PATTERSON UTI ENERGY INC [PTEN] Filings

10-Q 1 pten-20220331.htm 10-Q 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


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

For the quarterly period ended March 31, 2022


☐		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 ☑ No ☐

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 ☑ No ☐

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. ☐

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

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

216,303,200 shares of common stock, $0.01 par value, as of April 28, 2022.

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 loss	5
	Unaudited condensed consolidated statements of changes in stockholders’ equity	6
	Unaudited condensed consolidated statements of cash flows	7
	Notes to unaudited condensed consolidated financial statements	8
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	35
ITEM 4.	Controls and Procedures	36

	PART II — OTHER INFORMATION

ITEM 1.	Legal Proceedings	37
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
ITEM 6.	Exhibits	38
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)


	March 31,			December 31,
	2022			2021
ASSETS
Current assets:
Cash and cash equivalents	$	48,264		$	117,524
Accounts receivable, net of allowance for credit losses of $8,216 and $8,493 at March 31, 2022 and December 31, 2021, respectively		377,572			356,083
Federal and state income taxes receivable		67			67
Inventory		45,302			42,359
Other		61,704			67,620
Total current assets		532,909			583,653
Property and equipment, net		2,305,530			2,331,755
Right of use asset		19,697			19,024
Intangible assets		7,343			7,537
Deposits on equipment purchases		6,895			849
Other		12,778			11,055
Deferred tax assets, net		3,812			3,975
Total assets	$	2,888,964		$	2,957,848
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	206,798		$	190,219
Federal and state income taxes payable		569			232
Accrued liabilities		182,381			238,511
Lease liability		6,432			6,891
Total current liabilities		396,180			435,853
Long-term lease liability		18,280			18,108
Long-term debt, net of debt discount and issuance costs of $6,225 and $6,432 at March 31, 2022 and December 31, 2021, respectively		852,530			852,323
Deferred tax liabilities, net		29,234			29,234
Other		16,041			12,843
Total liabilities		1,312,265			1,348,361
Commitments and contingencies (see Note 9)
Stockholders' equity:
Preferred stock, par value $0.01; authorized 1,000,000 shares, no shares issued		—			—
Common stock, par value $0.01; authorized 400,000,000 shares with 299,418,814 and 299,268,967 issued and 215,288,948 and 215,139,972 outstanding at March 31, 2022 and December 31, 2021, respectively		2,994			2,993
Additional paid-in capital		3,176,177			3,171,536
Retained deficit		(235,848	)		(198,316	)
Accumulated other comprehensive income		6,030			5,915
Treasury stock, at cost, 84,129,866 and 84,128,995 shares at March 31, 2022 and December 31, 2021, respectively		(1,372,654	)		(1,372,641	)
Total stockholders' equity		1,576,699			1,609,487
Total liabilities and stockholders' equity	$	2,888,964		$	2,957,848

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
	March 31,
	2022			2021
Operating revenues:
Contract drilling	$	256,640		$	133,501
Pressure pumping		189,590			75,839
Directional drilling		43,334			19,670
Other		19,811			11,919
Total operating revenues		509,375			240,929
Operating costs and expenses:
Contract drilling		176,706			79,378
Pressure pumping		157,468			76,510
Directional drilling		36,954			16,637
Other		12,084			10,226
Depreciation, depletion, amortization and impairment		116,938			152,882
Selling, general and administrative		27,461			22,558
Merger and integration expenses		1,863			—
Other operating (income) expenses, net		(1,218	)		265
Total operating costs and expenses		528,256			358,456
Operating loss		(18,881	)		(117,527	)

Other income (expense):
Interest income		15			139
Interest expense, net of amount capitalized		(10,565	)		(10,009	)
Other		1,582			14
Total other expense		(8,968	)		(9,856	)

Loss before income taxes		(27,849	)		(127,383	)

Income tax expense (benefit)		928			(20,970	)

Net loss	$	(28,777	)	$	(106,413	)

Net loss per common share:
Basic	$	(0.13	)	$	(0.57	)
Diluted	$	(0.13	)	$	(0.57	)

Weighted average number of common shares outstanding:
Basic		215,267			187,677
Diluted		215,267			187,677
Cash dividends per common share	$	0.04		$	0.02

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 LOSS

(unaudited, in thousands)


	Three Months Ended
	March 31,
	2022			2021
Net loss	$	(28,777	)	$	(106,413	)
Other comprehensive income (loss), net of taxes of $0 for all periods:
Foreign currency translation adjustment		115			418
Total comprehensive loss	$	(28,662	)	$	(105,995	)

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						Accumulated Other
	Number of				Paid-in			Retained			Comprehensive		Treasury
	Shares		Amount		Capital			Deficit			Income		Stock			Total
Balance, December 31, 2021		299,269	$	2,993	$	3,171,536		$	(198,316	)	$	5,915	$	(1,372,641	)	$	1,609,487
Net loss		—		—		—			(28,777	)		—		—			(28,777	)
Foreign currency translation adjustment		—		—		—			—			115		—			115
Vesting of restricted stock units		150		1		(1	)		—			—		—			—
Stock-based compensation		—		—		4,642			—			—		—			4,642
Payment of cash dividends ($0.04 per share)		—		—		—			(8,611	)		—		—			(8,611	)
Dividend equivalents		—		—		—			(144	)		—		—			(144	)
Purchase of treasury stock		—		—		—			—			—		(13	)		(13	)
Balance, March 31, 2022		299,419	$	2,994	$	3,176,177		$	(235,848	)	$	6,030	$	(1,372,654	)	$	1,576,699


	Common Stock				Additional						Accumulated Other
	Number of				Paid-in			Retained			Comprehensive		Treasury
	Shares		Amount		Capital			Earnings			Income		Stock			Total
Balance, December 31, 2020		271,029	$	2,710	$	2,902,236		$	472,014		$	5,412	$	(1,366,313	)	$	2,016,059
Net loss		—		—		—			(106,413	)		—		—			(106,413	)
Foreign currency translation adjustment		—		—		—			—			418		—			418
Vesting of restricted stock units		163		2		(2	)		—			—		—			—
Stock-based compensation		—		—		5,891			—			—		—			5,891
Payment of cash dividends ($0.02 per share)		—		—		—			(3,754	)		—		—			(3,754	)
Dividend equivalents		—		—		—			(55	)		—		—			(55	)
Balance, March 31, 2021		271,192	$	2,712	$	2,908,125		$	361,792		$	5,830	$	(1,366,313	)	$	1,912,146

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)


	Three Months Ended
	March 31,
	2022			2021
Cash flows from operating activities:
Net loss	$	(28,777	)	$	(106,413	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation, depletion, amortization and impairment		116,938			152,882
Dry holes and abandonments		117			147
Deferred income tax expense (benefit)		404			(20,973	)
Stock-based compensation expense		4,642			5,891
Net gain on asset disposals		(1,113	)		(840	)
Amortization of debt discount and issuance costs		207			205
Changes in operating assets and liabilities:
Accounts receivable		(21,252	)		(20,877	)
Income taxes receivable/payable		442			4,273
Inventory and other assets		3,372			(2,825	)
Accounts payable		13,958			9,383
Accrued liabilities		(56,199	)		(10,882	)
Other liabilities		935			(1,349	)
Net cash provided by operating activities		33,674			8,622

Cash flows from investing activities:
Purchases of property and equipment		(94,828	)		(18,523	)
Proceeds from disposal of assets		3,576			2,713
Other		(2,116	)		(105	)
Net cash used in investing activities		(93,368	)		(15,915	)

Cash flows from financing activities:
Purchases of treasury stock		(13	)		—
Dividends paid		(8,611	)		(3,754	)
Net cash used in financing activities		(8,624	)		(3,754	)
Effect of foreign exchange rate changes on cash		(942	)		276
Net decrease in cash and cash equivalents		(69,260	)		(10,771	)
Cash and cash equivalents at beginning of period		117,524			224,915
Cash and cash equivalents at end of period	$	48,264		$	214,144

Supplemental disclosure of cash flow information:
Net cash received (paid) during the period for:
Interest, net of capitalized interest of $146 in 2022 and $24 in 2021	$	(10,574	)	$	(10,232	)
Income taxes		(148	)		4,256
Non-cash investing and financing activities:
Net increase in payables for purchases of property and equipment	$	2,866		$	161
Net increase in deposits on equipment purchases		(6,046	)		(242	)

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 (collectively referred to herein as “we,” “us,” “our,” “ours” and like terms). All significant intercompany accounts and transactions have been eliminated. Except for wholly-owned subsidiaries, we have no controlling financial interests in any other entity which would require consolidation. As used in these notes, “we,” “us,” “our,” “ours” and like terms refer collectively to Patterson-UTI Energy, Inc. and its consolidated subsidiaries. Patterson-UTI Energy, Inc. conducts its business operations through its wholly-owned subsidiaries and has no employees or independent operations.

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 (“U.S. 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 U.S. GAAP have been included. The unaudited condensed consolidated balance sheet as of December 31, 2021, as presented herein, was derived from our audited consolidated balance sheet but does not include all disclosures required by U.S. 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, 2021. The results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for the full year.

The U.S. dollar is the functional currency for all of our operations except for our Canadian operations, which use the Canadian dollar as their functional currency. The effects of exchange rate changes are reflected in accumulated other comprehensive income, which is a separate component of stockholders’ equity.

Recently Adopted Accounting Standards — In December 2019, the FASB issued an accounting standards update to simplify the accounting for income taxes. The amendments in the update were effective for public business entities for fiscal years beginning after December 15, 2020, with early adoption permitted. We adopted this new guidance on January 1, 2021, and there was no material impact on our consolidated financial statements.

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. We plan to adopt this standard when LIBOR is discontinued, and we do not expect this new guidance will have a material impact on our consolidated financial statements.

In October 2021, the FASB issued an accounting standards update, which requires contract assets and contract liabilities (i.e., deferred revenue) acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers. Generally, this new guidance will result in the acquirer recognizing contract assets and contract liabilities at the same amounts recorded by the acquiree. Historically, such amounts were recognized by the acquirer at fair value in acquisition accounting. The amendments should be applied prospectively to acquisitions occurring on or after the effective date. The amendments in the update are effective for public business entities for fiscal years beginning after December 15, 2022, with early adoption permitted. We plan to adopt this new guidance on January 1, 2023, and we do not expect this new guidance will have a material impact on our consolidated financial statements.

2. Acquisition and Discontinued Operations

Pioneer Energy Services Corp. ("Pioneer")

On October 1, 2021, we completed the acquisition of Pioneer by acquiring 100% of its equity interests. Total consideration for the acquisition included the issuance of approximately 26.3 million shares of our common stock and payment of $30 million cash, which based on the closing price of our common stock of $9.44 on October 1, 2021, valued the transaction at approximately $278 million.

Pioneer provided land-based contract drilling services and production services to a diverse group of oil and gas exploration and production companies in the United States and internationally in Colombia.

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


Shares of our common stock issued to Pioneer shareholders		26,274
Our common stock price on October 1, 2021	$	9.44
Fair value of common stock issued	$	248,025
Plus cash consideration	$	30,007
Total fair value of consideration transferred	$	278,032

A discounted cash flow model was used by a third-party specialist in determining the fair value of the property and equipment and intangible assets. 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 market day rates, direct operating costs, rig utilization percentages, expectations regarding the amount of future capital and operating costs, and discount rates. Certain data necessary to complete the purchase price allocation is not yet available, including final tax returns that provide the underlying tax basis of Pioneer's assets and liabilities. We expect to complete the purchase price allocation during the 12-month period following the acquisition date.


Identifiable assets acquired
Cash and cash equivalents	$	649
Accounts receivable		44,832
Inventory		8,513
Held for sale assets		73,649
Other current assets		5,272
Property and equipment		217,536
Other long-term assets		9,698
Intangible assets		907
Total identifiable assets acquired		361,056
Liabilities assumed
Accounts payable and accrued liabilities