Cuộc họp công bố kết quả kinh doanh quý 3/2026 của Patterson-UTI (PTEN): Tăng trưởng giá dịch vụ và nhu cầu năm 2027

Các điểm chính

• Patterson-UTI đã báo cáo doanh thu quý 3 năm 2026 đạt 1,342 tỷ USD, tăng 9% so với quý trước, với lợi nhuận ròng phân bổ cho cổ đông phổ thông đạt 28 triệu USD, tương ứng 0,07 USD trên mỗi cổ phiếu.
• EBITDA điều chỉnh đạt 264 triệu USD. Dòng tiền tự do điều chỉnh tăng mạnh so với mức của nửa đầu năm, và ban lãnh đạo dự kiến sẽ có thêm một quý tạo dòng tiền tự do mạnh mẽ trong quý 4.
• Hoạt động khoan theo hợp đồng tại Mỹ đạt trung bình 101 giàn khoan đang hoạt động, tăng 9% so với quý trước. Giá thuê ngày trung bình đã tăng từ vùng thấp của khoảng 30.000 USD vào đầu năm 2026 lên vùng giữa của khoảng 30.000 USD, với mức giá hợp đồng mới nhất ở mức cao hơn.
• Giá các dịch vụ hoàn thiện giếng đã tăng ở mức một chữ số tầm trung so với quý 2. Ban lãnh đạo kỳ vọng nhu cầu hoàn thiện sẽ tăng lên khi hoạt động khoan tăng và các thiết bị chạy bằng diesel cũ hơn bị loại bỏ.
• Doanh thu Sản phẩm Khoan tăng 21% so với quý trước, đạt mức kỷ lục kể từ thương vụ thâu tóm Ulterra năm 2023, nhờ tăng thị phần tại Mỹ và tăng trưởng quốc tế.
• Ban lãnh đạo dự kiến nhu cầu trên đất liền tại Mỹ sẽ tăng tốc trong năm 2027, đồng thời duy trì kỷ luật vốn và ưu tiên định giá, tỷ suất sinh lời và dòng tiền tự do trên mỗi cổ phiếu hơn là tăng trưởng công suất.

Dữ liệu tài chính chính

Lợi nhuận ròng bao gồm 18 triệu USD thu nhập hoạt động khác trước thuế, chủ yếu phản ánh khoản lãi 22 triệu USD từ việc bán giàn khoan và linh kiện dự định sử dụng tại Venezuela.

Hiệu suất Kinh doanh và Vận hành

Dịch vụ Khoan

Số lượng giàn khoan của Patterson-UTI đã tăng 16 giàn, tương đương 18%, so với mức đáy vào tháng 4. Chi phí tái khởi động đạt trung bình khoảng 1 triệu USD cho mỗi giàn, không bao gồm các nâng cấp theo yêu cầu riêng của khách hàng.

Ban lãnh đạo cho biết chỉ còn một số lượng hạn chế các giàn khoan có thể tái khởi động với chi phí thấp. Công ty sau đó xác định cụ thể con số này là khoảng 8 đến 10 giàn khoan có hiệu quả kinh tế để đưa vào hoạt động trở lại ở mức giá hiện tại. Ngoài các thiết bị này, cần phải có giá thuê ngày cao hơn và các điều khoản hợp đồng chặt chẽ hơn để hỗ trợ chi tiêu vốn bổ sung.

Nhu cầu mạnh nhất là đối với các giàn khoan đã nâng cấp được thiết kế cho các đoạn khoan ngang dài hơn và giếng sâu hơn. Patterson-UTI gần đây đã ký một hợp đồng 3 năm cho một giàn khoan XC+ được nâng cấp với mức giá thuê theo ngày trên 45.000 USD. Giàn khoan sẽ có tải trọng 1,3 triệu pound và dự kiến được bàn giao vào năm 2027.

Công ty cũng đang đánh giá các cơ hội quốc tế, bao gồm Argentina. Họ đã bán giàn khoan và linh kiện cho 10 giàn khoan điện AC thông số kỹ thuật cao dành cho Venezuela và có thể cung cấp thêm thiết bị.

Dịch vụ Hoàn thiện

Dịch vụ Hoàn thiện hưởng lợi từ mức giá cao hơn, nhưng hoạt động bị hạn chế do tình trạng thiếu cát ở Nam Texas và khả năng ứng ứng vận tải đường bộ ở Bồn địa Permian. Ban lãnh đạo mô tả cả hai vấn đề này chỉ là tạm thời và cho biết các hoạt động đã trở lại đạt hiệu suất tối đa vào đầu quý 4.

Giá dịch vụ hoàn thiện đã giảm khoảng 30% trong vài năm qua. Patterson-UTI đã phục hồi được khoảng một phần ba mức giảm đó. Ban lãnh đạo tin rằng có cơ hội phục hồi toàn bộ mức giảm trong năm 2027, và có tiềm năng hơn thế nữa, tùy thuộc vào cung và cầu.

Công ty ước tính các thiết bị chạy bằng diesel thế hệ cũ vẫn chiếm khoảng 20% tổng công suất hoàn thiện đang hoạt động tại Mỹ. Đến cuối năm, gần 90% công suất hoạt động của Patterson-UTI dự kiến sẽ được vận hành ít nhất một phần bằng khí đốt tự nhiên.

Công ty có kế hoạch tiếp tục thay thế các thiết bị chạy bằng diesel sắp ngừng hoạt động bằng các tài sản dẫn động trực tiếp chạy 100% bằng khí tự nhiên dòng Emerald trong năm 2027, đồng thời giữ cho tổng công suất hoàn thiện nhìn chung ổn định. Ban lãnh đạo cho biết công suất ngành sẽ không được mở rộng cho đến khi mức giá và cấu trúc hợp đồng hỗ trợ tỷ suất sinh lời cao hơn chi phí vốn của công ty.

Sản phẩm Khoan

Sản phẩm Khoan ghi nhận doanh thu và lợi nhuận gộp điều chỉnh hàng quý cao nhất kể từ khi Patterson-UTI thâu tóm Ulterra vào năm 2023. Doanh thu tại Mỹ tăng trưởng nhanh hơn mức độ hoạt động chung của ngành khi mức độ chấp nhận của khách hàng, giá bán và thị phần đều được cải thiện.

Doanh thu quốc tế cũng tăng so với quý trước, dẫn đầu là doanh thu kỷ lục tại Argentina, mặc dù các chi phí về logistics, an toàn và nhân sự liên quan đến xung đột đã ảnh hưởng đến hoạt động kinh doanh tại Trung Đông.

Doanh thu từ các công cụ dưới lòng đất mới tăng hơn 40% so với quý trước và chiếm khoảng 5% doanh thu phân khúc. Ban lãnh đạo kỳ vọng doanh thu công cụ dưới lòng đất năm 2026 sẽ tăng khoảng gấp đôi so với năm 2025, tiếp nối bằng một năm tăng trưởng mạnh mẽ nữa vào năm 2027.

Chiều sâu khoan địa nhiệt được thực hiện bằng mũi khoan của công ty đã tăng gấp bốn lần so với cùng kỳ năm ngoái. Địa nhiệt vẫn chiếm dưới 5% doanh thu năm 2026, nhưng ban lãnh đạo kỳ vọng mảng này sẽ tăng trưởng nhanh hơn đáng kể so với hoạt động kinh doanh tổng thể trong năm 2027.

Dự báo của Ban lãnh đạo

Triển vọng của Dịch vụ Hoàn thiện giả định giá cao hơn, các yếu tố mùa vụ bình thường và khả năng chậm trễ do thời tiết. Mức giảm dự kiến của Sản phẩm Khoan chủ yếu phản ánh hoạt động dự kiến thấp hơn ở Trung Đông, đặc biệt là Ả Rập Xê Út.

Ban lãnh đạo dự kiến hoạt động ngành tại Mỹ sẽ duy trì tương đối ổn định trong quý 4 trước khi bước vào đợt tăng nhu cầu tiếp theo vào năm 2027 khi ngân sách của khách hàng được thiết lập lại. Ban lãnh đạo cũng kỳ vọng dòng tiền tự do sẽ cải thiện đáng kể trong năm 2027, tạo sự linh hoạt cho các khoản đầu tư chiến lược, hoàn trả cho cổ đông và khả năng giảm nợ.

Rủi ro và các yếu tố cần theo dõi

• Việc tái khởi động thêm các giàn khoan ngoài 8 đến 10 giàn chi phí thấp còn lại sẽ đòi hỏi chi phí vốn và mức giá cao hơn đáng kể.
• Hoạt động hướng tới khí tự nhiên vẫn kém chắc chắn hơn, mặc dù hoạt động của công ty vẫn ổn định ở khu vực Đông Bắc và Haynesville.
• Các hoạt động hoàn thiện giếng vẫn chịu rủi ro từ nguồn cung cát, khả năng đáp ứng vận tải đường bộ, thời tiết và các hạn chế khác trong chuỗi cung ứng.
• Thời gian giao hàng cho các thiết bị dẫn động trực tiếp chạy bằng khí tự nhiên vượt quá một năm, làm hạn chế tốc độ bổ sung nguồn cung của ngành.
• Xung đột ở Trung Đông có thể hạn chế sự tăng trưởng ngắn hạn của Sản phẩm Khoan và làm tăng chi phí logistics, an toàn và nhân sự.
• Giá dịch vụ hoàn thiện mới chỉ phục hồi một phần mức giảm trước đó, và ban lãnh đạo chưa sẵn sàng bổ sung thêm công suất cho ngành cho đến khi tỷ suất sinh lời cải thiện đủ mức.

Các điểm nổi bật trong phần Q&A với chuyên gia phân tích

• Công suất giàn khoan: Ban lãnh đạo cho biết khoảng 8 đến 10 giàn khoan có thể được nâng cấp và tái khởi động một cách hiệu quả về mặt kinh tế ở mức giá hiện tại. Việc bổ sung quy mô lớn hơn sẽ đòi hỏi mức giá cao hơn và các điều khoản tốt hơn.
• Thời hạn hợp đồng: Patterson-UTI sẵn sàng ký các hợp đồng dài hạn hơn khi chúng bù đắp được chi phí nâng cấp lớn. Đối với các giàn khoan hiện có, công ty có thể ưu tiên các thời hạn ngắn hơn trong khi giá tiếp tục tăng.
• Nguồn cung hoàn thiện: Ban lãnh đạo kỳ vọng nhu cầu nứt nẻ thủy lực (frac) sẽ tăng trong năm 2027 nhưng nhận thấy còn rất ít công suất khả dụng. Patterson-UTI có kế hoạch giữ nguyên tổng công suất cho đến khi tỷ suất sinh lời đáp ứng việc mở rộng.
• Thiết bị khí tự nhiên: Công ty cho biết chênh lệch chi phí nhiên liệu hàng năm giữa khí tự nhiên và dầu diesel có thể lên tới hàng chục triệu USD trên mỗi cụm thiết bị. Điều này hỗ trợ chiến lược định giá khác biệt cho thiết bị dẫn động trực tiếp Emerald.
• Cơ cấu khách hàng: Khoảng 60% đến 70% doanh thu Dịch vụ Hoàn thiện đến từ 15 doanh nghiệp E&P lớn nhất tại Mỹ.
• Phân bổ vốn: Ban lãnh đạo dự kiến sẽ tiếp tục nâng cao chất lượng đội thiết bị thay vì bổ sung nguồn cung đáng kể cho ngành. Công ty sẽ xem xét thâu tóm sản phẩm chiến lược, hoàn trả cho cổ đông và giảm nợ khi khả năng tạo tiền mặt cải thiện.

Toàn bộ Biên bản Cuộc họp Báo cáo Kết quả Kinh doanh

Toàn văn cuộc gọi công bố kết quả kinh doanh

Phần trình bày của ban lãnh đạo

Operator

Hello, everyone. Thank you for joining us, and welcome to Patterson-UTI's Third Quarter 2026 Earnings Conference Call. [Operator Instructions]

I will now hand the conference over to Mike Sabella, Vice President of Investor Relations. Mike, please go ahead.

Michael Sabella

Thank you, operator. Good morning, and welcome to Patterson-UTI's earnings conference call to discuss our third quarter 2026 results.

With me today are Andy Hendricks, President and Chief Executive Officer; and Andy Smith, Chief Financial Officer. As a reminder, statements that are made in this conference call that refer to the company's or management's plans, intentions, targets, beliefs, expectations or predictions for the future are considered forward-looking statements.

These forward-looking statements are subject to risks and uncertainties as disclosed in the company's SEC filings, which could cause the company's actual results to differ materially. The company takes no obligation to publicly update or revise any forward-looking statements. Statements made in this conference call include non-GAAP financial measures. The required reconciliation to GAAP financial measures are included on our website at patenergy.com and in the company's press release issued prior to this conference call.

I will now turn the call over to Andy Hendricks, Patterson-UTI's Chief Executive Officer.

William Hendricks

Thank you, Mike, and welcome to our third quarter earnings conference call. The recovery in U.S. onshore activity gained momentum during the third quarter with activity levels increasing significantly compared to earlier in the year. Against this backdrop, our business has performed very well, supported by strong field-level execution and investments in technology and premium assets that continue to improve pricing and further strengthen the quality of our customer portfolio.

At the same time, we generated strong free cash flow and maintained our solid balance sheet. Looking ahead, we believe Patterson-UTI is well positioned to benefit as the cycle continues to improve.

Customer demand for advanced technology is strengthening while constrained access to capital is limiting the ability or even the willingness of some of our competitors to invest. These dynamics are creating attractive opportunities across our core businesses. We will continue to pursue those opportunities with discipline, deploying capital only where we see compelling returns and the potential to deepen long-term customer relationships.

Our capital allocation priorities remain clear: target investments that improve our long-term return on capital and our free cash flow per share, preserve the strength and flexibility of our balance sheet and return capital to shareholders through dividends and share repurchases and if appropriate, reduce debt.

The macro outlook for U.S. onshore drilling and completions has improved dramatically. Overall, we see a healthy outlook into 2027 across our core oilfield services and products markets, particularly for premium equipment and technologies that improve efficiency, reliability and overall well economics. To date, the increase in U.S. onshore drilling activity has been led by private E&Ps, which is typical in the early stages of a recovery.

As we approach 2027, however, our conversations with larger public operators are gaining momentum. These customers are increasingly focused on premium technology, including advanced digital, automation and AI capabilities across our drilling rigs and frac fleets, larger rig structures designed for longer laterals and deeper wells and equipment capable of using natural gas as a fuel.

This is the market scenario we anticipated when we increased our CapEx budget earlier this year. Importantly, the performance gap between the industry's highest quality assets and the older, less efficient equipment continues to widen. As activity improves, we expect customers to increasingly prioritize technologies that lower total well cost, enhance operational performance and reduce fuel costs by using more natural gas. We believe this trend creates an increasingly favorable backdrop for Patterson-UTI.

For the fourth quarter, we expect industry activity to remain relatively steady compared with third quarter levels. As we move into 2027, as customer budgets reset and considering contracts we already have in place, we anticipate another step-up in demand with 2027 forward oil prices meaningfully higher than what our customers used to budget for '26. Overall, we expect oil-directed activity to strengthen further into 2027.

Based on the demand signals we see today, we believe public operators are likely to account for a significant share of the next round of rig additions.

On the natural gas side, the commodity backdrop has been more fluid, although activity across our businesses has remained stable. Our position in the Northeast continues to be steady, consistent with the historical characteristics of that market.

In the Haynesville, our activity has also remained stable despite greater volatility in the broader basin. While the overall trajectory of natural gas-directed activity remains less certain, customer demand is shifting toward the same advanced technologies we are seeing gain traction in the oil basins. As a result, we believe our activity is likely to increase even if aggregate demand across the natural gas basins remains relatively unchanged.

Over the long term, we continue to expect activity in natural gas basins to increase as global natural gas demand continues to grow.

Turning to Drilling Services. Activity strengthened during the quarter, and pricing continued to improve. Average rates have increased from the low $30,000 per day range earlier this year to the mid-$30,000 per day range with leading-edge day rates well above the average. Demand has been particularly strong for rigs emerging from our upgrade program with structurally enhanced rigs securing day rates several thousand dollars above our company average.

Importantly, demand for these upgraded rigs is highest among larger public and private operators. Several customers have indicated that they expect these rigs to remain integral to their Drilling Programs for multiple years, reinforcing our confidence in the durability of the opportunity.

By quarter end, our rig count was up 16 rigs or 18% from the April trough. Since activity bottomed, reactivation costs have averaged approximately $1 million per rig, excluding any incremental upgrades required to meet customer specifications. We have a limited number of low-cost rig reactivations remaining before seeing a material increase in our incremental capital and upgrade costs, at which point, additional reactivations would require significantly higher pricing to meet our return threshold.

Beyond these limited remaining reactivations, we currently expect growth to come primarily from higher pricing, stronger contract terms and longer durations and a greater focus on strategic customer programs rather than just further rig additions. Based on current demand, we could reach that level of U.S. activity in early 2027.

Internationally, we are seeing a growing pipeline of opportunities for our drilling rigs. The opportunities in Argentina are tangible and could develop in the near term. Given the attractive contract terms, we may choose to deploy a portion of our remaining Tier 1 rig fleet into that market.

For Venezuela, we have sold rigs and components for 10 AC electric high-spec rigs from the U.S. as well as multiple other rigs from our operations in Colombia. These rigs are actually of higher capacity than was originally used to drill the horizontal wells in the country when I lived there. We may also supply additional equipment to Venezuela.

Turning to Completion Services. Third quarter results improved sequentially, driven by a mid-single-digit increase in pricing from the second quarter. Our Completions team continues to work with many of the industry's leading operators who appreciate the value that we bring to their operations, reflecting the quality of our assets, the value of our digital investments, and our commitment to delivering what we believe is the market's premier Completion Services offering.

Results improved despite elevated nonproductive time across several fleets as portions of the completion supply chain tightened late in the quarter. In South Texas, industry-wide sand constraints during much of September resulted in substantial downtime for several fleets, while trucking availability in the Permian periodically limited sand deliveries to location.

We believe both issues were temporary and our operations have returned to full efficiency thus far in the fourth quarter.

Looking ahead, the medium-term supply and demand outlook for the Completions market is becoming increasingly constructive. The U.S. shale industry has added more than 50 drilling rigs since activity troughed this past spring and current completion activity does not yet reflect the incremental demand those additions are expected to generate. At the same time, higher diesel prices are materially increasing the operating costs of legacy diesel-powered equipment, which we estimate still represents around 20% of the U.S. completion industry horsepower in operation today.

These diesel-powered assets were only marginally competitive before the recent increase in diesel prices and even with the improved completion pricing for some equipment are increasingly uneconomic to maintain.

In short, we expect completion demand to move higher over the next several quarters as available industry horsepower likely declines through the accelerating retirement of older diesel assets.

The replacement requirements are further challenged by extended equipment lead times. In our view, the direct drive systems represent the best new technology available, but lead times now exceed one year because these systems are produced on manufacturing lines that also support behind-the-meter power equipment for burning 100% natural gas. These dynamics create an attractive outlook for equipment capable of operating on natural gas.

By year-end, nearly 90% of our active horsepower will be powered at least in part by natural gas. As we expect the quality of our fleets to improve further in 2027 as natural gas-powered horsepower becomes a constraint on the industry's ability to meet completion demand, we believe we are well positioned to benefit from the changing competitive landscape. While this backdrop could present attractive investment opportunities that expand our position in the completions business over the next several years, our near-term focus remains on restoring segment returns to acceptable levels before committing capital to address the emerging undersupply.

From the past several years through this spring, pricing in our completions business declined by approximately 30%. We have since recovered roughly 1/3 of that decline, but pricing must move higher before we reconsider our investment strategy for the business.

For 2027, we expect to continue replacing anticipated diesel equipment retirements with new Emerald 100% natural gas-powered direct drive assets while keeping our overall capacity relatively steady.

Turning to Drilling Products. Third quarter results improved substantially from the second quarter. Revenue increased 21%, while we also saw significant margin expansion. The segment delivered its highest quarterly revenue and adjusted gross profit since we completed the acquisition of Ulterra in 2023.

Internationally, we continue to see growth across most markets, particularly in Latin America, where strong demand and market share gains in Argentina have driven record revenue. Total international revenue increased sequentially even as the conflict in the Middle East created challenges in one of our key markets. While the conflict may limit near-term growth in the Middle East, we continue to see strong demand in other regions.

Over the longer term, we see international markets, including the Middle East, as an important source of growth for the segment. In the U.S., revenue again grew faster than the broader industry activity trend. Customer adoption of what we believe our best-in-class drill bits continues to expand, supporting market share gains, improved pricing and stronger margins. As a result, the segment achieved another quarter of record revenue per industry rig.

Beyond drill bits, we continue to grow revenue from the new Downhole Tool product development with third quarter revenue from these offerings increasing more than 40% from the second quarter.

Downhole Tools now account for around 5% of segment revenue, and we expect revenue from this business to roughly double in '26 compared with '25. We anticipate another year of strong growth in 2027 as we are still in the early stages of penetrating several of the markets where we compete with the potential for significant growth in the years ahead.

Geothermal is also growing quickly with footage drilled using our bits quadrupling from the same quarter last year. We have a strong share of the U.S. Geothermal market and expect to see additional momentum into 2027. The market continues to develop in the U.S., and we also expect growth internationally, where we are in the early stages of market penetration. While Geothermal represents less than 5% of our revenue this year, growth should considerably outpace the overall business in 2027.

Our goal is to be the drill bit supplier of choice in every market we serve, combining differentiated technology and superior products with a focus on bringing new products to market quickly and capitalizing on our strong customer relationships. Our performance in Drilling Products gives us confidence in our ability to grow the business over time while maintaining strong cash conversion.

As we look forward toward 2027, we are encouraged by the outlook for U.S. onshore activity and the opportunities ahead for Patterson-UTI. Our customer conversations continue to point to growing demand for equipment and technology that improve efficiency, reliability and well economics. Importantly, we believe our opportunity extends beyond an increase in overall activity.

Customers are placing greater value on the capabilities of service providers and their equipment and our investments in premium assets, digital technology and automation align directly with those priorities. This should position us well to improve returns across our business while broadening our footprint with key customers and strengthening those relationships over time.

While we see opportunities to invest and expand our market position, our immediate priority is to recapture pricing and improve returns on our existing business. An improving demand environment does not change our approach to capital allocation. We need to achieve returns that we believe are adequate for our overall business before committing incremental capital to industry supply growth. And any additional investment must be supported by pricing and contract terms that justify the capital required. We will remain disciplined in evaluating those opportunities with a focus on long-term returns and free cash flow per share rather than growth for its own sake.

We're very pleased with our third quarter performance, including the strong growth in earnings and free cash flow. These results reflect the progress we are making as market conditions improve and as our investments in technology and premium equipment contribute to the business.

With continuing momentum across our operations and a disciplined approach to capital spending, we expect free cash flow to improve meaningfully in 2027. That cash generation should provide flexibility to pursue attractive strategic investments, return capital to shareholders and potentially reduce debt while preserving the strength of our balance sheet.

I'll now turn it over to Andy Smith, who will review the financial results for the quarter.

C. Smith

Thanks, Andy. Total reported revenue for the quarter was $,1.342 billion, a 9% increase compared to the second quarter. We reported net income attributable to common shareholders of $28 million or $0.07 per share. Net income included $18 million of pretax other operating income, primarily reflecting a $22 million gain on the sale of rigs and components for rigs to be used in Venezuela. Adjusted EBITDA for the quarter totaled $264 million, which is adjusted for the onetime gain on the sale of the rigs and components.

Our weighted average share count was 381 million shares during Q3, and we exited the quarter with 379 million shares outstanding. As expected, working capital trends improved during the third quarter. Even as we fund CapEx projects that improve the long-term earnings power of the company, adjusted free cash flow increased significantly from first half levels. We expect another quarter of strong free cash flow in the fourth quarter.

During the third quarter, we returned $62 million to shareholders through the repurchase of two million shares as well as a $0.10 per share dividend.

In Drilling Services, third quarter revenue was $417 million with adjusted gross profit of $149 million. In U.S. contract drilling, we recorded 9,249 operating days and averaged 101 operating rigs during the quarter. Higher adjusted gross margin compared to the second quarter was driven by a 9% improvement in the average rig count as well as higher revenue per day.

Directional Drilling also improved meaningfully on a sequential basis with higher revenue and significantly stronger margins. For the fourth quarter, we expect our Drilling Services rig count to average approximately 104 rigs and exit the quarter above that level. We expect segment adjusted gross profit of approximately $150 million.

We expect to incur reactivation costs during the quarter as we prepare additional rigs for reactivation late in the fourth quarter and in early 2027, and we anticipate additional costs as we wind down our operations in Colombia.

In Completion Services, third quarter revenue was $808 million and adjusted gross profit was $133 million. Completion pricing increased by a mid-single-digit percentage sequentially, driving higher revenue and adjusted gross profit.

Activity was lower primarily due to greater-than-expected nonproductive time related to sand availability and trucking constraints. For the fourth quarter, we expect Completion Services adjusted gross profit of approximately $140 million. We expect higher pricing compared to the third quarter.

This outlook incorporates normal seasonal factors, which we expect to be more modest this year as well as the potential for weather-related delays typical of the fourth quarter.

In Drilling Products, third quarter revenue was $110 million and adjusted gross profit was $51 million. Results significantly exceeded our expectations, driven by sequential revenue growth across the U.S., Canada and international markets.

Over the past 12 months, markets outside North America accounted for over 20% of Drilling Products revenue with the Middle East representing our largest international market. During the ongoing conflict, international revenue continued to grow, although logistics, safety and personnel challenges increased costs.

Even with these cost headwinds, Drilling Products delivered its highest quarterly revenue and adjusted gross profit since our acquisition of Ulterra in 2023. While we expect the conflict in the Middle East to have an impact on our international business in the near term, strength across the rest of the segment should partially offset the pressures in the Middle East.

Additionally, we continue to view the Middle East as a key long-term growth driver of our Drilling Products segment. For the fourth quarter, we expect Drilling Products adjusted gross profit to decline 5% to 10% compared to the third quarter, primarily reflecting lower anticipated drilling activity in the Middle East, particularly in Saudi Arabia.

Our Other revenue was $6 million for the quarter, and adjusted gross profit was $4 million. For the fourth quarter, we expect adjusted gross profit in Other to be steady compared to the third quarter. General and administrative expenses were $70 million in the third quarter. For the fourth quarter, we expect G&A expenses to be approximately $70 million. Depreciation, depletion, amortization and impairment expense was $222 million in the third quarter, and we expect it to be approximately $220 million in the fourth quarter.

During the third quarter, we invested $141 million in capital expenditures. That amount included $55 million in Drilling Services, $63 million in Completion Services, $20 million in Drilling Products and $3 million in Other and Corporate. We expect 2026 capital expenditures, net of proceeds from asset sales to be less than $600 million. We ended the third quarter with $339 million of cash on hand and no borrowings outstanding under our $500 million revolving credit facility. We have no senior note maturities until 2029. Our Board has approved a quarterly dividend of $0.10 per share payable December 15 to shareholders of record as of December 1.

I'll now turn it back to Andy Hendricks for closing remarks.

William Hendricks

Thank you, Andy. Before we conclude the prepared remarks, I want to leave you with a couple of key points.

The conflict in the Middle East appears to have increased the global call on U.S. oil and natural gas production for at least the next several years. As the conflict continues, global oil inventories are drawn down further, extending the time needed to rebuild them to levels most countries consider acceptable.

Demand for U.S. LNG is also likely to grow as customers place greater emphasis on security of supply. On Monday, the Head of the International Energy Agency said he does not expect energy markets to return to normal in 2027.

Oil futures continue to provide attractive hedging opportunities for our customers. Technology demand is rapidly reshaping U.S. Drilling and Completions, driving demand for upgraded equipment that will further differentiate our business.

In Drilling, customers need larger rigs, and we believe only a limited number of existing rigs can be economically upgraded to meet next-generation requirements. Growing international demand is also drawing rigs out of the U.S., further tightening supply. In Completion, higher diesel prices are increasing the fuel savings customers can achieve with natural gas-powered equipment, driving greater demand for these assets.

However, building more of this natural gas-powered equipment requires a substantial capital. In general, we believe many completion providers either cannot fund new equipment or need higher pricing and stronger contract terms that improve the overall industry returns.

Supply chain constraints will also limit how quickly the industry can respond. Together, these dynamics should create a very strong market for our Drilling and Completion Services businesses. We will remain focused on technologies that differentiate our company and help deliver better well results for our E&P customers, including digital and artificial intelligence systems, which should result in better returns for our investors.

Our approach to capital allocation is straightforward: invest in opportunities that strengthen long-term free cash flow and create the most value for our shareholders while maintaining our strong balance sheet. We expect free cash flow to be strong again in the fourth quarter with meaningful improvement in 2027 and beyond.

We continue to evaluate a range of capital allocation opportunities, including high-return strategic investments, additional cash returns to shareholders and debt reduction. I'd like to thank all of our employees for their dedication and look forward to building on the success we have seen this year.

We'd now like to open the line for Q&A. I'll hand it back to our host.

Operator

[Operator Instructions]

Your first question is from Scott Gruber with Citi.

Phần hỏi đáp

Scott Gruber

So one of the interesting backdrops here for the domestic land rig market is just how many rigs are leaving for opportunities in South America and elsewhere. Are you seeing less competition now on incremental tenders as a result? Do you think you'll see share improvement in the U.S. land rig market in '27, given international opportunities?

William Hendricks

I think we're seeing increasing opportunities in both the U.S. and Other markets. And we're going to see competition between these markets. It's really going to boil down to where can we get the best return for the investment that we have to make to activate the rig or even ship the rig. And so we're evaluating all these opportunities that are coming across. We're looking at the economics. We continue to upgrade rigs for the U.S. market, but we're upgrading rigs with the possibility that they could work outside the U.S. market as well if we can get returns that we're happy with.

Scott Gruber

That's interesting. So you did mention the interest in potentially additional rigs in Argentina. Would that be lease rigs? Would you look to operate rigs in country? What type of scale would you need to do that? And you talked about the competition for contracts. What do you need to see in the U.S. in terms of rate and duration to keep the rigs in the U.S. versus what's on the table in Argentina and elsewhere?

William Hendricks

First, I'd say, in the markets outside the U.S., it's ongoing discussions, and we'll keep you posted as those evolve. In the U.S., what we're seeing is pricing move up on leading edge. We started out the year in the low $30,000 range. We're now in the mid-$30,000 and moving higher, but we're also seeing the contract terms improve. Over the last three years, it hasn't been just a degradation in pricing. It's been a degradation in the contract terms with a shift to risk back to drilling contractors and service providers, but we're slowly moving the risk back to the point where it needs to be. So all these things continue to evolve, and we're weighing both U.S. and the markets outside the U.S.

Scott Gruber

Is the duration in the U.S. contracts now significantly improving? Are you seeing that as well?

William Hendricks

It's something that we choose to do or we choose not to do. So as the rates continue to push higher, we will likely lock in some longer-term contracts. And if it's an opportunity that we have today where we see the rig rates still have opportunity to move higher, then we're going to lock in a shorter term until we can get the rates to where we're happy and then we'll lock in the longer term.

C. Smith

Yes, Scott, I'll add to that, that one of the things affecting that is really what the rig or if it is an upgraded rig, really what that upgrade schedule looks like and whether or not we've had to put any kind of capital into it or significant capital into it. And to the extent that we have or that we choose to do that, we generally are trying to derisk that somewhat with the customer. And I'll be honest, that's not a real difficult conversation right now because the customer wants that rig and that rig is generally one of the most capable in the industry. So to the extent that we're looking at really good pricing and a longer term, that kind of goes hand-in-hand with what we're doing in our upgrade program.

Operator

Your next question is from Jim Rollyson with Raymond James.

James Rollyson

Andy, just kind of circling back to the U.S. rig market, your 104 rigs average expectation for this quarter. You guys mentioned in the prepared remarks, expectation of that picking up again in 1Q and just your conversations with public operators, even going back to what you were mentioning at Barclays, you've got some kind of verbal commitments and things like that. I'd love to understand maybe the order of magnitude of possible rig adds from the public guys as we look through next year, just given what's happened and kind of where the rig count is today versus where it was three years ago or so.

William Hendricks

Yes. The pace of increase was really fast coming out of April. And so we've added a significant number of rigs. We went from 88 to 104. Our rig count is -- we still see it moving higher, not quite at the pace that we had coming out of April, but we still see the rig count moving higher. And we see this shift to publics. We're even increasing rig count for some publics in the fourth quarter and into early next year. And we're even in discussions and signing contracts for rig deployments towards the middle of next year. So these are firming up. Some of them are discussions, some of them are signed contracts. But it's definitely still a draw from E&Ps on needing higher-spec rigs for what they're doing.

James Rollyson

Yes. Understood. And obviously, the crude being north of 80 through next year is probably helpful to those discussions. As a follow-up, just Drilling Products had a pretty remarkable quarter. You talked about some of the drivers there. Maybe help us understand how we should think about that growth opportunity maybe with and without the Middle East normalizing next year because it certainly was a bigger step than I think anybody was generally expecting and just kind of love to hear how you guys are thinking internally about growth opportunities.

William Hendricks

Yes. I appreciate the question on Drilling Products. We don't talk enough about it. They do a fantastic job. They are able to respond quickly to customer demand, so they were able to move quickly here in the U.S. I'll say that we're pushing our capacity on manufacturing here in the U.S. We may have to look at expanding that in some of our other locations, but that's a good problem to have. So the team responded quickly. We're getting some pricing improvement. We're doing very well on market share.

And then outside the U.S., there's parts of the Middle East that are doing well. Saudi is having its own separate challenges right now, where you saw an offshore slowdown and then a little bit of land rig decrease right now. But outside of that, we do expect further growth. So really excited about how the team is managing that business and what they're doing to continue to grow that business. And take Argentina, for instance, with the plan to increase the rig count in Argentina, I expect we're going to do very well down there as well. And then Venezuela could be a future opportunity for us, too.

Operator

Your next question is from Saurabh Pant with Bank of America.

Saurabh Pant

Andy, I think you made a comment in your prepared remarks about having limited number of low-cost rig reactivations, right? If I remember that right, I think that number might be 8 to 10 rigs is what I'm thinking. But correct me if I'm wrong. The question is, do you think those are net adds to the industry? Or do you think part of that is because you are upgrading rigs and there is a lot of demand for those upgraded rigs, so you might be gaining share? And then related to that, if we are adding that many rigs into 2027, how should we think about Completions demand coming out of that? Because we know Completions lag and that market is super tight. So just help us think about completions on the back end of that rig demand.

William Hendricks

Yes. Thanks. So yes, starting with the Drilling rigs, some of the upgrades that we're doing are on existing rigs that are operating where we do some swap outs for customers during a brief pause to put those upgrades in place. But some of these rigs are net adds where rigs are going back to work. And so we do see the rig count increasing into next year. And so really pleased with how our teams are progressing, how we're doing managing costs on those upgrades and how things are going with the contract negotiations and the pricing that we're getting. As Andy mentioned earlier, we're trying to lock in the term so that we're covering the cost. We completely derisk it that way, but it gives us a lot of future upside as well, having that rig with a higher upgrade.

So with the increasing rig count to the completion story, yes, the completion demand is going to increase, but it's not clear yet where the supply is going to come from. If you look at how we're managing things, as we've said many times, our pricing went down over the last three years, almost 30%, and we need to get some recovery before it makes sense from a capital investment to actually add capacity, and we don't think we're there yet. So we've been raising pricing. We were successful raising pricing in the third quarter. I think that continues into next year. We may get to a point where it makes sense to invest in adding capacity, but we're not there yet.

Saurabh Pant

Right. No, that's all very encouraging, Andy. And then Andy, maybe this one is for you. I think Andy made the comment that you're running the business for free cash flow per share growth and returns and not growth for growth sake, which is fantastic. But as we think about capital allocation, right, you are prioritizing pricing over just activity growth, but you do have opportunities to deploy capital into these newer technologies kind of strategic opportunities. But if we think about '27 free cash and capital allocation in general, right, how should we think about any preliminary color maybe on CapEx and any of the other things that we should be mindful of from a capital allocation standpoint?

C. Smith

Yes. Again, we haven't gone completely through our budget process yet. So I'm not ready to guide to '27 CapEx. But I will say, in general, I don't know that I see a material change probably from what we're seeing this year. Again, we talked about and you started your first question with sort of how many rigs do we have left in sort of that easy to put out range. And then beyond that, it becomes, again, a little bit more expensive and pricing really needs to come up.

If you look across the whole fleet, again, I still think pricing needs to come up kind of for the fleet we have today. So I don't see us coming in with a capital program that necessarily adds a lot of supply to the industry in any of our core businesses.

I do think that as we look at the makeup of our fleet, whether it's in drilling and/or completions or in I do think that we'll continue to high-grade our equipment so that our equipment will be the best-in-class and it will be the equipment that works regardless of the point in the cycle that we're in. So that's really what our focus is. I don't know that our focus is necessarily going out there and trying to capture a lot of share. But we will continue to try to make sure that we have the best, most capable fleet in the industry in either side of our business.

Saurabh Pant

Right.

William Hendricks

Our markets are in our favor if the industry short a few rigs and short a few frac fleets.

Saurabh Pant

Right. No, definitely, Andy, like you said, right, it's not growth for growth's sake, you're balancing risk, you're balancing return. And if the equation is favorable, you deploy something strategically, but the focus is on free cash flow per share growth rate, and that's the key point. Yes.

Operator

Your next question is from Alexa Breno with Goldman Sachs.

Alexa Petrick

I wanted to ask about the Completions market. If Completion demand strengthens again in '27, how do you think about the industry response for new adds, especially just given the capital requirements for high-quality horsepower? Could we see pricing move materially higher before a meaningful supply response? Or how do you think about that setup?

William Hendricks

Yes, I'll start, and then I'll hand it over to Andy Smith. As I've said before, we need to get recovery on our pricing to where when we're adding new equipment, it actually makes sense from a return standpoint. We're just not there yet. And so we've been working with our existing customer base. We are adding new equipment in terms of high technology for customers that need that to burn natural gas with our Emerald system, but we're also retiring the older Tier 2 at the same time.

So our overall capacity is staying level for the next projected several quarters. Unless we get pricing recovery up to the point where returns are much higher than our cost of capital to add new equipment, it just doesn't make sense. And what we see in the market from some of our competitors, some of the competitors, we either have challenge justifying a capital spend to grow or they have other priorities. And so it really doesn't show much increase in capacity in the industry over the next few quarters as far as we can see. Andy?

C. Smith

Yes. I would just say that, look, I do think that frac demand will certainly be higher next year. I don't think there's a lot of capacity out there. I think our industry has had a long history of sort of helping finance our customers' growth plans using our balance sheets and not getting appropriate returns for it. And until our returns return to where they need to be, I don't think we intend to invest to grow the overall industry fleet.

Alexa Petrick

Okay. That's very helpful. And then maybe just a follow-up on the Drilling side. As you talk about some of these high-spec rigs, can you just help us understand a little bit more of what that day rate could look like and then particularly around contract duration? Is that moving longer at all? Or how are customer conversations evolving there?

William Hendricks

Sure. We have a large number of our -- what we call our APEX XK rigs that we're upgrading to one million pound load capacity for the deeper wells, longer laterals, running some slightly heavier casing strings in the deeper wells and just the amount of drill pipe that we have to rack back. So those upgrades are happening right now. We're getting very favorable response from customers. But we also have a rig design that we call the XC+ that we're going all the way to 1.3 million pounds for the deepest wells in the Haynesville and in the deep Delaware.

And for the E&Ps that are looking at those projects, we're getting extremely favorable response. I mean this is a significant upgrade, not just on structure, but on fluid capacities, on torque capacities, a number of things. So for instance, we've recently signed a three-year contract to deliver one of those rigs next year with day rates over $45,000 a day. So that's really the true leading edge of our highest upgrade spec rig.

Operator

Your next question is from Derek Podhaizer with Piper Sandler.

Derek Podhaizer

I was on mute. Can you hear me?

William Hendricks

We got you now.

Derek Podhaizer

All right. Sorry about that. Sorry about that. Just jumping between too many calls. I wanted to go back to Saurabh's line of questioning around just the capacity and your supply. Just thinking about as you move above the 104 rig count level at the end of this year, adding rigs into next year. Obviously, a big theme for the industry, how many rigs actually could get added back with a little less friction. Maybe can you tell -- is it 110 rigs, 115 rigs, 120 rigs? When does it start to get a little bit more significant from a capital standpoint to really invest in these rigs? Just trying to gauge how the industry could respond if there's a rig count pull here.

C. Smith

So look, I think Saurabh's sort of number was fairly accurate. I think we've got 8 to 10 that are relatively easy to upgrade and put out into the market economically. Beyond a bag, it's much more expensive. And again, I don't have perfect information around what our competition necessarily has. But if I listen to their public comments, I don't feel like there's a lot of excess capacity out there either.

So I think, again, pricing is going to need to improve for a significant amount of rigs to come back into the market if that's what the market is really requiring. We'll have to wait and see where we go. But I would say that from our end, we probably have, again, about 8 to 10 rigs that are kind of given where we see pricing today that are economic to put back up.

Derek Podhaizer

Got it. Okay. That's helpful. And then on completions, just given some of the efficiency issues that you guys saw as far as the South Texas sand and some of the trucking in the Permian. Just curious just the overall confidence level of the Completions industry to bounce back if we do see this demand spike that we're expecting, just given the rig count -- the rigs that have been added and the expected rigs added for next year. I mean we've heard some of your peers talk about the rebuilding costs into the system. So I'd just love to hear your thoughts around any sort of issues around efficiencies into next year if we do get a demand spike in completions.

William Hendricks

Yes. It was a real interesting situation in the third quarter on Completions where they were on track for a significant beat versus what we had out for projections. And it wasn't long after we had our big analyst dinner and we all saw each other in New York that it wasn't just us, but the entire industry was struggling to get sand deliveries out of South Texas mines for the work in South Texas. And it ended up holding up us and even others as well. So we just ended up with white space in the calendar that we didn't expect.

The team did a great job of recovering where they could. Some of the customers actually paid us some standby on some of that, which is a big shift in the market compared to previous years. So pleased with some of that. And so we came in close. But like I said, they were on track for a big beat until that happened. There were also some trucking issues relative to driver shortages in the Permian. But where we are today, here we are almost through the month of October, and we haven't seen those issues now in South Texas with either the sand, and we do seem to have enough drivers to manage our loads out in the Permian today as well.

Operator

Your next question is from Stephen Gengaro with Stifel.

Stephen Gengaro

I think two for me. The first is kind of a high-level question. When we think about a lot of your competitors and they're investing a lot of money in sort of into new areas, what advantage do you think that gives you in the business? And maybe on top of that, are there areas that are tangential to what you're doing kind of like Ulterra that you've integrated very well that you would look at as additional business opportunities?

C. Smith

Yes. I would say that, look, if you think about the capital that's kind of being diverted away from Completions into other areas, and I think that's what you're referring to. If you go back into the history of Completions, the barriers to entry going back 10, 15 years ago were not as significant as they are today. I mean, today, you've got our digital offerings, you've got our equipment, you've got our safety programs, you've got even the cost to ensure this stuff has gone up. So the cost to get into this business is not what it was. I mean this is a tough business to operate in.

So as you take one of those easy things to solve for being capital and divert it somewhere else, it just makes those of us that are in the business and have established track records, all that much more competitive. So look, I think it's great. I think anything that kind of takes my competition's capital and puts it elsewhere is great for us. So from that standpoint, I think it's a positive. And I'm sorry, your second question was around Ulterra. Could you remind me what about?

Stephen Gengaro

Just are there -- similar to Ulterra, without naming specific companies, obviously, are there specific product lines related to Drilling or Completions that would be kind of top of your list of potential targets?

C. Smith

Yes. I mean I think, look, we really kind of struck gold with Ulterra. We have a phenomenal business, a phenomenal management team. And if there are those businesses out there, we would certainly be interested in them. Certainly, anything in the Downhole Tools sort of arena. Again, we've got to be selective because those things aren't a dime a dozen. You've got to get out there and kind of do the work and find them. So I wouldn't say that there's a bunch of them running around, but we'll certainly kind of continue to effort that.

William Hendricks

Yes, Stephen, this kind of leads into a use of cash discussion. And with the projections that you guys can do towards year-end and even into next year, we'll be sitting on a significant higher amount of cash than we probably ever have historically in the company. It gives us a lot of strategic opportunities, and we've been open that we really like what we've done in the products business. Ulterra is doing a fantastic job, and we continue to look for quality products and management teams that fit within that product segment that we have. It helps to shift the profile of the company to something that's relatively low CapEx versus our Drilling rigs and Completions business.

So we'll continue to look for those opportunities. But at the end of the day, like we said, if we can't find what we think are good opportunities, we'll return that cash to shareholders.

Stephen Gengaro

And just one quick one. You may have mentioned this and I might have missed it. The balance between frac fleets and drilling rigs, I mean, obviously, that kind of led the way early. Are we at a balance point now, like where the number of rigs out in the market and the number of frac fleets are pretty much working efficiently together where there's not a shortage of one versus the other. Obviously, you're not building or depleting DUCs effectively.

William Hendricks

I would say we were at a balance a couple of months ago.

C. Smith

We're a little short on the Completion side.

William Hendricks

Yes, you can. There's certainly tension out there. We're getting phone calls, "Hey, I need something, what can you do to help me?" I mean you can certainly see the tension in the market growing in terms of E&Ps needing equipment that's becoming harder to get.

Operator

Your next question is from Eddie Kim with Barclays.

Edward Kim

So you mentioned Completions pricing has declined about 30% over the prior three years and that we've since recovered about 1/3 of that decline. As pricing momentum improves, what level of recovery do you expect we could be at this point next year? Could we recover maybe 2/3 of that decline or maybe even more? And what level of pricing recovery would be required for you to actually consider expanding your position in the completions business?

William Hendricks

Yes. I think we have the opportunity to recover all of our pricing into next year at some point and potentially even more. We'll just have to see how the supply-demand equation really kind of carries out because if you look at the market now versus even three years ago, you have a little more consolidation in the market, but then you also have some companies that are diverting their capital to do other things. So there's really the list of companies that are willing to put capital into this completions business is pretty short right now.

So that's a good setup for a company like ours to generate good return on capital when we make these type of investments. But in terms of what we can get in terms of recovery, I think we can get all of our recovery and possibly more.

C. Smith

Yes. I would also just add to that, that look, as you talk about growing the industry capacity, I mean, you have to if we're going to put capital into that and think about growing the overall industry capacity, you have to think about it in terms of more than a one-year opportunity, right? So you have to have some visibility or potentially even a different contract structure with some of your customers. So I would say that until we recover that pricing, I think talk of growing the overall industry capacity is a little bit premature.

Edward Kim

Understood. Understood. And then just in your Drilling Products business, you mentioned that the expected kind of sequential decline here in the fourth quarter is due in part to lower drilling activity in Saudi Arabia. One of your peers recently who had some of their land rigs in Saudi suspended, they suggested that part of the reason for that is because of insufficient frac capacity in the Jafurah unconventional basin there.

So first, is that what you're hearing as well as to the reason for the Drilling-related slowdown? And secondly, I mean, does that present an opportunity for you to perhaps send a few fleets over to Saudi Arabia?

William Hendricks

I don't think it's our place to speak to the frac capacity in Saudi Arabia. We're not participating in that. And I think there are sufficient companies over there to do frac in Saudi Arabia, and they don't need another company to come in. So we'll stay focused on what we're doing in the U.S., and we don't have excess capacity in the U.S. to ship out.

Operator

Your next question is from Josh Silverstein with UBS.

Joshua Silverstein

I was just curious how you're thinking about your contract duration. Given the tightness in the market out there right now, are you trying to put more on longer-term duration, maybe not getting peak pricing? Or do you want to keep seeing price go higher before you lock in some of that longer-term contract duration?

William Hendricks

There's kind of a mix to that answer. So for instance, I mentioned earlier that we've signed a three-year contract for a very large upgrade. And so we're derisking the cost of the upgrade within that three-year contract. And so when we'll look at those types of scenarios, but there are some scenarios on just rigs that we're operating today, if we think we've got the opportunity for the rig rates to go up higher later this year or early next year, we're not ready to lock it in for a longer term yet.

So we weigh all these scenarios the way that you might manage a bond portfolio as well. We'll lock in when we think it's the right level.

Joshua Silverstein

And then maybe...

C. Smith

I don't have anything to add to that other than, yes, I mean, look, we've talked a lot about where pricing needs to go. And until it gets there, I think that depending upon which asset particularly we're talking about, we probably would defer too long of a lock. But again, if it's a brand new -- if it's a new asset coming out of the yard that we put a lot of money into, we might lock that up for a little bit longer.

Joshua Silverstein

Got you. Maybe along the same lines, we tend to think of the public E&Ps and larger privates is more kind of that duration in terms of what they want with contracts and private a little bit more short-term in nature. Just given how tight things are, are you seeing the smaller private guys willing to go and lock equipment up a bit longer? It feels like pricing -- if crude oil prices or gas prices come off, they're more likely to go and drop. But have things changed just because of how tight the markets have been?

William Hendricks

I will qualify the small privates that we might work for are typically privates that have multiyear programs. So they may only operate two or three rigs, but they're looking at long-term multiyear programs. Some of them are family operations. And that's how we look at those we don't do a lot of work necessarily for the private equity-backed privates that are trying to drill a few wells, bring some production online and then flip the property. So we tend to work for the ones that have the longer duration. So yes, therefore, some of the smaller E&Ps that we might work for are willing to lock in longer-term contracts because they have long-term plans.

Operator

Your next question is from Dan Kutz with Morgan Stanley.

Daniel Kutz

So maybe just go back to -- I think it was Eddie's question, but broadening it out to the whole Middle East. Any appetite or any conversations or considerations of sending actual assets over there, either in the Drilling or Completion Services side of the business? Obviously, you have the Turnwell JV and close relationship with ADNOC. They're ramping their unconventional plans and activity there. But yes, just any appetite or any conversations to send equipment outside of the drill bits business for Middle East unconventional plays?

William Hendricks

It's a good question, and I'll help kind of break it down because it really depends on the country and the market. I would say that in some of the more mature markets, like Kuwait, Saudi Arabia, even Oman, you've got sufficient Drilling contractor capacity in those countries, and you've got Saudi actually slowing rig count right now. So there's no reason for a new Drilling contractor to go put rigs into the country. The one thing that's been interesting about our joint venture with Turnwell, which has been in for a couple of years, we had a significant number of people on the ground helping to improve efficiencies, drilling shales and unconventional wells, both in oil and gas.

I think it gives us a bit of an advantage if they're looking at bringing rigs from outside of the country. But as you know, their primary drilling contractor is ADNOC drilling in the country. But if they were to look outside, I think we would have an advantage, but we just have to wait and see how all that plays out with both ADNOC, the E&P, but also with any of the international companies that are getting concessions over there.

Daniel Kutz

Got it. That makes sense. And so I guess there's been a lot of talk about some of the logistics bottlenecks that were headwinds in the third quarter on the completion side of the business. But I guess to come at that question from a different angle, it sounds like a lot of the bottlenecks are markets where Patterson has content like proppant logistics, like natural gas logistics and power is obviously in very high demand in the oil field and in other markets. But just wanted to kind of check broadly on any trends you're seeing pricing demand, anything to flag on the ancillary Completion Services businesses?

William Hendricks

Yes. So you bring up a really good point because when we do completion work for most customers, it is an integrated package that includes our hydraulic fracturing, our wireline, our digital services, our trucking for sand, which we have -- on any given day, we may be running 1,000 trucks for sand. Then on delivering compressed natural gas, it could be over 150 trucks on any given day that we have moving.

So we have all these things in place. Specific to South Texas, what we ran into was just the actual mines were struggling to keep up and actually produce the sand right at the mine. And so it wasn't a logistics issue. It was really just getting trucks loaded to get to location. But so far this month, everything looks like it's back on track with the mines, and we have sand moving in South Texas. And as I mentioned earlier, we have drivers in Permian. It looks like it's sufficient capacity right now.

Operator

Your next question is from Keith MacKey with RBC Capital Markets.

Keith MacKey

Maybe if we could just stick with the frac pricing discussion. Just curious how much of the pricing increases you've seen to date are like-for-like type equipment pricing based on supply-demand tightness versus how much of the pricing improvement has been driven by upgrading to increased natural gas substitution? And how much of that gas substitution are you able to work into your pricing strategy overall to make sure you get improving returns on your overall asset base?

William Hendricks

Let me back into that question a little bit. So certainly, as we increase the amount of Emerald 100% natural gas, pumps that we have in the field, that will come through as a pricing increase because we get to charge more for that technology because there is a big benefit when we can use more natural gas as a fuel versus diesel, it's a huge benefit for the E&P. But all that being said, we are getting -- the majority of the single -- what we said was mid-single-digit price increases in the quarter, majority of that was like-for-like price increases even to the point where we've actually walked away from some agreements when they were finished and moving on to other agreements where we get higher pricing.

I think you'll see more of that with some of the other companies, too, as E&Ps continue to do their price checks on the market and try to learn where the market is. I think you'll see some movement of Completion equipment to higher pricing opportunities. But yes, the majority of that mid-single-digit increase change in it was like-for-like pricing increase.

Operator

Your next question is from Arun Jayaram with JPMorgan.

Arun Jayaram

One of the E&Ps yesterday had an interesting comment on what they're doing in Completions. Expand Energy, as you know, Andy, largest U.S. natural gas player mentioned as a result of higher diesel costs, they burn around 25 million gallons a year that they're switching to kind of natural gas burning equipment or going to try. I think they're running like five or six fleets I mentioned. And I was wondering if you could talk a little bit about, are you seeing that same trend across the industry? And is that maybe supporting some of the differentiated pricing gains that you've been able to deliver just given your high mix of natural gas burning equipment?

C. Smith

Arun, the differential between being able to burn natural gas and diesel is probably at an all-time high. I'm going back and checked, but it's tens and tens of millions of dollars per fleet per year. So if you have the ability to get natural gas equipment, which is pretty sold out across the industry right now. But if you have the ability to get that and you have the availability of gas, you would absolutely choose that route. I can't speak specifically to what Expand is doing.

Arun Jayaram

Yeah. I was just wanting to get your take. But I guess...

C. Smith

Yes, generally, anyone in the industry would be doing that right now.

Arun Jayaram

Yes. But that could create the backdrop where if an XYZ customer wanted a fleet that they could bid up and that's how you can manifest pricing gains in a faster -- in a clip, yes. That was kind of what I was kind of trying to get more color on.

William Hendricks

Yes. And we continue to bring in the Emerald 100% natural gas direct drive pump systems in good numbers every quarter, and we have slots with the manufacturer all the way through next year. Again, it's not that we're not increasing overall capacity of frac supply for what we offer in the market because we're retiring the older Tier 2 diesel stuff. but we do get a higher rate for when we put those on location because of the benefit of burning more natural gas and less diesel when we do that. So we blend those into existing fleets that are out there and increase the amount of natural gas that we're burning on a per fleet basis.

Arun Jayaram

Great. And just my follow-up. If we take out some of the noise in late in the quarter in 3Q, your results in North America are definitely trending better than a lot of your completion peers. Andy, I was wondering if you could highlight what do you think is driving that, call it, differential pricing commentary and whatnot. We have a couple of theories, but I want to get your views on what's maybe driving it because a lot of your peers are not citing the strength in completions that you are.

William Hendricks

Yes, it's great execution and great product and all backed with the digital infrastructure that we put in place, and that's what's keeping us highly competitive out there. As I mentioned earlier, if it hadn't been for sand mines in South Texas, we would have had a really strong beat in Completions in the third quarter, we're on track for. The team is doing a great job.

Arun Jayaram

Got it. And then, Andy, to what extent have you been able to high grade the quality of your customer base? I know all customers are important, but there's obviously -- you want to be aligned with E&Ps that have sufficient scale so you can get the most drilling and D&C efficiencies from that and give you more utilization on your horsepower.

William Hendricks

Yes. We don't have any issue with the quality of our customers. I would explain it this way and say 60% to 70% of our completion revenue comes from the biggest 15 E&Ps in the U.S.

Operator

There are no further questions at this time. I will now turn the call back to Andy Hendricks for closing remarks.

William Hendricks

Thanks to everybody who dialed in today. It was really exciting to be able to talk about the third quarter. It's one of the best quarters we've had in a long time. I want to congratulate our teams across all of our segments at Patterson-UTI Energy for a great quarter and look forward to talking to you again at the next earnings call. Thanks a lot.

Operator

This concludes today's call. Thank you so much for attending. You may now disconnect.