PATTERSON UTI ENERGY INC [PTEN] Filings

10-Q 1 pten-20240930.htm 10-Q pten-20240930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________

Form 10-Q

______________________


þ			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024


o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-39270

______________________

Patterson-UTI Energy, Inc.

(Exact name of registrant as specified in its charter)

______________________


Delaware						75-2504748
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

10713 W. Sam Houston Pkwy N, Suite 800 Houston, Texas						77064
(Address of principal executive offices)						(Zip Code)

(281) 765-7100

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, $0.01 Par Value

PTEN

The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer

Accelerated filer

Smaller reporting company

Non-accelerated filer

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

389,956,453 shares of common stock, $0.01 par value, as of October 23, 2024.

PATTERSON-UTI ENERGY, INC. AND SUBSIDIARIES

TABLE OF CONTENTS


	PART I — FINANCIAL INFORMATION
		Page
ITEM 1.	Financial Statements

	Unaudited condensed consolidated balance sheets	3

	Unaudited condensed consolidated statements of operations	4

	Unaudited condensed consolidated statements of comprehensive income (loss)	5

	Unaudited condensed consolidated statements of changes in stockholders’ equity	6

	Unaudited condensed consolidated statements of cash flows	8

	Notes to unaudited condensed consolidated financial statements	9

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	47

ITEM 4.	Controls and Procedures	48

	PART II — OTHER INFORMATION

ITEM 1.	Legal Proceedings	49



ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	49

ITEM 5.	Other Information	49

ITEM 6.	Exhibits	50

Signature

PART I — FINANCIAL INFORMATION

ITEM 1. Financial Statements

The following unaudited condensed consolidated financial statements include all adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented.

PATTERSON-UTI ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited, in thousands, except share data)


	September 30, 2024		December 31, 2023
ASSETS
Current assets:
Cash, cash equivalents and restricted cash	$	115,482	$	192,680
Accounts receivable, net of allowance for credit losses of $14,954 and $3,490 at September 30, 2024 and December 31, 2023, respectively	863,779		971,091
Inventory	172,750		180,805
Other current assets	150,239		141,122
Total current assets	1,302,250		1,485,698
Property and equipment, net	3,095,070		3,340,412
Operating lease right of use asset	47,424		47,599
Finance lease right of use asset	33,874		63,228
Goodwill	487,388		1,379,741
Intangible assets, net	962,595		1,051,697
Deposits on equipment purchases	10,982		28,305
Other assets	24,094		19,424
Deferred tax assets, net	—		3,927
Total assets	$	5,963,677	$	7,420,031
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	493,360	$	534,420
Accrued liabilities	326,794		446,268
Operating lease liability	13,846		13,541
Finance lease liability	14,889		43,980
Current maturities of long-term debt	9,513		12,226
Total current liabilities	858,402		1,050,435
Long-term operating lease liability	36,794		37,848
Long-term finance lease liability	17,771		12,953
Long-term debt, net of debt discount and issuance costs of $7,956 and $8,919 at September 30, 2024 and December 31, 2023, respectively	1,219,461		1,224,941
Deferred tax liabilities, net	245,687		248,107
Other liabilities	13,604		25,066
Total liabilities	2,391,719		2,599,350
Commitments and contingencies (see Note 10)
Stockholders’ equity:
Preferred stock, par value $0.01; authorized 1,000,000 shares, no shares issued	—		—
Common stock, par value $0.01; authorized 800,000,000 shares with 520,742,360 and 516,775,313 issued and 389,938,852 and 411,195,302 outstanding at September 30, 2024 and December 31, 2023, respectively	5,207		5,166
Additional paid-in capital	6,443,043		6,407,294
Retained earnings (deficit)	(956,173)		57,035
Accumulated other comprehensive income (loss)	(51)		472
Treasury stock, at cost, 130,803,508 and 105,580,011 shares at September 30, 2024 and December 31, 2023, respectively	(1,929,899)		(1,657,675)
Total stockholders’ equity attributable to controlling interests	3,562,127		4,812,292
Noncontrolling interest	9,831		8,389
Total equity	3,571,958		4,820,681
Total liabilities and stockholders’ equity	$	5,963,677	$	7,420,031

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

PATTERSON-UTI ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, in thousands, except per share data)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Operating revenues:
Drilling Services	$	421,563	$	488,775	$	1,319,425	$	1,456,161
Completion Services	831,567		459,574		2,581,937		1,003,083
Drilling Products	89,102		46,570		265,129		46,570
Other	14,990		16,533		49,285		56,325
Total operating revenues	1,357,222		1,011,452		4,215,776		2,562,139
Operating costs and expenses:
Drilling Services	250,877		279,927		784,111		842,761
Completion Services	703,809		368,869		2,102,643		785,458
Drilling Products	47,144		32,071		141,921		32,071
Other	10,077		10,591		31,535		31,912
Depreciation, depletion, amortization and impairment	374,680		197,635		917,274		452,629
Impairment of goodwill	885,240		—		885,240		—
Selling, general and administrative	65,696		45,102		195,258		108,925
Credit loss expense	721		—		5,679		—
Merger and integration expense	6,699		70,188		29,577		78,128
Other operating expense (income), net	2,908		(2,635)		(19,060)		(9,994)
Total operating costs and expenses	2,347,851		1,001,748		5,074,178		2,321,890
Operating income (loss)	(990,629)		9,704		(858,402)		240,249

Other income (expense):
Interest income	745		2,131		4,801		4,583
Interest expense, net of amount capitalized	(17,990)		(15,625)		(54,238)		(34,189)
Other income (expense)	(716)		(618)		358		3,191
Total other expense	(17,961)		(14,112)		(49,079)		(26,415)

Income (loss) before income taxes	(1,008,590)		(4,408)		(907,481)		213,834

Income tax expense (benefit)	(30,256)		(4,130)		7,526		29,820

Net income (loss)	(978,334)		(278)		(915,007)		184,014

Net income (loss) attributable to noncontrolling interest	427		(328)		1,442		(328)

Net income (loss) attributable to common stockholders	$	(978,761)	$	50	$	(916,449)	$	184,342

Net income (loss) attributable to common stockholder per common share:
Basic	$	(2.50)	$	0.00	$	(2.29)	$	0.79
Diluted	$	(2.50)	$	0.00	$	(2.29)	$	0.79

Weighted average number of common shares outstanding:
Basic	391,732		280,218		399,795		233,631
Diluted	391,732		281,984		399,795		234,488
Cash dividends per common share	$	0.08	$	0.08	$	0.24	$	0.24

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

PATTERSON-UTI ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited, in thousands)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Net income (loss)	$	(978,334)	$	(278)	$	(915,007)	$	184,014
Other comprehensive income (loss):
Foreign currency translation adjustment, net of taxes of $0 for all periods	597		(656)		(523)		(656)

Comprehensive income (loss)	(977,737)		(934)		(915,530)		183,358
Less: comprehensive income (loss) attributable to noncontrolling interest	427		(328)		1,442		(328)
Comprehensive income (loss) attributable to common stockholders	$	(978,164)	$	(606)	$	(916,972)	$	183,686

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

PATTERSON-UTI ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(unaudited, in thousands)


	Common Stock			Additional Paid-in Capital		Retained Earnings (Deficit)		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Noncontrolling Interest		Total
	Number of Shares	Amount
Balance, December 31, 2023	516,775	$	5,166	$	6,407,294	$	57,035	$	472	$	(1,657,675)	$	8,389	$	4,820,681
Net income	—	—		—		51,235		—		—		471		51,706
Foreign currency translation adjustment	—	—		—		—		(993)		—		—		(993)
Vesting of restricted stock units	1,363	14		(14)		—		—		—		—		—
Stock-based compensation	—	—		12,051		—		—		—		—		12,051
Payment of cash dividends ($0.08 per share)	—	—		—		(32,553)		—		—		—		(32,553)
Dividend equivalents	—	—		—		(422)		—		—		—		(422)
Purchase of treasury stock	—	—		—		—		—		(98,613)		—		(98,613)
Balance, March 31, 2024	518,138	$	5,180	$	6,419,331	$	75,295	$	(521)	$	(1,756,288)	$	8,860	$	4,751,857
Net income	—	—		—		11,077		—		—		544		11,621
Foreign currency translation adjustment	—	—		—		—		(127)		—		—		(127)
Issuance of restricted stock	719	8		(8)		—		—		—		—		—
Vesting of restricted stock units	1,647	17		(17)		—		—		—		—		—
Stock-based compensation	—	—		10,813		—		—		—		—		10,813
Payment of cash dividends ($0.08 per share)	—	—		—		(31,815)		—		—		—		(31,815)
Dividend equivalents	—	—		—		(348)		—		—		—		(348)
Purchase of treasury stock	—	—		—		—		—		(133,487)		—		(133,487)
Balance, June 30, 2024	520,504	$	5,205	$	6,430,119	$	54,209	$	(648)	$	(1,889,775)	$	9,404	$	4,608,514
Net income (loss)	—	—		—		(978,761)		—		—		427		(978,334)

Foreign currency translation adjustment	—	—		—		—		597		—		—		597



Vesting of restricted stock units	238	2		(2)		—		—		—		—		—
Stock-based compensation	—	—		12,926		—		—		—		—		12,926
Payment of cash dividends ($0.08 per share)	—	—		—		(31,225)		—		—		—		(31,225)
Dividend equivalents	—	—		—		(396)		—		—		—		(396)
Purchase of treasury stock	—	—		—		—		—		(40,124)		—		(40,124)
Balance, September 30, 2024	520,742	$	5,207	$	6,443,043	$	(956,173)	$	(51)	$	(1,929,899)	$	9,831	$	3,571,958


	Common Stock			Additional Paid-in Capital		Retained Earnings (Deficit)		Accumulated Other Comprehensive Loss		Treasury Stock		Noncontrolling Interest		Total
	Number of Shares	Amount
Balance, December 31, 2022	302,326	$	3,023	$	3,202,973	$	(87,394)	$	—	$	(1,453,079)	$	—	$	1,665,523
Net income	—	—		—		99,678		—		—		—		99,678

Vesting of restricted stock units	89	1		(1)		—		—		—		—		—
Stock-based compensation	—	—		(758)		—		—		—		—		(758)
Payment of cash dividends ($0.08 per share)	—	—		—		(16,916)		—		—		—		(16,916)
Dividend equivalents	—	—		—		(263)		—		—		—		(263)
Purchase of treasury stock	—	—		—		—		—		(74,307)		—		(74,307)
Balance, March 31, 2023	302,415	$	3,024	$	3,202,214	$	(4,895)	$	—	$	(1,527,386)	$	—	$	1,672,957
Net income	—	—		—		84,614		—		—		—		84,614


Issuance of restricted stock	1,001	10		(10)		—		—		—		—		—
Vesting of restricted stock units	1,512	15		(15)		—		—		—		—		—

Stock-based compensation	—	—		6,738		—		—		—		—		6,738
Payment of cash dividends ($0.08 per share)	—	—		—		(16,591)		—		—		—		(16,591)
Dividend equivalents	—	—		—		(229)		—		—		—		(229)
Purchase of treasury stock	—	—		—		—		—		(27,320)		—		(27,320)
Balance, June 30, 2023	304,928	$	3,049	$	3,208,927	$	62,899	$	—	$	(1,554,706)	$	—	$	1,720,169
Net income (loss)	—	—		—		50		—		—		(328)		(278)
Noncontrolling interest	—	—		—		—		—		—		8,729		8,729
Foreign currency translation adjustment	—	—		—		—		(656)		—		—		(656)
Issuance of common stock - Ulterra acquisition	34,900	349		521,057		—		—		—		—		521,406
Issuance of common stock - NexTier merger	172,224	1,722		2,566,150		—		—		—		—		2,567,872
Issuance of replacement awards related to NexTier merger	—	—		72,413		—		—		—		—		72,413
Vesting of restricted stock units	3,793	38		(38)		—		—		—		—		—
Stock-based compensation	—	—		27,358		—		—		—		—		27,358
Payment of cash dividends ($0.08 per share)	—	—		—		(33,217)		—		—		—		(33,217)
Dividend equivalents	—	—		—		(811)		—		—		—		(811)
Purchase of treasury stock	—	—		—		—		—		(23,371)		—		(23,371)
Balance, September 30, 2023	515,845	$	5,158	$	6,395,867	$	28,921	$	(656)	$	(1,578,077)	$	8,401	$	4,859,614

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

PATTERSON-UTI ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)


	Nine Months Ended September 30,
	2024		2023
Cash flows from operating activities:
Net income (loss)	$	(915,007)	$	184,014
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion, amortization and impairment	917,274		452,629
Impairment of goodwill	885,240		—
Deferred income tax expense	5,824		22,323
Stock-based compensation	35,790		33,338
Net (gain) loss on asset disposals	(5,956)		427

Credit loss expense	5,679		—
Other	1,668		(1,188)
Changes in operating assets and liabilities:
Accounts receivable	103,691		45,207
Inventory	(15,086)		(29,355)
Other current assets	(7,457)		(30,053)
Other assets	23,397		16,460
Accounts payable	(25,322)		(29,388)
Accrued liabilities	(124,560)		(71,689)
Other liabilities	(25,473)		(39,443)
Net cash provided by operating activities	859,702		553,282

Cash flows from investing activities:
Acquisitions, net of cash acquired - NexTier	—		(65,185)
Acquisitions, net of cash acquired - Ulterra	2,983		(357,314)
Purchases of property and equipment	(538,036)		(410,417)
Proceeds from disposal of assets	14,685		19,566
Other	(4,447)		(286)
Net cash used in investing activities	(524,815)		(813,636)

Cash flows from financing activities:
Purchases of treasury stock	(269,948)		(124,286)
Dividends paid	(95,593)		(66,724)
Proceeds from borrowings under revolving credit facility	50,000		420,000
Repayment of borrowings under revolving credit facility	(50,000)		(420,000)

Proceeds from issuance of senior notes	—		396,412
Payments of finance leases	(36,635)		(6,321)
Repayment of senior notes	—		(7,837)
Other	(9,156)		(2,933)
Net cash (used in) provided by financing activities	(411,332)		188,311
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash	(753)		1,538
Net decrease in cash, cash equivalents and restricted cash	(77,198)		(70,505)
Cash, cash equivalents and restricted cash at beginning of period	192,680		137,553
Cash, cash equivalents and restricted cash at end of period	$	115,482	$	67,048

Supplemental disclosure of cash flow information:
Net cash paid during the period for:
Interest, net of capitalized interest of $938 in 2024 and $1,350 in 2023	$	(44,454)	$	(29,269)
Income taxes	(14,328)		(27,454)
Non-cash investing and financing activities:
Net decrease in payables for purchases of property and equipment	$	(15,645)	$	(10,083)
Net decrease in deposits on equipment purchases	17,323		7,214

Purchases of property and equipment through exchange of lease right of use asset	26,382		3,241
Derecognition of right of use asset	(31,538)		(3,241)
Issuance of common stock for business combinations	—		3,161,691

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

PATTERSON-UTI ENERGY, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

Basis of presentation — The unaudited interim condensed consolidated financial statements include the accounts of Patterson-UTI Energy, Inc. and its wholly-owned subsidiaries and consolidating interest of a joint venture (collectively referred to herein as “we,” “us,” “our,” “ours” and like terms). All intercompany accounts and transactions have been eliminated. Patterson-UTI Energy, Inc. conducts its business operations through its wholly-owned subsidiaries and has no employees or independent operations. Certain immaterial prior year amounts have been reclassified to conform to current year presentation.

The U.S. dollar is the reporting currency and functional currency for most of our operations except certain of our foreign subsidiaries, which use their local currencies as their functional currency. Assets and liabilities of these foreign subsidiaries are translated into U.S. dollars using the exchange rates in effect as of the balance sheet date. The effects of these translation adjustments are reflected in accumulated other comprehensive income, which is a separate component of stockholders’ equity.

The unaudited interim condensed consolidated financial statements have been prepared by us pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been omitted pursuant to such rules and regulations, although we believe the disclosures included either on the face of the financial statements or herein are sufficient to make the information presented not misleading. In the opinion of management, all recurring adjustments considered necessary for a fair statement of the information in conformity with GAAP have been included. The unaudited condensed consolidated balance sheet as of December 31, 2023, as presented herein, was derived from our audited consolidated balance sheet but does not include all disclosures required by GAAP. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (our “Annual Report”). The results of operations for the three and nine months ended September 30, 2024 are not necessarily indicative of the results to be expected for the full year.

There have been no material changes to our critical accounting policies from those disclosed in our Annual Report.

Restricted cash — Restricted cash includes amounts restricted as cash collateral for the issuance of standby letters of credit.

The following table provides a reconciliation of cash and restricted cash reported within the unaudited condensed consolidated balance sheets that sum to the total of such amounts shown in the unaudited condensed statements of cash flows for the nine months ended September 30, 2024 and 2023:


	Nine Months Ended September 30,
	2024		2023
Cash and cash equivalents	$	113,379	$	61,856
Restricted cash	2,103		5,192
Total cash, cash equivalents and restricted cash	$	115,482	$	67,048

Recently Issued Accounting Standards — In March 2020, the FASB issued an accounting standards update to provide temporary optional expedients that simplify the accounting for contract modifications to existing debt agreements expected to arise from the market transition from LIBOR to alternative reference rates. The amendments in the update are effective as of March 12, 2020 through December 31, 2022 and may be applied to contract modifications from the beginning of an interim period that includes or is subsequent to March 12, 2020. In December 2022, the FASB issued an update, which deferred the sunset date to December 31, 2024. We do not expect this new guidance will have a material impact on our consolidated financial statements.

In November 2023, the FASB issued an accounting standards update to improve reportable segment disclosure requirements and enhance disclosures about significant segment expenses. The amendments in the update are effective for public business entities for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024 on a retrospective basis. We are currently evaluating the effect of this pronouncement on our disclosures.

In December 2023, the FASB issued an accounting standards update to improve income tax disclosure requirements. The amendments in the update are effective for public business entities for fiscal years beginning after December 15, 2024 and should be applied prospectively. We are currently evaluating the effect of this pronouncement on our disclosures.

2. Business Combinations

Ulterra Drilling Technologies, L.P.

On August 14, 2023, we completed our acquisition (the “Ulterra acquisition”) of Ulterra Drilling Technologies, L.P. (“Ulterra”). Total consideration for the acquisition included the issuance of 34.9 million shares of our common stock and payment of approximately $373 million of cash (after purchase price adjustments), which based on the closing price of our common stock of $14.94 on August 14, 2023, valued the transaction at closing at approximately $894 million.

The total fair value of the consideration transferred was determined as follows (in thousands, except stock price):


Shares of our common stock issued to Ulterra	34,900
Our common stock price on August 14, 2023	$	14.94
Common stock equity consideration	$	521,406
Plus net cash consideration (1)	372,757
Total consideration transferred	$	894,163

(1)Net cash consideration included $370 million cash consideration as adjusted for customary purchase price adjustments set forth in the Ulterra merger agreement relating to cash, net working capital, indebtedness and transaction expenses of Ulterra as of the closing.

The acquisition has been accounted for as a business combination using the acquisition method. Under the acquisition method of accounting, the fair value of the consideration transferred is allocated to the tangible and intangible assets acquired and the liabilities assumed based on their estimated fair values as of the acquisition date.

The aggregate purchase price noted above was allocated to the major categories of assets acquired and liabilities assumed based on preliminary estimated fair values as of the date of the business combination. We applied significant judgment in estimating the fair value of assets acquired and liabilities assumed, which involved the use of significant estimates and assumptions with respect to future rig counts, cash flow projections, estimated economic useful lives, operating and capital cost estimates, customer attrition rates, contributory asset charges, royalty rates and discount rate (10.5%). The carrying amounts of cash and cash equivalents, accounts receivable, other assets, accounts payable and accrued liabilities approximate their fair values due to their nature or the short-term maturity of instruments. The remaining assets acquired and liabilities assumed are based on inputs that are not observable in the market and thus represent Level 3 inputs. The fair value of inventory and rental equipment was determined using a replacement cost approach. Intangible assets primarily consist of customer relationships and developed technology, the fair values of which were determined using an income approach. Property and equipment was valued using a combination of indirect cost and a market approach. The fair value was estimated by using a multi-period excess earnings method for customer relationships and a relief from royalty method for trade name and developed technology. The purchase price allocation was finalized in the third quarter of 2024. The valuation period adjustments did not have a material impact on our consolidated financial statements.

The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition:


Assets acquired:
Cash and cash equivalents	$	18,426
Accounts receivable	68,467
Inventory (1)	36,313
Rental equipment (2)	109,055
Property and equipment	27,583
Intangible assets	313,000
Operating lease right of use asset	7,513
Finance lease right of use asset	5,228
Other assets	15,989
Total assets acquired	601,574

Liabilities assumed:
Accounts payable	23,258
Accrued liabilities	33,323
Operating lease liability	7,513
Finance lease liability	5,228
Deferred tax liabilities	79,863
Total liabilities assumed	149,185
Less: noncontrolling interest	(8,729)
Net assets acquired	443,660
Goodwill	450,503
Total consideration transferred	$	894,163

(1)We recorded an adjustment of $5.5 million to write-up acquired drill bits classified as inventory to estimated fair value. This adjustment will be recorded as direct operating expense as acquired drill bits are sold.

(2)We recorded an adjustment of $74.4 million to write-up acquired drill bits classified as long-lived assets to estimated fair value. This adjustment will be depreciated as acquired drill bits are rented over a weighted-average estimated useful life of 7.5 runs.

The goodwill recognized in the acquisition represents the excess of the gross consideration transferred over the fair value of the underlying net tangible and identifiable intangible assets acquired and liabilities assumed. Goodwill represents the potential for new growth opportunities internationally with the acquisition of Ulterra as well as the recognition of deferred taxes for the difference between the fair value of the assets acquired and liabilities assumed and the respective carry-over tax basis. Goodwill is not deductible for tax purposes. All of the goodwill was assigned to our Drilling Products segment. See Note 7.

NexTier Oilfield Solutions Inc.

On September 1, 2023, we completed our merger (the “NexTier merger”) with NexTier Oilfield Solutions Inc. (“NexTier”). Under the terms of the merger agreement, NexTier became our wholly-owned subsidiary. Each share of NexTier common stock issued and outstanding immediately prior to the effective time of the merger was converted into the right to receive 0.752 shares of our common stock. Additionally, certain equity awards that were granted and outstanding under NexTier long-term incentive plans were assumed by us, and such equity awards were converted into equity awards in respect of our common stock in accordance with the merger agreement.

NexTier is a predominately U.S. land-focused oilfield service provider, with a diverse set of well completion and production services across a variety of active basins.

The total fair value of the consideration transferred was determined as follows (in thousands, except exchange ratio and stock price):


Number of shares of NexTier common stock outstanding as of September 1, 2023	228,846
Multiplied by the exchange ratio	0.752
Number of shares of Patterson-UTI Energy, Inc. common stock issued in connection with the merger	172,092
Patterson-UTI Energy, Inc. common stock price on September 1, 2023	$	14.91
Common stock equity consideration	2,565,895
Acceleration of RSU awards	1,997
Fair value of replacement equity awards (1)	70,416
NexTier long-term debt repaid by Patterson-UTI Energy, Inc.	161,000
Consideration transferred	$	2,799,308

(1)In connection with the merger, each of the share-based awards held by legacy NexTier employees were replaced with our share-based awards on the merger date. The fair value of the replacement awards has been allocated between each employee’s pre-combination and post-combination services. Amounts allocated to pre-combination services have been included as consideration transferred as part of the merger. See Note 12 for replacement awards details.

The transaction has been accounted for as a business combination using the acquisition method with Patterson-UTI Energy, Inc. determined to be the acquirer. Under the acquisition method of accounting, the fair value of the consideration transferred is allocated to the tangible and intangible assets acquired and the liabilities assumed based on their estimated fair values as of the acquisition date.

The aggregate purchase price noted above was allocated to the major categories of assets acquired and liabilities assumed based on preliminary estimated fair values as of the date of the business combination. We applied significant judgment in estimating the fair value of assets acquired and liabilities assumed, which involved the use of significant estimates and assumptions with respect to future rig counts, cash flow projections, estimated economic useful lives, operating and capital cost estimates, customer attrition rates, contributory asset charges, royalty rates and discount rate (14.0%.) The carrying amounts of cash and cash equivalents, accounts receivable, inventory, other assets, accounts payable, accrued liabilities, and other liabilities approximate their fair values due to their nature or the short-term maturity of instruments. The remaining assets acquired and liabilities assumed are based on inputs that are not observable in the market and thus represent Level 3 inputs. The fair value of property and equipment was determined using a combination of replacement cost and indirect cost. Intangible assets were valued using an income approach. The fair value was estimated by using multi-period excess earnings method for customer relationships and a relief from royalty method for trade name and developed technology. The purchase price allocation was finalized in the third quarter of 2024. The valuation period adjustments did not have a material impact on our consolidated financial statements.

The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of the merger:


Assets acquired:
Cash and cash equivalents	$	95,815
Accounts receivable	420,200
Inventory	71,930
Property and equipment (1)	1,045,610
Intangible assets	768,000
Operating lease right of use asset	19,091
Finance lease right of use asset	50,733
Other assets	84,677
Total assets acquired	2,556,056

Liabilities assumed:
Accounts payable	358,873
Accrued liabilities	129,535
Operating lease liability	19,091
Finance lease liability	50,733
Deferred tax liabilities	86,293
Long-term debt	22,533
Other liabilities	11,815
Total liabilities assumed	678,873
Net assets acquired	1,877,183
Goodwill	922,125
Total consideration transferred	$	2,799,308

(1)We recorded an adjustment of $263 million to write-up acquired property and equipment to estimated fair value. This adjustment will be depreciated on a straight-line basis over a weighted average period of six years.

The goodwill recognized in the merger represents the excess of the gross consideration transferred over the fair value of the underlying net tangible and identifiable intangible assets acquired and liabilities assumed. Goodwill largely consisted of the expected synergies and economies of scale from the combined operations of Patterson-UTI and NexTier as well as the recognition of deferred taxes for the difference between the fair value of the assets acquired and liabilities assumed and the respective carry-over tax basis. The goodwill is not deductible for tax purposes. All of the goodwill was assigned to our completion services segment. See Note 7.

3. Revenues

ASC Topic 606 Revenue from Contracts with Customers

Drilling Services and Completion Services — revenue is recognized based on our customers’ ability to benefit from our services in an amount that reflects the consideration we expect to receive in exchange for those services. This typically happens when the service is performed. The services we provide represent a series of distinct services, generally provided daily, that are substantially the same, with the same pattern of transfer to the customer. Because our customers benefit equally throughout the service period, generally measured in days, and our efforts in providing services are incurred relatively evenly over the period of performance, revenue is recognized as we provide services to the customer.

ASC Topic 842 Revenue from Equipment Rentals

Drilling Products Revenue — revenues are primarily generated from the rental of drilling equipment, comprised of drill bits and downhole tools. These arrangements provide the customer with the right to control the use of identified asset. Generally, the lease terms in such arrangements are for periods of two to three days and do not provide customers with options to purchase the underlying asset.

Other — we are a non-operating working interest owner of oil and natural gas assets primarily located in Texas and New Mexico. The ownership terms are outlined in joint operating agreements for each well between the operator of the well and the various interest owners, including us, who are considered non-operators of the well. We receive revenue each period for our working interest in the well during the period.

Accounts Receivable and Contract Liabilities

Accounts receivable is our right to consideration once it becomes unconditional. Payment terms typically range from 30 to 60 days.

We do not have any significant contract asset balances. Contract liabilities include prepayments received from customers prior to the requested services being completed. Also included in contract liabilities are payments received from customers for reactivation or initial mobilization of newly constructed or upgraded rigs that were moved on location to the initial well site. These payments are allocated to the overall performance obligation and amortized over the initial term of the contract. Total contract liability balances were $13.3 million and $103 million as of September 30, 2024 and December 31, 2023, respectively. We recognized $99.5 million of revenue in the nine months ended September 30, 2024 that was included in the contract liability balance at the beginning of the period. Revenue related to our contract liabilities balance is expected to be recognized through 2025. The $13.3 million current portion of our contract liability balance is included in “Accrued liabilities”.

Contract Costs

Costs incurred for newly constructed rigs or rig upgrades based on a contract with a customer are considered capital improvements and are capitalized to drilling equipment and depreciated over the estimated useful life of the asset.

Remaining Performance Obligations

We maintain a backlog of commitments for contract drilling services under term contracts, which we define as contracts with a duration of six months or more. Our contract drilling backlog in the United States as of September 30, 2024 was approximately $401 million. Approximately 9% of our total contract drilling backlog in the United States at September 30, 2024 is reasonably expected to remain at September 30, 2025. We generally calculate our backlog by multiplying the dayrate under our term drilling contracts by the number of days remaining under the contract. The calculation does not include any revenues related to fees for other services such as for mobilization, other than initial mobilization, demobilization and customer reimbursables, nor does it include potential reductions in rates for unscheduled standby or during periods in which the rig is moving or incurring maintenance and repair time in excess of what is permitted under the drilling contract. For contracts that contain variable dayrate pricing, our backlog calculation uses the dayrate in effect for periods where the dayrate is fixed, and, for periods that remain subject to variable pricing, uses commodity pricing or other related indices in effect at September 30, 2024. In addition, our term drilling contracts are generally subject to termination by the customer on short notice and provide for an early termination payment to us in the event that the contract is terminated by the customer. For contracts on which we have received notice for the rig to be placed on standby, our backlog calculation uses the standby rate for the period over which we expect to receive the standby rate. For contracts on which we have received an early termination notice, our backlog calculation includes the early termination rate, instead of the dayrate, for the period over which we expect to receive the lower rate. Please see “Our current backlog of contract drilling revenue may decline and may not ultimately be realized, as fixed-term contracts may in certain instances be terminated without an early termination payment” included in Item 1A of our Annual Report.

4. Inventory

Inventory consisted of the following at September 30, 2024 and December 31, 2023 (in thousands):


	September 30, 2024		December 31, 2023
Raw materials and supplies	$	127,745	$	141,311
Work-in-process	6,117		7,437
Finished goods	38,888		32,057
Inventory	$	172,750	$	180,805

5. Other Current Assets

Other current assets consisted of the following at September 30, 2024 and December 31, 2023 (in thousands):


	September 30, 2024		December 31, 2023
Federal and state income taxes receivable	$	35,213	$	26,949
Workers’ compensation receivable	33,615		31,006
Prepaid expenses	42,827		46,394


Other	38,584		36,773
Other current assets	$	150,239	$	141,122

6. Property and Equipment

Property and equipment consisted of the following at September 30, 2024 and December 31, 2023 (in thousands):


	September 30, 2024		December 31, 2023
Equipment	$	8,536,173	$	8,506,727
Oil and natural gas properties	242,961		238,337
Buildings	249,505		248,693
Rental equipment	133,335		119,653
Land	37,973		38,811
Total property and equipment	9,199,947		9,152,221
Less accumulated depreciation, depletion, amortization and impairment	(6,104,877)		(5,811,809)
Property and equipment, net	$	3,095,070	$	3,340,412

Depreciation and depletion expense on property and equipment of approximately $220 million and $188 million was recorded in the three months ended September 30, 2024 and 2023, respectively. Depreciation and depletion expense on property and equipment of approximately $684 million and $436 million was recorded in the nine months ended September 30, 2024 and 2023, respectively.

We review our long-lived assets, including property and equipment and definite-lived intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amounts of certain assets may not be recovered over their estimated remaining useful lives (“triggering events”). In connection with this review, assets are grouped at the lowest level at which identifiable cash flows are largely independent of other asset groupings. We estimate future cash flows over the life of the respective assets or asset groupings in our assessment of impairment. These estimates of cash flows are based on historical cyclical trends in the industry as well as our expectations regarding the continuation of these trends in the future. Provisions for asset impairment are charged against income when estimated future cash flows, on an undiscounted basis, are less than the asset’s net book value. Any provision for impairment is measured at fair value.

Negative market indicators such as lower industry-wide drilling rig count forecasts, increased volatility and pricing declines in the pressure pumping market, and continued efficiency gains and technology advancements reducing operating days have led to our reduced outlook for activity. The reduction in activity forecasts, the recent decline in the market price of our common stock, and the results of the fair value determination of certain of our reporting units, were triggering events indicating that certain of our long-lived tangible and intangible assets may be impaired. We deemed it necessary to perform recoverability tests on our asset groups within our completion services reporting unit and our Latin American contract drilling asset group as of September 30, 2024. Future cash flows were estimated over the expected remaining life of the primary asset for each asset group, and we determined that, on an undiscounted basis, expected cash flows exceeded the carrying value of the asset groups. As such, no impairment was indicated for our long-lived tangible or definite-lived intangible assets.

We then evaluated our fleet of drilling rigs for marketability based on the condition of inactive rigs, expenditures that would be necessary to bring them to working condition and the expected demand for drilling services by rig type. The components comprising rigs that will no longer be marketed were evaluated, and those components with continuing utility to other marketed rigs were identified for transfer to other rigs or to yards to be used as spare equipment. The remaining components of these rigs were abandoned. During the three months ended September 30, 2024, we identified 42 legacy, non-Tier-1 super-spec drilling rigs and related equipment to be abandoned. Based on the strong customer preference across the industry for Tier-1 super-spec drilling rigs, in addition to efficiency gains and technology advancements that have reduced the total number of rigs needed for the U.S. drilling

market, we believe the 42 rigs that were abandoned had limited commercial opportunity. The three and nine months ended September 30, 2024 included a charge of $114 million related to this abandonment. No similar charges were incurred in the three and nine months ended September 30, 2023.

Geopolitical instability, global or regional decreases in the demand of our services and products, or other unforeseen macroeconomic considerations could negatively impact the expected cash flows used in our recoverability tests on our asset groups. Such changes could result in impairment charges in the future, which could be material to our results of operations and financial statements as a whole.

7. Goodwill and Intangible Assets

Goodwill — Goodwill by reportable segment as of September 30, 2024 and changes for the nine months then ended are as follows (in thousands):


	Completion Services		Drilling Products		Total
Balance at January 1, 2024	$	922,125	$	457,616	$	1,379,741
Measurement period adjustment	—		(7,113)		(7,113)
Impairment	(885,240)		—		(885,240)
Balance at September 30, 2024	$	36,885	$	450,503	$	487,388

Goodwill is evaluated at least annually on July 31, or more frequently when events and circumstances occur indicating recorded goodwill may be impaired. Goodwill is tested at the reporting unit level, which is at or one level below our operating segments. We determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value after considering qualitative, market and other factors, and if that is the case, any necessary goodwill impairment is determined using a quantitative impairment test. If the resulting fair value of goodwill is less than the carrying value of goodwill, an impairment loss would be recognized for the amount of the shortfall. The fair value of a reporting unit is determined using significant unobservable inputs, or level 3 in the fair value hierarchy. These inputs are based on internal management estimates, forecasts, and significant judgment.

We determined our drilling products operating segment consists of a single reporting unit and, accordingly, goodwill acquired from the Ulterra acquisition was allocated to that reporting unit. We determined our completion services operating segment consists of two reporting units; completion services, which is primarily comprised of our hydraulic fracturing operations and other integrated service offerings, and cementing services.

Goodwill Impairment Assessment

Negative market indicators such as lower industry-wide drilling rig and pressure pumping fleet count forecasts, increased volatility and pricing declines in the pressure pumping market, and continued efficiency gains and technology advancements reducing operating days have led to our reduced outlook for activity. We viewed the reduction in activity forecasts combined with the recent decline in the market price of our common stock as a triggering event that warranted a quantitative assessment for goodwill impairment.

We estimated the fair value of the drilling products reporting unit in our drilling products operating segment and the completion services reporting unit in our completion services operating segment using the income approach. Under this approach, we used a discounted cash flow model, which utilizes present values of cash flows to estimate fair value. Forecasted cash flows reflected known market conditions in the third quarter of 2024 and management’s anticipated business outlook for each reporting unit. Future cash flows were projected based on estimates of revenue, gross profit, selling, general and administrative expense, changes in working capital, and capital expenditures. The terminal period used within the discounted cash flow model for each reporting unit consisted of a 1% growth estimate. Future cash flows were then discounted using a market-participant, risk-adjusted weighted average cost of capital of 10.25% for the drilling products reporting unit and 10.75% for the completion services reporting unit. Financial and credit market volatility directly impacts our fair value measurement through the weighted average cost of capital used to determine a discount rate. During times of volatility, significant judgment must be applied to determine whether credit market changes are a short-term or long-term trend.

We estimated the fair value of the cementing services reporting unit in our completion services operating segment using a market approach. The market approach was based on trading multiples of earnings before interest, taxes, depreciation and amortization for companies comparable to the cementing services reporting unit.

The forecast for the completion services reporting unit assumed lower activity in 2025 compared to average activity levels for full year 2024 and increases in estimated activity of 2% to 8% beginning in 2026 through 2029. Those estimates were based on future drilling rig and pressure pumping fleet count forecasts during the third quarter of 2024 and estimated market share. Additionally, the forecast reflected the expectation that industry-wide pricing pressure will persist within the completions market and continue to compress adjusted gross profit. These factors negatively impacted the estimated value of the reporting unit.

Based on the results of the quantitative assessment, the fair value of the completion services reporting unit was less than its carrying value. Accordingly, we recorded an $885 million impairment charge to goodwill for the completion services reporting unit during the third quarter of 2024.

The forecast for the drilling products reporting unit assumed continued growth domestically as well as in international markets. Geopolitical instability in regions in which we expect to maintain and grow market share, a global decrease in the demand of drilling products, or other unforeseen macroeconomic considerations could negatively impact the key assumptions used in our goodwill assessment for our drilling products reporting unit.

Based on the results of the goodwill impairment tests, the fair values of the drilling products and cementing services reporting units exceeded their carrying values by approximately 13% and 73%, respectively. Accordingly, no impairment was recorded for the drilling products and cementing services reporting units.

Intangible Assets — The following table presents the gross carrying amount and accumulated amortization of our intangible assets as of September 30, 2024 and December 31, 2023 (in thousands):


	September 30, 2024						December 31, 2023
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Customer relationships	$	785,055	$	(78,374)	$	706,681	$	786,715	$	(25,563)	$	761,152
Developed technology	202,772		(46,529)		156,243		202,772		(16,435)		186,337
Trade name	101,000		(10,906)		90,094		101,000		(3,406)		97,594
Other	12,260		(2,683)		9,577		7,345		(731)		6,614
Intangible assets, net	$	1,101,087	$	(138,492)	$	962,595	$	1,097,832	$	(46,135)	$	1,051,697

Amortization expense on intangible assets of approximately $31.1 million and $10.1 million was recorded for the three months ended September 30, 2024 and 2023, respectively. Amortization expense on intangible assets of approximately $92.4 million and $10.9 million was recorded for the nine months ended September 30, 2024 and 2023, respectively.

8. Accrued Liabilities

Accrued liabilities consisted of the following at September 30, 2024 and December 31, 2023 (in thousands):


	September 30, 2024		December 31, 2023
Salaries, wages, payroll taxes and benefits	$	103,745	$	129,982
Workers’ compensation liability	73,385		67,396
Property, sales, use and other taxes	68,419		62,194
Insurance, other than workers’ compensation	11,842		11,524
Accrued interest payable	10,724		19,172
Deferred revenue	13,307		98,914
Federal and state income taxes payable	—		3,437
Accrued merger and integration expense	7,275		15,113
Other	38,097		38,536
Accrued liabilities	$	326,794	$	446,268

9. Long-Term Debt

Long-term debt consisted of the following at September 30, 2024 and December 31, 2023 (in thousands):


	September 30, 2024		December 31, 2023
3.95% Senior Notes Due 2028	$	482,505	$	482,505
5.15% Senior Notes Due 2029	344,895		344,895
7.15% Senior Notes Due 2033	400,000		400,000
Equipment Loans Due 2025	9,530		18,686
	1,236,930		1,246,086
Less deferred financing costs and discounts	(7,956)		(8,919)
Less current portion	(9,513)		(12,226)
Total	$	1,219,461	$	1,224,941

Credit Agreement — On April 5, 2024, we entered into a Commitment Increase Agreement (the “Commitment Increase Agreement”), which increased the commitments under our Amended and Restated Credit Agreement, dated as of March 27, 2018 (as modified by the Commitment Increase Agreement and amended to date, the “Credit Agreement”), by and among us, as borrower, Wells Fargo Bank, National Association, as administrative agent, letter of credit issuer, swing line lender and lender and each of the other letter of credit issuers and lenders party thereto.

The Commitment Increase Agreement increased the commitments under our Credit Agreement to $615 million. The maturity date for $567 million of such commitments is March 27, 2026; and the maturity date for $48.3 million of such commitments is March 27, 2025.

On August 29, 2023, we entered into Amendment No. 4 to Amended and Restated Credit Agreement (the “Credit Agreement Amendment”), which, among other things, extended the maturity date for $85.0 million of revolving credit commitments of certain lenders under the Credit Agreement from March 27, 2025 to March 27, 2026.

The Credit Agreement is a committed senior unsecured revolving credit facility that permits aggregate borrowings of up to $615 million, including a letter of credit facility that, at any time outstanding, is limited to $100 million and a swing line facility that, at any time outstanding, is limited to the lesser of $50.0 million and the amount of the swing line provider’s unused commitment.

Loans under the Credit Agreement bear interest by reference, at our election, to the SOFR rate (subject to a 0.10% per annum adjustment) or base rate, in each case subject to a 0% floor. The applicable margin on SOFR rate loans varies from 1.00% to 2.00% and the applicable margin on base rate loans varies from 0.00% to 1.00%, in each case determined based on our credit rating. As of September 30, 2024, the applicable margin on SOFR rate loans was 1.75% and the applicable margin on base rate loans was 0.75%. A letter of credit fee is payable by us equal to the applicable margin for SOFR rate loans times the daily amount available to be drawn under outstanding letters of credit. The commitment fee rate payable to the lenders varies from 0.10% to 0.30% based on our credit rating.

None of our subsidiaries are currently required to be a guarantor under the Credit Agreement. However, if any subsidiary guarantees or incurs debt, which does not qualify for certain limited exceptions and is otherwise, in the aggregate with all other similar debt, in excess of Priority Debt (as defined in the Credit Agreement), such subsidiary is required to become a guarantor under the Credit Agreement.

The Credit Agreement contains representations, warranties, affirmative and negative covenants and events of default and associated remedies that we believe are customary for agreements of this nature, including certain restrictions on our ability and the ability of each of our subsidiaries to grant liens and on the ability of each of our non-guarantor subsidiaries to incur debt. If our credit rating is below investment grade at both Moody’s and S&P, we will become subject to a restricted payment covenant, which would generally require us to have a Pro Forma Debt Service Coverage Ratio (as defined in the Credit Agreement) greater than or equal to 1.50 to 1.00 immediately before and immediately after making any restricted payment. Restricted payments include, among other things, dividend payments, repurchases of our common stock, distributions to holders of our common stock or any other payment or other distribution to third parties on account of our or our subsidiaries’ equity interests. Our credit rating is currently investment grade at both credit rating agencies. The Credit Agreement also requires that our total debt to capitalization ratio, expressed as a percentage, not exceed 50% as of the last day of each fiscal quarter. The Credit Agreement generally defines the total debt to capitalization ratio as the ratio of (a) total borrowed money indebtedness to (b) the sum of such indebtedness plus consolidated net worth, with consolidated net worth determined as of the end of the most recently ended fiscal quarter. We were in compliance with these covenants at September 30, 2024.

As of September 30, 2024, we had no borrowings outstanding under our revolving credit facility. We had $2.1 million in letters of credit outstanding under the Credit Agreement at September 30, 2024 and, as a result, had available borrowing capacity of approximately $613 million at that date.

2015 Reimbursement Agreement — On March 16, 2015, we entered into a Reimbursement Agreement (the “Reimbursement Agreement”) with The Bank of Nova Scotia (“Scotiabank”), pursuant to which we may from time to time request that Scotiabank issue an unspecified amount of letters of credit. As of September 30, 2024, we had $35.9 million in letters of credit outstanding under the Reimbursement Agreement.

Under the terms of the Reimbursement Agreement, we will reimburse Scotiabank on demand for any amounts that Scotiabank has disbursed under any of our letters of credit issued thereunder. Fees, charges and other reasonable expenses for the issuance of letters of credit are payable by us at the time of issuance at such rates and amounts as are in accordance with Scotiabank’s prevailing practice. We are obligated to pay to Scotiabank interest on all amounts not paid by us on the date of demand or when otherwise due at the LIBOR rate plus 2.25% per annum, calculated daily and payable monthly, in arrears, on the basis of a calendar year for the actual number of days elapsed, with interest on overdue interest at the same rate as on the reimbursement amounts. A letter of credit fee is payable by us equal to 1.50% times the amount of outstanding letters of credit.

We have also agreed that if obligations under the Credit Agreement are secured by liens on any of our or our subsidiaries’ property, then our reimbursement obligations and (to the extent similar obligations would be secured under the Credit Agreement) other obligations under the Reimbursement Agreement and any letters of credit will be equally and ratably secured by all property subject to such liens securing the Credit Agreement.

Pursuant to a Continuing Guaranty dated as of March 16, 2015, our payment obligations under the Reimbursement Agreement are jointly and severally guaranteed as to payment and not as to collection by our subsidiaries that from time to time guarantee payment under the Credit Agreement. None of our subsidiaries are currently required to guarantee payment under the Credit Agreement.

2028 Senior Notes, 2029 Senior Notes and 2033 Senior Notes — On January 19, 2018, we completed an offering of $525 million in aggregate principal amount of our 3.95% Senior Notes due 2028 (the “2028 Notes”). On November 15, 2019, we completed an offering of $350 million in aggregate principal amount of our 5.15% Senior Notes due 2029 (the “2029 Notes”). On September 13, 2023, we completed an offering of $400 million in aggregate principal amount of our 7.15% Senior Notes due 2033 (the “2033 Notes”). The net proceeds before offering expenses from the offering of the 2033 Notes were approximately $396 million, which we used to repay amounts outstanding under our revolving credit facility.

We pay interest on the 2028 Notes on February 1 and August 1 of each year. The 2028 Notes will mature on February 1, 2028. The 2028 Notes bear interest at a rate of 3.95% per annum.

We pay interest on the 2029 Notes on May 15 and November 15 of each year. The 2029 Notes will mature on November 15, 2029. The 2029 Notes bear interest at a rate of 5.15% per annum.

We pay interest on the 2033 Notes on April 1 and October 1 of each year. The 2033 Notes will mature on October 1, 2033. The 2033 Notes bear interest at a rate of 7.15% per annum.

The 2028 Notes, 2029 Notes and 2033 Notes (together, the “Senior Notes”) are our senior unsecured obligations, which rank equally with all of our other existing and future senior unsecured debt and will rank senior in right of payment to all of our other future subordinated debt. The Senior Notes will be effectively subordinated to any of our future secured debt to the extent of the value of the assets securing such debt. In addition, the Senior Notes will be structurally subordinated to the liabilities (including trade payables) of our subsidiaries that do not guarantee the Senior Notes. None of our subsidiaries are currently required to be a guarantor under the Senior Notes. If our subsidiaries guarantee the Senior Notes in the future, such guarantees (the “Guarantees”) will rank equally in right of payment with all of the guarantors’ future unsecured senior debt and senior in right of payment to all of the guarantors’ future subordinated debt. The Guarantees will be effectively subordinated to any of the guarantors’ future secured debt to the extent of the value of the assets securing such debt.

At our option, we may redeem the Senior Notes in whole or in part, at any time or from time to time at a redemption price equal to 100% of the principal amount of such Senior Notes to be redeemed, plus accrued and unpaid interest, if any, on those Senior Notes to the redemption date, plus a “make-whole” premium. Additionally, commencing on November 1, 2027, in the case of the 2028 Notes, on August 15, 2029, in the case of the 2029 Notes, and on July 1, 2033, in the case of the 2033 Notes, at our option, we may redeem the respective Senior Notes in whole or in part, at a redemption price equal to 100% of the principal amount of the Senior Notes to be redeemed, plus accrued and unpaid interest, if any, on those Senior Notes to the applicable redemption date.

The indentures pursuant to which the Senior Notes were issued include covenants that, among other things, limit our and our subsidiaries’ ability to incur certain liens, engage in sale and lease-back transactions or consolidate, merge, or transfer all or substantially all of their assets. These covenants are subject to important qualifications and limitations set forth in the indentures.

Upon the occurrence of a change of control triggering event, as defined in the indentures, each holder of the Senior Notes may require us to purchase all or a portion of such holder’s Senior Notes at a price equal to 101% of their principal amount, plus accrued and unpaid interest, if any, to, but excluding, the applicable repurchase date.

The indentures also provide for events of default which, if any of them occurs, would permit or require the principal of, premium, if any, and accrued interest, if any, on the Senior Notes to become or to be declared due and payable.

Equipment Loans — As part of the NexTier merger, we assumed the obligations of NexTier Completions Solutions Inc. (“NCS”) under a Master Loan and Security Agreement (as amended, the “Master Agreement”) with Caterpillar Financial Services Corporation. The Master Agreement allows NCS to enter into secured equipment financing term loans from time to time (the “Equipment Loans”). The Equipment Loans may be drawn in multiple tranches, with each loan evidenced by a separate promissory note. The Master Agreement and the Equipment Loans contain customary affirmative and negative covenants, including limitations on further encumbrance of the collateral other than the applicable loans under the Master Agreement. We were in compliance with these covenants at September 30, 2024. The Equipment Loans bear interest at a rate of 5.25% per annum, and we pay interest on the 1st of each month. The Equipment Loans will mature on June 1, 2025.

Presented below is a schedule of the principal repayment requirements of long-term debt by fiscal year as of September 30, 2024 (in thousands):


Year ending December 31,
2024	$	3,135
2025	6,395
2026	—
2027	—
2028	482,505
2029	344,895
Thereafter	400,000
Total	$	1,236,930

10. Commitments and Contingencies

As of September 30, 2024, we maintained letters of credit in the aggregate amount of $40.0 million primarily for the benefit of various insurance companies as collateral for retrospective premiums and retained losses that could become payable under the terms of the underlying insurance contracts and compliance with contractual obligations. These letters of credit expire annually at various times during the year and are typically renewed. As of September 30, 2024, no amounts had been drawn under the letters of credit. As of September 30, 2024, we had $35.0 million in surety bond exposure issued as financial assurance on an insurance agreement.

As of September 30, 2024, we had commitments to purchase major equipment totaling approximately $67.2 million.

Our completion services segment has entered into agreements to purchase minimum quantities of proppants from certain vendors. As of September 30, 2024, the remaining minimum obligation under these agreements was approximately $21.5 million, of which approximately $4.8 million, $14.3 million, and $2.4 million relate to the remainder of 2024, 2025 and 2026, respectively.

We are party to various legal proceedings arising in the normal course of our business. We do not believe that the outcome of these proceedings, either individually or in the aggregate, will have a material adverse effect on our financial condition, cash flows or results of operations.

11. Stockholders’ Equity

Cash Dividend — On October 23, 2024, our Board of Directors approved a cash dividend on our common stock in the amount of $0.08 per share to be paid on December 16, 2024 to holders of record as of December 2, 2024. The amount and timing of all future dividend payments, if any, are subject to the discretion of the Board of Directors and will depend upon business conditions, results of operations, financial condition, terms of our debt agreements and other factors. Our Board of Directors may, without advance notice,

reduce or suspend our dividend to improve our financial flexibility and position our company for long-term success. There can be no assurance that we will pay a dividend in the future.

Share Repurchases and Acquisitions — In September 2013, our Board of Directors approved a stock buyback program. In February 2024, our Board of Directors approved an increase of the authorization under the stock buyback program to allow for an aggregate of $1.0 billion of future share repurchases. All purchases executed to date have been through open market transactions. Purchases under the buyback program are made at management’s discretion, at prevailing prices, subject to market conditions and other factors. Purchases may be made at any time without prior notice. There is no expiration date associated with the buyback program. As of September 30, 2024, we had remaining authorization to purchase approximately $780 million of our outstanding common stock under the stock buyback program. Shares of stock purchased under the buyback program are held as treasury shares.

Treasury stock acquisitions during the nine months ended September 30, 2024 were as follows (dollars in thousands):


	Shares	Cost
Treasury shares at January 1, 2024	105,580,011	$	1,657,675
Purchases pursuant to stock buyback program	24,020,777	259,247
Acquisitions pursuant to long-term incentive plans	1,202,720	12,977
Treasury shares at September 30, 2024	130,803,508	$	1,929,899

12. Stock-based Compensation

We use share-based payments to compensate employees and non-employee directors. We recognize the cost of share-based payments under the fair-value-based method. Share-based awards include equity instruments in the form of stock options or restricted stock units that have included service conditions and, in certain cases, performance conditions. Our share-based awards also include share-settled performance unit awards. Share-settled performance unit awards are accounted for as equity awards. We issue shares of common stock when vested stock options are exercised and after restricted stock units and share-settled performance unit awards vest.

Stock Options — We estimate the grant date fair values of stock options using the Black-Scholes-Merton valuation model. Volatility assumptions are based on the historic volatility of our common stock over the most recent period equal to the expected term of the options as of the date such options are granted. The expected term assumptions are based on our experience with respect to employee stock option activity. Dividend yield assumptions are based on the expected dividends at the time the options are granted. The risk-free interest rate assumptions are determined by reference to United States Treasury yields. No options were granted during the nine months ended September 30, 2024 or 2023.

Stock option activity from January 1, 2024 to September 30, 2024 follows:


	Underlying Shares	Weighted Average Exercise Price Per Share
Outstanding at January 1, 2024	2,865,223	$	23.36


Exercised	—	$	—
Expired	(1,031,218)	$	25.52
Outstanding at September 30, 2024	1,834,005	$	22.14
Exercisable at September 30, 2024	1,834,005	$	22.14

Restricted Stock Units (Equity Based) — For all restricted stock unit awards made to date, shares of common stock are not issued until the units vest. Restricted stock units are subject to forfeiture for failure to fulfill service conditions and, in certain cases, performance conditions. Forfeitable dividend equivalents are accrued on certain restricted stock units that will be paid upon vesting. We use the straight-line method to recognize periodic compensation cost over the vesting period.

Restricted stock unit activity from January 1, 2024 to September 30, 2024 follows:


	Time Based	Performance Based	Weighted Average Grant Date Fair Value Per Share
Non-vested restricted stock units outstanding at January 1, 2024	5,827,668	521,533	$	10.60
Granted	3,101,421	—	$	10.50

Vested	(3,220,826)	(27,640)	$	9.09
Forfeited	(189,134)	—	$	11.46
Non-vested restricted stock units outstanding at September 30, 2024	5,519,129	493,893	$	11.34

As of September 30, 2024, we had unrecognized compensation cost related to our unvested restricted stock units totaling $52.5 million. The weighted-average remaining vesting period for these unvested restricted stock units was 1.96 years as of September 30, 2024.

Restricted Stock Units (Liability Based) — We converted NexTier’s cash-settled performance based units into our cash-settled restricted stock units in connection with the NexTier merger. These awards are accounted for as liability classified awards and remeasured at fair value at each reporting period. Compensation expense is recorded over the vesting period and is initially based on the fair value at the award conversion date. Compensation expense is subsequently remeasured at each reporting date during the vesting period based on the change in our stock price. Dividend cash equivalents are not paid on cash-settled units. As of September 30, 2024, $3.6 million is included in “Accrued liabilities” in our unaudited condensed consolidated balance sheets for these awards.

Performance Unit Awards — We have granted share-settled performance unit awards to certain employees (the “Performance Units”) on an annual basis since 2010. The Performance Units provide for the recipients to receive shares of common stock upon the achievement of certain performance goals during a specified period established by the Compensation Committee. The performance period for the Performance Units is generally the three-year period commencing on April 1 of the year of grant, except as described below for the Performance Units granted in May 2024.

The performance goals for the Performance Units are tied to our total shareholder return for the performance period as compared to total shareholder return for a peer group determined by the Compensation Committee. For the performance units granted in April 2022, the peer group includes one market index. The performance goals are considered to be market conditions under the relevant accounting standards and the market conditions were factored into the determination of the fair value of the respective Performance Units. For the Performance Units granted in April 2022 and May 2023, the recipients will receive the target number of shares if our total shareholder return during the performance period, when compared to the peer group, is at the 55th percentile. If our total shareholder return during the performance period, when compared to the peer group, is at the 75th percentile or higher, then the recipients will receive two times the target number of shares. If our total shareholder return during the performance period, when compared to the peer group, is at the 25th percentile, then the recipients will only receive one-half of the target number of shares. If our total shareholder return during the performance period, when compared to the peer group, is between the 25th and 55th percentile, or the 55th and 75th percentile, then the shares to be received by the recipients will be determined using linear interpolation for levels of achievement between these points.

The Performance Units granted in May 2024 are subject to three separate performance periods—a one-year performance period (the “First Performance Period”), a two-year performance period (the “Second Performance Period”) and a three-year performance period (the “Third Performance Period”), each commencing on April 1 of the year of grant. One-third of the total target number of shares subject to the May 2024 Performance Units may become earned in respect of each performance period based on our total shareholder return during such performance period (the target number of shares eligible to vest in the applicable performance period, the “Performance Period Target Amount”). The recipients will earn the Performance Period Target Amount if our total shareholder return during the applicable performance period, when compared to the peer group, is at the 55th percentile. If our total shareholder return during the applicable performance period, when compared to the peer group, is at the 75th percentile or higher, then the recipients will earn two times the Performance Period Target Amount. If our total shareholder return during the applicable performance period, when compared to the peer group, is at the 25th percentile, then the recipients will only earn one-half of the Performance Period Target Amount. If our total shareholder return during the applicable performance period, when compared to the peer group, is between the 25th and 55th percentile, or the 55th and 75th percentile, then the shares to be earned by the recipients will be determined using linear interpolation for levels of achievement between these points. Notwithstanding the foregoing, a number of shares no greater than the Performance Period Target Amount may be earned for each of the First Performance Period and the Second Performance Period, unless our total shareholder return during the Third Performance Period is greater than our total shareholder return for, as applicable, the First Performance Period and/or the Second Performance Period, in which case, the number

of shares earned in respect of the First Performance and/or the Second Performance Period, as applicable, will be determined as if our total shareholder return during the Third Performance Period was our total shareholder return during the First Performance Period and/or the Second Performance Period, as applicable. If our total shareholder return during the Third Performance Period is zero or negative, no more than the aggregate target number of shares subject to the May 2024 Performance Units may be earned, regardless of results during the First Performance Period and the Second Performance Period. A full three-year vesting period applies to the Performance Units and no shares will vest and be delivered in respect of the May 2024 Performance Units until after the completion of the Third Performance Period.

The payout under the Performance Units may not exceed the target number of shares if our absolute total shareholder return is negative or zero.

The total target number of shares granted with respect to the Performance Units for the awards granted in 2020-2024 is set forth below:


	2024 Performance Unit Awards	2023 Performance Unit Awards	2022 Performance Unit Awards	2021 Performance Unit Awards	2020 Performance Unit Awards
Target number of shares	875,100	631,700	414,000	843,000	500,500

In May 2023, 1,001,000 shares were issued to settle the 2020 Performance Units. In May 2024, 718,581 shares were issued to settle the 2021 Performance Units. The Performance Units granted in 2022, 2023 and 2024 have not reached the end of their respective performance periods.

Because the Performance Units are share-settled awards, they are accounted for as equity awards and measured at fair value on the date of grant using a Monte Carlo simulation model. The fair value of the Performance Units is set forth below (in thousands):