[PART I — FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20%E2%80%94%20FINANCIAL%20INFORMATION) This section presents the company's unaudited condensed consolidated financial statements and detailed notes for the reporting period [ITEM 1. Financial Statements](index=3&type=section&id=ITEM%201.%20Financial%20Statements) This section provides the company's unaudited condensed consolidated financial statements and comprehensive notes on accounting policies and financial performance [Unaudited condensed consolidated balance sheets](index=3&type=section&id=Unaudited%20condensed%20consolidated%20balance%20sheets) The company's total assets decreased by **$257.8 million** from December 31, 2024, to June 30, 2025, primarily driven by reductions in property and equipment and intangible assets Condensed Consolidated Balance Sheet Highlights (in thousands) | Item | June 30, 2025 | December 31, 2024 | Change | | :-------------------------------- | :------------ | :---------------- | :----- | | Total Assets | $5,575,620 | $5,833,466 | $(257,846) | | Total Liabilities | $2,226,947 | $2,357,622 | $(130,675) | | Total Equity | $3,348,673 | $3,475,844 | $(127,171) | [Unaudited condensed consolidated statements of operations](index=5&type=section&id=Unaudited%20condensed%20consolidated%20statements%20of%20operations) For the six months ended June 30, 2025, the company reported a net loss of **$(47.4) million**, a significant decline from a net income of **$63.3 million** in the prior year Condensed Consolidated Statements of Operations Highlights (in thousands, except per share data) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total Operating Revenues | $1,219,320 | $1,348,194 | $2,499,857 | $2,858,554 | | Operating Income (Loss) | $(29,486) | $45,228 | $(12,541) | $132,227 | | Net Income (Loss) | $(48,697) | $11,621 | $(47,407) | $63,327 | | Net Income (Loss) Attributable to Common Stockholders | $(49,144) | $11,077 | $(48,139) | $62,312 | | Basic EPS | $(0.13) | $0.03 | $(0.12) | $0.15 | | Diluted EPS | $(0.13) | $0.03 | $(0.12) | $0.15 | | Cash Dividends per Common Share | $0.08 | $0.08 | $0.16 | $0.16 | [Unaudited condensed consolidated statements of comprehensive income](index=6&type=section&id=Unaudited%20condensed%20consolidated%20statements%20of%20comprehensive%20income) For the six months ended June 30, 2025, the company reported a comprehensive loss of **$(45.8) million**, a significant decrease from a comprehensive income of **$62.2 million** in the prior year period Condensed Consolidated Statements of Comprehensive Income Highlights (in thousands) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $(48,697) | $11,621 | $(47,407) | $63,327 | | Foreign currency translation adjustment, net of taxes of $0 for all periods | $1,848 | $(127) | $1,559 | $(1,120) | | Comprehensive income (loss) | $(46,849) | $11,494 | $(45,848) | $62,207 | | Comprehensive income (loss) attributable to common stockholders | $(47,296) | $10,950 | $(46,580) | $61,192 | [Unaudited condensed consolidated statements of changes in stockholders' equity](index=6&type=section&id=Unaudited%20condensed%20consolidated%20statements%20of%20changes%20in%20stockholders'%20equity) Total equity decreased by **$127.2 million** from December 31, 2024, to June 30, 2025, primarily due to a net loss, cash dividends paid, and treasury stock purchases Condensed Consolidated Statements of Changes in Stockholders' Equity Highlights (in thousands) | Item | December 31, 2024 | June 30, 2025 | Change (6 months) | | :------------------------------------ | :---------------- | :------------ | :---------------- | | Balance, December 31, 2024 | $3,475,844 | N/A | N/A | | Net income (loss) | N/A | $(49,144) | $(49,144) | | Payment of cash dividends | N/A | $(61,619) | $(61,619) | | Purchase of treasury stock | N/A | $(35,849) | $(35,849) | | Balance, June 30, 2025 | N/A | $3,348,673 | $(127,171) | [Unaudited condensed consolidated statements of cash flows](index=8&type=section&id=Unaudited%20condensed%20consolidated%20statements%20of%20cash%20flows) For the six months ended June 30, 2025, net cash provided by operating activities decreased by **$215.5 million** to **$347.9 million**, with overall cash and equivalents decreasing by **$55.4 million** Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Item | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change | | :------------------------------------ | :----------------------------- | :----------------------------- | :----- | | Net cash provided by operating activities | $347,890 | $563,413 | $(215,523) | | Net cash used in investing activities | $(289,207) | $(349,504) | $60,297 | | Net cash used in financing activities | $(112,720) | $(332,538) | $219,818 | | Net decrease in cash, cash equivalents and restricted cash | $(55,402) | $(117,644) | $62,242 | | Cash, cash equivalents and restricted cash at end of period | $185,891 | $75,036 | $110,855 | [Notes to unaudited condensed consolidated financial statements](index=8&type=section&id=Notes%20to%20unaudited%20condensed%20consolidated%20financial%20statements) These notes detail accounting policies, revenue recognition, inventory, assets, liabilities, equity, and fair value measurements, including segment disclosure updates and an impairment charge [Note 1. Basis of Presentation](index=9&type=section&id=Note%201.%20Basis%20of%20Presentation) The interim financial statements are unaudited and prepared under SEC rules and GAAP, with new segment disclosure requirements adopted and future income tax standards under evaluation - The company adopted a new FASB accounting standards update for reportable segment disclosure requirements effective **January 1, 2024**[25](index=25&type=chunk) - The company plans to adopt new FASB guidance on income tax disclosure requirements during fiscal year **2025**, with first enhancements to be reflected in its Annual Report on Form 10-K for the year ending **December 31, 2025**[26](index=26&type=chunk) - New FASB guidance expanding disclosure requirements for certain income statement expenses is effective for annual reporting periods beginning after **December 15, 2026**, and interim periods beginning after **December 15, 2027**[27](index=27&type=chunk) Cash, Cash Equivalents and Restricted Cash Reconciliation (in thousands) | Item | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Cash and cash equivalents | $183,768 | $72,444 | | Restricted cash | $2,123 | $2,592 | | Total cash, cash equivalents and restricted cash | $185,891 | $75,036 | [Note 2. Revenues](index=11&type=section&id=Note%202.%20Revenues) Revenue recognition for services is based on performance, with contract liabilities decreasing significantly to **$4.8 million** and **$70.5 million** recognized as revenue in H1 2025 - Revenue from Drilling Services and Completion Services is recognized as services are performed, typically daily or per stage, with variable consideration determined upon job completion[29](index=29&type=chunk)[31](index=31&type=chunk)[33](index=33&type=chunk) - Contract liabilities decreased from **$75.6 million** at December 31, 2024, to **$4.8 million** at June 30, 2025[38](index=38&type=chunk) - The company recognized **$70.5 million** of revenue during the six months ended June 30, 2025, that was included in the contract liability balance at the beginning of the period[38](index=38&type=chunk) - The contract drilling backlog in the United States was approximately **$312 million** as of June 30, 2025, with about **9%** expected to remain at June 30, 2026[40](index=40&type=chunk)[125](index=125&type=chunk) [Note 3. Inventory](index=12&type=section&id=Note%203.%20Inventory) Total inventory decreased slightly to **$163.7 million**, primarily due to an **$8.1 million** decrease in finished goods, partially offset by increases in raw materials Inventory (in thousands) | Item | June 30, 2025 | December 31, 2024 | Change | | :-------------------- | :------------ | :---------------- | :----- | | Raw materials and supplies | $125,555 | $121,694 | $3,861 | | Work-in-process | $7,596 | $6,681 | $915 | | Finished goods | $30,536 | $38,648 | $(8,112) | | Total Inventory | $163,687 | $167,023 | $(3,336) | [Note 4. Other Current Assets](index=13&type=section&id=Note%204.%20Other%20Current%20Assets) Other current assets decreased by **$2.5 million** to **$120.6 million**, mainly due to a decrease in workers' compensation receivable and other assets Other Current Assets (in thousands) | Item | June 30, 2025 | December 31, 2024 | Change | | :-------------------------------- | :------------ | :---------------- | :----- | | Federal and state income taxes receivable | $27,660 | $24,777 | $2,883 | | Workers' compensation receivable | $26,474 | $33,240 | $(6,766) | | Prepaid expenses | $43,388 | $34,004 | $9,384 | | Other | $23,122 | $31,172 | $(8,050) | | Total Other Current Assets | $120,644 | $123,193 | $(2,549) | [Note 5. Property and Equipment](index=13&type=section&id=Note%205.%20Property%20and%20Equipment) Net property and equipment decreased by **$174.9 million**, with a **$27.8 million** impairment charge recorded for Latin American drilling equipment due to deteriorating market conditions Property and Equipment, Net (in thousands) | Item | June 30, 2025 | December 31, 2024 | Change | | :------------------------------------ | :------------ | :---------------- | :----- | | Total property and equipment (gross) | $8,924,181 | $9,082,568 | $(158,387) | | Less accumulated depreciation, depletion, amortization and impairment | $(6,088,749) | $(6,072,226) | $(16,523) | | Property and equipment, net | $2,835,432 | $3,010,342 | $(174,910) | - Depreciation and depletion expense on property and equipment was approximately **$199 million** for the three months ended June 30, 2025, and **$399 million** for the six months ended June 30, 2025[43](index=43&type=chunk) - A **$27.8 million** impairment charge was recorded to Latin American drilling equipment during the three months ended June 30, 2025, due to a reduced outlook for activity driven by global economic deterioration, increased oil supply, and geopolitical tensions[44](index=44&type=chunk)[46](index=46&type=chunk) [Note 6. Goodwill and Intangible Assets](index=15&type=section&id=Note%206.%20Goodwill%20and%20Intangible%20Assets) Goodwill remained stable at **$487 million**, while net intangible assets decreased by **$57.7 million** due to amortization; no goodwill impairment was recorded despite a Q2 2025 assessment - Goodwill balance remained at **$487 million** as of June 30, 2025, with no additions or impairments during the six months ended June 30, 2025[48](index=48&type=chunk) - A quantitative assessment for goodwill impairment was performed in Q2 2025 due to reduced activity forecasts and a decline in stock price, but no impairment was recorded for the drilling products or cementing services reporting units[51](index=51&type=chunk)[53](index=53&type=chunk)[54](index=54&type=chunk) Intangible Assets, Net (in thousands) | Item | June 30, 2025 | December 31, 2024 | Change | | :-------------------- | :------------ | :---------------- | :----- | | Customer relationships | $652,189 | $687,004 | $(34,815) | | Developed technology | $125,884 | $146,210 | $(20,326) | | Trade name | $82,594 | $86,903 | $(4,309) | | Other | $11,283 | $9,493 | $1,790 | | Intangible assets, net | $871,950 | $929,610 | $(57,660) | - Amortization expense on intangible assets was approximately **$31.9 million** for the three months ended June 30, 2025, and **$62.8 million** for the six months ended June 30, 2025[55](index=55&type=chunk) [Note 7. Accrued Liabilities](index=16&type=section&id=Note%207.%20Accrued%20Liabilities) Total accrued liabilities decreased significantly by **$124.1 million** to **$261.7 million**, primarily due to decreases in deferred revenue, salaries, and workers' compensation liability Accrued Liabilities (in thousands) | Item | June 30, 2025 | December 31, 2024 | Change | | :------------------------------------ | :------------ | :---------------- | :----- | | Salaries, wages, payroll taxes and benefits | $89,575 | $110,212 | $(20,637) | | Workers' compensation liability | $65,988 | $73,730 | $(7,742) | | Property, sales, use and other taxes | $41,679 | $54,445 | $(12,766) | | Insurance, other than workers' compensation | $9,095 | $10,703 | $(1,608) | | Accrued interest payable | $17,512 | $17,484 | $28 | | Deferred revenue | $4,467 | $75,195 | $(70,728) | | Accrued merger and integration expense | $2,500 | $4,723 | $(2,223) | | Other | $30,837 | $39,259 | $(8,422) | | Total Accrued Liabilities | $261,653 | $385,751 | $(124,098) | [Note 8. Long-Term Debt](index=16&type=section&id=Note%208.%20Long-Term%20Debt) Total long-term debt remained stable at **$1.22 billion**, with **$6.4 million** in Equipment Loans paid off and a new **$500 million** credit facility established with **$498 million** available Long-Term Debt (in thousands) | Item | June 30, 2025 | December 31, 2024 | Change | | :------------------------------------ | :------------ | :---------------- | :----- | | 3.95% Senior Notes Due 2028 | $482,505 | $482,505 | $0 | | 5.15% Senior Notes Due 2029 | $344,895 | $344,895 | $0 | | 7.15% Senior Notes Due 2033 | $400,000 | $400,000 | $0 | | Equipment Loans Due 2025 | $0 | $6,395 | $(6,395) | | Total (gross) | $1,227,400 | $1,233,795 | $(6,395) | | Less deferred financing costs and discounts | $(7,002) | $(7,637) | $635 | | Less current portion | $0 | $(6,388) | $6,388 | | Total Long-Term Debt, Net | $1,220,398 | $1,219,770 | $628 | - The company paid off **$6.4 million** in Equipment Loans in June 2025[57](index=57&type=chunk) - A new **$500 million** senior unsecured credit facility was entered into on **January 31, 2025**, maturing on **January 31, 2030**[57](index=57&type=chunk)[58](index=58&type=chunk)[163](index=163&type=chunk) - As of June 30, 2025, the company had no borrowings outstanding under the Credit Agreement and approximately **$498 million** available borrowing capacity[62](index=62&type=chunk)[213](index=213&type=chunk) Principal Repayment Requirements of Long-Term Debt (in thousands) | Year ending December 31, | Amount | | :----------------------- | :----- | | 2025 | $0 | | 2026 | $0 | | 2027 | $0 | | 2028 | $482,505 | | 2029 | $344,895 | | Thereafter | $400,000 | | Total | $1,227,400 | [Note 9. Commitments and Contingencies](index=20&type=section&id=Note%209.%20Commitments%20and%20Contingencies) The company has **$42.1 million** in letters of credit, **$37.0 million** in surety bonds, and **$94.8 million** in equipment purchase commitments, facing a patent-related lawsuit with potential material impact - As of June 30, 2025, the company had **$42.1 million** in outstanding letters of credit and **$37.0 million** in surety bond exposure[76](index=76&type=chunk)[172](index=172&type=chunk) - Commitments to purchase major equipment totaled approximately **$94.8 million** as of June 30, 2025[77](index=77&type=chunk)[184](index=184&type=chunk) - Remaining minimum obligations for proppant purchases were approximately **$27.1 million** as of June 30, 2025, with **$9.2 million** for the remainder of 2025, **$13.1 million** for 2026, and **$4.8 million** for 2027[77](index=77&type=chunk)[184](index=184&type=chunk) - The company is a defendant in a patent-related breach of license agreement claim by NOV Inc., with trial scheduled for **October 27, 2025**[78](index=78&type=chunk)[81](index=81&type=chunk)[226](index=226&type=chunk) An unfavorable judgment not covered by indemnity could materially impact financial results [Note 10. Stockholders' Equity](index=20&type=section&id=Note%2010.%20Stockholders'%20Equity) A **$0.08** per share cash dividend was approved, and the stock buyback program has **$728 million** remaining authorization, with **$31.4 million** in repurchases during H1 2025 - A cash dividend of **$0.08** per share was approved on **July 23, 2025**, payable on **September 15, 2025**[83](index=83&type=chunk)[178](index=178&type=chunk) - The stock buyback program was increased in **February 2024** to **$1.0 billion**, with approximately **$728 million** remaining authorization as of June 30, 2025[84](index=84&type=chunk)[180](index=180&type=chunk) Treasury Stock Acquisitions (in thousands, except shares) | Item | Shares | Cost | | :------------------------------------ | :------------- | :--------- | | Treasury shares at January 1, 2025 | 133,440,028 | $1,951,067 | | Purchases pursuant to stock buyback program | 4,278,723 | $31,434 | | Acquisitions pursuant to long-term incentive plans | 669,959 | $4,632 | | Treasury shares at June 30, 2025 | 138,388,710 | $1,987,133 | [Note 11. Stock-based Compensation](index=21&type=section&id=Note%2011.%20Stock-based%20Compensation) Unrecognized compensation cost for unvested RSUs and Performance Units totals **$76.5 million**, with total stock-based compensation expense decreasing to **$22.5 million** in H1 2025 - No stock options have been granted since **2016**[87](index=87&type=chunk) - As of June 30, 2025, unrecognized compensation cost related to unvested equity-based restricted stock units totaled **$51.7 million**, with a weighted-average remaining vesting period of **2.26 years**[87](index=87&type=chunk) - As of June 30, 2025, unrecognized compensation cost related to unvested cash-settled restricted stock units totaled **$3.6 million**, with a weighted-average remaining vesting period of **2.83 years**[88](index=88&type=chunk) - As of June 30, 2025, unrecognized compensation cost related to unvested Performance Units totaled **$21.2 million**, with a weighted-average remaining vesting period of **2.05 years**[91](index=91&type=chunk) Stock-Based Compensation Expense (in thousands) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Share-settled awards | $9,578 | $10,812 | $21,867 | $22,864 | | Cash-settled awards | $581 | $(130) | $589 | $1,110 | | Total Stock-based compensation expense | $10,159 | $10,682 | $22,456 | $23,974 | [Note 12. Income Taxes](index=23&type=section&id=Note%2012.%20Income%20Taxes) The effective income tax rate for Q2 2025 was **(2.5)%** and for H1 2025 was **(5.8)%**, primarily due to valuation allowances and permanent differences, with the company evaluating new tax legislation - Effective income tax rate for Q2 2025 was **(2.5)%**, down from **60.5%** in Q2 2024, primarily due to valuation allowances on deferred tax assets and permanent differences[94](index=94&type=chunk) - Effective income tax rate for H1 2025 was **(5.8)%**, down from **37.4%** in H1 2024, due to valuation allowances on deferred tax assets and permanent differences[95](index=95&type=chunk) - The company is evaluating the impact of the "One Big Beautiful Bill Act" (OBBBA), signed into law on **July 4, 2025**, on its consolidated financial statements[97](index=97&type=chunk)[161](index=161&type=chunk) [Note 13. Earnings Per Share](index=23&type=section&id=Note%2013.%20Earnings%20Per%20Share) Basic and diluted EPS for H1 2025 were **$(0.12)**, reflecting a net loss attributable to common stockholders, a decrease from **$0.15** in the prior year Earnings Per Share (in thousands, except per share amounts) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) attributable to common stockholders | $(49,144) | $11,077 | $(48,139) | $62,312 | | Basic net income (loss) per common share | $(0.13) | $0.03 | $(0.12) | $0.15 | | Diluted net income (loss) per common share | $(0.13) | $0.03 | $(0.12) | $0.15 | | Weighted average number of common shares outstanding (Basic/Diluted) | 385,365 | 399,558 | 385,940 | 403,870 | [Note 14. Business Segments](index=24&type=section&id=Note%2014.%20Business%20Segments) Drilling Services operating income decreased by **29.5%**, Completion Services shifted to an operating loss, and Drilling Products operating income decreased by **10.5%** in H1 2025 - The company's business is organized into three segments: Drilling Services (contract drilling, directional drilling, oilfield technology, electrical controls and automation), Completion Services (hydraulic fracturing, wireline and pumping, completion support, cementing, power solutions, proppant logistics), and Drilling Products (manufacturing and distribution of drill bits)[101](index=101&type=chunk)[102](index=102&type=chunk)[103](index=103&type=chunk)[116](index=116&type=chunk)[117](index=117&type=chunk)[119](index=119&type=chunk)[121](index=121&type=chunk) Segment Operating Income (Loss) (in thousands) | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Drilling Services | $40,602 | $76,112 | $116,916 | $165,724 | | Completion Services | $(29,248) | $10,725 | $(48,084) | $60,354 | | Drilling Products | $6,820 | $8,639 | $13,548 | $15,139 | | Total Segment Operating Income (Loss) | $18,174 | $95,476 | $82,380 | $241,217 | Segment Capital Expenditures (in thousands) | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Drilling Services | $55,174 | $58,426 | $128,632 | $141,219 | | Completion Services | $68,985 | $48,728 | $131,158 | $172,105 | | Drilling Products | $15,252 | $13,958 | $33,474 | $29,544 | | Total Capital Expenditures | $144,206 | $130,508 | $306,037 | $357,449 | [Note 15. Fair Values of Financial Instruments](index=27&type=section&id=Note%2015.%20Fair%20Values%20of%20Financial%20Instruments) Fair values of cash, receivables, and payables approximate carrying values; outstanding debt fair values are based on market prices, with implied market interest rates ranging from **5.24%** to **6.70%** - The fair values of cash, cash equivalents, restricted cash, trade receivables, and accounts payable approximate their carrying values due to short-term maturities (Level 1 fair value estimates)[108](index=108&type=chunk)[216](index=216&type=chunk) Fair Values of Outstanding Debt (in thousands) | Debt Instrument | Carrying Value (June 30, 2025) | Fair Value (June 30, 2025) | Carrying Value (Dec 31, 2024) | Fair Value (Dec 31, 2024) | | :------------------------------------ | :----------------------------- | :--------------------------- | :----------------------------- | :--------------------------- | | 3.95% Senior Notes Due 2028 | $482,505 | $467,706 | $482,505 | $461,720 | | 5.15% Senior Notes Due 2029 | $344,895 | $340,174 | $344,895 | $336,490 | | 7.15% Senior Notes Due 2033 | $400,000 | $411,226 | $400,000 | $419,265 | | Equipment Loans Due 2025 | $0 | $0 | $6,395 | $6,424 | | Total Debt | $1,227,400 | $1,219,106 | $1,233,795 | $1,223,899 | Implied Market Rates of Interest for Outstanding Debt | Debt Instrument | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :-------------- | :---------------- | | 3.95% Senior Notes Due 2028 | 5.24 % | 5.49 % | | 5.15% Senior Notes Due 2029 | 5.51 % | 5.73 % | | 7.15% Senior Notes Due 2033 | 6.70 % | 6.42 % | | Equipment Loans Due 2025 | — % | 5.28 % | [SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS](index=29&type=section&id=SPECIAL%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This section highlights that forward-looking statements are subject to risks from industry conditions, economic volatility, competition, and geopolitical conflicts, which could materially affect actual results - Forward-looking statements are subject to known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially[113](index=113&type=chunk) - Key risks include adverse oil and natural gas industry conditions, global economic volatility (inflation, recession), commodity price volatility, geopolitical conflicts (Ukraine/Russia, Middle East), competition, and governmental regulation (including climate legislation)[113](index=113&type=chunk)[115](index=115&type=chunk) - The company cautions against undue reliance on forward-looking statements and undertakes no obligation to update them, except as required by law[114](index=114&type=chunk) [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=32&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section reviews business segments, market developments, financial performance, liquidity, capital resources, non-GAAP measures, and critical accounting estimates, including impacts of commodity prices and inflation [Management Overview](index=32&type=section&id=Management%20Overview) Patterson-UTI Energy, Inc. provides drilling and completion services through three segments, including **152** marketed rigs and investments in natural gas-powered equipment for emissions reduction - The company operates in three reportable business segments: Drilling Services, Completion Services, and Drilling Products[116](index=116&type=chunk) - As of June 30, 2025, the Drilling Services segment had **152** marketed land-based drilling rigs, including **136** Tier-1, super-spec rigs[118](index=118&type=chunk) - Completion Services has invested in natural gas-powered equipment (electric, direct drive, dual fuel pumps) to replace legacy diesel equipment for emissions reduction[120](index=120&type=chunk) - Drilling Products manufactures and distributes drill bits in North America and over **30** international countries, with manufacturing and repair facilities in Texas, Alberta, and Saudi Arabia[121](index=121&type=chunk) [Recent Developments in Market Conditions and Outlook](index=32&type=section&id=Recent%20Developments%20in%20Market%20Conditions%20and%20Outlook) Global economic conditions deteriorated in Q2 2025 due to trade policies and increased oil supply, leading to lower commodity prices and a decreased U.S. rig count, with a mid-90s rig count expected for Q3 2025 - Global economic conditions deteriorated in Q2 2025 due to trade policies, increased OPEC+ oil supply, and geopolitical tensions, leading to lower crude oil futures prices and heightened uncertainty[123](index=123&type=chunk) Average Commodity Prices | Commodity | Q2 2025 Average | Q1 2025 Average | Change (QoQ) | | :-------------------- | :-------------- | :-------------- | :----------- | | Oil (per barrel) | $64.57 | $71.78 | $(7.21) | | Natural Gas (per MMBtu) | $3.19 | $4.14 | $(0.95) | - The average active U.S. rig count decreased to **104** in Q2 2025 from **106** in Q1 2025[124](index=124&type=chunk) - For Q3 2025, the company expects its average rig count to be in the **mid-90s**, Completion Services adjusted gross profit to remain steady, and Drilling Products adjusted gross profit to improve slightly[126](index=126&type=chunk)[127](index=127&type=chunk) [Impact on our Business from Oil and Natural Gas Prices and Other Factors](index=34&type=section&id=Impact%20on%20our%20Business%20from%20Oil%20and%20Natural%20Gas%20Prices%20and%20Other%20Factors) The company's financial performance is highly dependent on volatile oil and natural gas prices and customer capital spending, with operational risks, competition, and labor issues also impacting the business - Revenues, profitability, and cash flows are highly dependent on prevailing oil and natural gas prices, future price expectations, and customer capital access/deployment[128](index=128&type=chunk)[207](index=207&type=chunk)[208](index=208&type=chunk) - The oil and natural gas services industry is cyclical, with downturns leading to excess equipment, difficulty sustaining profit margins, and potential losses[129](index=129&type=chunk) - Operational risks, competition, labor issues, weather, product availability, and supplier delays can materially adversely affect the business[130](index=130&type=chunk) [Results of Operations - Segment Analysis (Three Months Ended June 30, 2025 vs. March 31, 2025)](index=35&type=section&id=Results%20of%20Operations%20-%20Segment%20Analysis%20(Three%20Months%20Ended%20June%2030,%202025%20vs.%20March%2031,%202025)) This section analyzes sequential segment performance, showing declines in Drilling Services and Completion Services operating income, while Drilling Products saw slight revenue growth [Drilling Services](index=35&type=section&id=Drilling%20Services_QoQ) Drilling Services revenues decreased by **2.2%** and operating income by **46.8%** due to lower U.S. operating days, pricing, and a **$27.8 million** impairment charge Drilling Services Performance (in thousands) | Item | Three Months Ended June 30, 2025 | Three Months Ended March 31, 2025 | % Change | | :------------------------------------ | :------------------------------- | :-------------------------------- | :------- | | Revenues | $403,805 | $412,860 | (2.2)% | | Direct operating costs | $254,772 | $247,629 | 2.9 % | | Adjusted gross profit | $149,033 | $165,231 | (9.8)% | | Operating income | $40,602 | $76,314 | (46.8)% | | Capital expenditures | $55,174 | $73,458 | (24.9)% | | Operating days – U.S. | 9,465 | 9,573 | (1.1)% | - Operating income decreased primarily due to a decrease in U.S. operating days and lower pricing, and a **$27.8 million** impairment charge to Latin American drilling equipment[133](index=133&type=chunk)[134](index=134&type=chunk) - Other operating income, net, increased due to insurance proceeds received during Q2 2025[135](index=135&type=chunk) [Completion Services](index=36&type=section&id=Completion%20Services_QoQ) Completion Services revenues decreased by **6.1%**, resulting in an operating loss of **$(29.2) million**, primarily due to lower activity in fracturing and power solutions operations Completion Services Performance (in thousands) | Item | Three Months Ended June 30, 2025 | Three Months Ended March 31, 2025 | % Change | | :------------------------------------ | :------------------------------- | :-------------------------------- | :------- | | Revenues | $719,332 | $766,080 | (6.1)% | | Direct operating costs | $619,083 | $657,681 | (5.9)% | | Adjusted gross profit | $100,249 | $108,399 | (7.5)% | | Operating loss | $(29,248) | $(18,836) | 55.3 % | | Capital expenditures | $68,985 | $62,173 | 11.0 % | - Revenues and direct operating costs declined primarily due to a decrease in activity in fracturing and power solutions operations, with revenues decreasing **$35 million** and direct operating costs decreasing **$31 million** (**5%** and **6%** respectively) from Q1 2025[136](index=136&type=chunk) - Selling, general and administrative expenses decreased primarily as a result of cost reduction efforts[137](index=137&type=chunk) [Drilling Products](index=36&type=section&id=Drilling%20Products_QoQ) Drilling Products revenues increased by **3.2%** and operating income by **1.4%** due to additional activity, though direct operating costs were higher from purchase accounting adjustments Drilling Products Performance (in thousands) | Item | Three Months Ended June 30, 2025 | Three Months Ended March 31, 2025 | % Change | | :------------------------------------ | :------------------------------- | :-------------------------------- | :------- | | Revenues | $88,390 | $85,663 | 3.2 % | | Direct operating costs | $49,335 | $46,940 | 5.1 % | | Adjusted gross profit | $39,055 | $38,723 | 0.9 % | | Operating income | $6,820 | $6,728 | 1.4 % | | Capital expenditures | $15,252 | $18,222 | (16.3)% | - Revenues and direct operating costs increased primarily due to additional activity[138](index=138&type=chunk) - Direct operating costs and depreciation, amortization and impairment expense were approximately **$0.5 million** and **$1.6 million** higher than they would have otherwise been for the three months ended June 30, 2025, respectively, as a result of the step up to fair value of our drill bits in accordance with purchase accounting[139](index=139&type=chunk) [Other](index=37&type=section&id=Other_QoQ) The "Other" segment's revenues decreased by **51.1%** and reported an operating loss of **$(2.0) million**, primarily due to the divestiture of the oilfield rentals business Other Segment Performance (in thousands) | Item | Three Months Ended June 30, 2025 | Three Months Ended March 31, 2025 | % Change | | :------------------------------------ | :------------------------------- | :-------------------------------- | :------- | | Revenues | $7,793 | $15,934 | (51.1)% | | Direct operating costs | $6,173 | $9,164 | (32.6)% | | Adjusted gross profit | $1,620 | $6,770 | (76.1)% | | Operating income (loss) | $(2,000) | $230 | NA | | Capital expenditures | $1,802 | $3,596 | (49.9)% | - The changes for the three months ended June 30, 2025, as compared to the three months ended March 31, 2025, can be primarily attributed to the divestiture of the oilfield rentals business during the second quarter of 2025[140](index=140&type=chunk) [Corporate](index=37&type=section&id=Corporate_QoQ) Corporate expenses were relatively flat sequentially, with merger and integration expense increasing by **13.0%** and interest income decreasing by **13.1%** Corporate Financials (in thousands) | Item | Three Months Ended June 30, 2025 | Three Months Ended March 31, 2025 | % Change | | :------------------------------------ | :------------------------------- | :-------------------------------- | :------- | | Selling, general and administrative | $41,500 | $42,253 | (1.8)% | | Merger and integration expense | $488 | $432 | 13.0 % | | Depreciation | $2,315 | $1,856 | 24.7 % | | Other operating expense, net | $1,357 | $2,950 | (54.0)% | | Interest income | $1,272 | $1,464 | (13.1)% | | Interest expense, net of amount capitalized | $(17,645) | $(17,697) | (0.3)% | | Other income (expense) | $(1,644) | $1,968 | NA | | Capital expenditures | $2,993 | $4,382 | (31.7)% | [Results of Operations - Segment Analysis (Six Months Ended June 30, 2025 vs. June 30, 2024)](index=38&type=section&id=Results%20of%20Operations%20-%20Segment%20Analysis%20(Six%20Months%20Ended%20June%2030,%202025%20vs.%20June%2030,%202024)) This section analyzes year-over-year segment performance, showing declines in Drilling Services and Completion Services operating income, while Drilling Products saw a slight decrease [Drilling Services](index=38&type=section&id=Drilling%20Services_YoY) Drilling Services revenues decreased by **9.0%** and operating income by **29.5%** due to lower U.S. operating days, pricing, and a **$27.8 million** impairment charge Drilling Services Performance (in thousands) | Item | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change | | :------------------------------------ | :----------------------------- | :----------------------------- | :------- | | Revenues | $816,665 | $897,862 | (9.0)% | | Direct operating costs | $502,401 | $533,234 | (5.8)% | | Adjusted gross profit | $314,264 | $364,628 | (13.8)% | | Operating income | $116,916 | $165,724 | (29.5)% | | Capital expenditures | $128,632 | $141,219 | (8.9)% | | Operating days – U.S. | 19,038 | 21,412 | (11.1)% | - The decrease in operating days for U.S. contract drilling reflects the industry-wide activity declines during the first six months of 2025[144](index=144&type=chunk) - Depreciation, amortization and impairment expense increased primarily due to a **$27.8 million** impairment charge to Latin American drilling equipment during the second quarter of 2025[145](index=145&type=chunk) This increase was partially offset by a decrease in depreciation, amortization and impairment expense which was attributable to a lower depreciable asset base in 2025, in part, due to the abandonment of **42** legacy non-super-spec rigs and equipment in the third quarter of 2024 [Completion Services](index=39&type=section&id=Completion%20Services_YoY) Completion Services revenues decreased by **15.1%**, shifting to an operating loss of **$(48.1) million**, primarily due to lower fracturing activity and reduced capital expenditures Completion Services Performance (in thousands) | Item | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change | | :------------------------------------ | :----------------------------- | :----------------------------- | :------- | | Revenues | $1,485,412 | $1,750,370 | (15.1)% | | Direct operating costs | $1,276,764 | $1,398,834 | (8.7)% | | Adjusted gross profit | $208,648 | $351,536 | (40.6)% | | Operating income (loss) | $(48,084) | $60,354 | NA | | Capital expenditures | $131,158 | $172,105 | (23.8)% | - Completion services revenues and direct operating costs decreased primarily due to lower activity in fracturing operations[147](index=147&type=chunk) Revenues and direct operating costs from our fracturing operations decreased by approximately **$250 million** and **$123 million**, or **17%** and **11%**, respectively - Depreciation, amortization and impairment expense decreased primarily due to fewer capital additions placed in service relative to asset retirements between the periods[148](index=148&type=chunk) - We reduced capital expenditures in response to changing macroeconomic conditions between the periods[150](index=150&type=chunk) [Drilling Products](index=39&type=section&id=Drilling%20Products_YoY) Drilling Products revenues decreased slightly by **1.1%** and operating income by **10.5%**, with direct operating costs higher due to purchase accounting adjustments Drilling Products Performance (in thousands) | Item | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change | | :------------------------------------ | :----------------------------- | :----------------------------- | :------- | | Revenues | $174,053 | $176,027 | (1.1)% | | Direct operating costs | $96,275 | $94,777 | 1.6 % | | Adjusted gross profit | $77,778 | $81,250 | (4.3)% | | Operating income | $13,548 | $15,139 | (10.5)% | | Capital expenditures | $33,474 | $29,544 | 13.3 % | - Direct operating costs and depreciation, amortization and impairment expense were approximately **$1.1 million** and **$3.8 million** higher than they would have otherwise been for the six months ended June 30, 2025, respectively, as a result of the step up to fair value of our drill bits in accordance with purchase accounting[152](index=152&type=chunk) [Other](index=40&type=section&id=Other_YoY) The "Other" segment's revenues decreased by **30.8%** and reported an operating loss of **$(1.8) million**, primarily due to the divestiture of the oilfield rentals business Other Segment Performance (in thousands) | Item | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change | | :------------------------------------ | :----------------------------- | :----------------------------- | :------- | | Revenues | $23,727 | $34,295 | (30.8)% | | Direct operating costs | $15,337 | $21,458 | (28.5)% | | Adjusted gross profit | $8,390 | $12,837 | (34.6)% | | Operating income (loss) | $(1,770) | $1,421 | NA | | Capital expenditures | $5,398 | $13,010 | (58.5)% | - The changes for the six months ended June 30, 2025, as compared to the six months ended June 30, 2024, can be primarily attributed to the divestiture of the oilfield rentals business during the second quarter of 2025[153](index=153&type=chunk) - Excluding the effects of our oilfield rentals business divestiture, the decrease in revenue and direct operating costs was driven by lower realized crude oil prices[154](index=154&type=chunk) Oil prices averaged **$68.12** per barrel in the first half of 2025 as compared to **$79.69** per barrel in the first half of 2024 [Corporate](index=40&type=section&id=Corporate_YoY) Corporate selling, general and administrative expenses were flat, while merger and integration expense decreased significantly by **96.0%** due to prior year merger timing Corporate Financials (in thousands) | Item | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change | | :------------------------------------ | :----------------------------- | :----------------------------- | :------- | | Selling, general and administrative | $83,753 | $83,763 | 0.0 % | | Merger and integration expense | $920 | $22,878 | (96.0)% | | Depreciation | $4,171 | $2,988 | 39.6 % | | Other operating expense, net | $4,307 | $782 | 450.8 % | | Interest income | $2,736 | $4,056 | (32.5)% | | Interest expense, net of amount capitalized | $(35,342) | $(36,248) | (2.5)% | | Other income | $324 | $1,074 | (69.8)% | | Capital expenditures | $7,375 | $1,571 | 369.4 % | - Merger and integration expense decreased due to the timing of the NexTier merger and the Ulterra acquisition, which both closed in the third quarter of 2023[155](index=155&type=chunk) - The increase in capital expenditures was primarily due to the expansion of our Corporate office[157](index=157&type=chunk) [Income Taxes](index=40&type=section&id=Income%20Taxes) The effective income tax rate for Q2 2025 was **(2.5)%** and for H1 2025 was **(5.8)%**, primarily due to valuation allowances and permanent differences, with new tax legislation under evaluation - Effective income tax rate for Q2 2025 was **(2.5)%**, compared to **51.9%** for Q1 2025, primarily due to permanent differences and book impairments[159](index=159&type=chunk) - Effective income tax rate for H1 2025 was **(5.8)%**, compared to **37.4%** for H1 2024, primarily due to valuation allowances on deferred tax assets and permanent differences[160](index=160&type=chunk) - The company is evaluating the impact of the "One Big Beautiful Bill Act" (OBBBA), signed into law on **July 4, 2025**, on its consolidated financial statements[161](index=161&type=chunk) [Liquidity and Capital Resources](index=41&type=section&id=Liquidity%20and%20Capital%20Resources) The company had **$525 million** in working capital and **$498 million** available under its credit agreement, with sufficient liquidity to fund operations, debt service, dividends, and share repurchases - As of June 30, 2025, the company had **$525 million** in working capital, including **$184 million** of cash and cash equivalents, and approximately **$498 million** available under its Credit Agreement[162](index=162&type=chunk)[177](index=177&type=chunk)[213](index=213&type=chunk) - The company believes its current liquidity, together with cash expected to be generated from operations, should provide sufficient ability to fund current plans for equipment maintenance, debt service, cash dividends, and share repurchases for at least the next **12 months**[174](index=174&type=chunk) - During the six months ended June 30, 2025, cash flow sources included **$348 million** from operating activities and **$28.3 million** in proceeds from asset disposals[178](index=178&type=chunk)[182](index=182&type=chunk) - During the six months ended June 30, 2025, cash flow uses included **$306 million** for capital expenditures, **$35.8 million** for repurchases of common stock, and **$61.6 million** to pay dividends[182](index=182&type=chunk) Cash Dividends Paid (in thousands) | Payment Date | Per Share | Total | | :-------------------- | :-------- | :------ | | Paid on March 17, 2025 | $0.08 | $30,877 | | Paid on June 16, 2025 | $0.08 | $30,742 | | Total (H1 2025) | $0.16 | $61,619 | [Non-GAAP Financial Measures](index=44&type=section&id=Non-GAAP%20Financial%20Measures) This section defines and reconciles non-GAAP measures; Adjusted EBITDA for H1 2025 was **$482.4 million**, and total Adjusted Gross Profit was **$609.1 million**, both decreasing year-over-year [Adjusted EBITDA](index=44&type=section&id=Adjusted%20EBITDA) Adjusted EBITDA, a non-GAAP measure, was **$482.4 million** for H1 2025, a decrease from **$698.8 million** in the prior year, reflecting net loss and other adjustments - Adjusted EBITDA is a non-GAAP measure defined as net income (loss) plus income tax expense, net interest expense, depreciation, depletion, amortization and impairment expense, impairment of goodwill, and merger and integration expense[187](index=187&type=chunk) Adjusted EBITDA Reconciliation (in thousands) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $(48,697) | $11,621 | $(47,407) | $63,327 | | Income tax expense | $1,194 | $17,785 | $2,584 | $37,782 | | Net interest expense | $16,373 | $16,046 | $32,606 | $32,192 | | Depreciation, depletion, amortization and impairment | $261,858 | $267,638 | $493,724 | $542,594 | | Merger and integration expense | $488 | $10,645 | $920 | $22,878 | | Adjusted EBITDA | $231,216 | $323,735 | $482,427 | $698,773 | [Adjusted Gross Profit](index=45&type=section&id=Adjusted%20Gross%20Profit) Adjusted gross profit, a non-GAAP measure, was **$609.1 million** for H1 2025, a decrease from **$810.3 million** in the prior year, reflecting revenues less direct operating costs - Adjusted gross profit is a non-GAAP measure defined as revenues less direct operating costs (excluding depreciation, depletion, amortization and impairment expense)[189](index=189&type=chunk) Adjusted Gross Profit by Segment (in thousands) | Segment | Three Months Ended June 30, 2025 | Three Months Ended March 31, 2025 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :-------------------------------- | :----------------------------- | :----------------------------- | | Drilling Services | $149,033 | $165,231 | $314,264 | $364,628 | | Completion Services | $100,249 | $108,399 | $208,648 | $351,536 | | Drilling Products | $39,055 | $38,723 | $77,778 | $81,250 | | Other | $1,620 | $6,770 | $8,390 | $12,837 | | Total Adjusted Gross Profit | $289,957 | $319,123 | $609,080 | $810,251 | [Critical Accounting Estimates](index=45&type=section&id=Critical%20Accounting%20Estimates) This section details critical accounting estimates for impairment of long-lived assets and goodwill, including a **$27.8 million** impairment charge for Latin American drilling equipment in Q2 2025 [Impairment of long-lived assets](index=45&type=section&id=Impairment%20of%20long-lived%20assets) A **$27.8 million** impairment charge was recorded for Latin American drilling equipment in Q2 2025 due to market conditions, with future material charges possible from unfavorable market changes - The company reviews long-lived assets for impairment whenever events or changes in circumstances, such as reduced activity forecasts and a decline in stock price, indicate that the carrying amounts of certain assets may not be recovered[192](index=192&type=chunk)[194](index=194&type=chunk) - A **$27.8 million** impairment charge was recorded to Latin American drilling equipment during the three months ended June 30, 2025, as estimated undiscounted cash flows did not exceed its carrying value[195](index=195&type=chunk) - Prolonged trade tensions and sustained lower crude oil futures prices could adversely affect future outlook on activity and profitability, potentially resulting in material impairment charges[196](index=196&type=chunk) [Goodwill](index=46&type=section&id=Goodwill) Goodwill was assessed in Q2 2025 due to reduced activity forecasts and stock price decline, but no impairment was recorded, though future unfavorable changes could lead to material impairment - Goodwill is evaluated at least annually or more frequently if impairment indicators arise, with a quantitative assessment performed in Q2 2025 due to reduced activity forecasts and stock price decline[197](index=197&type=chunk)[199](index=199&type=chunk) - No goodwill impairment was recorded for the drilling products or cementing services reporting units, as their fair values exceeded carrying values based on discounted cash flow models[201](index=201&type=chunk)[203](index=203&type=chunk) - A **100 bps** decrease in the long-term revenue growth rate for drilling products would reduce estimated fair value by approximately **7%**, while a **100 bps** increase to the discount rate would reduce it by approximately **10%**[204](index=204&type=chunk) - A decrease in fair value resulting from unfavorable changes to these assumptions, or others, could result in goodwill impairment in future periods that could be material to our results of operations and financial statements as a whole[205](index=205&type=chunk) [Recently Issued Accounting Standards](index=47&type=section&id=Recently%20Issued%20Accounting%20Standards) The company refers to Note 1 for a discussion of the impact of recently issued accounting standards - Refer to Note 1 for details on recently issued accounting standards[206](index=206&type=chunk) [Volatility of Oil and Natural Gas Prices and its Impact on Operations and Financial Condition](index=47&type=section&id=Volatility%20of%20Oil%20and%20Natural%20Gas%20Prices%20and%20its%20Impact%20on%20Operations%20and%20Financial%20Condition) Financial performance is highly dependent on volatile oil and natural gas prices; global economic deterioration and increased oil supply in Q2 2025 led to lower prices and increased market uncertainty - The company's financial condition, operations, and ability to access sources of capital are highly dependent upon unpredictable oil and natural gas prices[208](index=208&type=chunk) - Global economic deterioration, increased OPEC+ oil supply, and geopolitical tensions in Q2 2025 contributed to lower average crude oil (**$64.57/barrel**) and natural gas (**$3.19/MMBtu**) prices, increasing market uncertainty[207](index=207&type=chunk) - A decline in demand for oil and natural gas, prolonged low prices, or a reduction in the ability of customers to access capital would likely result in decreased demand for services and materially adverse effects on operating results[208](index=208&type=chunk) [Impact of Inflation and Trade Policies](index=48&type=section&id=Impact%20of%20Inflation%20and%20Trade%20Policies) Moderate inflationary pressures and uncertain trade policies have increased costs for goods, services, and labor, with prolonged trade tensions potentially leading to further cost increases - Moderate inflationary pressures and uncertain trade policies/tariffs have contributed to increases in the cost of certain goods, services, and labor[209](index=209&type=chunk) - Prolonged trade tensions could, among other things, increase the costs of certain products used in the businesses, such as drill pipe, parts, and electronics[209](index=209&type=chunk) - The company continues to actively monitor market trends primarily related to sourcing of labor, supplies and equipment[209](index=209&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures About Market Risk](index=49&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Market risk exposure remains unchanged, with interest rate risk from borrowings and letters of credit, and limited foreign currency risk due to primarily USD-denominated revenue - No material changes in market risk exposure since the Annual Report[211](index=211&type=chunk) - Exposure to interest rate market risk exists from outstanding borrowings and letters of credit under the Credit Agreement and Reimbursement Agreement[212](index=212&type=chunk)[213](index=213&type=chunk)[214](index=214&type=chunk) - Approximately **98%** of H1 2025 revenue was denominated in U.S. dollars, limiting significant foreign currency exchange rate risk, though some exposure exists from foreign currency costs or revenues[215](index=215&type=chunk) [ITEM 4. Controls and Procedures](index=50&type=section&id=ITEM%204.%20Controls%20and%20Procedures) The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting - The CEO and CFO concluded that disclosure controls and procedures were effective as of **June 30, 2025**[219](index=219&type=chunk) - No material changes in internal control over financial reporting occurred during the most recently completed fiscal quarter[220](index=220&type=chunk) [PART II — OTHER INFORMATION](index=51&type=section&id=PART%20II%20%E2%80%94%20OTHER%20INFORMATION) This section covers legal proceedings, unregistered sales of equity securities, other information, and exhibits, concluding with the report's signature [ITEM 1. Legal Proceedings](index=51&type=section&id=ITEM%201.%20Legal%20Proceedings) Ulterra subsidiaries are defendants in a patent-related breach of license agreement claim by NOV Inc., with trial scheduled for **October 27, 2025**, potentially impacting financial results - Ulterra Drilling Technologies, LP, a subsidiary, is a defendant in a patent-related breach of license agreement claim by NOV Inc., with trial scheduled for **October 27, 2025**[223](index=223&type=chunk)[224](index=224&type=chunk)[226](index=226&type=chunk) - Ulterra has asserted defenses and counterclaims, including declaratory judgments of non-infringement and no royalties after **October 22, 2021**[225](index=225&type=chunk) - An unfavorable judgment or resolution of this claim not covered by indemnity could have a material impact on financial results[226](index=226&type=chunk) - Other legal proceedings are not believed to have a material adverse effect on financial condition, cash flows, or results of operations[227](index=227&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=51&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q2 2025, the company purchased **2,611,401** shares of common stock, including **2,200,000** shares under its buyback program, with **$727.5 million** remaining authorized Common Stock Purchases (Q2 2025) | Period Covered | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (in thousands) | | :------------- | :------------------------------- | :--------------------------- | :---------------------------------------------------------------------------- | :------------------------------------------------------------------------------------------------ | | April 2025 | 18,558 | $6.22 | — | $740,872 | | May 2029 | 2,291,007 | $6.07 | 2,200,000 | $727,501 | | June 2025 | 301,836 | $5.80 | — | $727,501 | | Total | 2,611,401 | N/A | 2,200,000 | N/A | - The company withheld **411,401** shares during the second quarter of 2025 for employees' tax withholding obligations upon the vesting of restricted stock units, not under the stock buyback program[229](index=229&type=chunk) - As of June 30, 2025, approximately **$727.5 million** remained authorized under the stock buyback program[229](index=229&type=chunk) [ITEM 5. Other Information](index=52&type=section&id=ITEM%205.%20Other%20Information) No director or officer adopted or terminated any trading arrangements for the sale of common stock during the three months ended June 30, 2025 - No director or officer adopted or terminated any trading arrangements for the sale of common stock during the three months ended June 30, 2025[230](index=230&type=chunk) [ITEM 6. Exhibits](index=53&type=section&id=ITEM%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including corporate documents, stock award agreements, CEO/CFO certifications, and Inline XBRL documents - The report includes exhibits such as the Restated Certificate of Incorporation, Amended and Restated Bylaws, executive officer stock award agreements, CEO and CFO certifications, and Inline XBRL documents[232](index=232&type=chunk) [Signature](index=54&type=section&id=Signature) The report was signed by C. Andrew Smith, Executive Vice President and Chief Financial Officer, on behalf of Patterson-UTI Energy, Inc. on **July 29, 2025** - The report was signed by C. Andrew Smith, Executive Vice President and Chief Financial Officer, on **July 29, 2025**[235](index=235&type=chunk)

Core Insights - Patterson-UTI Energy, Inc. (PTEN) reported a second-quarter 2025 adjusted net loss of $0.06 per share, which was wider than the Zacks Consensus Estimate of a $0.04 loss, and a decline from a profit of $0.05 in the same quarter last year [1][9] - Total revenues reached $1.2 billion, exceeding the Zacks Consensus Estimate by 0.3%, but decreased by 9.6% year over year due to weaker contributions from various segments [2][9] Financial Performance - **Drilling Services**: Revenues totaled $403.8 million, down 8.3% from $440.3 million in the prior year, but exceeded the estimate of $365.1 million. Operating income was $40.6 million, down from $76.1 million year over year, yet above the estimate of $24.1 million [4] - **Completion Services**: Revenues were $719.3 million, a drop of 10.7% from $805.4 million year over year, and missed the estimate of $762.4 million. The operating loss was $29.2 million compared to a profit of $10.7 million in the previous year, but was narrower than the estimated loss of $43.4 million [5] - **Drilling Products**: Revenues increased by 2.7% to $88.4 million from $86.1 million year over year, beating the estimate of $85.8 million. Operating profit was $6.8 million, down 21.1% from the previous year, and missed the estimate of $20.6 million [6] - **Other Services**: Revenues fell 52.7% to $7.8 million from $16.5 million year over year, but exceeded the estimate of $5.6 million. The operating loss was $2 million compared to a profit of $0.4 million in the prior year, missing the estimated operating income of $0.1 million [7] Capital Expenditure & Financial Position - PTEN spent $144.2 million on capital programs in the reported quarter, up from $130.5 million in the prior year [8] - As of June 30, 2025, the company had cash and cash equivalents of $185.9 million and long-term debt of $1.2 billion, with a debt-to-capitalization ratio of 26.7% [8] Shareholder Returns - The board declared a quarterly dividend of $0.08 per share, unchanged from the previous quarter, to be paid on September 15, 2025 [3][9] - The company returned $56 million to shareholders in Q2 2025, including $20 million in share repurchases [10] Q3 Outlook - PTEN anticipates an average rig count of approximately 90 for its Drilling Services segment in Q3 2025, with expected adjusted gross profit of around $130 million [11] - The company expects adjusted gross profit for Completion Services to remain steady, while Drilling Products is anticipated to improve slightly [12] - Total depreciation, depletion, amortization, and impairment expense is expected to be approximately $230 million for Q3 [13] - Net capital expenditures for full-year 2025 are anticipated to be less than $600 million, with a reduction in maintenance capital expenditures due to lower activity [14]

Financial Data and Key Metrics Changes - Total reported revenue for the quarter was $1,219 million, with a net loss attributable to common shareholders of $49 million or $0.13 per share, which included a $28 million impairment related to drilling operations in Colombia [21] - Adjusted EBITDA for the quarter totaled $231 million, and the company generated $70 million of adjusted free cash flow in the first half of the year [21][22] - The company closed the quarter with $186 million in cash and an undrawn $500 million revolving credit facility, with expectations for free cash flow in the second half of the year to significantly exceed dividends [14][29] Business Line Data and Key Metrics Changes - In the Drilling Services segment, revenue was $404 million with an adjusted gross profit of $149 million, operating an average of 104 rigs [23] - Completion Services segment revenue totaled $719 million with an adjusted gross profit of $100 million, despite some calendar gaps in dedicated fleets [24] - Drilling Products segment revenue was $88 million with an adjusted gross profit of $39 million, showing improvements in both U.S. and international markets [25] Market Data and Key Metrics Changes - The U.S. market saw revenue improve compared to the prior quarter, delivering a record U.S. revenue per industry rig, while international revenue remained steady with increases in key markets like the Middle East [18] - Canadian markets performed well despite seasonal impacts, with significant traction for the Maverick drill bit in the market [19] - The company expects an average rig count in the mid-90s for the third quarter, with potential stabilization in the fourth quarter [24][65] Company Strategy and Development Direction - The company is focused on leveraging its differentiated commercial strategy, operational footprint, and growing technology portfolio to create long-term value for shareholders [11][12] - Investments in digital technology and automation are expected to enhance operational efficiency and customer relationships, positioning the company as a leader in the oilfield services market [12][35] - The strategic vision post-merger includes deeper integration and automation, aiming to deliver value beyond capital equipment [13] Management's Comments on Operating Environment and Future Outlook - Management noted that macroeconomic conditions remain unsettled, with oil prices stabilizing in the mid-sixties, which is encouraging for future drilling activity [7][8] - There are expectations for increased natural gas activity as LNG facilities come online, with a positive long-term outlook for U.S. LNG volumes [10][34] - The company remains optimistic about the future, believing that investments made in technology and digital services will yield significant benefits [35] Other Important Information - The company returned $46 million to shareholders during the quarter, including dividends and share repurchases, and has reduced its share count by 8% since the merger [22] - Capital expenditures for the second quarter were $144 million, with expectations for less than $600 million in total capital expenditures for 2025 [27][28] - The company is exploring ways to best utilize cash to create long-term value for shareholders [29] Q&A Session Summary Question: What is the outlook for completion activity in Q4? - Management indicated that while there may be some moderation in Q4, it is too early to predict a steep decline, and they are encouraged by the current activity levels [41][42] Question: Can you provide more details on the third quarter outlook for completion services? - Management stated that completion activity is expected to remain steady, with no significant commentary on specific basins at this time [50] Question: What are the expectations for gas-directed activity in 2026? - Management anticipates an increase in gas activity next year based on discussions with customers and the demand for LNG volumes [57][58] Question: How is the pricing dynamic for low-emission gas-burning assets? - Management noted that their Emerald fleet, which burns 100% natural gas, is in high demand and continues to command premium pricing [67][68] Question: What is the company's strategy regarding technology investments and potential M&A? - Management emphasized ongoing investments in digital platforms and automation, with potential for future acquisitions to enhance technology offerings [52][53]

Financial Data and Key Metrics Changes - Total reported revenue for the quarter was $1,219 million, with a net loss attributable to common shareholders of $49 million or $0.13 per share, which included a $28 million impairment related to drilling operations in Colombia [22] - Adjusted EBITDA for the quarter totaled $231 million, and the company generated $70 million of adjusted free cash flow in the first half of the year [22][31] - The company closed the quarter with $186 million in cash and an undrawn $500 million revolving credit facility, with low leverage and an investment-grade credit rating [14][31] Business Line Data and Key Metrics Changes - In the Drilling Services segment, revenue was $404 million with an adjusted gross profit of $149 million, and the average operating rig count was 104 rigs [24] - Completion Services segment revenue totaled $719 million with an adjusted gross profit of $100 million, despite some calendar gaps in dedicated fleets [25] - Drilling Products revenue was $88 million with an adjusted gross profit of $39 million, showing improvement in the U.S. market despite overall industry activity moderation [26] Market Data and Key Metrics Changes - The U.S. market saw revenue improve compared to the prior quarter, delivering another quarter of record U.S. revenue per industry rig [18] - International revenue remained steady, with higher revenue in key markets including the Middle East [19] - The Canadian market, representing just under 10% of segment revenue, performed well despite seasonal impacts [20] Company Strategy and Development Direction - The company is focused on creating long-term value for shareholders through differentiated commercial strategies and investments in technology [10][12] - The integration of Patterson UTI and NexTier is expected to yield benefits beyond cost synergies, with a focus on automation and data-driven solutions [13] - The company aims to capitalize on the growing demand for digital and automation services in the oilfield services market [30] Management's Comments on Operating Environment and Future Outlook - Management noted that the oil market remains unsettled, with volatility impacting customer decision-making [6][7] - There are expectations for increased natural gas activity as LNG facilities come online, leading to incremental demand for drilling and completions in natural gas basins [9][35] - The company is optimistic about its long-term outlook, believing that current market conditions will lead to opportunities for top-tier service providers [34] Other Important Information - The company returned $46 million to shareholders during the quarter, including dividends and share repurchases, and has reduced its share count by 8% since the merger [23] - Capital expenditures for the second quarter were $144 million, with expectations for less than $600 million in total capital expenditures for 2025 [29][30] - The company is exploring ways to best utilize its cash to create long-term value for shareholders [31] Q&A Session Summary Question: What is the outlook for completion activity in Q4? - Management indicated that while there may be some moderation in Q4, it is too early to predict a steep decline, and they are encouraged by the current activity levels [41][43] Question: Can you provide more detail on the third quarter outlook for completion services? - The company expects steady activity in completions, with no significant commentary on one basin over another, and is working with solid customers in both gas and oil basins [50][51] Question: What are the expectations for gas-directed activity in 2026? - Management anticipates an increase in gas activity next year based on discussions with customers and the expected demand for LNG volumes [59][60] Question: How is the pricing dynamic for low-emission gas-burning assets? - The company noted that their Emerald fleet, which burns 100% natural gas, is in high demand and continues to receive premium pricing compared to lower-tier services [69][70] Question: What are the thoughts on the rig count and its impact on completion services? - Management acknowledged that while the overall rig count is declining, their exposure to higher technology rigs keeps their completion services relatively steady [108]

Core Insights - Patterson-UTI reported a quarterly loss of $0.06 per share, which was worse than the Zacks Consensus Estimate of a loss of $0.04, marking an earnings surprise of -50.00% [1] - The company generated revenues of $1.22 billion for the quarter ended June 2025, exceeding the Zacks Consensus Estimate by 1.02%, but down from $1.35 billion year-over-year [2] - The stock has underperformed, losing approximately 29.1% since the beginning of the year, while the S&P 500 has gained 7.3% [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is -$0.06 on revenues of $1.18 billion, and for the current fiscal year, it is -$0.20 on revenues of $4.78 billion [7] - The estimate revisions trend for Patterson-UTI was unfavorable prior to the earnings release, resulting in a Zacks Rank 4 (Sell) for the stock, indicating expected underperformance in the near future [6] Industry Context - The Oil and Gas - Drilling industry, to which Patterson-UTI belongs, is currently ranked in the bottom 7% of over 250 Zacks industries, suggesting a challenging environment [8] - Another company in the same industry, Nabors Industries, is expected to report a quarterly loss of $2.05 per share, with a significant downward revision of the consensus EPS estimate by 67.7% over the last 30 days [9]

[Financial and Operational Highlights](index=1&type=section&id=Second%20Quarter%202025%20Financial%20Results%20and%20Other%20Key%20Items) Patterson-UTI reported a Q2 2025 net loss of $49 million, with $1.2 billion revenue and $231 million Adjusted EBITDA Q2 2025 Financial Highlights | Metric | Value (Q2 2025) | | :--- | :--- | | Total Revenue | $1.2 billion | | Net Loss Attributable to Common Stockholders | $49 million | | Non-cash Asset Impairment (Colombia) | $28 million | | Adjusted EBITDA | $231 million | | Shareholder Returns | $46 million ($0.08/share dividend + $16M buybacks) | - The company declared a quarterly dividend of **$0.08 per share**, payable on September 15, 2025[6](index=6&type=chunk) [Management Commentary](index=1&type=section&id=Management%20Commentary) Management noted Q2 activity aligned with market trends, emphasizing technology and a positive long-term natural gas outlook - The company is focused on leveraging its technology portfolio, including automation and digital services, to deliver differentiated value and improve its market position in both drilling and completions[3](index=3&type=chunk) - Customer caution persists due to oil market volatility and macroeconomic uncertainties, however, management sees long-term upside for natural gas activity driven by rising domestic and global LNG demand[3](index=3&type=chunk) - The company's strong balance sheet is a key strategic advantage, providing flexibility for capital allocation, with free cash flow expected to accelerate in the second half of 2025[3](index=3&type=chunk) [Segment Performance](index=1&type=section&id=Segment%20Performance) Q2 2025 saw Completion Services lead revenue at $719 million, with all segments advancing technology for efficiency and value [Drilling Services](index=1&type=section&id=Drilling%20Services) Drilling Services generated $404 million revenue and $149 million adjusted gross profit, with growing automation demand Drilling Services Q2 2025 Metrics | Metric (Q2 2025) | Value | | :--- | :--- | | Revenue | $404 million | | Adjusted Gross Profit | $149 million | | U.S. Operating Days | 9,465 | | Average Rigs Working | 104 | - Demand is growing for proprietary technologies like the Cortex® Automation Platform and the cloud-based REX® monitoring system, which enhance drilling processes and customer relationships[6](index=6&type=chunk)[7](index=7&type=chunk) - As of June 30, 2025, the company had term contracts for drilling rigs in the U.S. providing for approximately **$312 million** in future dayrate drilling revenue[7](index=7&type=chunk) [Completion Services](index=3&type=section&id=Completion%20Services) Completion Services reported $719 million revenue and $100 million adjusted gross profit, with fully utilized natural gas fleets Completion Services Q2 2025 Metrics | Metric (Q2 2025) | Value | | :--- | :--- | | Revenue | $719 million | | Adjusted Gross Profit | $100 million | - The fleet of Emerald™ 100% natural gas-powered assets and Tier IV dual fuel assets are fully utilized and expected to remain so through the rest of 2025[9](index=9&type=chunk) - The company is advancing its EOS Completions Platform™, successfully deploying its proprietary Vertex™ frac automation with fleet-wide deployment expected by the end of 2025[10](index=10&type=chunk) [Drilling Products](index=3&type=section&id=Drilling%20Products) Drilling Products achieved $88 million revenue and $39 million adjusted gross profit, with record U.S. revenue per rig Drilling Products Q2 2025 Metrics | Metric (Q2 2025) | Value | | :--- | :--- | | Revenue | $88 million | | Adjusted Gross Profit | $39 million | - Achieved a record U.S. revenue per U.S. industry rig, benefiting from an increase in performance-based agreements[12](index=12&type=chunk) - International business saw steady revenue with gains in the Middle East and continued penetration into offshore markets including the North Sea, Gulf of America, and Guyana[13](index=13&type=chunk)[14](index=14&type=chunk) [Other](index=3&type=section&id=Other) The 'Other' segment generated $8 million revenue and $2 million adjusted gross profit, including divested oilfield rentals Other Segment Q2 2025 Metrics | Metric (Q2 2025) | Value | | :--- | :--- | | Revenue | $8 million | | Adjusted Gross Profit | $2 million | [Business Outlook](index=3&type=section&id=Outlook) Q3 2025 outlook anticipates moderate drilling decline, steady completion services, and reduced full-year capital expenditures Q3 2025 Business Outlook | Segment | Q3 2025 Outlook | | :--- | :--- | | Drilling Services | Average rig count in the mid-90s; Adjusted gross profit of ~$130 million. | | Completion Services | Activity and adjusted gross profit to remain steady with Q2. | | Drilling Products | Adjusted gross profit to improve slightly sequentially. | - Full-year 2025 capital expenditures, net of asset sales, are now expected to be **less than $600 million**, a reduction from prior guidance[21](index=21&type=chunk) - For Q3, selling, general and administrative (SG&A) expense is expected to decline slightly, while depreciation, depletion, amortization, and impairment expense is projected to be approximately **$230 million**[20](index=20&type=chunk) [Financial Statements](index=7&type=section&id=Financial%20Statements) Financial statements show total assets of $5.58 billion as of June 30, 2025, with a Q2 2025 net loss of $49.1 million [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets were $5.58 billion, total liabilities $2.23 billion, and cash $185.9 million Condensed Consolidated Balance Sheets (in thousands) | Balance Sheet Item (in thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash, cash equivalents and restricted cash | $185,891 | $241,293 | | Total current assets | $1,241,123 | $1,295,315 | | Total assets | $5,575,620 | $5,833,466 | | Total current liabilities | $716,472 | $841,993 | | Total liabilities | $2,226,947 | $2,357,622 | | Total equity | $3,348,673 | $3,475,844 | [Condensed Consolidated Statements of Operations](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q2 2025 revenues were $1.22 billion, resulting in a net loss of $49.1 million or ($0.13) per diluted share Condensed Consolidated Statements of Operations (in thousands) | Income Statement Item (in thousands, except per share data) | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Revenues | $1,219,320 | $1,348,194 | | Operating Income (Loss) | $(29,486) | $45,228 | | Net Loss Attributable to Common Stockholders | $(49,144) | $11,077 | | Diluted EPS | $(0.13) | $0.03 | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For H1 2025, net cash from operations was $347.9 million, with a $55.4 million net decrease in cash Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Item (Six Months Ended June 30, in thousands) | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $347,890 | $563,413 | | Net cash used in investing activities | $(289,207) | $(349,504) | | Net cash used in financing activities | $(112,720) | $(332,538) | | Net decrease in cash | $(55,402) | $(117,644) | [Non-GAAP Financial Measures](index=11&type=section&id=Non-GAAP%20Financial%20Measures) Non-GAAP measures show Q2 2025 Adjusted EBITDA at $231.2 million and H1 2025 adjusted free cash flow [Adjusted EBITDA Reconciliation](index=11&type=section&id=Adjusted%20EBITDA) Q2 2025 Adjusted EBITDA was $231.2 million, reconciled from a net loss of $48.7 million, a decrease from Q2 2024 Adjusted EBITDA Reconciliation (in thousands) | Adjusted EBITDA Reconciliation (in thousands) | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net income (loss) | $(48,697) | $11,621 | | Income tax expense | $1,194 | $17,785 | | Net interest expense | $16,373 | $16,046 | | Depreciation, depletion, amortization and impairment | $261,858 | $267,638 | | **Adjusted EBITDA** | **$231,216** | **$323,735** | [Adjusted Free Cash Flow Reconciliation](index=12&type=section&id=Adjusted%20Free%20Cash%20Flow) For H1 2025, adjusted free cash flow was $70.2 million, derived from net cash from operations and capital expenditures Adjusted Free Cash Flow (Six Months Ended June 30, in thousands) | Adjusted Free Cash Flow (Six Months Ended June 30, in thousands) | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $347,890 | $563,413 | | Less capital expenditures | $(306,037) | $(357,449) | | Plus proceeds from disposal of assets | $28,344 | $9,321 | | **Adjusted free cash flow** | **$70,197** | **$215,285** | [Adjusted Gross Profit Reconciliation](index=13&type=section&id=Adjusted%20Gross%20Profit) Q2 2025 total adjusted gross profit was $289.9 million, with Drilling Services contributing $149.0 million Adjusted Gross Profit by Segment (Q2 2025, in thousands) | Adjusted Gross Profit by Segment (Q2 2025, in thousands) | GAAP Gross Profit (Loss) | Depreciation, Amortization & Impairment | Adjusted Gross Profit | | :--- | :--- | :--- | :--- | | Drilling Services | $36,386 | $112,647 | $149,033 | | Completion Services | $(19,525) | $119,774 | $100,249 | | Drilling Products | $15,471 | $23,584 | $39,055 | | Other | $(1,918) | $3,538 | $1,620 |

Core Viewpoint - Patterson-UTI Energy, Inc. (PTEN) is expected to report a second-quarter loss of 4 cents per share with revenues of $1.21 billion, reflecting a year-over-year decline in both earnings and revenues [1][10]. Group 1: Financial Performance - In the first quarter of 2025, PTEN achieved breakeven adjusted earnings per share, outperforming the Zacks Consensus Estimate of a loss of 4 cents per share, driven by an 11.2% year-over-year reduction in costs and expenses [3]. - Total revenues for Q1 2025 were $1.3 billion, exceeding the Zacks Consensus Estimate by 7.7% [3]. - The Zacks Consensus Estimate for second-quarter 2025 earnings indicates a 180% year-over-year decline, while revenues are expected to decrease by 10.09% from the previous year [4][10]. Group 2: Cost Management - PTEN's operating costs and expenses are projected to reach $1.26 billion in the second quarter, a 3.4% decrease from the same period last year, reflecting the company's focus on streamlining operations [6]. - Direct operating costs are expected to decline from $971.2 million to $961.2 million, and depreciation, depletion, amortization, and impairment costs are anticipated to decrease from $267.6 million to $230 million [7]. Group 3: Revenue Challenges - The Zacks Consensus Estimate for second-quarter revenues is $1.21 billion, down from $1.35 billion in the year-ago quarter, attributed to poor performance in Completion Services, Drilling Services, and Drilling Products segments [8][10]. - Despite expected revenue declines across several segments, PTEN's cost management efforts are likely to mitigate the financial impact [9].

Core Viewpoint - Wall Street anticipates a year-over-year decline in earnings for Patterson-UTI due to lower revenues, with a focus on how actual results compare to estimates impacting stock price [1][2]. Earnings Expectations - Patterson-UTI is expected to report a quarterly loss of $0.04 per share, reflecting a year-over-year change of -180% [3]. - Revenue is projected to be $1.21 billion, down 10% from the same quarter last year [3]. Estimate Revisions - The consensus EPS estimate has been revised down by 32.87% over the last 30 days, indicating a reassessment by analysts [4]. - The Most Accurate Estimate for Patterson-UTI is lower than the Zacks Consensus Estimate, resulting in an Earnings ESP of -3.23% [12]. Earnings Surprise Prediction - A positive Earnings ESP is a strong predictor of an earnings beat, especially when combined with a Zacks Rank of 1, 2, or 3 [10]. - Stocks with a positive Earnings ESP and a solid Zacks Rank have historically produced a positive surprise nearly 70% of the time [10]. Historical Performance - In the last reported quarter, Patterson-UTI was expected to post a loss of $0.04 per share but delivered break-even earnings, resulting in a surprise of +100.00% [13]. - Over the last four quarters, the company has only beaten consensus EPS estimates once [14]. Conclusion - Patterson-UTI does not appear to be a compelling earnings-beat candidate, and investors should consider other factors when making decisions regarding the stock ahead of its earnings release [17].

Industry Overview - The Zacks Oil and Gas - Drilling industry includes companies providing rigs and services for oil and natural gas exploration and development, with operations both onshore and offshore [2] - Drilling for hydrocarbons is capital-intensive and technically challenging, primarily influenced by contracting activity rather than oil or gas prices [2] - Offshore drilling companies exhibit higher volatility compared to onshore counterparts, with their share prices more closely correlated to oil and gas prices [2] Current Challenges - The industry is facing significant challenges due to contracting delays, soft gas prices, and macroeconomic uncertainty, leading to a Zacks Industry Rank of 235, placing it in the bottom 4% of 245 Zacks industries [1][7] - Earnings estimates for the industry have declined sharply, with a drop of 85.2% for 2025 and 51.7% for 2026 over the past year, indicating a negative outlook [9] - The industry has underperformed compared to the broader Zacks Oil - Energy sector and the S&P 500, with a decline of 38.6% over the past year versus a 2.1% increase in the sector and a 9.1% gain in the S&P 500 [11] Market Trends - Macroeconomic uncertainty is causing hesitation in customer decision-making, slowing the pace of tenders and contract awards, and making near-term earnings visibility difficult for drillers [3] - There are concerns about premature rig reactivation leading to oversupply, particularly in deepwater segments, which could undermine pricing power and margins [4] - Despite short-term challenges, long-term demand for deepwater drilling is expected to grow, with forecasts indicating a 40% increase in investment by 2030, supported by large undeveloped reserves and major project approvals [5] Company Highlights - **Transocean Ltd. (RIG)**: Reported contract drilling revenues of $906 million in Q1 2025, an 18.7% increase year-over-year, with a market capitalization of $2.9 billion and a projected earnings growth of 123.1% for 2025 [18] - **Patterson-UTI Energy (PTEN)**: Generated $51 million in adjusted free cash flow in Q1 2025, with a market capitalization of $2.5 billion and a dividend yield of nearly 5% [21] - **Precision Drilling Corporation (PDS)**: Canada’s largest drilling rig contractor, with a market capitalization of $687.3 million, has seen its earnings estimate for 2025 increase from $3.84 to $4.13 per share in the past 60 days [24]

Company Overview - Patterson-UTI Energy is an oil and gas service provider primarily operating in the United States [1] Industry Context - A recent decline in crude oil prices has led several producers to slightly reduce drilling activity [1]