abaft plan and area you accepted to be in your Directional Conduct business appropriate now?

William Andrew Hendricks — President, Chief Executive Officer

I advanced it’s safe to say that yes, we are abaft plan and hasn’t been breeding the margins that we’ve been aiming for in 2018. We are still alive with the administration teams to accomplish every accomplishment to beforehand that there’s efforts beneath way to beforehand the operating bulk to run some of this accessories in the acrid ambiance that we’re accomplishing with the super-spec rigs. We’re additionally action to accomplish every accomplishment to advance appraisement is the epitomize continues to beforehand as well.

James Wicklund — Acclaim Suisse Securities — Analyst

Can you get to 20% margins afterwards price?

William Andrew Hendricks — President, Chief Executive Officer

I think, we’re absolutely focused on convalescent the margins area that goes from actuality based on the challenges in ’18, it’s a little bit added difficult to alarm out today, but —

James Wicklund — Acclaim Suisse Securities — Analyst

Understand. Okay. Acknowledgment guys. Acknowledge it.

Operator

Your aing catechism comes from the band of James West with Evercore ISI. Your band is open.

James West — Evercore Group — Analyst

Hi, acceptable morning guys.

William Andrew Hendricks — President, Chief Executive Officer

Good morning.

James West — Evercore Group — Analyst

I basic to focus on the basic disciplinarian actuality of earnings, decidedly over the aing brace of quarters, the rig business. So, you’ve got, I advanced Andy you said 53 now APEX rigs that can be upgraded to super-spec bottomward from I advanced 56 or so recently. As you, I apperceive you guys are action to be actual accurate on basal and what you put into the bazaar and so you’re action to appetite to accept contracts, but as you accept these discussions with customers, are you starting to adjustment continued lead-time items developing an inventory, so that aback they do hit go on contracts, you can get out there quickly.

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133 13 practice congruent figures form g answers – Kivan .. | 4 1 practice congruent figures form k answers

William Andrew Hendricks — President, Chief Executive Officer

Yeah, James. Acknowledgment and as you know, as we attending at these aloft upgrades and with the beforehand to booty to do this, we appetite to derisk the dollars with the abiding affairs to be able to do this at acceptable day, ante it gives you the economics, but of course, we accept to accumulate some continued advance items in the adjustment action and that’s aural the accepted CapEx account that we gave you. So, we are acclimation some of the best advance items for commitment into 2019, if we don’t end of application those to advancement rigs will authority in the spares. These are not ample dollars compared to the all-embracing budget. But we do appetite to say, hardly advanced on continued advance items, but we wouldn’t body a rig on blueprint or advancement a rig on spec.

James West — Evercore Group — Analyst

Okay. And afresh should we apprehend based on the conversations and you’re accepting added the angle for the industry overall. Should we apprehend the aforementioned blazon of accent of advance rigs as we’ve apparent in the aftermost year or two? I beggarly aloof like a 10, 15 per year or so.

William Andrew Hendricks — President, Chief Executive Officer

Well, we mentioned that we accept two to bear aboriginal in 2019 and as we discussed, we’re accepting some continued advance items already on order. But I advanced it’s too aboriginal to acquaint absolutely what the accent is action to attending like in 2019. I advanced the acceptable account is that we’re in discussions with barter for 2019 aloft the two aloft upgrades and we plan to bear aboriginal in the year. But as to what that Accent is action to attending like, I advanced it’s still a bit early.

James West — Evercore Group — Analyst

Okay. Got it. All right. Thanks, Andy.

Operator

Your aing catechism comes from the band of Marc Bianchi with Cowen. Your band is open. Please go ahead.

Marc Bianchi — Cowen & Co. — Analyst

Thank you. Following on the advancement chat you’ve got these four added rigs that are action into the bazaar actuality in fourth and first. What affectionate of arrangement appellation do these rigs accept and what are the aftereffect periods attending like for the advancement that you’ve — advancement beforehand you’ve done.

William Andrew Hendricks — President, Chief Executive Officer

Yeah, so for the four aloft upgrades that we appear on the Q2 balance call, we said that we alive affairs for four years for anniversary of those rigs and that the aftereffect aeon based on those day ante and margins is aural that four year aeon of those contracts.

Marc Bianchi — Cowen & Co. — Analyst

Andy, aback you —

William Andrew Hendricks — President, Chief Executive Officer

Two rigs — two rigs that are actuality delivered at the end of this year and two rigs delivered in aboriginal 2019.

Marc Bianchi — Cowen & Co. — Analyst

Okay. And aback you account that aftereffect that’s on the — is that on the absolute allowance or is that on the accession allowance that you’re accepting because of the advancement investments you’re making?

William Andrew Hendricks — President, Chief Executive Officer

I assumption we don’t abstracted the two. We attending at it in acceding of the day bulk that we’re accepting on the rig for that advancement and what that aftereffect is based on the banknote spent.

Marc Bianchi — Cowen & Co. — Analyst

Okay. And afresh as you attending at opportunities aloft these four, would you say that they would be agnate with that four year appellation and pay aback or are you seeing things advance differently?

William Andrew Hendricks — President, Chief Executive Officer

I advanced it’s too aboriginal to say how things are action to advance accomplished those contracts. But I advanced acknowledgment it to say that we do allegation abiding contracts. You apperceive acceptable day ante in adjustment to do added of these upgrades and accomplishment some added of these rigs.

Marc Bianchi — Cowen & Co. — Analyst

Got it. Okay. Maybe if I could aloof one added on the pumping side. The fleets now you’ve got 21 in the acreage and four that you’ve put on the sidelines. Accustomed what you see actuality over the aing division or two. Would you say is it fair to say that, absurd you would be stacking added fleets and affectionate of analytical what the appliance befalling is on the 21 that you’ve in the acreage appropriate now, maybe how abundant white amplitude there is to be captivated as action comes aback up?

William Andrew Hendricks — President, Chief Executive Officer

So, we plan to accomplish 21 spreads during the fourth division based on projections that we have. There is some white amplitude in that agenda aloof because of seasonality that’s congenital into some of that workload. And that’s not acceptable to change in the fourth quarter, but it could accept some variability, so it is a bit arduous to protect. That continues on acceptable into the aboriginal quarter, but at the aforementioned time, you get some account displace from the customers. And we already in discussions with some barter who appetite to restart aboriginal in the fourth quarter. So, we absolutely intend to authority assimilate accomplished cadre and we’re action to accomplish every accomplishment to be accessible to respond. Again, our focus is action to be on allowance per beforehand and so we appetite accomplish abiding that we’re maximizing that as we actuate in an upturn in 2019.

Marc Bianchi — Cowen & Co. — Analyst

Okay. Well, acknowledgment for that. I’ll about-face it back.

Operator

Your aing catechism comes from the band of Jud Bailey with Wells Fargo. Your band is now open. Please go ahead.

Judson Bailey — Wells Fargo Securities — Analyst

Thanks, acceptable morning. Chase up there, on burden pumping, if I could, if I attending at the acquirement guidance, and the gross accumulation advice affectionate of aback into a decrement, that’s apparently the mid 20’s. I think, I’m accomplishing the algebraic appropriate and if I am correct, what are the drivers to accumulate decrements at a such a reasonable akin accustomed the consequence of the acquirement drop. Is it, afterimage on appraisement or commodity you’re accomplishing on the bulk side? I apperceive you said you acumen costs as best you can. But I would accept you’re aggravating to accumulate staffed up, like you said as able-bodied to be accessible aback things recover. So, could you advice us affectionate of advanced through the, affectionate of what you’re suggesting from decremental allowance standpoint for the fourth quarter?

William Andrew Hendricks — President, Chief Executive Officer

You know, as we formed our way bottomward in the third division from 25 to 21. We are aggravating to ensure that we’re befitting the costs in band aback we do that, so action into the fourth quarter, again, we accept a lot of accent on costs and spending and befitting that bound in the fourth quarter. We’ve got some white amplitude in the fourth division as able-bodied and there’s action to be a about-face in the mix of the barter with the shrinking from 25 to 21. So, there is assorted affective genitalia that are in there.

Judson Bailey — Wells Fargo Securities — Analyst

Okay. And is there in that advice is our advised any weakness and our aeon over into lower appraisement or are you appealing abundant set from a appraisement standpoint, this division from what you can acquaint today?

William Andrew Hendricks — President, Chief Executive Officer

For the best part, our spreads are alive at committed crews of beneath committed agreements. And on those committed agreements, we’re not currently seeing a lot of burden in acceding of renegotiating the pricing, it’s alone aback we try to ample white amplitude in the agenda and we appetite to grab some atom assignment for concise breach that we see a cogwheel on the pricing. But for best of our crews and we’re not seeing that burden appropriate now.

Judson Bailey — Wells Fargo Securities — Analyst

Okay. Great. And if I could clasp one added in, aloof cerebration one added catechism on CapEx. Am I fair to advanced that this akin of action as you affectionate of avenue the year that your aliment CapEx is apparently about 350 as a baseline as we had in the ’19 and afresh on top of that will be any growth. I aloof appetite to accomplish abiding I’m affectionate of cerebration about that cardinal correctly?

William Andrew Hendricks — President, Chief Executive Officer

I advanced it’s absolutely too aboriginal for us to animadversion on absolutely what that’s action to attending like or alarm out a cardinal appropriate now, because of the changes in action and some of the things that we’re accomplishing to try to bind that aliment CapEx spendings. We will aloof accept to get aback to you afterwards on that.

Judson Bailey — Wells Fargo Securities — Analyst

Okay. Thanks. I’ll about-face it back.

Operator

Your aing catechism comes from the band of Tommy Moll with Stephens. Your band is open. Please go ahead.

Tommy Moll — Stephens, Inc. — Analyst

Good morning. Acknowledgment for demography my questions.

William Andrew Hendricks — President, Chief Executive Officer

Good morning.

Tommy Moll — Stephens, Inc. — Analyst

So, on the 53 advancement opportunities that you’ve got left. How abounding of those rigs are currently abandoned against active? And afresh for those that are idle, are we attractive at the almost 15 actor a allotment CapEx to accomplish the advancement and afresh for those that are active. Is it a agnate akin of CapEx or a lower level?

William Andrew Hendricks — President, Chief Executive Officer

133 13 practice congruent figures form g answers - Kivan ..
133 13 practice congruent figures form g answers – Kivan .. | 4 1 practice congruent figures form k answers

So Mike affairs up on the numbers on which of the 53 are alive appropriate now. Yes, some of those 53 APEX rigs are currently alive and afresh some are idle. If those rigs are currently working, there’s — they are about fit for the bazaar with some of those that are currently working. Mike aloof gave you the numbers. So, we accept 32 of the 53 that are idle. But the ones that are currently alive may alone allegation to add locking system. They may alone allegation to add aerial burden circulating systems. So, you’re talking about $1 actor to $5 actor beforehand there depending on the rig. The ones that are abandoned may bare a abundant beyond advancement in the ambit of that $15 million. And so afresh for us to do that, we would appetite some affectionate of abiding arrangement that economically makes faculty to do that. The acceptable account is, that we are in discussions with barter in 2019, the super-spec rig bazaar is tight. We see appeal for super-spec rigs and we see that continuing into 2019 and we’re actual upbeat about the conduct business.

Tommy Moll — Stephens, Inc. — Analyst

Is it fair to accept that the aing accumulation of upgrades are best acceptable to appear from the Abandoned assemblage and afresh already that is depleted there’d be a allusive leg up in acceding of appraisement ability because it’s — aback you get into advance and alive rig your aftereffect adding would attending different. I would accept because it’s not a action of aught gross allowance today against commodity beneath a contract, but you already breeding a appealing acceptable allowance and accordingly ability allegation added allurement on the appraisement ancillary to accomplish the upgrade. Is that fair?

William Andrew Hendricks — President, Chief Executive Officer

So, afterwards accepting alone rigs schedules in advanced of me and aloof authoritative some assumptions there. If an APEX rig is alive today is acceptable to accumulate working. So, for those rigs that are working, we are not acceptable to accompany them in, and do any upgrades or acceptable to break alive in the action that they’re in and we apparently be talking about the abandoned APEX rig and some aloft upgrades that becomes incremental to the rig adding if we do that. So, you’d accept absolute APEX is we abide alive and afresh as the bazaar altitude abide to improve, but we were able to assurance those abiding affairs for rigs in 2019, afresh those will be incremental to the rig count.

Tommy Moll — Stephens, Inc. — Analyst

Okay. Acknowledge you. That’s all for me.

Operator

Your aing catechism comes from the band of Chase Mulvehill with Bank of America Merrill Lynch. Your band is open. Please go ahead.

Chase Mulvehill — Bank of America Merrill Lynch — Analyst

Hey, acceptable morning. I assumption the aboriginal question, aloof affectionate of befitting on the acreage rig theme, I was afraid to not to see new upgrad appear during the quarter. So, could you maybe aloof allocution about to the cardinal of bids outstanding for aloft upgrades. How has that trended recently, has that started to trend bottomward and if so, what do you advanced is alive the beneath cardinal of bids a lower cardinal of bids out there today.

William Andrew Hendricks — President, Chief Executive Officer

Yes, aboriginal off, I wouldn’t necessarily characterize them as bids. These are absolutely discussions and negotiations amid us and the barter it’s not necessarily that our chump goes out to bid, and get appraisement it’s added of a discussion, which is absolute because we are talking about operators entering into abiding contracts. What we accede a college day ante and so that’s added than aloof a bid blazon situation. But I advanced the acumen that we don’t accept added affairs to advertise appropriate now is absolutely a action of the timing and area we are with operators account cycle.

The operators are alive on their budgets appropriate now and so aback you get to the conduct administration akin as an abettor — organization, they acceptable don’t accept centralized beforehand yet to altercate the added the rig adds although we’re in altercation of what their abeyant affairs are for aing year. It’s — they’ve got into their account aeon afore the conduct departments accept that akin of approval. And so I don’t advanced we’re action to apprehend added — we’re not action to apprehend added absolute advice from the operators until afterwards in this year aboriginal aing year, but afresh this bazaar is tight. Operators are in discussions with us now because they accept there’s a chain out there and they understand, if they appetite a rig, they’ve got to get in the line.

Chase Mulvehill — Bank of America Merrill Lynch — Analyst

Okay. And if somebody would accept appear to you today and appetite you to advancement a aloft advancement with one of your rigs, aback would you be able to bear it?

William Andrew Hendricks — President, Chief Executive Officer

That aboriginal one from a altercation today would be accessible backward in the aboriginal division or aboriginal added quarter.

Chase Mulvehill — Bank of America Merrill Lynch — Analyst

Okay. And afresh the gross allowance per day was guided to be up 500,000 a day. How — what’s the OpEx basal of that? Is OpEx affectionate of collapsed or is it action to be down?

William Andrew Hendricks — President, Chief Executive Officer

In the conduct rig business, we apprehend OpEx in the fourth division to be almost akin from the third quarter.

Chase Mulvehill — Bank of America Merrill Lynch — Analyst

Okay. If I could clasp one added in. Can you aloof allocution a little bit about arch bend super-spec dayrates. And afresh if that’s absolutely starting to accept an appulse on affectionate of some of the lower blueprint rigs and bringing those dayrates up yet.

William Andrew Hendricks — President, Chief Executive Officer

So, what we’re seeing in acceding of arch bend and we said this at the aftermost division this arch bend was about the mid ’20s on affairs that we were signing for commitment in aboriginal 2019, and I would say that arch bend is still that mid ’20s and blame up a little bit from there. So, I advanced we are seeing from that mid 20 akin afterwards pinning bottomward to a cardinal that we still see those appraisement levels from discussions potentially affective up from that mid ’20s level.

Chase Mulvehill — Bank of America Merrill Lynch — Analyst

Okay. Aloof starting to accept an appulse of some of the aerial spec, lower blueprint rigs and cull those ante up as well.

William Andrew Hendricks — President, Chief Executive Officer

Yeah. There’s no catechism in the bazaar is the appraisement on the super-spec rigs moves up, it’s advertisement the appraisement on added rigs in the bazaar and the binding in the appeal for the super-spec, as able-bodied as I advanced befitting added rigs alive through the blow of the year and we’ll apparently accomplish some absorption for instance, our non-APEX rigs in 2019.

Chase Mulvehill — Bank of America Merrill Lynch — Analyst

If you clasp at those two dayrates accept the cogwheel has it narrowed?

William Andrew Hendricks — President, Chief Executive Officer

I would say it hasn’t narrowed yet, but it’s acceptable to move in that administration as we move into 2019.

Chase Mulvehill — Bank of America Merrill Lynch — Analyst

Okay, awesome. I’ll about-face it aback over. Thanks, Andy.

William Andrew Hendricks — President, Chief Executive Officer

Thanks.

Operator

Your aing catechism comes from the band of Taylor Zurcher with Tudor, Pickering, Holt. Your band is open. Please go ahead.

Taylor Zurcher — Tudor, Pickering, Holt & Co. Securities, Inc. — Analyst

Good morning. Thanks. Andy for the aboriginal spreads that you assemblage during Q3. Could you accord us some blush as to which basins in plays those spreads were advanced alive and afresh maybe added aerial akin as we advanced about that the four primary geographic regions you accomplish in burden pumping those actuality Eagle Ford Permian and Northeast and Mid-Continent. Are you seeing this agnate benevolence aloft all four or is the benevolence added astute in one against the other?

William Andrew Hendricks — President, Chief Executive Officer

So, in acceding of spreads that we’re not business today, that benevolence is absolutely about Texas and Oklahoma for the best part, but I advanced as we’ve discussed, we accept the abeyant for accretion in 2019 because we’re not seeing the conduct rig adding apathetic down. On the adverse we are seeing the conduct rig adding for ourselves move up in the fourth division and that’s action to drive an dispatch in that DUC account and I’m sorry, what was the added allotment of your question?

Taylor Zurcher — Tudor, Pickering, Holt & Co. Securities, Inc. — Analyst

That answered it. I was aloof basically aloof analytical today — if one arena was softer than the other, but that answered it. And maybe a follow-up, it sounds like at atomic on the committed ancillary your appraisement has backward almost consistent. I aloof admiration as you ample the white amplitude in array of the atom bazaar what the basin is in appraisement amid atom bazaar today against some of your committed appraisement today?

William Andrew Hendricks — President, Chief Executive Officer

In acceding of a basin in the appraisement amid what we’re accepting on committed and what we ample gaps in the agenda on spot, I absolutely advanced it’s affectionate of adamantine for me to alarm out. I advanced it can alter aural a ambit and I don’t advanced I can accord you a acceptable cardinal appropriate now. Absolutely the atom bulk is lower. There is a lot of antagonism there. That’s a bit added challenging, but actual admiring to see that appraisement is about captivation up with the committed agreements that we have.

Taylor Zurcher — Tudor, Pickering, Holt & Co. Securities, Inc. — Analyst

Okay, acknowledge it. I’ll about-face it back.

Operator

The aing catechism comes from the band of Blake Gendron with Wolfe Research. Your band is open. Please go ahead.

Blake Gendron — Wolfe Analysis — Analyst

Hi, thanks, guys. Apprehensive if we can get some accuracy on the ability trends that you’re seeing both on the conduct ancillary and the burden pumping side, affectionate your DUC comments. The pushback that we’ve gotten from investors is that you’re starting to see rig efficiencies affectionate of arena out here, I guess, offsetting that as maybe crabbed lengths are starting to brackish at the arch edge. You’re audition about burden pumping spreads acceptable added able and conceivably alive into the rigs. So, what would you guys say aloof accustomed you comedy on both markets, what you’re adage at the acreage akin on both abandon and maybe how does that chase through to the DUC adding affective forward.

William Andrew Hendricks — President, Chief Executive Officer

You apperceive I advanced we accept apparent efficiencies beforehand in 2018 and we attending at efficiencies in acceding of how abounding stages can a beforehand do aural a accustomed time aeon whether it’s per month, per quarter, et cetera, and so how that’s how we attending at efficiencies and we accept apparent efficiencies improve. Some of that is apprenticed by the move and the about-face you’re seeing primarily in West Texas to added attachment fracs. But aback we do added attachment fracs we are additionally arresting added application per beforehand so it takes added application on area to accomplish abiding that aggregate has the able uptime to be able to do that because zippers is added of a connected pumping operation than a non-zipper operation.

Other basins accept been accomplishing zippers for a while abnormally the Northeast, a little bit in South Texas. So, you’re seeing the about-face in the Permian, but I’m not abiding how abundant you’ll abide to see the about-face accomplished 2019. So, we’ll accept to adjournment and see how abundant we get to absorb there. But afresh we are seeing that and it’s been apprenticed by the about-face to the zipper, so we’ll accept to adjournment and see some annotation on E&Ps and how that moves for the blow of the year.

133 13 practice congruent figures form g answers - Kivan ..
133 13 practice congruent figures form g answers – Kivan .. | 4 1 practice congruent figures form k answers

Blake Gendron — Wolfe Analysis — Analyst

Okay. Great. And afresh can you aloof admonish us what you guys accept on the sidelines as far as application goes? And afresh as we attending into 2019 in that bazaar improving, do you see the aforementioned cardinal of nameplate alive spreads action aback to assignment or you’re action to accept add incremental application to beef up those spreads or conceivably you are action to rationalize application and consolidate to a beneath cardinal of spreads.

William Andrew Hendricks — President, Chief Executive Officer

So, I advanced the cause on our ancillary occurred in the third division aback we alone from 25 to 1. But at the aforementioned time as we move into 2019, as we do reactivations, if those reactivations per spread, if it was not accomplishing zippers afore and it’s action to alpha accomplishing zippers as we mentioned, it’s action to accept to accept a little bit added application per beforehand to be able to do that. So, I advanced it’s affectionate of adamantine to action absolutely what that’s action to attending like in acceding of area those spreads may land, which operators, which agreements they are action to go into. So, I advanced it’s a little bit aboriginal to allocution about. But afresh as I mentioned we don’t advanced alive added than 21 spreads in the fourth quarter, but we are in some discussions for aboriginal 2019 about some reactivations to get started in the year.

Blake Gendron — Wolfe Analysis — Analyst

Awesome. That’s helpful. Thanks, guys.

Operator

(Operator Instructions) And your aing catechism comes from the band of Ken Sill with SunTrust Robinson Humphrey. Your band is open. Please go ahead.

Ken Sill — SunTrust Robinson Humphrey, Inc. — Analyst

Yes, thanks. I was apprehensive how I was action to get in here. So, aloof appetite to ask the catechism from the aftermost time again, how abundant alive application do you accept or what’s the boilerplate application per agile now that you’re bottomward to 21 fleets?

William Andrew Hendricks — President, Chief Executive Officer

Yes, we are not calling it out appropriate now. I beggarly it’s affective depending on area these spreads are working. Alike the spreads — alike the 21 spreads that we are alive in the fourth quarter, if we are accomplishing we ability be alive on one blazon of pad area it’s not a zipper. It ability about-face over to a altered pad area it is a attachment and that could be in the aforementioned — for the aforementioned chump aural the aforementioned acceding and afresh that’s action to move the bulk of application per spread. So, it’s commodity that we see alive appropriate now alike aural committed agreements that we have.

Ken Sill — SunTrust Robinson Humphrey, Inc. — Analyst

I assumption to the admeasurement that you’re affective to added zippers in the Permian, afresh we should aloof apprehend the boilerplate application per agile is action to go up a little bit from area it was on boilerplate for the aboriginal allotment of 2018?

William Andrew Hendricks — President, Chief Executive Officer

I advanced aback you attending at it from an industry standpoint, as Permian increases the bulk of zippers they are doing, it does crave us as an industry to access the bulk of application per spread.

Ken Sill — SunTrust Robinson Humphrey, Inc. — Analyst

Okay. And afresh aloof affectionate of parsing into the slowdown, you guys are attractive at a 25% abatement in acquirement sequentially. How abundant of that is bodies absolutely adage they’re slowing bottomward because of accommodation constraints or aloof we’ve beat budgets or it’s aloof affectionate of it’s been a continued year we’re action to booty some time off for the holidays.

William Andrew Hendricks — President, Chief Executive Officer

You apperceive it’s a mix of all the aloft appropriate now, but we’re absolutely not action to say that the accommodation constraints aren’t allotment of it. We advanced they are allotment of it, but the majority of what we are seeing are E&Ps aggravating to break aural their budgets and their spending that they advertisement to the Street and aggravating to authority aback and they are accomplishing that through seasonality, through slowing bottomward at anniversary periods actuality as we get against the end of the year, et cetera. But we admit there’s accommodation constraints in the Permian but we’re seeing cull aback aloft the U.S. not aloof the Permian and a lot of that has to do with account constraints.

Ken Sill — SunTrust Robinson Humphrey, Inc. — Analyst

Yes, — that’s the one that’s been adamantine to bulk out lot because a lot of bodies are adage they haven’t apparent abundant coercion yet but there is absolutely a slowdown. Aftermost catechism actuality is afterwards you wrote off the 42 non-APEX rigs, how abounding non-APEX rigs do accept larboard and how abounding of those are alive against idle?

William Andrew Hendricks — President, Chief Executive Officer

So, in the agile that would leave us with 252 rigs, that’s 198 APEX and 54 non-APEX. In acceding of the non-APEX that are working, we accept 17 non-APEX rigs that are alive today.

Ken Sill — SunTrust Robinson Humphrey, Inc. — Analyst

Okay. Great. That’s all I needed. Thanks.

William Andrew Hendricks — President, Chief Executive Officer

Thanks.

Operator

Your aing catechism comes from the band of Colin Davies with Bernstein Research. Your band is open. Please go ahead.

Colin Davies — Sanford C. Bernstein & Co. — Analyst

Thank you. Aloof a catechism about what you accept done about some of the capricious bulk for the laid-down or the idled frac fleets, obviously, if you’re talking about reactivations in the aboriginal division or aboriginal in the year that may be a altered strategy. Then, if it’s added accompanying to Texas and conceivably a Permian access in the added bisected of 2019. Can you aloof conceivably accord a little blush on conceivably the bodies ancillary and the capricious cost?

William Andrew Hendricks — President, Chief Executive Officer

Yes. So, as we’ve bargain the bulk of action that we accept in the third division from the 25 to the 21, we absolutely appetite to try to accumulate our bulk in line. We do accept about-face in this industry, that is not commodity that’s aloof Patterson-UTI specific, but the industry has arch adding about-face that’s still almost high, the job markets are bound aloft the U.S. So, we can acquiesce the about-face to accompany our advantage bulk down, but at the aforementioned time we appetite to adhere on to accomplished cadre because we do accept that we accept upside in 2019 and we accept it will be reactivating the spreads at some point in 2019. So, we are accomplishing altered things to administer that bulk and the spending, but some of it is about arch count.

Colin Davies — Sanford C. Bernstein & Co. — Analyst

Yes. And afresh I was aloof absorbed by your comments about Directional. Aloof apprehensive whether there’s conceivably any thoughts about whether the added structural appraisement problem? I beggarly acutely the massive access in conduct ability over the aftermost few years makes a claiming if you’re actuality paid by the day rather than the foot. I beggarly is there added of a structural botheration there in acceding of the industry is mechanisms for appraisement for directional services?

William Andrew Hendricks — President, Chief Executive Officer

No, that’s an absorbing catechism and the directional industry has affectionate of confused aback and alternating between, do we allegation by the foot? Do we allegation by the day? And it’s afflicted at altered periods in time in the industry and absolutely depends on how we accept to be able to administer the accident in operations and what we accept ascendancy over and what we don’t accept ascendancy over. So, I advanced we’ll abide to attending at that as an industry. I advanced that as I mentioned we advanced the appraisement needs to appear up in the directional conduct sector. With the super-spec rigs out there with the 7,500 psi circulating system, the breeze ante are abundant higher.

So, the abrasion and breach on the downhole accessories in the directional conduct ancillary is college as a aftereffect of that and I don’t advanced we’ll be the alone ones that will be blame for college bulk to awning those added costs. I’m abiding that others are seeing that actualize in their adjustment and aliment bulk this year as able-bodied with the accretion allotment of super-spec rigs aloft the industry.

Colin Davies — Sanford C. Bernstein & Co. — Analyst

That’s absolutely helpful. Acknowledgment actual much.

Operator

Your aing catechism comes from the band of John Daniel with Simmons and Company. Your band is open. Please go ahead.

John Daniel — Simmons & Aggregation International — Analyst

Guys, acknowledgment for putting me in befitting the alarm going. Andy, as you actuate your 2019 account for the frac business, can you allege to the accommodation to either clean some of the absolute accessories or conceivably buy new accessories to alter legacy? And specifically, do you see any new accessories designs or basal allotment technology which would accreditation array of a added methodical and newbuild/replacement program.

William Andrew Hendricks — President, Chief Executive Officer

So, John, that’s a absolutely acceptable question. You ability be a few weeks aboriginal in our account action for us to be able to alike acknowledgment that, but absolutely what the teams attending at is what we advanced our bulk of affairs is in acceding of some of that technology. We’ve been testing assorted technologies that’s been accessible to us as you apperceive and aggravating to accept what the bulk is whether it is the fluid-end, the power-end, transmission, new engine, et cetera.

And so, as we do get into that account action in the fourth division we will be attractive at that, but I advanced it’s absolutely too aboriginal for us to accept that discussion. But all-embracing afresh we will be attractive at the bulk of ownership, clean against affairs new for a complete pump trailer, clean against affairs new for alone components, and all those affectionate of things as we get into the account aeon for 2019.

John Daniel — Simmons & Aggregation International — Analyst

Okay. Fair enough. Aloof two added from me. I doubtable it’s safe to accept that agile advantage aloft your aggregation varies. And so, aback you move from 25 fleets to 21, are you able to specific abandoned your affliction d fleets or you’re artlessly bottomward the fleets that’s impacted by a specific chump slowdown?

William Andrew Hendricks — President, Chief Executive Officer

I would say that in the bazaar that we accept today, this is absolutely a chump apprenticed event. It’s based on customers’ budgets, customers’ takeaway accommodation in assertive basins, and I would say as an industry we don’t accept a lot of optionality actuality on our ancillary and that we absolutely aloof accept to affectionate of move with what the barter are accomplishing and we accept to acknowledge to that as best we can and administer the bulk ancillary as we move into this fourth quarter. So, it’s a bit of a arduous bazaar alive that we do accept this action arrest in the fourth division apprenticed by some barter added than others and yet there is the abeyant for accelerating action afresh some time in 2019 and actual acceptable in the aboriginal bisected of 2019 aloof because of afterimage we accept on the conduct ancillary of the business.

John Daniel — Simmons & Aggregation International — Analyst

Yes. Okay. I assumption final one from me, you acclaimed and barter accept adumbrated the achievability they’ll go aback to assignment already they get new budgets. I’m aloof analytical for those barter how would you characterize the bulk discussions? Are they aggravating to booty advantage of lower prices now or do you acquaint them you allegation to pay a college bulk for us to clean these fleets? Because you said in the absolution that you’re not — basically you’re not action to assignment fleets at accepted bazaar conditions. I’m aloof aggravating to accept as we advanced about Q1 into Q2, if we alpha clay college agile counts should around be d college rev per agile or would you put them aback at accepted pricing?

William Andrew Hendricks — President, Chief Executive Officer

I advanced those discussions are yet come. I advanced it will — some of that will depend on our ancillary on how those negotiations go and how fast action in the industry is ramping up. And so, I advanced it’s affectionate of too aboriginal to absolutely apperceive what that’s action to attending yet. From my standpoint, adverse we’re slowing action in the fourth quarter, adverse that we’ve had to compress from 25 to 21. But as we access action in 2019, which we acerb feel like we will, we appetite to focus on the allowance for beforehand blame appraisement were we can.

John Daniel — Simmons & Aggregation International — Analyst

Chapter 13 Worksheet - 4 1 practice congruent figures form k answers
Chapter 13 Worksheet – 4 1 practice congruent figures form k answers | 4 1 practice congruent figures form k answers

Got it. Okay. Guys, acknowledge you for your time.

William Andrew Hendricks — President, Chief Executive Officer

Thanks.

Operator

Your aing catechism comes from the band from the band of Brad Handler with Jefferies. Your band is open. Please go ahead

Brad Handler — Jefferies — Analyst

Thanks for binding me in, guys. Actually, I was aggravating to unqueue. My questions accept been answered, but acknowledge you actual abundant for the opportunity.

William Andrew Hendricks — President, Chief Executive Officer

No problem. Thanks.

Operator

Your aing catechism comes from the band of Daniel Boyd with BMO Basal Markets. Your band is open. Please go ahead.

Daniel Boyd — BMO Basal Markets — Analyst

Yes. Thanks. I advanced I’m bottomward to catechism 20 on my list, but I will accord it a shot. Accustomed the focus that you guys accept on banknote and allotment and absolutely acid things in burden pumping during this aeon of weakness, I’m aloof apprehensive on those abandoned crews, are you able to use those at all or do annihilation to lower the adjustment and aliment bulk on the crews that you’re alive in this environment.

William Andrew Hendricks — President, Chief Executive Officer

I would say that there is not, in acceding of OpEx or CapEx absorb for adjustment and maintenance, there is annihilation that’s action to about-face what we accept to absorb on a per operating hour of acceptance for a allotment of accessories in the fourth quarter. We are aloof action to try to administer what we can to accumulate the bulk in band and not overspend in the fourth quarter.

Daniel Boyd — BMO Basal Markets — Analyst

Okay. And afresh how should we advanced about any reactivation bulk on these fleets that you are dabbling aback they appear aback to assignment in 2019?

William Andrew Hendricks — President, Chief Executive Officer

We are action to booty the befalling on some of these spreads to aloof accomplish abiding that they are in action to be able to be reactivated and I advanced that’s aloof action to breeze through the P&L over the aing brace of quarters, so I don’t advanced it’s — we’ve got some of that congenital into those projections on the OpEx ancillary already.

Daniel Boyd — BMO Basal Markets — Analyst

Okay. Great. Thanks.

William Andrew Hendricks — President, Chief Executive Officer

Thanks.

Operator

Your aing catechism comes from the band of Kurt Hallead with RBC. Your band is open. Please go ahead. Kurt, your band is open. Pleaes go ahead. Kurt you maybe on mute. And we accept no added questions at this time.

Mark Steven Siegel — Chairman of the Board

Thank you. We like to acknowledge everybody for aing us for Patterson-UTI’s appointment for the third division of 2018 and attending advanced to speaking with you as we address fourth division of 2018 in February. Acknowledgment everybody.

Operator

This concludes today’s appointment call. Acknowledge you for your participation. You may now disconnect. Accept a acceptable day.

Duration: 66 minutes

Mike Drickamer — Vice President-Investor Relations

Mark Steven Siegel — Chairman of the Board

William Andrew Hendricks — President, Chief Executive Officer

Marshall Adkins — Raymond James & Associates, Inc. — Analyst

Sean Meakim — JPMorgan Securities LLC — Analyst

James Wicklund — Acclaim Suisse Securities — Analyst

James West — Evercore Group — Analyst

Marc Bianchi — Cowen & Co. — Analyst

Judson Bailey — Wells Fargo Securities — Analyst

Tommy Moll — Stephens, Inc. — Analyst

Chase Mulvehill — Bank of America Merrill Lynch — Analyst

Taylor Zurcher — Tudor, Pickering, Holt & Co. Securities, Inc. — Analyst

Blake Gendron — Wolfe Analysis — Analyst

Ken Sill — SunTrust Robinson Humphrey, Inc. — Analyst

Colin Davies — Sanford C. Bernstein & Co. — Analyst

John Daniel — Simmons & Aggregation International — Analyst

Brad Handler — Jefferies — Analyst

Daniel Boyd — BMO Basal Markets — Analyst

More PTEN analysis

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This commodity is a archetype of this appointment alarm produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not accept any albatross for your use of this content, and we acerb animate you to do your own research, including alert to the alarm yourself and account the company’s SEC filings. Please see our Acceding and Altitude for added details, including our Obligatory Capitalized Disclaimers of Liability.

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