North American onshore pressure pumping pricing has deteriorated to an “unsustainable level,” and the U.S. rig count is going to decline even more into 2016, Patterson-UTI Energy Inc. (PTEN) management said Thursday.

Houston-based onshore contractor PTEN is one of the largest drillers and pressure pumping providers for exploration and production (E&P) companies in North America. Business is bad and getting worse, and there’s no clear sight on when conditions may improve, CEO Andy Hendricks said during a conference call to discuss third quarter earnings.

“Looking forward, we expect current commodity prices will lead to further rig count reductions across the industry in the fourth quarter,” he told analysts.

Low commodity prices have impacted E&P spending, thereby reducing demand and pricing for drilling and pressure pumping services, said Chairman Mark S. Siegel.

“We believe that pricing in the pressure pumping industry has deteriorated to levels that are not sustainable,” Siegel said. “At current pricing levels, we believe many companies are not generating sufficient cash flow to cover maintenance capital. Under these circumstances, we believe some pressure pumping companies are deferring maintenance, and their equipment is being cannibalized.”

Drilling services, contracted before pressure pumping takes place, provided PTEN some insight into the onshore pullback. However, pressure pumping revenue still fell 13% sequentially to $154 million from $177 million. Gross margin fell to 10% from 19%.

Pressure pumping services activity “was lower than we expected during the third quarter,” Hendricks said.

Between July and September, PTEN averaged 105 U.S. rigs and four in Canada, versus a 2Q2015 average of 122 U.S. and two Canadian rigs. In October, the domestic count is forecast to fall to 92, with Canada holding steady. But the rigs should continue to fall, with PTEN forecasting an average U.S. count of 85 during 4Q2015. Four rigs still are seen working in Canada on average.

With no money to spend, E&Ps continue to terminate their rig contracts early. PTEN recognized $28.9 million in revenue related to early drilling contract terminations in 3Q2015, which positively impacted total average rig revenue by $2,870/day to a total average of $26,010. Minus the early termination fees, average rig revenue would have been $23,140/day, versus $24,330 in 2Q2015.

With less work, average rig operating costs fell sequentially by about $140/day to $13,530. Excluding the positive impact from early contract terminations, average rig margin was $9,560/day in 3Q2015, versus $10,600 in 2Q2015.

PTEN is known for aggressively pursuing newbuild drilling contracts, but market conditions are proving to be a barrier to finding business.

At the end of September, PTEN’s fleet included 160 premium Apex high-spec rigs, as two were added during 3Q2015. One more newbuild goes under contract before the end of the year. But that’s it. With no visibility about where commodity prices are going or activity, there are “no plans for additional newbuild rigs” in the coming year, Hendricks said.

“Based on contracts currently in place, we expect an average of 71 rigs operating under term contracts during the fourth quarter and an average of 45 rigs operating under term contracts during 2016.”

Unlike some of its competitors, PTEN isn’t cannibalizing equipment, Hendricks said. Equipment is being stacked and maintained to prepare for the eventual upturn. The company would rather keep its fleet in shape and provide equipment to customers as it’s needed, he explained.

Competition remains fierce and not everyone is going to make it, said Siegel. It’s truly “survival of the fittest,” he told analysts. “Falling demand and low pricing is leading to a rebalancing in the industry. This rebalancing process in drilling and pressure pumping is painful but we are well positioned.”

Net losses, including impairments, totaled $226 million (minus $1.54/share) in 3Q2015, versus profits in the year-ago period of $16 million (11 cents). Revenues plunged to $422 million from $846 million. One-time charges took a big chunk from profits, including $125 million for the pressure pumping business, $11 million for drilling equipment primarily related to mechanical rigs/spar rig components, $22 million for pressure pumping equipment/closed facilities, $1.9 million for oil/natural gas properties and almost $78 million to retire mechanical rigs and excess spare rig components.