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

or

 

 

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.

 

3


 

 

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.

 

4


 

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.

 

5


 

 

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.

6


 

 

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.

 

7


 

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.

8


 

 

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