Good day ladies and gentleman, and welcome to the Second Quarter 2008 Patterson-UTI Energy, Inc. Earnings Call. My name is Jack and I will be your coordinator for today. Now at this time all participants are in a listen-only mode. We will facilitate the question-and-answer session at the end of the conference. (Operator Instructions). On behalf of Patterson-UTI Energy I would now like to turn the presentation over to Mr. Jeff Lloyd. Please proceed sir. Jeff Lloyd – Investor Relation Officer: Thank you Jack and good morning everybody. On behalf of Patterson-UTI Energy, I would like to welcome you to today’s conference call to discuss the results of the three and six months ended June 30, 2008. Participating in todays call will be Mark Siegel, Chairman; Doug Wall, Chief Executive Officer; and John Vollmer, Chief Financial Officer. Just a quick reminder that statements made in this conference call which state the company’s or management's intentions, beliefs, expectations, or predictions for the future are forward-looking statements. It is important to note that actual results could differ materially from those discussed in such forward-looking statements. Important factors that could cause actual results to differ materially include, but are not limited to: declines in oil and natural gas prices that could adversely affect demand for the company’s services and their associated effect on day rates, regulization, and planned capital expenditures; excess availability of land drilling rigs including as a result of the reactivation or construction of new land drilling rigs; adverse industry conditions; difficulty in integrating acquisitions; demand for oil and natural gas; shortages of rig equipment; and ability to retain management and field personnel. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statement is contained from time to time in the company’s SEC filings which may be obtained by contacting the company or the SEC. These filings are also available through the company’s web site or through the SEC’s EDGAR system. The company undertakes no obligation to publicly update or revise any forward-looking statements. And now it is my pleasure to turn the call over to Mark Siegel for some opening remarks. Mark?

Thank you Jeff Good morning and thank you for joining us today. I hope that by now all of you have had an opportunity to read our earnings release which was issued earlier this morning prior to the opening of the market. I planned to begin by taking a couple of minutes to review briefly the financial results for the just completed quarter. I will then turn the call over to Doug Wall, Patterson-UTI President and CEO for some brief comments and color on our operating results. As always we will be pleased to take your question following these prepared remarks. Today we reported net income of $81.4 million or $0.52 ended June 30, 2008, compared to net income of a 140 million or $0.88 per share for the three months ended June 30, 2007. Revenues for the second quarter of 2008 were $526 million compared to revenues of $523 for the second quarter of 2007. We reported net income of a $159 million or $1.02 per share for the six month ended June 30, 2008, compared to net income of 255 million or $1.62 per share for the six months ended June 30, 2007. Revenues for the first six months of 2008 were $1.03 billion compared to revenues of $1.07 billion for the six months of 2007. The results for the three and six months ended June 20, 2007 include pre-tax non-recurring gains of $58.4 million resulting from the sales of certain EMP asset and the recovery of embezzled funds. These gains net of tax increased our net income for the three months and six months ended June 30, 2007 by $37.9 million or $0.24 per share. Today I am also pleased to report that our board declared a quarterly cash dividend on our common stock of $0.16 per…

(Operator Instructions) The first question comes from line of John Fischer with the Raymond James. Please proceed.

Good morning guys. Douglas Wall Hey John, good morning.

Just couple of questions on your stack fleet. Could you guys give kind of ballpark number for how much cash to put into stacked rig for you to bring back in the service?

John that's – it really varies rig by rig we had look current 60 some stack rigs we have today, probably half of room could go back to work tomorrow with little or no capital expenditures. There is always some incremental operating expenditures that you face when you reactivate a rig. But in terms of capital about half of the stack fleet could go back to work with very little capital. The remaining rigs in that would -- could vary anywhere from as little as a $100,000 to upwards of a couple of million dollars before we put them back to work.

Okay. And I guess out of those 60 or so you could put out in near term. Are those waited on a certain region or certain debts capacity?

Well, probably that’s a good question. To give you some idea about 40 of those rigs are 750 horsepower rigs and under. About another 20 years so are 750 to a 1000. So that's the bulk of the stack rig, we do have four of them much larger rigs, the 2000 horsepower rig that are also stacked, but at the moment we think those will go back to work in the short term. In terms of regions, those – the smaller rigs are primarily in West Texas and the Rockies are probably the two big areas where those rigs reside.

Okay. And then I guess switching over to the margin side, cost increase a little bit more than we expected in second quarter, is that kind of begged into the $300 margin increase you guys see I n next quarter and is that like a labor issue, a fuel issue and something you kind of see going forward or is that one time deal?

It is concerned in the comments of our margin going forward. Here there is couple of aspects toward the most significant of which is when are activating rigs you have to hire people and you have to prepare the rig before you have running revenue, and that was couple of hundred dollars of the increase and the cost per day in the second quarter, and with he activation rigs you can see in July we expect that to continue. There is also an increase in repair cost and cost of operating rigs in over the last 12 months.

John, let me add a point to that. We expect to see another 10 or 15 of those currently stack rigs go back to work here in the next quarter or two, we have work for them, and I think we feel there will be some additional startup cost for those rigs to go back to work as well.

Okay guys great. Thanks for the call.

The next question comes from the line of Geoff Kieburtz with Citi. Please proceed.

Good morning.

Good morning Geoff.

Really kind of following along the same thing with plans that you have for adding new rigs, should we really think about this $200 a day as sort of going to continue going forward as a cost, was that also inflating?

Geoff, I think if we look at other up cycles what you will find initially there is a bump in average cost per day. And then as we run more rigs on a per day basis our cost then begin to decline because you get past that point of having people activating rigs and you get to more stable rig count.

That’s right John. With your point that Doug outlined before that doesn’t seem like that slowing of the rate of addition is going to occur until maybe the end of `09, is that right?

You know, I am clear he has mentioned 15 rigs, and the question is how many really go out over the next couple of quarters, it could be more than that. If that was a case then that couple of hundred dollars would stay in it as the rig counts begin to stabilize those cost could drop that down. The other side there is inflation in the sense that we are having lot of demands from people on the oilfield which has created a bit of a higher cost environment that we’ve seen in the past. So that’s the fact that it will go the other way and potentially if you keep the cost at these levels going forward.

Do you have a ballpark estimate of what that underlying inflation is excluding the specific startup cost?

Well, we know, while there is some expenses, people service the rigs in more expense then they were a couple of a years ago, there is a lot of demands in their time, exactly what it is I don’t know. One observation to make these two things going on relative to rig count, one is we are activating the new rigs that we announced back in 2006, we have also added to that program. Those rigs have a very small impact from a cost per day point of view because you‘re constructing a new rig and when its constructed and rigged up it goes directly to the field that is moved in your generally collecting revenues at the movement of activation. The place we incur the extra cost is where rigs has been fact from more than a couple of months, and that time there is parts within that rig, not capital parts expandable, that mean to be a replace, you also have to hire a new crew because we don’t keep the crews around when the rig is back, you have train them, they have to learn to rig up the rig and et cetera. So, the extra cost per day is really about reactivation and about the new build program.

And I appreciate you cant maybe pinpoint the inflation, but would you put above or below 10%?

I would have to say at the moment it would be well below 10%. But you know as this industry heats up Jeff, we – who knows we are about to be here, we’re running more rigs in the industry then we have in the long, long time and there is increasing for almost every facet of the service business from labor to welders to repairing to black off. So at the moment I think we have kept a pretty good lid on it, we are starting to see some signs as completing inflation.

Geoff I would add to that also keep in mind that an excess of 50% of our daily operating cost is payroll driven Rich, for the most part is to pass-through the customers under our contracts.

Okay.

And then what we have seen of late is the increase in cost per day has been driven by the startup cost and then also in the repairs and maintenance side for that, call 35 or 40% of our cost that are not payroll driven.

Okay. So that under 10% and a fair portion of that can be passed through immediately within a quarter?

Yes.

Okay. And on the pressure pumping side, would you say the same thing under 10% inflation?

Yes, I think I would, Jeff.

Okay. And last question, can you give us a sense of what the leading edge rate is today for say 1,000 horsepower and a 1,500 horsepower rig?

We don’t typically dissolve those numbers, Jeff. So I prefer not to get into that. But certainly pricing has moved pretty dramatically in the last 30 to 45 days and in the areas where for example 1,000 to 1,500 horsepower rigs there just aren't any of them available today. Obviously the prices have moved more quickly in those rigs than others.

Geoff, we think that the better indicator is average revenue per day. That’s why we talk about it.

Yeah.

Because otherwise you start to speak about in effect one rig and it's about as misleading as a portfolio manager talking of that one stock.

Got you. All right, thank you.

Your next question comes from the line of Doug Becker with Banc of America Securities. Please proceed.

Thanks. Doug, you mentioned some favorable economics in the new-builds. Just hoping to get a little more color on that, whether it's a day rate or a pay back debt that you are expecting?

Maybe I will take that question, Doug. This is Mark Siegel. Frankly we think that we wouldn't be building new-builds if we didn’t think the economics were favorable. We have always talked about entering into long term contracts and doing things as a sort of customer driven organization. We see our customers having a demand for a certain kind of rig and our ability to provide it. We are very proud of the fact that over the last five years our average return on equity has been 24%. We think that’s among the industry leaders. When we make these decisions to invest in new-build rigs, we think that we are going to continue to generate the kinds of returns for shareholders that we historically generated otherwise we wouldn’t be doing it. So I guess I am trying to tell you in a long winded way that we don’t want to get into the specifics of the economics of each transaction. We think that that doesn’t do our company and the shareholders a lot of good, but we think that we are achieving rates of return consistent with historical rates of return.

Let me ask it this way. You are getting a lower payback than you were maybe in the past?

I don’t believe we are getting a different payback. We are getting just a payback.

Okay, fair enough. Obviously demand is picking up pretty aggressively, are there any opportunities or I guess customer inquires that you haven't been able to meet because of crew constraints?

Doug, there has been a little bit about in certain markets at least on a temporary situation. Obviously when if a customer phones today and wants a fire up that rig tomorrow, we can't always meet what they are requiring. But for the most part, other than the unavailability of 1,000 and 1,500 horsepower rigs, we really haven't had to turn away customers.

Okay. And then I guess that leads into a question about the 740 horsepower rigs and below, given the demand trends that you are seeing, what's the prospect that they are those being reactivated?

Well, the interesting thing is that since I have been here Doug, I have heard repeatedly that those rigs would never go back to work and it's interesting the first six months of this year we have put 25 or 30 of those rigs back to work in the six months already. We have another 10 or 15 that are probably going to go back to work by the end of the year. So I think there is a significant of them that they are still are prospects and they will work.

That's definitely encouraging. And then just briefly you mentioned previously in the last quarter that North Texas and Rockies had been relatively weak compared to some of the other regions? Has that reversed and are there other regions that neither or maybe not growing as fast as others?

I think both North Texas and Rockies were at a point in time there was some weakness there. We have actually seen virtually all of our regions Improved pretty dramatically. If there is one area that’s a little more spotty than the rest, it could be West Texas.

Okay. Thank you very much.

Doug, I would just add one thing to that that what we have really seen is a significant demand for this that Doug was really speaking about this return of existing rigs from our fleet as well as for the new rigs in various different horsepower rigs.

Okay. Thanks Mark. Operator The next question comes from the line of Dan Boyd with Goldman Sachs.

Hi thanks. I know you don’t want to talk about specific leading edge day rates, can you give us some color on where average day rates in your fleets to 1,000, 1,500 horsepower class relative to the free average?

I don’t think we have ever divulged or tried do that and sort of take out a particular class and we are getting this kind of average rate for this particular sort of set of rigs and frankly, the reason is because I think it will be quite misleading. We do business as you know many basins in North America and prices vary among basins and they vary also depending on what in effect the contractor is furnishing et cetera. So I think that that information is not something we generally give because we don’t think there is a way to encapsulate it in a way that’s terribly meaningful.

Okay. And then in the new-build program, some deliveries you might start going into 2010, does that imply that you wouldn't be able to get additional rigs delivered in 2009 or is that not the case?

We still certainly have some capacity to deliver some additional rigs in 2009. I am not going to share with you just how much, but at the moment I would be real surprised if we don’t have some further announcement for rigs to be delivered later in 2009. But at the moment, with what we have announced, pretty much takes us through about the end of Q2 next year and maybe end of Q3. So we do have some additional capacity for later in the year next year.

Okay. How do you think about your internal capacity to deliver rigs, I guess maybe on a per month basis?

Well, we have a lot of capacity of rig building. Let me share with you, we primarily with our new-build rigs that we purchased a complete rig from a particular supplier. We buy components and we basically rig those rigs up and two of our rig up yards, one is Thailand and one in Victoria. All of our walking rigs are built in our Midland yard and West Texas. We have other capabilities around the company to add capacity if we need it to, but we are trying to do things prudently to make sure that we maintain a handle on our costs and it's also very important to make sure that we spend the appropriate time to introduce rigs to the marketplace in a very controlled prudent fashion so that they go to work with little and no problems.

Okay. Just one last question. You mentioned I think you have 64 sort of idle or stack rigs at the moment. So at spot sort of at the peak of the market you had over 100 idle and stack and maybe that calculation is wrong and then implying that you put maybe 30 back to work. Does that suggest that you did scrap a few or take those out of the what would you consider marketed fleet?

I think we may have ignored Canada in that set of numbers. I mean with us running with 20 rigs in Canada and I think Doug was speaking to US number of stack rig so that another 10 in Canada may reconcile that for you.

All right, that makes sense. Okay, thanks guys.

And no, we have not scrapped any rig.

350 approximately rigs we have talked about.

The next question comes from the line of Mike Drickamer with Morgan Keegan.

Hey, good morning guys. Would you guys taking and ordering some rigs yet? I was interested, what lead times are you being quoted for new rig delivery that is going on?

Well Mike, most of the lead times are in the 9 to 12 months timeframe. I think as you know, we had a significant amount of inventory that we had purchased back in '06 and '07. So we were able to put some new rigs together just based on our inventory but anything new that we are ordering today we are looking at 9 to 12 months.

Okay. What bottlenecks are being seen right now for the new build rigs?

Well, I think that I would like to say the big bottleneck is just getting the equipment component deliveries from our suppliers.

Okay.

Mike one thing is I think we are betting to what Doug is that part of the reason that we are able to get the equipment when in the time split that Doug spoke about is that we have been in discussion about with suppliers and in the supply chain for long time and it may held our major customer.

Okay. So perhaps if your smaller moment top contract or it take a longer than the 9 to 12 months then for new rig?

I would think so, and that’s really what I was trying to indicate was that you know, in fact, I don’t think that those availabilities are availabilities for everyone who would want to go by our rig today.

Okay. And then what kind of cost inflation that we’ve seen in the cost of building or buying these new rigs?

I would think the cost inflation has been a little bit, but its probably under 5% -- probably the biggest difference with us from the rigs we ordered in 2006 versus the rigs we’re ordering today is actually the fact that we’re going AC as opposed to HCR and that had probably a million dollar per rig to the cost, but that was something that – but we made the decision man have decided about way to go. But cost inflation overall is probably in that 5% range.

Okay. And then one more ideal rigs, you discussed number of those rigs could go back with minimal capital being invested in the rig, what is your capacity Doug as far as being able those back, as far as crewing them up and I guess, supplying the pipe and everything else that would be needed for those rigs, you know, one, two month or is it higher than that?

I think its higher than that, we probably could understand how is it go through, we probably could putout five a month, but again we’re trying to do it prudently, we’re not going to put the rig out and do a better job for our customer. So we want to make sure we’ve got quality crews, we want to make sure the rig is ready to go to work.

Okay. I guess, I will just add one more there, I mean, in previous calls the industries talked about labor and how much the bottleneck labor was, that seems to be less of an issue this earning season, I am I reading that long or something else going on there?

I am not sure if you’re reading that wrong, but I am just not sure people are talking about it very much, I think, I think the labor is going to be huge challenge for this industry in the next two or three years if it isn’t already today. I think so far we have been able to get the incremental amount of rigs in the marketplace with literally no problems, but I think we’re going to see increasing demand for those kinds of skill set that are throughout the industry. So I think as an industry we’re going to have to do more training in on boarding people and getting peoples that get attract to this business. Over the comment I didn’t mentioned, you asked about drill pipe, we are activating the lid with us drill pipe is not a problem whatsoever, we have plenty of drill pipe to reactivate, all the rigs we wan to.

Alright, thanks a lot gentlemen, that’s all from me.

The next question comes from the line of Alan Laws with Merrill Lynch. Please proceed

Good morning.

Good morning Alan.

I got a couple of followups actually more than anything. On the 20 new the ones that you’re building, you talked about the cost inflation just previously. How much of these rigs costing them?

Alan on average they’re going to be about $17 million.

And these are full AC with top drives and everything else on the..

Top drives, hydraulic catalos virtually state-of-the art anything that you could put on rig today that our customer would want. Some of those also includes the packages for rigs in the Northeast.

Okay. So those are – the 17.5, you said 17.5?

17.

17 and that’s excluding drill pipe?

That includes drill pipe.

Oh good right. And then of the 20, it looks like you have contracts of most of them, you didn’t mention any contracts for the eight walking that you’re constructing?

Actually, I thought I did, they are all contracted.

All contracted. Okay I missed that.

I am sorry, but now all rate of those walking rigs are contracted. And I think that these rigs are state-of-the-art second in them.

These are option the path, the walking, stocking kind of.

That’s right. That‘s the who asked the other 12 are not walking rigs.

Okay, yeah, okay I got that. Now on the reactivation you have 60 stack, neighbors had some more number they thought that only 20 of theirs would ever go back to work. You have 30 that could go back. Could you may be say something about the size of these rigs and their configurations and how many you actually expect to go back other than the 10 to 15 you have already mentioned here.

Well, I think, as I mentioned the ten or 15 we already know at some point in time are going to go back to work in the neck couple of months. They are primarily in the kind of 750-horsepower range. We certainly haven't seen much interest in the 500-horsepower and less. So I think most of the rigs that you'll see go back to work are in that 750-horsepower category.

These have top drives on them?

No.

Would you put that on? Does that make them more.

Some of them you might be able to, Alan but lot of more with that small a rig it's difficult to get a top drive that will fit in the mast. You can rent some top drives that will fit but typically they tend to be the smaller top drives with more limited capability.

Okay, and last thing I got here is on universal. Can you remind me how many spreads you guys run and how much horsepower in the whole company?

Well, we don't normally talk about the spreads or horsepower. We have – I think I mentioned to you a couple conference calls ago that we will end or exit 2008 with about 110,000-horsepower fraking capability. I don't have the numbers in front of me for nitrogen and cementing and some of the other things. But we have, this year we will have a full frak crew available using these quintplex pumps for doing the horizontal shale fraks and we have plans to add to that going forward.

That's all I have, thanks.

Next question comes from line of Jeff Tillery with Tudor Pickering, please proceed.

Hi good morning.

The name got shotterred a bit

Alright can you talk little bit about this choice to go with A.C., what's driving that in just comfort level in the technology in the up time?

Yeah, Geoff the A.C. technology has been in the lands business now for a couple of years. We were not a first mover to A.C. technology because we wanted to make sure that the bugs got out of the system and that the technology is as described. We have seen some real recent improvements particularly with our suppliers and what they do with both offshore and what they are proposing to do with lands rigs. And the prime benefits really are the control from the drillers perspective to get far more control of the operations, what they see. Obviously the other big benefit to them is the size and the wait of the components. And the fuel consumption. Those are probably the three big things that we see are advantages to A.C. over S. C. R. Having said that S. C. R. technology has been around for 37 some years, highly proven, very effective. But we do feel it's time for to us stick out tow in the water and see just how good the A.C. technology can be for us.

And on, as far as your CapEx budget, do these new builds, are they incremental to the you guys have talked about in the past? And can you give us a little bit guidance on what you're looking at for 2009 just what the new builds announced today?

Well for 2008 the new builds are going to add a little bit to our CapEx for 2008 and we would guess at this point that it would be about 530 million. Related to those new builds about $350 million is committed for 2009 or will be committed for 2009. In terms of a complete CapEx budget for 2009 that has not yet been completed.

That's helpful, though and then my last question is just regarding some of these smaller rigs that are left in the idle fleet. You guys have talked a little bit in the past about the potential opportunity to move some of them up to the Northeast. Could you just give us an update on how you're thinking about that right now?

Well, Interestingly enough we really thought quite a few of those rigs would be certainly suitable and very capable of drilling a lot of the wells in the Appalachia. I think what has surprised us a little bit is our customers interest in actually having new rigs. I think the new rigs that we announced we had initially thought we would probably put some of these lower horsepower rigs to work up in that marketplace, but the customers have actually moved us in a different direction.

All right, thank you very much.

Your next question comes from the line of John Dan Yells with Simmons and Company. Please proceed.

Hey guys, a quick question on your pumping business. It looks like, I mean you had a nice increase in the revenue per job. Is it safe to assume that that’s more business mix as opposed to price increases?

No, it's actually price increases and us being pretty selective in terms of the jobs we have taken in that market.

Okay. And on the jobs that you are doing right now, what would you say, is it 20,000 horsepower for frac job right now?

No actually, we haven’t done any of the deep horizontal fracs yet to-date. We expect sometime in this quarter we hope to have done a couple of them. But to-date, all of the fracking work that we have done up there has been the traditional lower horsepower kind of fracs where you have got 2,000 or 2,500 horsepower on a location.

Okay. Last question. Any opportunity to expand beyond Appalachian on the pumping side?

Yeah, that’s something that we look at all the time and at the moment we feel we have got a niche market there. We feel we are local, we have very good reputation in the local market not to say we won't look at expanding but at the moment but there appears to plenty of capacity in the industry with all our other competitors. So unless we find a niche somewhere we feel we can bring something to the market, we will probably stick to nailing them in the Appalachian.

Okay, thank you. That's it.

The next question comes from the line of Kurt Hallead with RBC Capital Markets. Please proceed.

Hey, good morning.

Hi Kurt.

I think finally you guys are pretty well aware of the skepticism in the market about Patterson's ability to effectively compete with the new rigs and clearly you have addressed that with some of your announcements here today and at the beginning of the year. Just wondering if you guys can provide some color because some of the push back now is that essentially the bulk of the markets, one of your primary competitors and it's not neighbor. So can you address how you guys are going to stack up with respect to adding new rigs into the market as required going forward vis-à-vis the rest of the industry?

Sure Kurt. Let me take a shot at that and if John and Doug want to add to it, it would be fine. I think that we see this building of new rigs and again this was the same thing we said about long term contract as being highly customer driven and that’s basically what Doug was saying before. We try to offer our customers in effect the opportunity for the right rig at the right price for the right drilling job. And if they want an existing rig that’s great, they want a new rig that’s great and that’s really how we see it. And in fact, obviously from the number of rigs that we are currently running, you get a strong sense that our existing rig fleet does in fact compete very very well with other competitors' rigs. Our walking rigs we believe to be absolutely state-of-the-art and compete with people's state-of-the-art rigs. We think [model/remodel]. So we don’t see it as some kind of need to do this to catch up, we are doing this in response to our customers and that’s the basis for it. Finally, as respects the question that I think is sort of behind your question if one of our competitors decides to build X rigs, we don’t feel the need to build X plus one rigs for purposes of some kind of race to in effect show the investors that we can build at the same number of rigs as one of our competitors. Fundamentally, our response to building rigs is one which as I say emanates from the customer, in response to the customer and thus so we think in a way that is also responsive to our investors expectations about a great return on equity.

I understood. And I guess the question I had is, I noticed that just period in a lot of these new rigs have contracts behind them and whether or not there is going to be a shift in share of those contracts whether or not you will be able to maintain the current position in the market or is there some other dynamic out there that may cause a shift in share of incremental business going forward?

Kurt, I think that we are getting our share of the market. I think we have always gotten our share of the market. I think what we have been is very price disciplined as a company over a lot of years and in up market we have always expanded faster than our competitors because we had the capacity to do so. We have always also seen the fastest increases typically in average margin per day. So we have both gotten utilization as well as increases in margin. What we haven't done I think is in effect try to maintain percentages of market and market share just for the sake of doing so and sometimes in down market and have been in fact willing to accept a lower share of market in down markets but that’s never been the case in up markets.

And then everyone this question, so we have had natural gas prices come off from 13 back to 9, because this probably again before -- just as it's kind of getting off the grounds here, what indications are you getting from customers, what are their price sensitivities? Is it $9 to market or is it 8, is it 7 or what's the sensitivity where everybody starts blowing their horns again?

Kurt, we have seen the pricing change, obviously in the natural gas market, but we have seen nothing to indicate that there has been any diminution of interest on the part of our customers. In fact, in the kind of prepared remarks that I made at the end those remarks about the customer is enter into and desire to enter into these long term contract really reflects their bullishness I think about the industry generally and that’s really the point I was trying to make, which is that their bullishness is right up until today. We haven't seen any signs in respect of the fact that gas has obviously come down; that’s point one. Point two is our remarks have always been going back to February that kind of looking at the market at sort of 9 or better that we for kind of a prolonged period has been well, we think our customers were hoping for and expecting and was driving their activity. If it's significantly below that on a long term basis, we wouldn’t be surprised to see some short term issue.

How would you compare and contrast what's going on now versus January of '06, right because the fundamentals of the land business was very good in January of '06 even with -- and gas prices were coming down and everybody started getting nervous and lo and behold six months, nine months later, everybody started blowing in their horns? Can you give a little compare and contrast for that period?

Kurt, I don’t think I can because fundamentally the question is what's going on with the commodity price and I don’t know that I can perfectly recollect January of '06 at this moment. But the question is if we have $126 oil prices and 9.25 gas prices and we kind of sustain levels in this area, I think everything is going to be great. If it changes dramatically from here, obviously people will rethink what's going on, but this has been historically very very set of pricing that currently exists in the marketplace. So we are feeling -- our customers are quite bullish.

Great, thanks.

Your next question comes from the line of Daniel Kraemer with Coast Asset Management. Please proceed. Mr. Kraemer, your line is open, you may be on mute. Your next question comes from the line of Arun Jayaram with Credit Suisse. Please proceed.

Good morning guys.

Hi Arun.

I have a quick question for you guys. If the rig count was to increase by 200 rigs from today's level and based on your conversations with operators, how many rigs of those do you think would be existing rigs in the field and how many of those do you think would be new builds?

Arun, over what period of time did you say the rig increase?

Let's just over the next six to nine months I think in the short term if the short term is the six-month period, I would say a lot of those rigs are going to have to come out of the existing idle capacity in the industry. And I think that place very well into our hands. If it's a longer period obviously some of these new builds that people have announced as well as us will start to play a major role in that. But I think in the short term its a lot of it has to come from the current capacity.

Okay. Second, I was wondering if you could may be comment on what you are seeing in Canada in terms of pricing and forward-looking demand?

We think the Canadian count is probably going to stay in a fairly narrow band similar to what you've seen in the last month or so. I think as the weather is good over the course of the summer I think the rig count may go up potentially 100 rigs up there. But I think typically once you get into September, October, November you get some sloppy weather that can help some fairly large fluctuations. So I think January I think Canada probably will be slightly better than what you have seen but we don’t see a big run away up there. Either our own case we expect 10 to 11 rigs to be running probably through up until freeze up.

Okay, and last question is you talked about the 20 incremental that the new builds. Any help in terms of what you think the ultimate earnings power those rigs could be an annual basis on the rigs there up in running in 2010?

I think we will be hesitant to project what the expected earnings for those 20 rigs would be.

Okay, or could you help us or remind us in terms of depreciation, John how you are depreciates those rigs as a 15 years 10% salvage?

We actually depreciate all our equipments with no salvage value. The way in we do it by component but generally the way is ever to life for rigs is on the 12 to 14 year range so is never diffuse about 13 years you should give pretty accurate answer.

Okay, that's helpful, thanks guys.

Your next comes from line of Amanda Scott with (inaudible) and company, please proceed.

Hi guys, I was wondering if you please provide me with a breakdown as the number of rigs that Patterson owns that are capable of directional drilling?

That's kind of a very difficult question to answer. Virtually all of them could drill some type of a directional well. There's many, many different kinds of directional wells and horizontal wells. As I said I have to say that virtually all of them could drill a directional well but to drill a deep horizontal wells you start factoring in a number of other things that potentially, three quarters of our rigs could only drill certain types of deep horizontal wells.

Okay, that's very helpful. I know that's a big question. But I have couple more. On the Q1 call it was mentioned that Patterson has three rigs in Appalachia that are currently and would have an additional three by the end of '08. Do you have any plans to increase the rig count there and field support services well in the Marcellus play specifically?

Well I mentioned all of those six new rigs are going up to the Appalachians in '09 and we do expect some additional existing equipment to go to that market throughout 2009. So obviously with that, with that kind of an operation we are looking at building up our infrastructure up there for the drilling company. We do have a leg up I think in that our sister company universal has been established in that marketplace for over 30 years and so we do rely a little bit on our little brother up there to help us with some of these things.

Okay. What about the Bakken formation, same thing there or are you not seeing as much demand there?

Well, The Bakken is a very interesting play. We've moved a number of rigs up in there in the last three to four months. I think you will see continuing rigs go into that marketplace over the course of the next six months. We have several I think at the moment that are probably heading to that marketplace. But again it takes a very specific type of rig to drill those wells.

Right. Okay, I thank you very much for your time, appreciate it.

Thank you.

Your next question comes from line of Todd Garman with Peters & Company, please proceed.

Good morning, I just want to come back to your pressure pumping business for a minute. You mentioned that you had hire sand costs here during the quarter. Can you give us some color on why that was.

Well I say sand costs primarily we have seen some pressure obviously on getting certain qualities of sands. We have seen some price inflation. We do have contracts with two or three suppliers in the market. But it’s interesting some of our competitors are actually having to truck sand in from the western U.S. for that marketplace. So we have seen some pressure on sands pricing. And the grades and qualities of sands required for these horizontal fraks is certainly different than the standard frak.

And so you are positioned with your sand suppliers to have enough supply of Barken going forward to meet the forecast demand in that play?

Well, our guys certainly talk to our suppliers all the time. We think we are in pretty good shape. It will depends just how quickly that market turns up and heats up. We think we certainly have the capability of doing two of those deep horizontal fraks every month and we are geared up for about that level.

And is that in addition to the conventional fracturing business that you currently have or is that total?

No that's, that's in addition to.

Okay, thank you.

There are no more audio questions at this time.

Well, we'd like to thank all of our investors and the analyst community for joining us on this call and look forward to speaking with you again at the end of our third quarter. Thanks everybody.

Thank you for your participation in today's conference. This concludes the presentations and you may now disconnect. Have good day.