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 the consolidating interest in 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, 2025, 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 year ended December 31, 2025 (our “Annual Report”). The results of operations for the three and six months ended June 30, 2026 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 six months ended June 30, 2026 and 2025 (in thousands):
| | | | | | | | | | | |
| Six Months Ended
June 30, |
| 2026 | | 2025 |
| Cash and cash equivalents | $ | 201,024 | | | $ | 183,768 | |
| Restricted cash | 2,145 | | | 2,123 | |
| Total cash, cash equivalents and restricted cash | $ | 203,169 | | | $ | 185,891 | |
Recently Adopted Accounting Standards — In December 2023, the FASB issued ASU 2023-09 to improve income tax disclosure. We adopted this accounting pronouncement effective January 1, 2025, on a prospective basis with the first disclosure enhancements reflected in our Annual Report on Form 10-K for the year ended December 31, 2025. The adoption did not have a material impact on our consolidated financial position, results of operations, or cash flows, but resulted in expanded disclosures within the Income Taxes footnote.
In July 2025, the FASB issued ASU 2025-05 to provide entities the option to use a practical expedient to assume balance sheet conditions remain unchanged when developing forecasts for estimating expected credit losses. This guidance is effective for fiscal years beginning after December 15, 2025, with early adoption permitted. We adopted this new guidance on January 1, 2026, and there was no material impact on our consolidated financial statements.
Recently Issued Accounting Standards — In November 2024, the FASB issued ASU 2024-03 to expand disclosure requirements related to certain income statement expenses, which requires public entities to disclose additional information about specific expense categories in the notes to the financial statements on an interim and annual basis. This guidance is effective for
annual reporting periods beginning after December 15, 2026 and interim periods beginning after December 15, 2027, with early adoption permitted. We are currently evaluating the impact this pronouncement will have on our consolidated financial statements.
In September 2025, the FASB issued ASU 2025-06 to improve the accounting for internal-use software cost by increasing the operability of the recognition guidance by removing all references to software development project stages so that the guidance is neutral to different software development methods. This guidance is effective for annual reporting periods beginning after December 15, 2027, with early adoption permitted. We are currently evaluating the impact this pronouncement will have on our consolidated financial statements.
In December 2025, the FASB issued ASU 2025-11 to clarify the applicability of the interim reporting guidance, the types of interim reporting and the form and content of interim financial statements in accordance with GAAP. Per the FASB, the amendment does not intend to change the fundamental nature of interim reporting or expand or reduce current interim disclosure requirements but rather provide clarity and improve navigability of the existing interim reporting requirements. The update will be effective for interim reporting periods within annual reporting periods beginning after December 15, 2027. We are currently evaluating the impact this pronouncement will have on our consolidated financial statements.
2. 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.
Drilling Services revenue primarily consists of daywork drilling contracts for which related revenues and expenses are recognized as services are performed. For certain contracts, we receive payments for the mobilization of rigs and other drilling equipment. We defer revenue and related direct operating expense related to mobilizations and recognize those revenues and expenses on a straight-line basis as drilling services are provided. Costs incurred to relocate rigs and other drilling equipment to areas in which a contract has not been secured are expensed as incurred and are recorded in Drilling Services operating expense in the Consolidated Statements of Operations and Comprehensive Income (Loss). For certain contracts, we are also entitled to early termination payments if our customers choose to terminate a contract prior to the expiration of the contractual term. We recognize revenue associated with early termination payments when all contractual requirements related to early termination payments have been met.
Certain of our drilling contracts are performance-based. Performance-based contracts are contracts pursuant to which we are compensated partly based upon our performance against a mutually agreed upon set of predetermined targets. These types of contracts typically have a lower base dayrate but give us the opportunity to receive additional compensation by meeting or exceeding certain performance targets agreed to by our customers.
Completion Services revenue consists of services and products related to our suite of completion businesses, including hydraulic fracturing, completion support services, wireline and pumpdown services and cementing. These services are provided pursuant to contractual arrangements, including pricing agreements. Revenue from these services is earned as services are rendered, which is generally on a per stage or fixed monthly rate, except for our cementing services. All revenue is recognized when a contract with a customer exists, the performance obligations under the contract have been satisfied over time, the amount to which we have the right to invoice has been determined and collectability of amounts subject to invoice is probable. Contract fulfillment costs, such as mobilization costs and shipping and handling costs, are expensed as incurred and are recorded in Completion Services operating expense in the Consolidated Statements of Operations and Comprehensive Income (Loss). To the extent fulfillment costs are considered separate performance obligations that are billable to the customer, the amounts billed are recorded as revenue in the Consolidated Statements of Operations and Comprehensive Income (Loss).
ASC Topic 842 Revenue from Equipment Rentals and Other
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 the 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.
Our revenue is disaggregated by service category, which aligns with our reportable segments. See Note 14 for details. Management believes this disaggregation depicts the nature, amount, timing and uncertainty of revenue and cash flows, as each service category is subject to different demand drivers and contract characteristics.
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.
The timing of revenue recognition may differ from the timing of invoicing to customers, and these timing differences result in receivables, contract assets, or contract liabilities (deferred revenue) on our consolidated balance sheet. We do not have any significant contract asset balances. Contract liabilities include prepayments received from customers prior to the requested services being completed. Once the services are complete and have been invoiced, the prepayment is applied against the customer’s account to offset the accounts receivable balance. Also included in contract liabilities are payments received from customers for reactivation or initial mobilization of 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.
Contract liabilities consisted of the following at June 30, 2026 and December 31, 2025 (in thousands):
| | | | | | | | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
Balance at December 31, 2025 | | | $ | 79,506 | |
| Payment received/accrued and deferred | | | 20,049 | |
| Revenue recognized during the period | | | (89,688) | |
Balance at June 30, 2026 (1) | | | $ | 9,867 | |
(1)$8.6 million of our contract liability balance is current and is included in “Accrued liabilities,” and $1.2 million of our contract liability balance is noncurrent and is included in “Other liabilities” on our consolidated balance sheet.
During the six months ended June 30, 2026, we recognized $73.0 million of revenue that was included in the contract liability balance at the beginning of the period. The substantial majority of our revenue related to our contract liabilities balance is expected to be recognized within one year.
Contract Costs
Costs incurred for 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 June 30, 2026 was approximately $365 million. Approximately 15% of our total contract drilling backlog in the United States at June 30, 2026 is reasonably expected to remain at June 30, 2027. 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 June 30, 2026. 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.
3. Inventory
Inventory consisted of the following at June 30, 2026 and December 31, 2025 (in thousands):
| | | | | | | | | | | |
| June 30, 2026 | | December 31, 2025 |
| Raw materials and supplies | $ | 111,108 | | | $ | 129,440 | |
| Work-in-process | 7,359 | | | 4,573 | |
| Finished goods | 22,283 | | | 26,267 | |
| Inventory | $ | 140,750 | | | $ | 160,280 | |
4. Other Current Assets
Other current assets consisted of the following at June 30, 2026 and December 31, 2025 (in thousands):
| | | | | | | | | | | |
| June 30, 2026 | | December 31, 2025 |
| Federal and state income taxes receivable | $ | 9,127 | | | $ | 22,194 | |
| Workers’ compensation receivable | 27,942 | | | 30,492 | |
| Prepaid expenses | 48,233 | | | 34,829 | |
| | | |
| | | |
| | | |
| Other | 23,301 | | | 26,377 | |
| Other current assets | $ | 108,603 | | | $ | 113,892 | |
5. Property and Equipment
Property and equipment consisted of the following at June 30, 2026 and December 31, 2025 (in thousands):
| | | | | | | | | | | |
| June 30, 2026 | | December 31, 2025 |
| Equipment | $ | 7,983,282 | | | $ | 8,224,950 | |
| Oil and natural gas properties | 251,422 | | | 248,088 | |
| Buildings and improvements | 228,583 | | | 235,621 | |
| Rental equipment | 156,084 | | | 155,385 | |
| Land and improvements | 36,295 | | | 39,591 | |
| Total property and equipment | 8,655,666 | | | 8,903,635 | |
| Less accumulated depreciation, depletion, amortization and impairment | (6,057,253) | | | (6,192,598) | |
| Property and equipment, net | $ | 2,598,413 | | | $ | 2,711,037 | |
Depreciation, depletion, amortization and impairment — The following table summarizes depreciation, depletion, amortization and impairment expense related to property and equipment and intangible assets for the three and six months ended June 30, 2026 and 2025 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended
June 30, | | Six Months Ended
June 30, |
| 2026 | | 2025 | | 2026 | | 2025 |
| Depreciation expense | $ | 183,264 | | | $ | 197,562 | | | $ | 368,555 | | | $ | 395,045 | |
| Amortization expense | 31,883 | | | 31,922 | | | 63,717 | | | 62,767 | |
| Depletion expense | 1,453 | | | 1,635 | | | 2,722 | | | 3,500 | |
| Impairment expense | 1,181 | | | 30,739 | | | 1,181 | | | 32,412 | |
| Total | $ | 217,781 | | | $ | 261,858 | | | $ | 436,175 | | | $ | 493,724 | |
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 (a “triggering event”). As of June 30, 2026, we concluded no triggering event that could indicate possible impairment of property and equipment had occurred.
6. Goodwill and Intangible Assets
Goodwill — During the six months ended June 30, 2026, there were no additions or impairments to goodwill. As of June 30, 2026 and December 31, 2025, our goodwill balances by operating segment were as follows (in thousands):
| | | | | | | | | | | | | | | | | |
| Completion
Services | | Drilling
Products | | Total |
Balance as of June 30, 2026 and December 31, 2025 | $ | 36,885 | | | $ | 450,503 | | | $ | 487,388 | |
Goodwill is evaluated at least annually on July 31, or more frequently when events or circumstances occur indicating recorded goodwill may be impaired. As of June 30, 2026, we determined there were no events that would indicate the carrying value of goodwill may not be recoverable or that potential impairment exists.
Intangible Assets — The following table presents the gross carrying amount and accumulated amortization of our intangible assets as of June 30, 2026 and December 31, 2025 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2026 | | December 31, 2025 |
| Gross
Carrying
Amount | | Accumulated
Amortization | | Net
Carrying
Amount | | Gross
Carrying
Amount | | Accumulated
Amortization | | Net
Carrying
Amount |
| Customer relationships | $ | 780,653 | | | $ | (199,233) | | | $ | 581,420 | | | $ | 783,259 | | | $ | (166,135) | | | $ | 617,124 | |
| Developed technology | 202,771 | | | (116,748) | | | 86,023 | | | 202,771 | | | (96,689) | | | 106,082 | |
| Trade name | 101,000 | | | (28,406) | | | 72,594 | | | 101,000 | | | (23,406) | | | 77,594 | |
| Other | 26,214 | | | (11,010) | | | 15,204 | | | 22,729 | | | (8,719) | | | 14,010 | |
| Intangible assets, net | $ | 1,110,638 | | | $ | (355,397) | | | $ | 755,241 | | | $ | 1,109,759 | | | $ | (294,949) | | | $ | 814,810 | |
Amortization expense on intangible assets of approximately $31.9 million was recorded for each of the three months ended June 30, 2026 and 2025. Amortization expense on intangible assets of approximately $63.7 million and $62.8 million was recorded for the six months ended June 30, 2026 and 2025, respectively.
7. Accrued Liabilities
Accrued liabilities consisted of the following at June 30, 2026 and December 31, 2025 (in thousands):
| | | | | | | | | | | |
| June 30, 2026 | | December 31, 2025 |
| Salaries, wages, payroll taxes and benefits | $ | 81,705 | | | $ | 107,650 | |
| Insurance | 72,264 | | | 73,621 | |
| | | |
| Property, sales, use and other taxes | 43,286 | | | 45,369 | |
| | | |
| Accrued interest payable | 13,035 | | | 17,471 | |
| Deferred revenue | 8,634 | | | 79,286 | |
| | | |
| | | |
| Accrued legal expenses | 12,047 | | | 15,000 | |
| Other | 17,363 | | | 28,091 | |
| Accrued liabilities | $ | 248,334 | | | $ | 366,488 | |
8. Long-Term Debt
Long-term debt consisted of the following at June 30, 2026 and December 31, 2025 (in thousands):
| | | | | | | | | | | |
| June 30, 2026 | | December 31, 2025 |
3.95% Senior Notes Due 2028 | $ | — | | | $ | 482,505 | |
5.15% Senior Notes Due 2029 | 344,895 | | | 344,895 | |
7.15% Senior Notes Due 2033 | 400,000 | | | 400,000 | |
6.05% Senior Notes Due 2036 | 500,000 | | | — | |
| | | |
| 1,244,895 | | | 1,227,400 | |
| Less deferred financing costs and discounts | (10,722) | | | (6,362) | |
| | | |
| Total | $ | 1,234,173 | | | $ | 1,221,038 | |
Credit Agreement — On January 31, 2025, we entered into the Second Amended and Restated Credit Agreement with the lenders party thereto and Wells Fargo Bank, National Association, as administrative agent, and the other parties thereto (the “Amended and Restated Credit Agreement”), which amended and restated our Amended and Restated Credit Agreement dated as of March 27, 2018.
On April 24, 2026, we entered into the Assignment and Amendment No. 1 to Second Amended and Restated Credit Agreement, which amended the Amended and Restated Credit Agreement (as amended, the “Credit Agreement”), which, among other things, (i) extended the maturity date for $450 million of revolving credit commitments of certain lenders under the Credit Agreement from January 31, 2030 to January 31, 2031, with the option at our election for two one-year extensions, and (ii) assigned $25 million of the revolving credit commitments from HSBC Bank USA, N.A., to JPMorgan Chase Bank, N.A., in each case, on the terms and subject to the conditions set forth therein. As of June 30, 2026, the commitments under the Amended and Restated Credit Agreement were $500 million, and $450 million of the loans and commitments under the Credit Agreement would mature on January 31, 2031, with the remainder maturing January 31, 2030.
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. We were in compliance with the covenants at June 30, 2026.
As of June 30, 2026, we had no borrowings outstanding under our Credit Agreement. We had $2.3 million in letters of credit outstanding under the Credit Agreement at June 30, 2026 and, as a result, had available borrowing capacity of approximately $498 million under the Credit Agreement at that date.
2015 Reimbursement Agreement — On March 16, 2015, we entered into a Reimbursement Agreement (as amended from time to time, the “2015 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 June 30, 2026, we had $27.0 million in letters of credit outstanding under the 2015 Reimbursement Agreement.
2028 Senior Notes, 2029 Senior Notes, 2033 Senior Notes and 2036 Senior Notes — On January 19, 2018, we completed an offering of $525 million in aggregate principal amount of 3.95% senior notes due 2028 (the “2028 Notes”), of which the outstanding amount was fully redeemed on June 4, 2026. On November 15, 2019, we completed an offering of $350 million in aggregate principal amount of 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 7.15% senior notes due 2033 (the “2033 Notes”). On May 19, 2026, we completed an offering of $500 million in aggregate principal amount of 6.05% senior notes due 2036 (the “2036 Notes”). The net proceeds before offering expenses from the offering of the 2036 Notes were approximately $496 million, which we used to fully redeem our outstanding 2028 Notes and for general corporate purposes.
We pay interest on the 2036 Notes on May 15 and November 15 of each year. The 2036 Notes will mature on May 15, 2036. The 2036 Notes bear interest at a rate of 6.05% per annum.
The 2029 Notes, 2033 Notes, and 2036 Notes, (together, the “Senior Notes”) are our senior unsecured obligations, which rank equally with all other existing and future senior unsecured debt and will rank senior in right of payment to all 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 2036 Notes in whole or in part, at any time or from time to time prior to February 15, 2036 at a redemption price equal to the greater of (i) (a) the sum of the present values of the remaining scheduled payments of principal and interest thereon discounted to the redemption date (assuming the 2036 Notes matured on the Par Call Date) on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate plus 25 basis points less (b) interest accrued to the date of redemption, and (ii) 100% of the principal amount of the 2036 Notes to be redeemed, plus in either case, accrued and unpaid interest thereon to, but excluding, the redemption date. Additionally, commencing on February 15, 2036, we may redeem the 2036 Notes at our option, in whole or in part, at a redemption price equal to 100% of the principal amount of the 2036 Notes to be redeemed, plus accrued and unpaid interest thereon to, but excluding, the redemption date.
Upon the occurrence of a change of control triggering event, as defined in the indenture governing the 2036 Notes, each holder of the 2036 Notes may require us to purchase all or a portion of such holder’s 2036 Notes at a purchase price in cash equal to 101% of their principal amount, plus accrued and unpaid interest, if any, to, but excluding, the applicable repurchase date.
On June 4, 2026, we completed our redemption of all the approximately $483 million aggregate principal amount of the outstanding 2028 Notes. The 2028 Notes were redeemed at a redemption price of 100% of the principal amount of the 2028 Notes outstanding, plus accrued and unpaid interest to the redemption date. The total amount of the redemption was approximately $483 million, which was funded using a portion of the net proceeds from our 2036 Notes offering. We recognized a non-cash loss on extinguishment of debt of $0.9 million, primarily related to the write-off of unamortized debt issuance cost associated with the 2028 Notes, which is included in “Interest expense, net of amount capitalized” in the consolidated statement of operations.
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. We were in compliance with these covenants at June 30, 2026. The indentures governing the Senior Notes also contain customary events of default with respect to the Senior Notes. No events of default had occurred at June 30, 2026.
For additional information regarding our long-term debt, see Note 9 of Notes to consolidated financial statements in Item 8 of our Annual Report.
9. Commitments and Contingencies
Purchase Commitments — As of June 30, 2026, we maintained letters of credit in the aggregate amount of $31.3 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 June 30, 2026, no amounts had been drawn under the letters of credit. As of June 30, 2026, we had $39.0 million in surety bond exposure issued as financial assurance on an insurance agreement.
As of June 30, 2026, we had commitments to purchase major equipment totaling approximately $169 million.
Our completion services segment has entered into agreements to purchase minimum quantities of proppants from certain vendors. As of June 30, 2026, the remaining minimum obligation under these agreements was approximately $8.7 million, of which approximately $3.9 million and $4.8 million relate to the remainder of 2026 and 2027, respectively.
Contingencies — Certain subsidiaries we acquired in the Ulterra acquisition are defendants in a claim brought by a subsidiary of NOV Inc. alleging breach of a license agreement related to certain patents. Such subsidiaries have asserted defenses to the claim and are defending vigorously against this claim.
On February 6, 2023, Grant Prideco, Inc., ReedHycalog UK, Ltd., ReedHycalog, LP and National Oilwell Varco, LP (“NOV”) sued Ulterra Drilling Technologies, LP (“Ulterra”) and several other companies in Texas state court. NOV seeks a declaration that United States Patent No. 8,721,752 (the “’752 Patent”) is a “Licensed RH Patent” per the terms of a license agreement between Ulterra and NOV. NOV also alleges a breach of contract based on the license agreement between NOV and Ulterra and seeks allegedly owed royalties since October 22, 2021. NOV also seeks attorney’s fees.
On February 27, 2023, Ulterra filed a plea to the jurisdiction, and subject thereto, an answer, affirmative defenses and counterclaims. Ulterra’s counterclaims include: (i) declaratory judgments of non-infringement of U.S. Pat. No. 7,568,534 and the ’752 patent; (ii) a declaratory judgment of no royalties after Oct. 22, 2021; (iii) a declaratory judgment that certain other identified patents are expired and therefore not infringed after Oct. 22, 2021; and (iv) a declaratory judgment of no breach of contract. On the same day, Ulterra filed a notice of removal in federal court for the Southern District of Texas, Houston Division (SDTX 4:23-cv-00730), as well as a corresponding notice in Texas state court. NOV moved to dismiss and remand the case back to state court. On February 17, 2024, the Court denied NOV’s motion. On March 19, 2024, Ulterra moved for judgment on the pleadings regarding its declaratory judgment that certain other identified patents are expired and therefore not infringed after October 22, 2021. On February 13, 2025, the motion was granted in part and denied in part.
In October and November 2025, the Court resolved certain dispositive motions in Ulterra’s favor, resulting in a Final Judgment in Ulterra’s favor on November 25, 2025. NOV has acknowledged that the Court’s rulings mean it cannot collect any of the royalties it had alleged were owed. On December 12, 2025, NOV filed a Notice of Appeal to the United States Court of Appeals for the Federal Circuit. The appeal is currently pending before the Federal Circuit as Docket Nos. 26-1256 and 26-1266. On April 20, 2026, NOV filed its opening appellate brief. Ulterra filed its response on July 31, 2026.
Additionally, we are party to various other 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.
10. Stockholders’ Equity
Cash Dividend — On July 29, 2026, our Board of Directors approved a cash dividend on our common stock in the amount of $0.10 per share to be paid on September 15, 2026 to holders of record as of September 1, 2026. 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 for any reason, including 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 June 30, 2026, we had remaining authorization to purchase approximately $694 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 six months ended June 30, 2026 were as follows (dollars in thousands):
| | | | | | | | | | | |
| Shares | | Cost |
Treasury shares at January 1, 2026 | 144,435,252 | | $ | 2,020,714 | |
| | | |
| Acquisitions pursuant to long-term incentive plans | 817,628 | | | 9,478 | |
Treasury shares at June 30, 2026 | 145,252,880 | | $ | 2,030,192 | |
11. Stock-based Compensation
We use share-based payments to compensate employees and non-employee directors. We grant incentive awards in the form of restricted stock units (a small portion of which are subject to the achievement of performance conditions) and performance unit awards (which are subject to the achievement of performance conditions). Certain of these incentive awards are share-settled, and certain of these incentive awards are cash-settled. See Note 12 in Notes to consolidated financial statements in Item 8 of our Annual Report for further description of the various types of stock-based compensation awards and the applicable award terms and accounting.
The Patterson-UTI Energy, Inc. 2021 Long-Term Incentive Plan (as amended from time to time, the “2021 Plan”) was originally approved by our stockholders on June 3, 2021. Subject to stockholder approval, our Board of Directors approved an amendment to the 2021 Plan to increase the number of shares available for issuance under the 2021 Plan by 28.9 million shares (the “Amendment”). On June 4, 2026, our stockholders approved the Amendment.
Stock Options — No stock options have been granted since 2016. Stock option activity from January 1, 2026 to June 30, 2026 follows:
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| Underlying
Shares | | Weighted Average
Exercise Price
Per Share |
Outstanding at January 1, 2026 | 1,137,205 | | $ | 23.56 | |
| | | |
| | | |
| Exercised | — | | $ | — | |
| Expired | (655,800) | | $ | 18.54 | |
Outstanding at June 30, 2026 | 481,405 | | $ | 30.40 | |
Exercisable at June 30, 2026 | 481,405 | | $ | 30.40 | |
Restricted Stock Units (Equity Based) — Share-settled restricted stock unit activity from January 1, 2026 to June 30, 2026 follows:
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| Time Based Shares | | Performance
Based Shares | | Weighted Average Grant Date Fair Value Per Share |
Non-vested restricted stock units outstanding at January 1, 2026 | 6,673,838 | | 409,890 | | $ | 8.06 | |
| Granted | 2,286,042 | | — | | $ | 11.08 | |
Performance based restricted stock units settled (1) | — | | (331,675) | | $ | 14.10 | |
| Vested | (2,896,287) | | — | | $ | 8.40 | |
| Forfeited | (270,126) | | (4,316) | | $ | 7.22 | |
Non-vested restricted stock units outstanding at June 30, 2026 | 5,793,467 | | 73,899 | | $ | 8.76 | |
(1)Performance based restricted stock units reached the end of their performance period during the six months ended June 30, 2026, and no shares were issued to settle such performance based restricted stock units.
As of June 30, 2026, we had unrecognized compensation cost related to our unvested restricted stock units totaling $47.0 million. The weighted-average remaining vesting period for these unvested restricted stock units was 2.21 years as of June 30, 2026.
Restricted Stock Units (Liability Based) — A portion of the restricted stock unit awards granted in 2025 and 2026 are cash-settled. Cash-settled restricted stock unit activity from January 1, 2026 to June 30, 2026 follows:
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| Time Based Shares | | |
Non-vested cash-settled restricted stock units outstanding at January 1, 2026 | 628,175 | | |
| Granted | 331,816 | | |
| Vested | (210,849) | | |
| Forfeited | — | | |
Non-vested cash-settled restricted stock units outstanding at June 30, 2026 | 749,142 | | |
As of June 30, 2026, we had unrecognized compensation cost related to our unvested cash-settled restricted stock units totaling $7.5 million. The weighted-average remaining vesting period for these unvested cash-settled restricted stock units was 2.29 years as of June 30, 2026.
Performance Unit Awards — We have granted performance unit awards to certain employees (the “Performance Units”). The Performance Units generally vest over a three-year period based on the achievement of performance goals. Historically, Performance Units have been tied to total shareholder return (“TSR”) achievement as compared to the TSR of a designated peer group, and allow for a payout ranging between 0% and 200% of the target payout. With respect to the Performance Units granted in each of April 2026 and May 2025, (i) one-half are cash-settled and are otherwise structured similarly to the Performance Units granted in 2024 with vesting tied to our relative TSR and (ii) one-half are share-settled and tied to our relative free cash flow return as compared to the free cash flow return of a designated peer group (“FCF”).
Performance Units activity from January 1, 2026 to June 30, 2026 follows:
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| Performance Units
Share-Settled
(at target) | | Weighted
Average Grant
Date Fair Value
Per Share | | Performance
Units
Cash-Settled
(at target) | | |
Non-vested Performance Units outstanding at January 1, 2026 | 2,214,700 | | $ | 10.49 | | | 743,800 | | |
| Granted | 414,600 | | $ | 12.22 | | | 414,600 | | |
Performance Units settled (1) | (595,800) | | $ | 13.36 | | | — | | |
| Forfeited | — | | $ | — | | | — | | |
Non-vested Performance Units outstanding at June 30, 2026 | 2,033,500 | | $ | 10.00 | | | 1,158,400 | | |
(1) Share-settled Performance Units granted in 2023 reached the end of their performance period during the six months ended June 30, 2026, and no shares were issued to settle such Performance Units.
As of June 30, 2026, we had unrecognized compensation cost related to our unvested Performance Units totaling $26.4 million. The weighted-average remaining vesting period for these unvested Performance Units was 2.24 years as of June 30, 2026.
Stock-Based Compensation Expense — Expense associated with restricted stock units and Performance Unit awards is included in “Direct operating costs” and “General and administrative” in our unaudited condensed consolidated statements of operations. The following table presents stock-based compensation expense for the three and six months ended June 30, 2026 and 2025 (in thousands):
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| | Three Months Ended
June 30, | | | | Six Months Ended
June 30, |
| | 2026 | | 2025 | | | | 2026 | | 2025 | | |
| Share-settled awards | | | | | | | | | | | | |
| Restricted stock units | | $ | 5,560 | | | $ | 7,512 | | | | | $ | 7,488 | | | $ | 17,398 | | | |
| Performance Units – TSR | | 1,124 | | | 1,568 | | | | | 2,674 | | | 3,971 | | | |
| Performance Units – FCF | | 1,841 | | | 498 | | | | | 2,775 | | | 498 | | | |
| Total share-settled awards | | 8,525 | | | 9,578 | | | | | 12,937 | | | 21,867 | | | |
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| Cash-settled awards | | | | | | | | | | | | |
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| Cash-settled restricted stock units | | 869 | | | 204 | | | | | 1,995 | | | 212 | | | |
| Cash-settled Performance Units | | 695 | | | 377 | | | | | 2,529 | | | 377 | | | |
| Total cash-settled awards | | 1,564 | | | 581 | | | | | 4,524 | | | 589 | | | |
| Stock-based compensation expense | | $ | 10,089 | | | $ | 10,159 | | | | | $ | 17,461 | | | $ | 22,456 | | | |
12. Income Taxes
Our effective income tax rate fluctuates from the U.S. statutory tax rate based on, among other factors, changes in pretax income in jurisdictions with varying statutory tax rates, the impact of U.S. state and local taxes, the realizability of deferred tax assets and other differences related to the recognition of income and expense between GAAP and tax accounting.
Our effective income tax rate for the three months ended June 30, 2026 was 31.0%, compared with (2.5)% for the three months ended June 30, 2025. The difference in effective income tax rates between the periods was primarily attributable to the impact of permanent differences against earnings between periods.
Our effective income tax rate for the six months ended June 30, 2026 was 21.9%, compared with (5.8)% for the six months ended June 30, 2025. The difference in effective income tax rates between periods was primarily attributable to the impact of permanent differences against earnings between periods.
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized, and when necessary, valuation allowances are provided. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. We assess the realizability of our deferred tax assets quarterly and consider carryback availability, the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.
We continue to monitor income tax developments, including OECD Pillar 2 legislation, in the United States and other countries where we have legal entities or operations. We will incorporate into our future financial statements the impacts, if any, of future regulations and additional authoritative guidance when finalized.
On July 4, 2025, the One Big Beautiful Bill Act (the “OBBBA”) was signed into law in the United States. This legislation includes several changes to existing income tax provisions with certain changes effective during 2025 and other changes effective after 2025.
13. Earnings Per Share
We provide a dual presentation of our net income (loss) per common share in our unaudited condensed consolidated statements of operations: basic net income (loss) per common share (“Basic EPS”) and diluted net income (loss) per common share (“Diluted EPS”).
Basic EPS excludes dilution and is determined by dividing the earnings attributable to common stockholders by the weighted average number of common shares outstanding during the period.
Diluted EPS is based on the weighted average number of common shares outstanding plus the dilutive effect of potential common shares, including stock options and non-vested performance units and non-vested restricted stock units. The dilutive effect of stock options, non-vested performance units and non-vested restricted stock units is determined using the treasury stock method.
The following table presents information necessary to calculate net income (loss) per share for the three and six months ended June 30, 2026 and 2025 as well as potentially dilutive securities excluded from the weighted average number of diluted common shares outstanding because their inclusion would have been anti-dilutive (in thousands, except per share amounts):
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| Three Months Ended
June 30, | | Six Months Ended
June 30, |
| 2026 | | 2025 | | 2026 | | 2025 |
| BASIC EPS: | | | | | | | |
| Net income (loss) attributable to common stockholders | $ | (19,602) | | | $ | (49,144) | | | $ | (44,229) | | | $ | (48,139) | |
| Weighted average number of common shares outstanding, excluding non-vested restricted stock units | 380,192 | | 385,365 | | 379,891 | | 385,940 |
| Basic net income (loss) per common share | $ | (0.05) | | | $ | (0.13) | | | $ | (0.12) | | | $ | (0.12) | |
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| DILUTED EPS: | | | | | | | |
| Net income (loss) attributable to common stockholders | $ | (19,602) | | | $ | (49,144) | | | $ | (44,229) | | | $ | (48,139) | |
| Weighted average number of common shares outstanding, including non-vested restricted stock units | 380,192 | | | 385,365 | | | 379,891 | | 385,940 |
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| Diluted net income (loss) per common share | $ | (0.05) | | | $ | (0.13) | | | $ | (0.12) | | | $ | (0.12) | |
| Potentially dilutive securities excluded as anti-dilutive | 8,382 | | 10,828 | | 8,382 | | 10,828 |
14. Business Segments
Our Chief Operating Decision Maker (“CODM”) is our Chief Executive Officer, who has ultimate responsibility for evaluating operating performance, allocating resources and making strategic and operational decisions for the company. Our business is organized based on the services and products we provide in three segments: (i) drilling services, (ii) completion services and (iii) drilling products. The CODM evaluates segment performance based primarily on segment operating income (loss). This measure is used to assess operating results and to make decisions regarding the allocation of resources among segments.
Drilling Services — represents our contract drilling, directional drilling, oilfield technology and electrical controls and automation businesses.
Completion Services — represents our hydraulic fracturing, completion support services, wireline and pumpdown services and cementing businesses.
Drilling Products — represents our manufacturing and distribution of drill bits business.
The following tables summarize selected financial information relating to our business segments (in thousands):
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| Drilling Services | | Completion Services | | Drilling Products | | Total |
| For the three months ended June 30, 2026 | | | | | | | |
| Revenues from external customers | $ | 373,501 | | | $ | 753,641 | | | $ | 91,333 | | | $ | 1,218,475 | |
Direct operating costs (1) | 259,619 | | | 630,716 | | | 54,194 | | | 944,529 | |
| General and administrative | 6,617 | | | 7,230 | | | 8,344 | | | 22,191 | |
Depreciation, amortization and impairment (1) | 85,490 | | | 108,838 | | | 20,478 | | | 214,806 | |
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Other segment items (2) | (962) | | | (1,328) | | | — | | | (2,290) | |
Segment operating income (loss) (3) | $ | 22,737 | | | $ | 8,185 | | | $ | 8,317 | | | $ | 39,239 | |
| | | | | | | |
| Reconciliation of revenue: |
| Total segment revenues from external customers | | | | | | | $ | 1,218,475 | |
Other revenues (4) | | | | | | | 9,492 | |
| Total consolidated revenues | | | | | | | $ | 1,227,967 | |
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| Reconciliation to consolidated income (loss) before income taxes: |
Segment operating income (loss) (3) | | | | | | | $ | 39,239 | |
Other (4) | | | | | | | 5,053 | |
| Corporate | | | | | | | (51,254) | |
| Interest income | | | | | | | 2,902 | |
| Interest expense | | | | | | | (20,398) | |
| Other income (expense) | | | | | | | (3,464) | |
| Income (loss) before income taxes | | | | | | | $ | (27,922) | |
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| Drilling Services | | Completion Services | | Drilling Products | | Total |
| For the three months ended June 30, 2025 | | | | | | | |
| Revenues from external customers | $ | 403,805 | | | $ | 719,332 | | | $ | 88,390 | | | $ | 1,211,527 | |
Direct operating costs (1) | 254,772 | | | 619,083 | | | 49,335 | | | 923,190 | |
| General and administrative | 4,152 | | | 9,723 | | | 8,651 | | | 22,526 | |
Depreciation, amortization and impairment (1) | 112,647 | | | 119,774 | | | 23,584 | | | 256,005 | |
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Other segment items (2) | (8,368) | | | — | | | — | | | (8,368) | |
Segment operating income (loss) (3) | $ | 40,602 | | | $ | (29,248) | | | $ | 6,820 | | | $ | 18,174 | |
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| Reconciliation of revenue: |
| Total segment revenues from external customers | | | | | | | $ | 1,211,527 | |
Other revenues (4) | | | | | | | 7,793 | |
| Total consolidated revenues | | | | | | | $ | 1,219,320 | |
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| Reconciliation to consolidated income (loss) before income taxes: |
Segment operating income (loss) (3) | | | | | | | $ | 18,174 | |
Other (4) | | | | | | | (2,000) | |
| Corporate | | | | | | | (45,660) | |
| Interest income | | | | | | | 1,272 | |
| Interest expense | | | | | | | (17,645) | |
| Other income (expense) | | | | | | | (1,644) | |
| Income (loss) before income taxes | | | | | | | $ | (47,503) | |
(1)The significant expense categories and amounts align with the segment-level information that is regularly provided to the chief operating decision maker.
(2)Other segment items for each reportable segment includes other operating expenses (income), such as certain legal accruals and settlements, and equity in earnings from an unconsolidated joint venture.
(3)Segment operating income (loss) is our measure of segment profitability. It is defined as revenue less operating expenses, general and administrative expenses, depreciation, amortization and impairment expense and other operating expenses (income).
(4)Other includes our oilfield rentals business, prior to its divestiture in April 2025, and oil and natural gas working interests.
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| Drilling Services | | Completion Services | | Drilling Products | | Total |
| For the six months ended June 30, 2026 | | | | | | | |
| Revenues from external customers | $ | 725,218 | | | $ | 1,433,228 | | | $ | 171,130 | | | $ | 2,329,576 | |
Direct operating costs (1) | 477,480 | | | 1,212,202 | | | 101,118 | | | 1,790,800 | |
| General and administrative | 13,714 | | | 14,560 | | | 16,267 | | | 44,541 | |
Depreciation, amortization and impairment (1) | 169,434 | | | 220,310 | | | 40,324 | | | 430,068 | |
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Other segment items (2) | (2,450) | | | (1,328) | | | — | | | (3,778) | |
Segment operating income (loss) (3) | $ | 67,040 | | | $ | (12,516) | | | $ | 13,421 | | | $ | 67,945 | |
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| Reconciliation of revenue: |
| Total segment revenues from external customers | | | | | | | $ | 2,329,576 | |
Other revenues (4) | | | | | | | 15,722 | |
| Total consolidated revenues | | | | | | | $ | 2,345,298 | |
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| Reconciliation to consolidated income (loss) before income taxes: |
Segment operating income (loss) (3) | | | | | | | $ | 67,945 | |
Other (4) | | | | | | | 7,128 | |
| Corporate | | | | | | | (96,352) | |
| Interest income | | | | | | | 5,667 | |
| Interest expense | | | | | | | (37,883) | |
| Other income (expense) | | | | | | | (2,499) | |
| Income (loss) before income taxes | | | | | | | $ | (55,994) | |
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| Drilling Services | | Completion Services | | Drilling Products | | Total |
| For the six months ended June 30, 2025 | | | | | | | |
| Revenues from external customers | $ | 816,665 | | | $ | 1,485,412 | | | $ | 174,053 | | | $ | 2,476,130 | |
Direct operating costs (1) | 502,401 | | | 1,276,764 | | | 96,275 | | | 1,875,440 | |
| General and administrative | 8,097 | | | 21,132 | | | 17,770 | | | 46,999 | |
Depreciation, amortization and impairment (1) | 197,619 | | | 235,600 | | | 46,460 | | | 479,679 | |
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Other segment items (2) | (8,368) | | | — | | | — | | | (8,368) | |
Segment operating income (loss) (3) | $ | 116,916 | | | $ | (48,084) | | | $ | 13,548 | | | $ | 82,380 | |
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| Reconciliation of revenue: |
| Total segment revenues from external customers | | | | | | | $ | 2,476,130 | |
Other revenues (4) | | | | | | | 23,727 | |
| Total consolidated revenues | | | | | | | $ | 2,499,857 | |
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| Reconciliation to consolidated income (loss) before income taxes: |
Segment operating income (loss) (3) | | | | | | | $ | 82,380 | |
Other (4) | | | | | | | (1,770) | |
| Corporate | | | | | | | (93,151) | |
| Interest income | | | | | | | 2,736 | |
| Interest expense | | | | | | | (35,342) | |
| Other income (expense) | | | | | | | 324 | |
| Income (loss) before income taxes | | | | | | | $ | (44,823) | |
(1)The significant expense categories and amounts align with the segment-level information that is regularly provided to the chief operating decision maker.
(2)Other segment items for each reportable segment includes other operating expenses (income), such as certain legal accruals and settlements, and equity in earnings from an unconsolidated joint venture.
(3)Segment operating income (loss) is our measure of segment profitability. It is defined as revenue less operating expenses, general and administrative expenses, depreciation, amortization and impairment expense and other operating expenses (income).
(4)Other includes our oilfield rentals business, prior to its divestiture in April 2025, and oil and natural gas working interests.
Other business segment information
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| Three Months Ended
June 30, | | Six Months Ended
June 30, |
| 2026 | | 2025 | | 2026 | | 2025 |
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| Capital expenditures: | | | | | | | |
| Drilling Services | $ | 60,148 | | | $ | 55,174 | | | $ | 114,569 | | | $ | 128,632 | |
| Completion Services | 75,023 | | | 68,985 | | | 120,124 | | | 131,158 | |
| Drilling Products | 18,711 | | | 15,252 | | | 34,553 | | | 33,474 | |
| Segment capital expenditures | $ | 153,882 | | | $ | 139,411 | | | $ | 269,246 | | | $ | 293,264 | |
| Other | 1,910 | | | 1,802 | | | 3,021 | | | 5,398 | |
| Corporate | 132 | | | 2,993 | | | 285 | | | 7,375 | |
| Total capital expenditures | $ | 155,924 | | | $ | 144,206 | | | $ | 272,552 | | | $ | 306,037 | |
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| June 30, 2026 | | December 31, 2025 |
| Identifiable assets: | | | |
| Drilling Services | $ | 1,811,877 | | | $ | 1,865,598 | |
| Completion Services | 2,217,394 | | | 2,341,232 | |
| Drilling Products | 1,028,063 | | | 1,018,867 | |
| Segment assets | $ | 5,057,334 | | | $ | 5,225,697 | |
| Other | 28,878 | | | 29,418 | |
Corporate (1) | 286,462 | | | 315,351 | |
| Total assets | $ | 5,372,674 | | | $ | 5,570,466 | |
(1)Corporate assets primarily include cash on hand and certain property and equipment.
15. Fair Values of Financial Instruments
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Our valuation techniques require inputs that we categorize using the valuation hierarchy established in ASC 820-10, which categorizes assets and liabilities measured at fair value into one of three different levels depending on the observability of the inputs employed in the measurement. The three levels are defined as follows:
Level 1 – Observable inputs such as quoted prices in active markets at the measurement date for identical, unrestricted assets or liabilities.
Level 2 – Other inputs that are observable directly or indirectly, such as quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability.
Level 3 – Unobservable inputs for which there is little or no market data and for which we make our own assumptions about how market participants would price the assets and liabilities.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The carrying values of cash, cash equivalents and restricted cash, trade receivables and accounts payable approximate fair value due to the short-term maturity of these items. These fair value estimates are considered Level 1 fair value estimates in the fair value hierarchy of fair value accounting.
The estimated fair value of our outstanding debt balances as of June 30, 2026 and December 31, 2025 is set forth below (in thousands):
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| June 30, 2026 | | December 31, 2025 |
| Carrying
Value | | Fair
Value | | Carrying
Value | | Fair
Value |
3.95% Senior Notes Due 2028 (1) | $ | — | | | $ | — | | | $ | 482,505 | | | $ | 477,694 | |
5.15% Senior Notes Due 2029 | 344,895 | | | 345,486 | | | 344,895 | | | 348,032 | |
7.15% Senior Notes Due 2033 | 400,000 | | | 429,226 | | | 400,000 | | | 428,615 | |
6.05% Senior Notes Due 2036 | 500,000 | | | 497,952 | | | — | | | — | |
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| Total debt | $ | 1,244,895 | | | $ | 1,272,664 | | | $ | 1,227,400 | | | $ | 1,254,341 | |
(1)All of the outstanding 2028 Notes were fully redeemed on June 4, 2026. See Note 8 of Notes to unaudited condensed consolidated financial statements for additional information.
The fair values of the 2028 Notes, the 2029 Notes, the 2033 Notes and the 2036 Notes are based on quoted market prices, which are considered Level 1 fair value estimates in the fair value hierarchy of fair value accounting.
The implied market rates of interest used to determine the fair value of our outstanding debt balances as of June 30, 2026 and December 31, 2025 are set forth below:
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| June 30, 2026 | | December 31, 2025 |
3.95% Senior Notes Due 2028 | — | % | | 4.46 | % |
5.15% Senior Notes Due 2029 | 5.10 | % | | 4.89 | % |
7.15% Senior Notes Due 2033 | 5.90 | % | | 5.99 | % |
6.05% Senior Notes Due 2036 | 6.12 | % | | — | % |
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Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
We apply the provisions of the fair value measurement standard to our non-recurring, non-financial measurements including business combinations, as well as impairment related to goodwill and other long-lived assets.
16. Other Charges
Exit from Contract Drilling Operations in Colombia
During the second quarter of 2026, management approved a plan to exit our Colombian contract drilling operations within the Drilling Services segment. Changes in Colombia’s political environment, coupled with continued reductions in activity forecasts and challenging market conditions in the region, have reduced the attractiveness of additional investment. The exit activity is expected to be substantially completed over the next year.
During the second quarter of 2026, we recognized approximately $21.0 million of exit and disposal costs, consisting of approximately $20.0 million in direct operating expenses related to inventory and other asset write-downs and approximately $1.0 million in rig impairment expense within the consolidated statements of operations. We currently estimate that approximately $5.0 million of additional costs will be incurred to complete the exit activities, primarily related to employee termination benefits and other costs directly associated with wind-down activities. Actual costs and the timing of completion may differ from current estimates.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (this “Report”) and other public filings, press releases and presentations by us contain “forward-looking statements” within the meaning of the Securities Act of 1933, as amended (the “Securities Act”), the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995, as amended. As used in this Report, “we,” “us,” “our,” “ours” and like terms refer collectively to Patterson-UTI Energy, Inc. and its consolidated subsidiaries. Patterson-UTI Energy, Inc. conducts its operations through its wholly-owned subsidiaries and has no employees or independent business operations. These “forward-looking statements” involve risk and uncertainty. These “forward-looking statements” include, without limitation, statements relating to: outlook; liquidity; revenue; cost and margin expectations and backlog; financing of operations; oil and natural gas prices; rig counts and frac spreads; source and sufficiency of funds required for building new equipment, upgrading existing equipment and acquisitions (if opportunities arise); demand and pricing for our services; competition; equipment availability; government regulation; legal proceedings; debt service obligations; impact of inflation and economic downturns; capital expenditures; and other matters. Our forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts and often use words such as “anticipate,” “believe,” “budgeted,” “continue,” “could,” “estimate,” “expect,” “goal,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “pursue,” “see,” “should,” “strategy,” “target,” or “will,” or the negative thereof and other words and expressions of similar meaning. The forward-looking statements are based on certain assumptions and analyses we make in light of our experience and our perception of historical trends, current conditions, expected future developments and other factors we believe are appropriate in the circumstances.
Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to have been correct. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from actual future results expressed or implied by the forward-looking statements. These risks and uncertainties also include those set forth in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this Report and other sections of our filings with the United States Securities and Exchange Commission (the “SEC”) under the Exchange Act and the Securities Act, as well as, among others, risks and uncertainties relating to:
•adverse oil and natural gas industry conditions, including the impact of commodity price volatility on industry outlook;
•global economic conditions, including inflationary pressures and risks of economic downturns or recessions in the United States and elsewhere;
•volatility in customer spending and in oil and natural gas prices that could adversely affect demand for our services and their associated effect on rates;
•excess supply of drilling and completions equipment, including as a result of reactivation, improvement or construction;
•competition and demand for our services;
•the impact of the ongoing Ukraine/Russia and Middle East conflicts and instability in other international regions;
•strength and financial resources of competitors;
•utilization, margins and planned capital expenditures;
•ability to obtain insurance coverage on commercially reasonable terms and liabilities from operational risks for which we do not have and receive full indemnification or insurance;
•operating hazards attendant to the oil and natural gas business;
•failure by customers to pay or satisfy their contractual obligations (particularly with respect to fixed-term contracts);
•the ability to realize backlog;
•specialization of methods, equipment and services and new technologies, including the ability to develop and obtain satisfactory returns from new technology and the risk of obsolescence of existing technologies;
•the ability to attract and retain management and field personnel;
•loss of key customers;
•shortages, delays in delivery, and interruptions in supply, of equipment and materials;
•cybersecurity events;
•difficulty in building and deploying new equipment;
•complications with the design or implementation of our new enterprise resource planning system;
•governmental regulation, including climate legislation, regulation and other related risks;
•environmental, social and governance practices, including the perception thereof;
•environmental risks and ability to satisfy future environmental costs;
•technology-related disputes;
•legal proceedings and actions by governmental or other regulatory agencies;
•changes to tax, tariff and import/export regulations and sanctions by the United States or other countries, including the impacts of any sustained escalation or changes in tariff levels or trade-related disputes;
•the ability to effectively identify and enter new markets or pursue strategic acquisitions;
•public health crises, pandemics and epidemics;
•weather;
•operating costs;
•expansion and development trends of the oil and natural gas industry;
•financial flexibility, including availability of capital and the ability to repay indebtedness when due;
•adverse credit and equity market conditions;
•our return of capital to stockholders, including timing and amounts (including any plans or commitments in respect thereof) of any dividends and share repurchases;
•stock price volatility;
•compliance with covenants under our debt agreements; and
•other financial, operational and legal risks and uncertainties detailed from time to time in our filings with the SEC.
We caution that the foregoing list of factors is not exhaustive. Additional information concerning these and other risk factors is contained elsewhere in this Report and in our Annual Report on Form 10-K for the year ended December 31, 2025 (our “Annual Report”) and may be contained in our future filings with the SEC. You are cautioned not to place undue reliance on any of our forward-looking statements. The forward-looking statements speak only as of the date made and, other than as required by law, we undertake no obligation to update publicly or revise any of these forward-looking statements, whether as a result of new information, future events or otherwise. In the event that we update any forward-looking statement, no inference should be made that we will make additional updates with respect to that statement, related matters or any other forward-looking statements. All subsequent written and oral forward-looking statements concerning us or other matters and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements above.