Welcome to the Fourth Quarter 2008 Patterson-UTI Energy Inc. Earnings Conference Call. My name is [Latrice]; I will be your coordinator for today's conference. At this time, all participants will be in a listen only mode. We will conduct a question and answer session towards the end of this conference. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes, and I will now turn the call over to your host for today's conference, Mr. Jeff Lloyd, on behalf of Patterson-UTI Energy.

Thank you very much and good morning to everybody. On behalf of Patterson-UTI Energy, I'd like to just welcome you to today's conference call to discuss the results of the three and twelve months ended of December 31, 2008. Participating in today's call will be Mark Siegel, Chairman, Douglas Wall, Chief Executive Officer, and John Vollmer, Chief Financial Officer. Again, 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's 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 deterioration in the global economic environment, declines in oil and natural gas prices that could adversely affect demand for the company's services and their associated affect on day rates, rig utilization, and planned capital expenditures, excess availability of land drilling rigs, including 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 statements 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 website or through the SEC's EDGAR System. The company undertakes no obligation to publicly update or revise any forward-looking statements. At this time it's my pleasure to turn the call over to Mark Siegel for some opening remarks, to be followed by questions and answers. Mark.

Jeff, thank you. Good morning and welcome to Patterson-UTI's conference call for the fourth quarter of 2008. I trust 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. Our plan this morning, is to take a few minutes to review the results of the three and twelve months ended December 31, 2008, and to indicate some of the financial highlights from the just completed quarter, which I hasten to add, was an excellent quarter in terms of financial results. I will then turn the call over to Doug Wall, Patterson-UTI's President and CEO, who will make some brief comments on the results of the individual operating [expenses] and current operations. After Doug's comments on the quarter, I will make a few comments on the market outlook, even though we have very little clarity at the moment. As always, we will be prepared to take your questions following these prepared remarks. To summarize, net income for the three month period totaled $79.5 million or $0.52 per share, compared to $85.1 million or $0.55 per share, for the three months ended December 31, 2007. Revenues for the quarter were $570 million compared to $521 million for the fourth quarter of 2007. For the 12 month period ended December 31, 2008, net income totaled $347 million or $2.24 per share, compared to net income of $439 million or $2.79 per share, for the 12 months of 2007. Revenues were $2.2 billion for the year ended December 31, 2008, compared to $2.1 billion for 2007. In summary, we had an excellent fourth quarter and an excellent 2008. As reflected in our press release, these reported results for 2008 include three unusual non-cash items; number one, write off of the goodwill in our fluids business of $10 million, number two, a charge of $10.4 million related to the retirement of 22 rigs from our drilling rig fleet, and third, an impairment charge of $2.4 million related to some of our E&P properties. On an after tax kick basis, these three items reduce our earnings by a total of $0.12 per share for the quarter. Capital expenditures for the quarter were $119 million and $449 million for the year. During the quarter, we repurchased 1.5 million shares of the company, at an average price of $10.64. The remaining authorization under our share repurchase program now stands at $113 million. I would like to now turn the call over to Doug, who will discuss our operations for the fourth quarter and for the current quarter.

Good morning and thank you, Mark. I'll make a few comments this morning on each of the operating divisions' results, starting with the drilling company. For the quarter ended December 31, 2008, the company had an average of 252 drilling rigs operating, including 239 rigs in the U.S. and 13 rigs in Canada. This compares to an average of 276 drilling rigs operating, including 264 in the U.S. and 12 in Canada for the third quarter. Average revenues per operating day during the fourth quarter were $20,210 compared to $19,620 in the third quarter. This primarily reflects the pass through of the $500 per day wage increase we instituted in early September, as well as improve rig pricing that was achieved in Q3 and in early Q4. It also includes a $1.2 million buy-out on a term contract on a rig in the Rockies, which increased our average revenue per day for the fourth quarter by approximately $50. Average direct rig costs per operating day were $11,210 for the fourth quarter, compared to $11,130 for the third quarter. The wage cost increase that I mentioned earlier was largely offset by other cost reductions. Our activity levels in the U.S. peaked in early October, with a count of 275 rigs. Since that time, we have witnessed perhaps the steepest and quickest decline we have ever seen. The U.S. average monthly rig count for the quarter was as follows; October 270, November 247, and December 201. We recently announced our January U.S. rig count average 147 rigs, further confirmation of the steep decline in the U.S. market. Our current rig count stands at 132 total rigs, quoting 120 in the U.S. and 12 in Canada. Low commodity prices, too much oil and natural gas supply, combined with declining demand, as well as…

Thanks Doug. In our last call with you at the end of October, we were just seeing the first signs of turmoil in our markets. The last 100 days or so have been unprecedented in our industry and in the world’s business markets. Never before in my lifetime have we seen such a dramatic change in the business climate in such a short period of time, and never before has it impacted virtually every business segment, every industry in every country around the world. The combination of falling commodity prices and general turmoil in the credit markets, have combined to slow the oil services industry to a level not seen for years. This is most unfortunate, as our industry produces natural gas and environmentally friendly fuel, which is mostly U.S. sourced and we employ a substantial U.S. workforce. Although we don’t a have a lot of clarity as to where all of this is headed, several things are becoming clearer. Until commodity prices make a sustained upward move away from the current depressed levels, our customers will likely maintain their current posture of limiting their spending programs. Until credit flows freely, the tendency of everyone, including our customers is to hoard cash and this will depress activity levels. All of these factors do not bode well for our business in 2009. What does bode well for our business is our fundamental strengths, that nature of the land drilling industry, and the laws of supply and demand. These strengths include, first, our strong balance sheet with $81 million in cash at year end and now in excess of $130 million in cash and our unleveraged financial condition. In this regard, it’s important for investors to keep in mind that we own outright 347 land rigs and a huge inventory of associated…

(Operator Instructions) Our first question comes from the line of Jeff Tillery – Tudor, Pickering & Holt. Jeff Tillery – Tudor, Pickering & Holt.: Could you give us a feel on the existing rigs and the new builds that are contracted what those day rates are relative to what your overall fleet average was in say the fourth quarter? Is it a big premium, close to parity just trying to get a feel for what's locked in?

John, you want to take that question?

Sure, in terms of the long-term contracts, they are going to be that hired on the spot rates, those are locked in rates. As time passes and new rigs come on, the rates on those contracts will actually increase a little bit over the quarters, with the new builds coming on over the next year. Jeff Tillery – Tudor, Pickering & Holt: All right, that's helpful and could you give us a feel for, obviously activity overall for the industry has come off sharply and is continuing to do so over the past few weeks, are you seeing any stability in terms of customer inquiries or anything that gives you a feel for what the next month looks like?

Certainly, the rig count as we said has dropped faster and quicker than I think we all thought it might under the circumstances. I don’t think at this point we have any idea how much deeper it's going to go. John and I were at a conference last week and there was speculation all over the map as how deep does it drop. I think the reality is we don’t think we've hit bottom yet. There still to this point, has not been a whole lot of inquiries on wells or programs. I think our customers are still sorting through their 2009 budgets and trying to determine just how much they want to do. I think the real problem that we have, Jeff, I think is that with commodity prices where they are today there's just no incentive for our customers to drill into this market. And we've seen some indications, a well here a well there but certainly the majority of the big drilling programs I think we haven’t seen that sort of activity come back at this point. Jeff Tillery – Tudor, Pickering & Holt: All right and my last question, your balance sheet is in very good shape, you obviously built another $50 million in cash in the first quarter, are you viewing this year as a consolidation opportunity for you guys, or you prefer to kind of stay your course with your new rig designs?

I think that the way we look at it is that historically the management team that's in place in our company has been able to build value coming out of down cycles. I think we've added a huge amount to long-term value of the company through these kinds of transactions. Right now it appears that it may be early, but we're certainly looking for opportunities in this environment and think that balance sheet that you spoke about is one of the reasons why we'll have those opportunities, the other is the ability fundamentally, to be able to manage our business in a sound way, the scalability that I spoke about and the opportunities that will present.

And our next question comes from the line of Dan Boyd – Goldman Sachs. Dan Boyd – Goldman Sachs: Can you talk a minute about the economics of some of the buy-outs that you're seeing on the contracts and what impact that might have on the day rates for 1Q? I noticed in the press release you were putting guidance there the average revenue per day would be less than $500.00 over the fourth quarter. What impact have you – do you expect to come from contract cancellations?

Dan, let me maybe sort of spend a moment, I think your question is a good opportunity to make some comments about these contracts. Basically, these comments are take or pay contracts and our customers, therefore, have the option at any given point of either taking the rig and paying for it or paying typically a buy-out fee that compensates us for in effect the margin we would have otherwise received. The customers come to us oftentimes and say we'd like to discuss it and we're willing to discuss those contracts with our customers and trying to find favorable outcomes for both parties. It's hard to speculate as to what buy-outs would occur, what changes will occur going forward. Historically, we think we're at a very good position, we think it's more likely that our customers will take these contracts, take the rigs and drill the wells as contracted and that’s what we're expecting will be happening going forward in the vast majority of the cases. Now there may be exceptions, but that's what we anticipate will be the rule and not the exception and that's how we're operating, of course we're open to conversations with our customers at all times because that's the nature of the service business. Dan Boyd – Goldman Sachs: Okay, so just to clarify year-to-date you have not received any contract cancellation payments and that $500 decrease that you're guiding to that does not include anything of that nature?

That’s correct. Dan Boyd – Goldman Sachs: Okay, next question is more as we come out of this down cycle, I think we are all hopeful that gas prices one day improve from current levels. In the past, Patterson has been able to pick up considerable amount of market share as rig counts start to improve. How do you see that playing out this time, given that there has been a mixed shift towards what rigs are preferred in the market given the shale plays. Do you see any change in that dynamic and how do you think the company is positioned?

I think we're superbly positioned and I think we're going to do that exact same thing again. The rigs that we have available for customers, are among our most technologically advanced rigs we have available. These rigs are perfectly capable of drilling the horizontal shale plays that are available. We think we've got an advantage because of our field capabilities and here I just would like to take a moment to salute our field people because they're just spectacular and that capability in the field is what allows us, we think, to get a jump start on the industry when rigs go back to work. And we think that we have the rig fleet to do that. Make no mistake, we've invested a substantial amount of money over the last several years building the kind of fleet that we expected would be needed going forward and that's where we are. Doug, I don’t know if you want to add anything?

Yes I think I'd add a couple of things, almost every market has been hurt, when we look at the analysis of the rig count drop it's hard to single out one region, it's hard to single out any kind of particular size of rig. We have as many quality rigs down today we're actually surprised by that, in fact I said earlier that we were a little bit surprised at the somewhat indiscriminate reduction in rigs. Price, performance didn’t apparently seem to make much difference and I think our customers were quite frankly just trying to get rid of the cost wherever they could. And obviously the customers that had long term contracts, those rigs were very difficult to get rid of, so just like some of our competitors I think we have a number of rigs down today that we were surprised that they're down. We think we're very well positioned. I think as this market does start to turn up that we've proven in the past and we will prove it again, that we do have the capability of as John calls it, scalability, both up and down and very quickly we feel we will be poised to react to that and take advantage of it. Dan Boyd – Goldman Sachs: Okay that's very helpful, one last one if I can. There's a lot of talk out there that day rates, if you are actually signing any new rigs, they're close to cash break-even levels or near there. Can you comment on that and then also just some experience in coming out of the some of the prior down cycles, what you saw in terms of, what did it take in terms of utilization or drilling activity before you start to see day rates increase again once they reach cash break-even levels?

Well, let me address the cash break even comment first, we've certainly seen some of that. I don’t think it's widespread. I think in this industry you're always going to have some people, particularly those smaller players and interestingly enough, some of those have a significant amount of debt that they feel utilization is far more important than actually turning a profit. And that's never been our philosophy, as you know, we always try and keep a reasonable amount of market share but at the same time we do try to maximize our margins. So I think there's kind of a story on every street corner about so and so might be working at cash costs, I think you need to be careful with making a generalization that that's across the board. There certainly, when you talk cash costs, there's a lot of different contractors that have a much different level of a cash cost level. Again I think we – I think even if you looked at the last two downturns we did not get down to cash costs levels, or if we did it was for a very, very short period of time. I think the fundamental answer is, this business, particularly I think with new advanced technology rigs, the cash costs to run these rigs are significantly higher than those last two down cycles. And I don't think the industry is prepared, or should quite frankly, work rigs just for the practice of it. As you know, these new advanced technology rigs are expensive, they're expensive to maintain and the industry needs to get a decent return from them.

The only thing I would add to that and it's really a small comment, to echo what Doug has said, but Patterson historically has had among the best abilities to manage its costs so we think that we'll be able to do that again in this cycle, and we think that will give us some competitive advantages.

And our next question comes from James West – Barclays Capital. James West – Barclays Capital: Mark or Doug, at this point as you think about balancing the market and your position as really one of the swing providers of a lot of the capacity, how many rigs that may show up in your fleet count are actually not marketed or stacked out at this point?

John, do you want to respond to that?

Three hundred forty-seven rigs currently marketable that we mentioned in the press release. Those are all available to work and ready to work. We do not maintain crews for those, but as the market increases we would bring those back when the demand is there. Does that answer your question? James West – Barclays Capital: I guess how many don't have crews then is maybe a better way to ask that.

The answer there would be that we only maintain crews for those rigs that we're working. So as over the last several months as rigs were stacked, rigs properly stacked out over a day or two and if we do not have further demand for the rigs, those employees leave employment with the company. That's the scalability that Mark and Doug have been talking about. James West – Barclays Capital: Then a second question, you just reviewed your fleet. You do it every 12 months or so. What do you think about retiring assets, you retired 22 or so rigs this time? Before looking at a market let's say that it's depressed for all of 2009 and we get to the end of next year and the 2010 market doesn't look much better, how many rigs at this point, or when you went through the review recently, were on the fringe that would be retired at that point?

We really can't answer that. We review our fleet every year. We would have again another look at it next November and December, but the reality is today we felt we retired the rigs that we wanted to take out of this fleet this year. So I would say today, that every rig that we say is marketable is a rig that we feel can work and we feel likely will work sometime in the future.

(Operator instructions) And our next question comes from Arun Jayaram – Credit Suisse. Arun Jayaram – Credit Suisse: Doug or John, can you help us a little bit on the margins on some of the term contracts that you have? I think you cited 52 in the first quarter and averaging 37 for the year. Can you give us a sense of what the margins would be those rigs?

You have really two groups of rigs under term contracts. Like everybody else we've signed some term contracts in various states beginning in 2006, and some of those are rolling off, at the same time you have new rigs coming on that were requested in 2008 to meet requirements in place with like the Marcellus Shale. We really truly avoid giving exact specifics of what we're getting from our customers on these contracts, but I think we've indicated before, and so have other competitors that the day rates on those are in the mid-20s and the costs aren't dissimilar to other rigs. Most of these deals for us are three-year contracts; a couple of them are two-year. Arun Jayaram – Credit Suisse: So somewhere on the new ones in the mid-teens in terms of margins and the existing ones may be a little bit lower than that for existing rates. Is that fair?

That's fair. Arun Jayaram – Credit Suisse: Second question is, in terms of your Q1 guidance you expected revenue per day, or your day rates, to be down $500. Help us understand how the cost side of the equation could look. Do you expect daily costs to be up because of fixed cost absorption or can you hold that relatively flat?

We are assuming that we can hold that relatively flat, actually probably down a little bit from the fourth quarter. We're going to endeavor to further tighten up those cost numbers as time passes. To date, we have gotten we believe the full benefit of stacking rigs and eliminating the underlying costs of those rigs that were stacked. We'll continue to look at our cost structure and see if we can squeeze down the daily costs as 2009 progresses. Arun Jayaram – Credit Suisse: Okay two other quick ones. Based on historical patterns, margins and cyclical troughs tended to be in the $1,500 to $2,000 range and the assumption is you want to get somewhat of a margin and so if you burn up a top drive, you don't want to work at true cash costs. Do you think that's a reasonable assumption, assuming the rig count goes down to a $900 to $1,000 rig, just from the spot market?

Well underlying the rigs that we have running as term contracts, which clearly have margins significantly above those type margins. I'd also point out if you go back to 2001 to 2002, only momentarily were margins down to the levels you're talking about. A customer showed a willingness on the spot rate rigs to provide us some return on that. I would also point out the rigs we have running on spot rate are generally 1,000 HP or more. Many of them have top drives, this is very premium equipment that's working and generally we have not experienced margins down to the levels you've mentioned.

Arun, I would just be cautious about assuming that what occurred in prior down-turns is a perfect indicator of what's going to happen in this time. As Doug and John have made reference to, the equipment that's being provided is very different in 2009 from the equipment that was being provided in 2002, and the costs of both operating that equipment, as well as the capital costs that went into acquiring it are all vastly different. So I think that making the kind of quick assumptions that are being made about rates going down to this kind of cash cost level, is ignoring the sort of spectrum of rigs, and there's going to be a lot of thinking that's going to need to be done on the part of investors in respect of the kind of spectrum of rigs and the spectrum of pricing. Arun Jayaram – Credit Suisse: Okay that's fair, but Mark, just putting those comments together, you're expectation as you see it today, would be that the profit margins would be higher than we've seen in history.

Yes. Arun Jayaram – Credit Suisse: Okay that's exactly what I was looking for, and lastly guys, perhaps a little bit more of an aggressive CapEx number, excluding some of the new builds, where you have contracts for, that I would have expected given the outlook. Can you walk us through that logic and perhaps your expectation of when we do see a turn in the market?

Well, Arun as Mark mentioned in his comments, the $200 million of capital includes some upgrades and also the additional horizontal fracs spread for the Marcellus. We think those are going to provide us with good returns and of course you have some maintenance capital. The big piece of the capital budget for the year is the 22 new builds, which will provide very good returns, we think for our shareholders, appropriate extension and improvement of our rig fleet over time.

Arun, I might add something to that. Of that $200 million, approximately $80 million of that is for our continued rig upgrade capital program. Now we've cut that back significantly over what we had originally had hoped to spend this year, and that part of it is still to some extent discretionary. As the year unfolds, we will continue to look at that number, but we embarked on this program of upgrading the overall fleet three or four years ago, and we want to continue to do that. Arun Jayaram – Credit Suisse: Okay, makes sense guys. Thank you so much.

It's also part and parcel of the idea that we have this competitive strength of our balance sheet. We have this ability to improve our business even during this down-turn, and potentially to get to an even better competitive situation by investing in our business at this point, without debt. Arun Jayaram – Credit Suisse: Right, okay, makes sense guys, thanks.

And our next question comes from the line of Marshall Adkins – Raymond James. Marshall Adkins – Raymond James: Let's start off – I want to go back to the margin question in Q1. I mean normally it's pretty difficult, I mean you guys do a better job than the most, but it's pretty difficult to bring your cost down as fast as utilization's coming down, and I heard you say that you expect actually costs to come down pretty sharply and so should we imply, I mean if revenues are down 500 or so, that margins are only going to be down 500? I mean that just, that would be pretty impressive management if that's happening. I just want to make sure I heard that right.

I think we meant to say something a little different from that. From the cost side, I think we will get our costs down a little bit from the fourth to the first quarter, but that's a couple hundred dollars or so. The scalability and when those rigs go away, the related costs go away. We're going to take a further look at it and see if we can further tighten up our costs and bring down our costs per day, but I don't think we put any number with that. We view that as an opportunity. In terms of rates, when we look at where we stand today relative to the fourth quarter, we think that overall average rates fourth to first quarter will go down less than $500, but I think that was the limit of our comments. Marshall Adkins – Raymond James: Yes, yes, and that was pretty clear and that's helpful, but if you're able to also bring costs down a couple hundred, then that would imply margins are only falling maybe 300 or so, and that's just what I was confused about.

Marshall, if you look at our Q4 numbers, if you looked at the costs, you'll notice that apart from the wage increase, we actually did a pretty good job managing our costs in Q4. That's been an ongoing program that we've had to really evaluate and review and manage those costs very aggressively. The two things that John mentioned earlier, in past cycles when we have had these little dips, typically I think the industry has been slow sometimes to reduce the number of people quickly, and we've been very aggressive doing that this time. And the second factor there is I think in past cycles people took the opportunity, oh the rig's down, I think I'll repair that [drawer works], I'll get those pumps in. And we've been very careful this time to make sure that we haven't been spending money on things that we feel we did not need to. All I'll say is we've had a very aggressive managed approach to looking at our costs. Marshall Adkins – Raymond James: Well, that's where I was going, that's pretty impressive that you are succeeding in doing that.

Marshall just to be clear, the comments that we're on a revenue decrease and possibly a little bit of a cost savings, so taken together, we don't think margins will drop a lot from the fourth to the first quarter. Marshall Adkins – Raymond James: That's pretty good. It's real good. Okay, shifting gears here, your market share has fallen off probably a little steeper than most, and I think a lot of investors we've talked to just assume that's because of the type of rigs you have. I would think there's other factors going into that, like the regions where you're strong or the customer type you have, or more price discipline or maybe even the amount of long-term contracts. Help me understand how much of your market share loss, you think is the type of rig, versus other issues like price discipline and customer type.

Marshall, I mentioned earlier that as we've kind of watched this unfold and seen that our customers have almost indiscriminately released rigs, it's obvious to us, they've released some of their best performing rigs, some of their most efficient rigs, and it's obvious to us that some of it has been with little or no regard to efficiencies or even the cost. As I said before, some of our best and most efficient rigs have been laid down during this cycle, so in my mind I would say that it has nothing to do with the age or the quality of the equipment. We have felt for quite some time that others had a higher percentage of term contracts and we've seen that borne out in the marketplace, the rigs that have seemingly got to stay, working for customers have all had term contracts. We did see I think initially, some initial reaction that some regions got hit faster than others. West Texas, for example and I think predominantly because of our crude oil focus out there, but as you know we have extensively upgraded our fleet over the last three or four years and we're very proud of the fleet that we've got today, and I think with very few exceptions, our fleet is as good or better than the vast majority of the rigs that are in the U.S. fleet. So we do not feel that we've lost share because of the nature of our fleet, and I think if you look at the numbers today, we may have got hit very early and quicker than some of our competitors. We believe that was because of the term contracts, but if you look at the numbers recently, a lot of those other contractors have caught up and have seen a bigger hit than we have, say over the last month or 45 days. Marshall Adkins – Raymond James: That's very helpful, good clarity there. All right, last one for me, you give some good details on the CapEx, it's very helpful for modeling and pretty clear on the $320 million on new rigs, but the other $200 million, can you kind of break that down in a little more detail. How much of that is, what we would call maintenance CapEx that you're going to have to do anyway, versus the rig upgrade program versus you know frac fleet, etc.?

The maintenance CapEx number is in the $55 to $60 million range, obviously… Marshall Adkins – Raymond James: And that's included in the $200 million, right?

Yes.

That is part of the 200. Marshall Adkins – Raymond James: Right, okay good. That's what I wanted to get clear on, then keep going, sorry.

Well, I mentioned there was about $80 million that was kind of our remaining rig upgrade program, and our capital associated with Universal this year will be down about $20 million over what it was last year, likely in the low $40 million range. Marshall Adkins – Raymond James: Okay, that's...

We have about $14 million for the NP business. You add those things together Marshall, it gets pretty close to the couple hundred million we're talking about, and obviously some of that is discretionary. Marshall Adkins – Raymond James: The $80 million more of the upgrades is probably your most discretionary component I would assume.

Right. Marshall Adkins – Raymond James: All right, great, that's what I needed to know. Thanks for the help you guys.

And our next question comes form the line of Mark Brown – Pritchard Capital. Mark Brown – Pritchard Capital Partners LLC: Just one question I had is that when we do see this market start to see a supply response, I just want to confirm, you would think that the rigs that would be snapped back most quickly would be your best and most efficient rigs from new rigs or upgrades, or do you think it would be to some extent some of the lower end rigs that would be coming back?

It's kind of interesting, we see it more likely to be across the whole rig fleet, and different customers with different applications going for different rigs. That's always been our view about the overall rig market and in fact, the fit for purpose covers both the new rigs that are fit for some of the most technically challenging drilling, as well as fit for purpose in terms of some of the in field drilling that doesn't require such rigs. So, if there is this kind of supply decrease and price increase, which we think is kind of inevitable, can't tell you when, but inevitable none the less, then we think that rigs across the board go back to work. Mark Brown – Pritchard Capital Partners LLC: Okay and for sort of your Apex rigs, do you think that when they are hired for any of them that aren't already on term contracts, do you think they would be more on the two to three year term contracts, and I guess the reason I bring that up, is that some – an operator may not want to commit to that when we just start to see the turn upward in the market, they may prefer to pick up something on the spot market. Just wanted to see what your thoughts were on the extent to which the upgraded or new rigs would be put on term contracts when the market turns up.

Look I think that your comment is probably correct, that as the market starts to turn up, the participants won't be 100% confident and they may not want to make long-term commitments at that point. So, we think that what you just said is probably correct. We’ve been – I think, we’ve always been pretty flexible in trying to figure out how to maximize the returns for our shareholders, and at the same time, do a good job for our customers, and I think we will be able to strike that balance between those two competing interests to find what will be something that will maximize our profits, and at the same time maximize the service to our customers. Mark Brown – Pritchard Capital Partners LLC: All right, very good, thanks a lot.

And our next question comes from the line Kevin Pollard – JP Morgan. Kevin Pollard – JP Morgan: Thanks. Good morning. My question, probably for you Doug, is around the Apex rigs. In the last conference call, you guys indicated you had 34 additional Apex planned and that I think that 25 of them were contracted. Now, you’re talking about 22, all of which are contracted, and I know you’ve had some deliveries since then, but were those last sort of nine uncontracted rigs, did you ever secure contracts for them or were they just sort of put on hold given the market environment?

Those nine that you’re talking about Kevin, were deferred. We did not have long-term contracts for them, so we went back to our supplier, and actually just deferred them. We do hope that over time, we will have a need for those rigs again, but we just, because we did not have a term contract for them, we just felt that we did not want to go ahead and take delivery of them. Kevin Pollard – JP Morgan: Okay, makes sense. I just – in terms of the CapEx spending, the $320 million on the new rigs, is that going to be predominantly loaded into the first half of the year, so that you can meet the delivery by year end?

It’s pretty much spread out pretty equally over the year. I probably would say there’s maybe a little higher percentage over the first three quarters, but sometimes you get a lag time with when some of the bills come in, but in terms of deliveries, they’re pretty equalized over the four quarters. Kevin Pollard – JP Morgan: Okay. All right, that’s all I had. Thanks Doug.

And our next question comes from the line of Mike Urban – Deutsche Bank. Mike Urban – Deutsche Bank: I wanted to revisit the contract issue a little bit. You’d talked about some of the take or pay contracts that you have. What is your view if a customer does still want to take delivery of the rig, but might want to renegotiate the rate or the term of that contract? Would you – is that something that you’ve done in the past or that you’d be willing to do or would you try to stick within the original take or pay terms?

I don’t think I can say anything here that’s going to be extremely valuable to you, because each of these conversations is a separate conversation with each customer about each rig and we’re happy to engage in those discussions with our customers. What we’re not likely to be wanting to do is to give up the favorable economics that are built into it, but if we can strike a win/win for our customer and for our company, that’s a great opportunity. So, we’re always happy to engage in those conversations, but we’re not, if you’re asking us whether we’re expecting to be discounting those contracts or doing something else that’s going to be sharply different from what are the terms, the answer is, no expectations currently. Mike Urban – Deutsche Bank: Okay, and you’ve addressed the day rate issue in a number of different ways, but I was wondering if you could give us a sense as to what the leading edge rate may be, or is there no such concept right now just given that rates seem to be stacking out, and rather than renewing, you’re going to some new kind of market rate?

I think that the market is the rig market, like financial markets, like so many markets right now is in a moment of trying to assess what direction it's going in. I mean, just kind of a point of reference here, our rig count was going up through mid-October and reached a height in kind of early October and 275 was the number of rigs that were being run then. I mean it's shocking to the participants throughout the industry to be at the current levels, and so I think when you say kind of what are pricing expectations? I think that right now, people’s expectations are that the market's looking for kind of a new set of footings and, once it finds those new set of footings we'll then be coming to come some kind of new pricing. But I mean to say that right today is going to be the pricing and the footings for the next two years, strikes me as being – or even potentially at several months, it strikes me as a set of assumptions that I’m not sure I’m ready to buy into. Mike Urban – Deutsche Bank: Yes, I would tend to agree, and last question, how many of the upgrade program, how many rigs are planned for upgrade this year?

Actually none. The – other than the 22 new rigs, most of the rest of the upgrade program is primarily related to things like top drives, new masts, new substructures, our continuation of our pump program. Mike Urban – Deutsche Bank: But not necessarily any…

We’re actually not refurbishing any rigs this year, other than the brand new rigs that we’re talking about delivery. Mike Urban – Deutsche Bank: Okay, so no total overhauls, just more adding equipment and things like that?

Unplanned. Mike Urban – Deutsche Bank: Okay. Great. That’s all for me, thanks.

And our next question comes from the line of Geoff Kieburtz – Weeden. Geoff Kieburtz – Weeden & Co., LP: I think you may have already addressed this, Doug, but you mentioned that in the first quarter, you’ve got six new rigs coming in on term contracts, seven old contracts rolling off, could you fill in the schedule for the remaining three quarters of ’09?

Geoff, I don’t have that right in front of me. Geoff Kieburtz – Weeden & Co., LP: But it sounded like from your earlier comment, we should be kind of getting roughly six new builds delivered in the, maybe the second and third quarter and then, maybe it drops off to four in the fourth quarter and, then the…

You're pretty close there; we're looking at probably, six in the first quarter, seven in the second quarter and, then five and four. Geoff Kieburtz – Weeden & Co., LP: Okay.

In terms of existing term contracts coming off, we do have a number of term contracts coming off in Q2. I don’t know that I have the exact number in front of me. Geoff Kieburtz – Weeden & Co., LP: Right, but it must accelerate because you’re starting out at 52 and you averaged 37 for the year, so maybe I can back into anyway?

That's correct. Geoff Kieburtz – Weeden & Co., LP: And just in regards to these term contracts, when – what is the relationship between the margin on an old contract that’s rolling off versus a new contract on a new build? Are they roughly the same?

Geoff, the margins on the new ones coming on are a bit higher. What kind of happened in the industry is people began to build new rigs four years ago. Geoff Kieburtz – Weeden & Co., LP: Yes.

Initially, the rates on those were a bit lower. Frankly, the equipment was a bit less expensive and I think the contracts that were entered into by the various land drillers in the U.S. during the first half of 2008 had higher rates as mentioned earlier in the mid-20s or so. If you go back to some of the earlier years, many of those contracts were at about $16 to $20,000 day rate, so the rates are actually bumping up as these new rigs come out, probably for each of the drillers. Geoff Kieburtz – Weeden & Co., LP: Okay.

And the average of those is going down 'cause you have older ones rolling off. Geoff Kieburtz – Weeden & Co., LP: You’ve made several times, the point about the variable cost nature of the land drilling business, but then we’ve also heard a number of operators commenting on that and we’ve got 2004 commodity prices and 2008 cost structures. Just narrowly talking about the rig market, the average day rate for Patterson in ’04 was something approximately half of what you posted in the fourth quarter. How do you engage in the conversation with your customers when they start with this, hey, 2004 commodity prices, 2008 cost structures?

Well, Geoff, I’ll turn it over to Doug in just a second for the how we talked to the customers, but I guess I would point out that we indicated earlier that we’re going to endeavor to try to lower our costs per day. Geoff Kieburtz – Weeden & Co., LP: Right.

But, realize that the rigs that are running today are different sets of equipment. We’re consistently upgrading our fleet for – to meet the customer’s needs. They have top drives, they have iron roughnecks, they have lots of things that cost more per day to operate than they used to. However, we’re trying to maximize margin for shareholders and be competitive on price, so we will work to lower our costs per day, but we haven’t put a dollar amount of that, but we will be endeavoring to do that.

Besides that, Geoff, and I agree with what John’s just said, we drill different kinds of wells today. Geoff Kieburtz – Weeden & Co., LP: Yes.

The horizontal plays that are now a significant part of our activity, wasn’t the same drilling that we were doing back then. Geoff Kieburtz – Weeden & Co., LP: Sure.

Number two, we drill those wells more quickly with different kinds of equipment and so the customer’s really evaluating the cost of the well… Geoff Kieburtz – Weeden & Co., LP: Yes.

And not necessarily the cost per day of the drilling. Geoff Kieburtz – Weeden & Co., LP: Right.

And frankly, some of the other associated costs with wells that we see through our EMP experience are some of the ones that have actually been the ones that have gone up the most, and the drilling costs are typically not the part of the equation that’s really driving the customer’s costs. So I think your point about customers saying, hey, look I’m getting a lower commodity price and I got to make sure that I do what I can to get my service costs in line with my commodity costs, or my commodity pricing, makes some sense, but I don’t think we’re the primary whipping boy for that problem. There are a lot of other costs in the equation that have gone up and are significantly more than ours.

Geoff, I’d add one thing. I’d been in the drilling business on and off since the mid-1970s and in this latest cycle for the first time in my career in the drilling business, I’ve had customers say to me, Doug, it really doesn’t matter what your cost is for your drilling rig. You guys are not the big component of the cost anymore. We’ve had people say you could charge me nothing and I still wouldn’t drill these wells. Geoff Kieburtz – Weeden & Co.: Right. Okay. Doug, you mentioned that ten of the new 22 new rigs coming in ’09 are targeted for Appalachia. At press release you commented the ramp up and the Marcellus being slower than expected. Any concern there that these ten rigs that are slated for the Marcellus may not be needed?

I don’t think so. They’re all spread out over at least four different customers and I won’t name the customers. I think you know who they are. These are all rigs that quite honestly these plans and programs were put in place 12 to 18 months ago. It’s taken this long for us get the fit for purpose type of rig built that they’re looking for up there and from the customers that we’re dealing with, they’re all very encouraged and I think everybody feels that there’s a lot of promising work to do done up there. So we’re not concerned that – we heard numbers of rigs that are moving into that market. We think these ten fits for purpose rigs are going to be ideally suited for the drilling up there. Geoff Kieburtz – Weeden & Co.: Okay.

If I could just add one more thing, Geoff, that goes with that. Geoff Kieburtz – Weeden & Co.: Sure.

We’ve got a lot of experience in that marketplace from Universal Well Services having been in that marketplace and been a very significant player in that marketplace and one of the things we’ve learned through Universal is that the – both the geography and geology of the area are different. And that equipment that necessarily works in other areas doesn’t easily – isn’t easily adapted to work in that area. The result is that you need equipment that is specially designed and uniquely positionable for that kind of marketplace and we think we’ve done it both on the frac] equipment side, as well as on the drilling side. Geoff Kieburtz – Weeden & Co.: Right. And, Mark, one final question, when you were talking about the capital spending and the program to insure that the fleet is matched to the customers needs, you – I think you made a comment about without debt. Were you saying there that spending at Patterson in ’09 would not exceed cash flow?

The short answer to your question, Geoff, is that based on the work we’ve done we don’t expect to be in a borrowed state at the end of the year. Geoff Kieburtz – Weeden & Co: Okay. Great. Thank you very much.

Our next question comes from the line of John Daniel – Simmons and Company. John Daniels – Simmons and Company: Just a few questions on the pumping business, are the margins that you’re getting on the new horizontal frac work, are they materially different than the traditional work?

Margins are in the same range. I think what you have to recognize is these jobs are much bigger. In fact they’re almost 10X in terms of both horsepower and the revenue. John Daniels – Simmons and Company: Okay.

So overall the margins are significantly higher, but on a percentage basis they’re certainly in the same ballpark. John Daniels – Simmons and Company: Okay. Speaking of the horsepower, you mentioned you’ve got a few pumps coming this year. Once those are all in what will your final horsepower be?

The exit rate for ’09 will be pushing 130,000 horsepower. John Daniels – Simmons and Company: Okay. And last but not least, at this point we’ve heard lots of companies talking about moving assets to better performing regions. Have you seen some your larger pumping competitors start to transfer assets up to Appalachia?

Well that’s been an ongoing process we’ve actually seen it for the last couple years, people moving in and out. All the major players are there. John Daniels – Simmons and Company: Yes.

They’re all capable of doing it and so far the volume of business really has not supported a mass, I guess input of equipment into that market. John Daniels – Simmons and Company: Okay. Thank you. That’s it for me.

Our next question comes from the line of Alan Laws – Bank of America. Alan Laws – Bank of America: I got actually a follow up to Geoff’s question on the balance sheet side or the cash flow side. You always have a great balance sheet, no question there. Activity is kind of bad, well kind of, really bad. Credit’s pretty tight and you have about $130 million I think you said in cash and you’re spending $530. You did cut the dividend, which I guess should keep you from drawing on your revolver in any significant way, but how are you looking at the renewal of that revolver at the year end or any thoughts around what you’d expect on the renewal size or term. Like, do you really need $375?

I guess do we really need $375, we’ve – off the top of my head I don’t think we’ve ever been borrowed more than $100 million in the life of that thing. I think it’s been around for a very long time. We expect to renew the facility at the appropriate time to working capital line. It could also be used for opportunities for other things, but we would expect that we can renew it at levels that will be appropriate and support our business. Alan Laws – Bank of America: Okay. How much working capital do you think you can claw back in this slowdown? I think you have over $300 million out there right now.

I guess we can say reduced working capital how much will convert to cash, because if it’s cash I think it still working capital, but certainly as the activities decline we will see a meaningful move from receivables, net payables toward cash. It really depends what you think the rig counts going to be and how that’ll progress but, certainly, to say that its $100 million or more will convert to cash I would think would not be an unreasonable assumption. Alan Laws – Bank of America: Okay. Are there any risks out there to any of your receivables right now?

We have not had – the last, I don't want to call it significant, because it wasn’t that significant given our size of a company, but the only big item we have had a problem with in the last seven, eight years was about a $4 million receivable of which we ultimately would collect about $1 million of it, with a $3 million individual write off. Everything else has been much, much smaller and has not been a problem. We work for the big independents. We work for a lot of very strong smaller independents. We’re careful about who we work for and we have not had significant losses on receivables in the last, I would say, ten years. Alan Laws – Bank of America: Sure. That’s great.

Alan, I’d like to add one thing. We work very hard at watching our receivables. We are concerned in this environment, but I’m pleased to say that Q4 our DSOs actually went down a couple days. Alan Laws – Bank of America: That’s great. That’s really good. The last question and more of a scoping question and sort of how you’d think about this, but some of your peers are issuing bonds as kind of a safety cushion it looks like, or against future maturities for an overextended down-turn. You don’t have maturities, obviously, but is there any interest on your part to issue debt to cash up, take advantage of any opportunities that may arise? Because it looks like you may have some road kill, given the depth of this slowdown.

Let me respond to that, Alan. I hope that we’re always looking at our balance sheet and trying to see what the opportunity sets are, from the front, can we achieve with our balance sheet. So the short answer is, do we think about that? You bet. All the time. We try as best we can to manage both the profit and loss and the balance sheet and that’s the thing we think gives us some competitive advantages, frankly, in the overall marketplace and with our shareholders. Ultimately, we’ve been able to get extremely favorably long-term shareholder returns by being able to manage both sides. Alan Laws – Bank of America: Well, you're certainly better positioned than many of your peers, that’s for sure. That’s all I have.

And our next question comes from the line of Andrew Coleman – UBS. Andrew Coleman – UBS: I had a question on your Marcellus pressure pumping operations, being Universal. I mean is that stuff spread pretty evenly across Pennsylvania or is it primarily on one side of the state versus the other?

It’s pretty much spread through the Appalachians, it’s not just Pennsylvania. We operate in New York, we operate in West Virginia. We have a total of total I think of about 12 different camps that we operate out of, so we're not just limited to Pennsylvania. I think if you've heard us talk, the Huron Shale tends to be non-Pennsylvania. It certainly is part of Pennsylvania but we're probably spread out over five to six states. Andrew Coleman – UBS: And are you seeing, I've heard stories about difficulties getting profit in other parts of the U.S. normally in Texas. Is that being alleviated or are you seeing those same issues up in Marcellus?

Well the big market there has been primarily sand fracs and certainly the last year, there was some shortage of supply in sand. We've done some things internally to try and assure our sources of sand. I think as the Marcellus develops, just like the Barnett and the Haynesville, you will see some science projects on how these fracs are completed. But so far the issues have been sand and water, and I think the water issue in particular has been the one area that I think things have developed slower because of the concern of citizens about the usage of water, but we believe those issues are being addressed and will get resolved. Andrew Coleman – UBS: Then a question on earlier comments in the call here that said something like 10,000 [folks] have left the sector there over the last few months; how much further do you think that goes before it starts to eat into some of the coring? Kind of [internal] knowledge that the drilling companies possess?

I don't think we said 10,000

I think someone else did. Andrew Coleman – UBS: Oh somebody else did, I'm sorry.

Well, if you think back over the different cycles where we had a low period in 1999, we had a low period in 2002, it appears clear at this point we're going to see a low period in 2009, and it isn't easy, but our operations people have been able to attract the talent they need, as the market recovers. The peoples' rigs are stacked that tend to be sent home, are the less experienced. We always endeavor to keep the talent we need to be able to come back and run the number of rigs that we have. That's the nature of our industry. I think Mark spoke to it in his opening comments about scalability and this is a two-way street, and we have lots of experience in managing that process. Andrew Coleman – UBS: Okay and then the last question, I wanted to step back to the pressure pumping issue. How big is the backlog? Is that going to persist do you think past the second quarter?

This business we don't traditionally we don't speak to backlog. Typically, we will have a work board, each one of those camps, would have the jobs that are projected out for maybe the next couple of months. Customers typically don't get too much beyond that in terms of saying, hey put me on the list for next November. That just doesn't happen because of the well has to get drilled first, so as I said we don't typically talk about backlog. The one thing we have said is that the traditional business in the Appalachians which tend to be fairly shallow, fairly simplistic kind of wells. With the industry's focus on the Marcellus and the Huron, some of that business has retrenched somewhat, and we've seen that impact our numbers. But in some cases it's been more than offset by the fracturing and the cementing and nitrogen jobs on the Marcellus and the Huron shale wells.

And our next question comes from Judson Bailey – Jefferies & Co. Judson Bailey – Jefferies & Co.: To follow up from an earlier comment, Doug, I believe you said nine of your new build rigs have been deferred. To the extent you choose to go forward on those whenever that may be, do you keep the same construction agreement or construction price, or would you benefit if construction prices begin to come down?

The answer to that Jud, is that the pricing would be modified in accordance with the current conditions. Judson Bailey – Jefferies & Co.: Do you have any comment to the extent things have changed on the pricing front for new construction?

It would seem that steel costs have gone down and certain other costs have gone down so we expect that our costs are going to go down. Judson Bailey – Jefferies & Co.: To the extent you're in the market for replacement costs and upgrades, can you comment on any reductions you're seeing in equipment costs or for secondhand equipment?

I think at this point, we haven't seen those costs come down significantly. I think as this unfolds and evolves we will see some of those things, and as Mark said, steel costs are certainly probably the biggest part of that, but you've also got labor costs with welders and associated people that we expect over time are going to come down.

And our next question comes from the line of Arun Jayaram – Credit Suisse. Arun Jayaram – Credit Suisse: Hey guys, my answer – my question was answered. Thanks.

(Operator Instructions) And our next question comes from the line of Mike Clark – SIR Capital. Mike Clark – SIR Capital: Just wondering very quickly what G&A may be for the first quarter and what your SG&A expectations are for the full year?

John?

Yes, I'm looking at the wrong thing here. Hold on. In terms of the G&A costs, again with the down-turn, we're taking a look at every cost and seeing what we can squeeze out of it, and not having completed that work at this point, I would venture a guess that at current levels G&A will run about $16 million or so, maybe $16.5 million. In terms of depreciation, depletion and amortization, including all of our business un – , my guess would be about $73 million. Mike Clark – SIR Capital: Thank you very much.

And there are no further questions in queue at this time. I would like to turn the call over to Mr. Siegel for closing remarks.

Thank you. I would like to thank everybody for their participation, look forward to our call at the end of the first quarter. Thanks everybody.

Thanks for your participation in today's conference. This concludes the presentation; you may now disconnect and have a great day.