Patterson-UTI Energy(PTEN) - 2021 Q2 - Quarterly Report

PART I — FINANCIAL INFORMATION This part provides the unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations ITEM 1. Financial Statements This section presents unaudited condensed consolidated financial statements and notes, reporting reduced net loss and decreased assets and equity Unaudited Condensed Consolidated Balance Sheets This section presents the company's financial position, detailing assets, liabilities, and equity at specific dates Condensed Consolidated Balance Sheet Highlights (in thousands): | Metric | June 30, 2021 | December 31, 2020 | | :-------------------------- | :------------ | :------------------ | | Total Assets | $3,073,306 | $3,299,069 | | Total Liabilities | $1,265,589 | $1,283,010 | | Total Stockholders' Equity | $1,807,717 | $2,016,059 | Unaudited Condensed Consolidated Statements of Operations This section outlines the company's revenues, expenses, and net loss for the reported periods Net Loss and EPS (in thousands, except per share data): | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Loss | $(103,309) | $(150,332) | $(209,722) | $(585,054) | | Basic Net Loss Per Share | $(0.55) | $(0.81) | $(1.12) | $(3.10) | | Diluted Net Loss Per Share | $(0.55) | $(0.81) | $(1.12) | $(3.10) | Total Operating Revenues (in thousands): | Period | 2021 | 2020 | Change | | :----- | :--- | :--- | :----- | | Three Months Ended June 30 | $291,774 | $250,380 | +16.5% | | Six Months Ended June 30 | $532,703 | $696,307 | -23.5% | Unaudited Condensed Consolidated Statements of Comprehensive Loss This section details the company's comprehensive loss, including net loss and other comprehensive income/loss items Total Comprehensive Loss (in thousands): | Period | 2021 | 2020 | | :----- | :--- | :--- | | Three Months Ended June 30 | $(103,054) | $(149,637) | | Six Months Ended June 30 | $(209,049) | $(585,745) | Unaudited Condensed Consolidated Statements of Changes in Stockholders' Equity This section reports changes in stockholders' equity, including net loss, stock-based compensation, and treasury stock transactions - Total stockholders' equity decreased from $2,016,059 thousand at December 31, 2020, to $1,807,717 thousand at June 30, 2021, primarily due to net loss and treasury stock purchases[16] Key Changes in Stockholders' Equity (Six Months Ended June 30, 2021, in thousands): | Item | Amount | | :-------------------------- | :------- | | Net Loss | $(209,722) | | Stock-based compensation | $11,825 | | Payment of cash dividends | $(7,523) | | Purchase of treasury stock | $(3,522) | Unaudited Condensed Consolidated Statements of Cash Flows This section summarizes cash flows from operating, investing, and financing activities for the reported periods Cash Flow Summary (Six Months Ended June 30, in thousands): | Activity | 2021 | 2020 | Change | | :-------------------------- | :------- | :------- | :------- | | Net cash provided by operating activities | $44,197 | $219,333 | -79.8% | | Net cash used in investing activities | $(41,651) | $(114,336) | -63.5% | | Net cash used in financing activities | $(11,045) | $(32,444) | -65.9% | | Cash and cash equivalents at end of period | $216,682 | $246,781 | -12.2% | Notes to Unaudited Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures for the unaudited condensed consolidated financial statements Note 1. Basis of Presentation This note outlines the basis of preparation for the interim financial statements and significant accounting policies - The unaudited interim condensed consolidated financial statements are prepared in accordance with SEC rules and should be read in conjunction with the annual Form 10-K[20] - The U.S. dollar is the functional currency for all operations, except for Canadian operations which use the Canadian dollar[21] - Recently adopted accounting standards (ASU 2016-13 on credit losses, ASU 2018-15 on capitalizing implementation costs, ASU 2018-13 on fair value measurements, ASU 2019-12 on income taxes) had no material impact on the consolidated financial statements[22][23][24][25] Note 2. Credit Losses This note discusses the company's accounting policy for expected credit losses and related impacts - The company adopted ASU 2016-13 (CECL) on January 1, 2020, for measuring expected credit losses, which did not have a material impact on financial statements[27][28] - No credit loss expense was recorded during the three and six months ended June 30, 2021[29] Note 3. Revenues This note details revenue recognition policies and disaggregates revenue by primary segments - Primary revenue-generating segments include contract drilling, pressure pumping, and directional drilling, with revenue recognized over time as services are performed[30][32] - Revenue from oil and natural gas working interests is excluded from ASC Topic 606[35] Accounts Receivable and Contract Liabilities (in millions): | Metric | June 30, 2021 | December 31, 2020 | | :------------------- | :------------ | :------------------ | | Accounts receivable | $194 | $158 | | Contract liabilities | $0.5 | $0.6 | - Recorded $2.3 million in early termination revenue during the six months ended June 30, 2021, for performance obligations satisfied in 2020, due to collectability becoming probable[42] Note 4. Inventory This note provides a breakdown of the company's inventory composition Inventory Composition (in thousands): | Category | June 30, 2021 | December 31, 2020 | | :-------------------- | :------------ | :------------------ | | Finished goods | $315 | $600 | | Work-in-process | $424 | $802 | | Raw materials and supplies | $33,024 | $31,683 | | Total Inventory | $33,763 | $33,085 | Note 5. Property and Equipment This note presents the net carrying amount of property and equipment and discusses impairment considerations Property and Equipment, Net (in thousands): | Metric | June 30, 2021 | December 31, 2020 | | :-------------------------- | :------------ | :------------------ | | Property and equipment, net | $2,511,977 | $2,761,041 | - No impairment related to the marketability or condition of drilling rigs was recorded during the three and six months ended June 30, 2021[44] Note 6. Goodwill and Intangible Assets This note details the balances and amortization of goodwill and other intangible assets - Goodwill was fully impaired in the first quarter of 2020, resulting in no goodwill balance as of June 30, 2021, following a $395 million impairment charge[46][48] Intangible Assets, Net Carrying Amount (in thousands): | Category | June 30, 2021 | December 31, 2020 | | :-------------------- | :------------ | :------------------ | | Customer relationships | $1,114 | $1,243 | | Developed technology | $22,192 | $28,257 | | Internal use software | $751 | $587 | | Total | $24,057 | $30,087 | - Amortization expense on intangible assets was approximately $6.3 million for the six months ended June 30, 2021, down from $10.6 million in the prior year[48] Note 7. Accrued Liabilities This note provides a detailed breakdown of the company's accrued liabilities Accrued Liabilities (in thousands): | Category | June 30, 2021 | December 31, 2020 | | :---------------------------------- | :------------ | :------------------ | | Salaries, wages, payroll taxes and benefits | $35,316 | $37,627 | | Workers' compensation liability | $62,179 | $70,847 | | Property, sales, use and other taxes | $18,559 | $10,666 | | Insurance, other than workers' compensation | $7,427 | $8,462 | | Accrued interest payable | $10,636 | $11,325 | | Accrued restructuring expenses | $8,314 | $14,310 | | Other | $23,864 | $21,767 | | Total Accrued Liabilities | $166,295 | $175,004 | Note 8. Long-Term Debt This note outlines the company's long-term debt obligations, including terms, covenants, and repayment schedules Long-Term Debt (in thousands): | Category | June 30, 2021 | December 31, 2020 | | :------------------------------------------ | :------------ | :------------------ | | Term Loan Agreement (Maturing June 2022) | $50,000 | $50,000 | | 3.95% Senior Notes | $509,505 | $509,505 | | 5.15% Senior Notes | $349,250 | $349,250 | | Less deferred financing costs and discounts | $(6,859) | $(7,271) | | Total | $901,896 | $901,484 | - The company had $50 million outstanding under the Term Loan Agreement at a LIBOR-based interest rate of 1.48% as of June 30, 2021, maturing in June 2022[52] - The Credit Agreement provides a $600 million revolving credit facility, with no borrowings outstanding and approximately $600 million available capacity at June 30, 2021[57][61] - The company was in compliance with all debt covenants at June 30, 2021[55][60] Principal Repayment Requirements of Long-Term Debt (as of June 30, 2021, in thousands): | Year ending December 31, | Amount | | :----------------------- | :----- | | 2021 | $0 | | 2022 | $50,000 | | 2023 | $0 | | 2024 | $0 | | 2025 | $0 | | Thereafter | $858,755 | | Total | $908,755 | Note 9. Commitments and Contingencies This note discloses the company's various commitments, including letters of credit, equipment purchases, and legal proceedings - Outstanding letters of credit totaled $63.7 million at June 30, 2021, primarily for insurance collateral[77] - Commitments to purchase major equipment amounted to approximately $53.0 million[78] - Remaining minimum obligation under proppant and chemical purchase agreements was approximately $8.4 million, expiring in 2021 and 2022[79] - Legal proceedings are not expected to have a material adverse effect on financial condition, cash flows, or results of operations[80] Note 10. Stockholders' Equity This note details changes in stockholders' equity, including dividends, stock buybacks, and equity plans - The Stockholder Rights Agreement expired on April 21, 2021[81] - A cash dividend of $0.02 per share was approved on July 28, 2021, to be paid on September 16, 2021[82] - As of June 30, 2021, approximately $130 million remained authorized under the stock buyback program[83] Treasury Stock Acquisitions (Six Months Ended June 30, 2021, in thousands): | Metric | Shares | Cost | | :------------------------------------------ | :------- | :----- | | Treasury shares at beginning of period | 83,402,322 | $1,366,313 | | Acquisitions pursuant to long-term incentive plan | 428,665 | $3,522 | | Treasury shares at end of period | 83,830,987 | $1,369,835 | Note 11. Stock-based Compensation This note describes the company's stock-based compensation plans and related expenses - The Patterson-UTI Energy, Inc. 2021 Long-Term Incentive Plan was approved on June 3, 2021, authorizing approximately 13.5 million shares[86] - No stock options were granted during the six months ended June 30, 2021 or 2020[87] Non-Vested Restricted Stock Units Outstanding (as of June 30, 2021): | Type | Number of Shares | | :-------------------------- | :--------------- | | Time Based | 3,268,802 | | Performance Based | 359,315 | - 621,400 shares were issued in April 2021 to settle the 2018 Performance Units[92] Phantom Units Compensation Expense (in thousands): | Period | 2021 | 2020 | | :-------------------------- | :--- | :--- | | Three Months Ended June 30 | $1,000 | $200 | | Six Months Ended June 30 | $1,500 | $200 | Note 12. Income Taxes This note explains the company's effective income tax rates and significant factors influencing them Effective Income Tax Rate: | Period | 2021 | 2020 | | :-------------------------- | :--- | :--- | | Three Months Ended June 30 | 13.4% | 11.4% | | Six Months Ended June 30 | 15.0% | 13.3% | - The higher effective tax rate in 2021 was primarily due to the non-deductible portion of goodwill impairment in 2020 and state rate changes in 2021, partially offset by a valuation allowance in 2021[96][97] Note 13. Earnings Per Share This note presents basic and diluted earnings per share calculations and potentially dilutive securities Net Loss Per Common Share: | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic | $(0.55) | $(0.81) | $(1.12) | $(3.10) | | Diluted | $(0.55) | $(0.81) | $(1.12) | $(3.10) | - Potentially dilutive securities totaling 10,361 thousand shares (2021) and 9,101 thousand shares (2020) were excluded from diluted EPS calculations as their inclusion would have been anti-dilutive[103] Note 14. Business Segments This note provides financial information disaggregated by the company's reportable business segments - The company operates three reportable business segments: contract drilling, pressure pumping, and directional drilling, along with other operations including oilfield rentals, equipment servicing, electrical controls and automation, and oil and natural gas working interests[104][106] Total Revenues by Segment (Three Months Ended June 30, in thousands): | Segment | 2021 | 2020 | | :---------------- | :------- | :------- | | Contract drilling | $142,264 | $171,476 | | Pressure pumping | $111,991 | $59,533 | | Directional drilling | $24,869 | $11,742 | | Other operations | $18,251 | $11,460 | | Total Revenues | $291,774 | $250,380 | Loss Before Income Taxes by Segment (Six Months Ended June 30, in thousands): | Segment | 2021 | 2020 | | :---------------- | :--------- | :--------- | | Contract drilling | $(106,850) | $(434,760) | | Pressure pumping | $(63,660) | $(104,040) | | Directional drilling | $(10,033) | $(24,980) | | Other operations | $(7,843) | $(29,126) | | Corporate | $(38,551) | $(54,982) | | Total Loss Before Income Taxes | $(246,665) | $(674,541) | Note 15. Fair Values of Financial Instruments This note discloses the fair values of the company's financial instruments, particularly outstanding debt - The carrying values of cash and cash equivalents, trade receivables, and accounts payable approximate fair value due to their short-term maturity[108] Fair Values of Outstanding Debt (in thousands): | Debt Type | Carrying Value (June 30, 2021) | Fair Value (June 30, 2021) | Carrying Value (Dec 31, 2020) | Fair Value (Dec 31, 2020) | | :---------------- | :----------------------------- | :------------------------- | :----------------------------- | :------------------------- | | Term Loan Agreement | $50,000 | $50,000 | $50,000 | $50,000 | | 3.95% Senior Notes | $509,505 | $516,397 | $509,505 | $471,019 | | 5.15% Senior Notes | $349,250 | $366,655 | $349,250 | $319,560 | | Total Debt | $908,755 | $933,052 | $908,755 | $840,579 | Note 16. Restructuring Expenses This note details the restructuring plan implemented and associated expenses by segment - A restructuring plan was implemented in Q2 2020, resulting in $38.3 million in charges, and was completed in Q3 2020 with no additional expenses in 2021[109][200] Restructuring Expenses by Segment (Six Months Ended June 30, 2020, in thousands): | Category | Contract Drilling | Pressure Pumping | Directional Drilling | Other Operations | Corporate | Total | | :----------------------- | :---------------- | :--------------- | :------------------- | :--------------- | :-------- | :---- | | Severance costs | $1,821 | $3,460 | $503 | $501 | $215 | $6,500 | | Contract termination costs | — | $20,373 | — | — | — | $20,373 | | Other exit costs | $523 | $194 | $827 | — | — | $1,544 | | ROU asset abandonments | $86 | $7,304 | $1,845 | — | $686 | $9,921 | | Total | $2,430 | $31,331 | $3,175 | $501 | $901 | $38,338 | Note 17. Subsequent Event This note describes significant events occurring after the balance sheet date, specifically a merger agreement - On July 5, 2021, the company entered into a merger agreement to acquire Pioneer Energy Services Corp. for up to 26,275,000 shares of common stock and $30 million cash[112] - All Pioneer debt will be retired in connection with the transaction, which is expected to close in the fourth quarter of 2021, subject to regulatory and stockholder approvals[112][113] ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section analyzes operations, segment performance, oil price impact, the Pioneer acquisition, and the company's strong liquidity Management Overview and Recent Developments This section provides an overview of the company's operations, market conditions, and strategic initiatives - The company is a Houston-based oilfield services company, primarily operating land-based drilling rigs and pressure pumping equipment[122] - Oil prices (WTI-Cushing) experienced significant volatility, recovering from negative $36.98/barrel in April 2020 to $74.21/barrel in June 2021, averaging $66.19/barrel in Q2 2021[125] Operational Activity Highlights: | Metric | Q2 2021 | Q1 2021 | Q3 2021 (Expected) | | :-------------------------- | :------ | :------ | :----------------- | | Average Active Rig Count | 73 | 69 | ~81 | | Average Active Pressure Pumping Spreads | ~8 | 7 | ~9 | - The 2021 capital expenditure forecast was increased to approximately $165 million due to improving activity levels and increasing oilfield cost inflation[128] - On July 5, 2021, the company agreed to acquire Pioneer Energy Services Corp. for up to 26,275,000 shares of common stock and $30 million cash, with closing expected in Q4 2021[130][132] Operating Revenues by Segment (Three Months Ended June 30, in thousands): | Segment | 2021 | % of Total | 2020 | % of Total | | :---------------- | :------- | :--------- | :------- | :--------- | | Contract drilling | $141,732 | 48.6% | $171,134 | 68.3% | | Pressure pumping | $111,991 | 38.4% | $59,533 | 23.8% | | Directional drilling | $24,869 | 8.5% | $11,742 | 4.7% | | Other operations | $13,182 | 4.5% | $7,971 | 3.2% | | Total | $291,774 | 100.0% | $250,380 | 100.0% | Results of Operations This section analyzes the company's financial performance across its various business segments Contract Drilling This section details the financial and operational performance of the contract drilling segment Contract Drilling Performance (Three Months Ended June 30, in thousands, except per day data): | Metric | 2021 | 2020 | % Change | | :-------------------------------- | :------- | :------- | :------- | | Revenues | $141,732 | $171,134 | (17.2)% | | Operating loss | $(58,229) | $(30,742) | 89.4% | | Operating days | 6,652 | 7,450 | (10.7)% | | Average revenue per operating day | $21.31 | $22.97 | (7.2)% | | Average direct operating costs per operating day | $15.05 | $11.69 | 28.7% | | Capital expenditures | $24,042 | $42,501 | (43.4)% | Contract Drilling Performance (Six Months Ended June 30, in thousands, except per day data): | Metric | 2021 | 2020 | % Change | | :-------------------------------- | :------- | :------- | :------- | | Revenues | $275,233 | $438,498 | (37.2)% | | Operating loss | $(106,850) | $(434,760) | (75.4)% | | Operating days | 12,835 | 18,685 | (31.3)% | | Average revenue per operating day | $21.44 | $23.47 | (8.6)% | | Average direct operating costs per operating day | $13.99 | $13.41 | 4.3% | | Capital expenditures | $35,469 | $91,946 | (61.4)% | - As of June 30, 2021, the rig fleet included 198 APEX® rigs, with 150 classified as super-spec rigs[138] - Contract drilling backlog was approximately $210 million as of June 30, 2021, with about 20% expected to remain at June 30, 2022[140] Pressure Pumping This section details the financial and operational performance of the pressure pumping segment Pressure Pumping Performance (Three Months Ended June 30, in thousands, except job data): | Metric | 2021 | 2020 | % Change | | :-------------------------- | :------- | :------- | :------- | | Revenues | $111,991 | $59,533 | 88.1% | | Operating loss | $(23,921) | $(68,554) | (65.1)% | | Average active spreads | 8 | 4 | 100.0% | | Fracturing jobs | 105 | 35 | 200.0% | | Average revenue per fracturing job | $1,006.36 | $1,549.71 | (35.1)% | | Capital expenditures | $8,921 | $1,947 | 358.2% | Pressure Pumping Performance (Six Months Ended June 30, in thousands, except job data): | Metric | 2021 | 2020 | % Change | | :-------------------------- | :------- | :------- | :------- | | Revenues | $187,830 | $184,640 | 1.7% | | Operating loss | $(63,660) | $(104,040) | (38.8)% | | Average active spreads | 7 | 7 | (—)% | | Fracturing jobs | 176 | 124 | 41.9% | | Average revenue per fracturing job | $994.88 | $1,413.11 | (29.6)% | | Capital expenditures | $12,989 | $16,227 | (20.0)% | - The pressure pumping market remains oversupplied, with the company having approximately 1.4 million horsepower in its fleet as of June 30, 2021[141] Directional Drilling This section details the financial and operational performance of the directional drilling segment Directional Drilling Performance (Three Months Ended June 30, in thousands): | Metric | 2021 | 2020 | % Change | | :-------------------------- | :------- | :------- | :------- | | Revenues | $24,869 | $11,742 | 111.8% | | Operating loss | $(5,110) | $(14,385) | (64.5)% | | Average jobs per day | 28 | 12 | 133.3% | | Capital expenditures | $1,219 | $2,044 | (40.4)% | Directional Drilling Performance (Six Months Ended June 30, in thousands): | Metric | 2021 | 2020 | % Change | | :-------------------------- | :------- | :------- | :------- | | Revenues | $44,539 | $46,227 | (3.7)% | | Operating loss | $(10,033) | $(24,980) | (59.8)% | | Average jobs per day | 25 | 23 | 8.7% | | Capital expenditures | $1,323 | $4,052 | (67.3)% | Other Operations This section details the financial and operational performance of the company's other business activities Other Operations Performance (Three Months Ended June 30, in thousands): | Metric | 2021 | 2020 | % Change | | :-------------------------- | :------- | :------- | :------- | | Revenues | $13,182 | $7,971 | 65.4% | | Operating loss | $(3,287) | $(10,355) | (68.3)% | | Capital expenditures | $3,429 | $2,808 | 22.1% | Other Operations Performance (Six Months Ended June 30, in thousands): | Metric | 2021 | 2020 | % Change | | :-------------------------- | :------- | :------- | :------- | | Revenues | $25,101 | $26,942 | (6.8)% | | Operating loss | $(7,843) | $(29,126) | (73.1)% | | Capital expenditures | $6,173 | $8,072 | (23.5)% | - Oil and natural gas revenues increased by $3.2 million in Q2 2021 (YoY) due to favorable crude oil market prices ($66.19/barrel in Q2 2021 vs. $27.81/barrel in Q2 2020)[160] - Oilfield rentals business experienced a $3.1 million decrease in service volume for the six months ended June 30, 2021 (YoY)[184] Corporate This section presents corporate-level financial items not allocated to specific business segments Corporate Financials (Three Months Ended June 30, in thousands): | Metric | 2021 | 2020 | % Change | | :-------------------------------- | :------- | :------- | :------- | | Selling, general and administrative | $19,045 | $19,197 | (0.8)% | | Merger and integration expenses | $1,148 | $0 | NA | | Net gain on asset disposals | $(3,211) | $(1,222) | 162.8% | | Credit loss expense | $0 | $4,551 | (100.0)% | | Interest income | $20 | $334 | (94.0)% | | Interest expense | $10,704 | $10,984 | (2.5)% | | Capital expenditures | $439 | $373 | 17.7% | Corporate Financials (Six Months Ended June 30, in thousands): | Metric | 2021 | 2020 | % Change | | :-------------------------------- | :------- | :------- | :------- | | Selling, general and administrative | $36,978 | $41,223 | (10.3)% | | Merger and integration expenses | $1,148 | $0 | NA | | Net gain on asset disposals | $(4,052) | $(2,461) | 64.6% | | Credit loss expense | $0 | $5,606 | (100.0)% | | Interest income | $159 | $991 | (84.0)% | | Interest expense | $20,713 | $22,208 | (6.7)% | | Capital expenditures | $619 | $1,304 | (52.5)% | - Merger and integration expenses of $1.148 million were recognized in Q2 2021 related to the Pioneer Energy Services Corp. acquisition[164][191] - Other operating expenses (income), net, in 2020 included a $9.2 million charge related to a capacity reservation agreement for sand[165][192] - Lower interest expense in 2021 was due to the early repayment of long-term debt in Q4 2020[194] Income Taxes This section discusses the company's income tax expense and effective tax rate Effective Income Tax Rate: | Period | 2021 | 2020 | | :-------------------------- | :--- | :--- | | Three Months Ended June 30 | 13.4% | 11.4% | | Six Months Ended June 30 | 15.0% | 13.3% | - The higher effective tax rate in 2021 was primarily due to the non-deductible portion of goodwill impairment in 2020 and state rate changes in 2021, partially offset by a valuation allowance in 2021[196][197] Liquidity and Capital Resources This section assesses the company's ability to meet its financial obligations and fund operations - As of June 30, 2021, the company had approximately $215 million in working capital, including $217 million in cash and cash equivalents[202] - The company had approximately $600 million available under its revolving credit facility at June 30, 2021, with no outstanding borrowings[203] - Outstanding debt totaled $909 million at June 30, 2021, and the company was in compliance with all debt covenants[207] - Cash flows from operating activities were $44.2 million for the six months ended June 30, 2021, with $56.6 million used for capital expenditures and $7.5 million for dividends[213] - The 2021 capital expenditure forecast was increased to approximately $165 million[214] - As of June 30, 2021, approximately $130 million remained authorized under the stock buyback program[217] Adjusted EBITDA This section presents Adjusted EBITDA as a non-GAAP measure for evaluating business performance - Adjusted EBITDA is a non-GAAP financial measure used to assess business performance[220] Adjusted EBITDA (in thousands): | Period | 2021 | 2020 | | :-------------------------- | :------- | :------- | | Three Months Ended June 30 | $35,439 | $14,086 | | Six Months Ended June 30 | $70,808 | $101,618 | Critical Accounting Policies and Estimates This section highlights key accounting policies and estimates that require significant management judgment - There have been no material changes in critical accounting policies and estimates since the 2020 Annual Report on Form 10-K[222] Recently Issued Accounting Standards This section refers to disclosures on recently issued accounting standards - Refer to Note 1 of the unaudited condensed consolidated financial statements for a discussion of recently issued accounting standards[223] Volatility of Oil and Natural Gas Prices and its Impact on Operations and Financial Condition This section discusses the impact of fluctuating oil and natural gas prices on the company's financial results - The company's financial performance is highly dependent on volatile oil and natural gas prices, which averaged $66.19 per barrel (WTI-Cushing) in Q2 2021[224] - A decline in demand, prolonged low prices, or reduced customer access to capital could materially adversely affect operating results, financial condition, and cash flows[226] ITEM 3. Quantitative and Qualitative Disclosures About Market Risk The company faces interest rate market risk from its variable-rate Term Loan Agreement and revolving credit facility - The company has interest rate market risk exposure from its Term Loan Agreement ($50 million outstanding at LIBOR-based 1.48% as of June 30, 2021)[227][228] - A one percent increase in the interest rate on the Term Loan Agreement would increase annual cash interest expense by $0.5 million[228] - The revolving credit facility and reimbursement agreement also expose the company to variable interest rate risk, though no amounts were outstanding or disbursed under these at June 30, 2021[229][230] ITEM 4. Controls and Procedures The company's management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of June 30, 2021, and reported no material changes in internal control over financial reporting during the quarter - The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2021[233] - There were no material changes in internal control over financial reporting during the most recently completed fiscal quarter[234] PART II — OTHER INFORMATION This part covers legal proceedings, risk factors, equity security sales, and exhibits ITEM 1. Legal Proceedings This section describes ongoing legal matters and their potential impact on the company - The company is party to various legal proceedings arising in the normal course of business[236] - The outcome of these proceedings is not expected to have a material adverse effect on the company's financial condition, cash flows, or results of operations[236] ITEM 1A. Risk Factors This section outlines significant risks, particularly for the Pioneer acquisition, covering closing conditions, business disruptions, costs, litigation, and integration - Completion of the Pioneer acquisition is subject to various conditions, including stockholder and regulatory approvals, which may delay or prevent the transaction[237][239] - Uncertainty surrounding the Pioneer acquisition and the planned divestiture of Pioneer's well service rig business could disrupt existing business relationships[240] - The company expects to incur significant transaction costs for the Pioneer acquisition, which may exceed anticipations and will be borne even if the acquisition is not completed[241][242] - Litigation related to the Pioneer acquisition could result in injunctions, delaying or preventing the closing, and incur substantial costs[243][244] - There is a risk of inability to successfully integrate Pioneer's business or realize the anticipated benefits and synergies from the acquisition[247][248][250] - The expanded size, complexity, and international footprint of the business post-acquisition will pose substantial management challenges[251] ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds This section reports on Q2 2021 common stock purchases, primarily for employee tax withholding, not under the stock buyback program Common Stock Purchases (Quarter Ended June 30, 2021): | Period Covered | Total Number of Shares Purchased | Average Price Paid per Share | | :------------- | :------------------------------- | :--------------------------- | | April 2021 | 255,650 | $6.52 | | May 2021 | — | $— | | June 2021 | 173,015 | $10.72 | | Total | 428,665 | | - These purchases were primarily for employees' tax withholding obligations upon the settlement of performance unit awards and vesting of restricted stock units, not under the stock buyback program[254] - As of June 30, 2021, approximately $130 million remained authorized under the stock buyback program[253][254] ITEM 6. Exhibits This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including corporate governance, incentive plans, and certifications - Exhibits include the Restated Certificate of Incorporation, Bylaws, 2021 Long-Term Incentive Plan, Executive Officer Restricted Stock Unit Award Agreement, Employment Agreements, and certifications by the CEO and CFO[255] Signature This section confirms the official signing and submission of the report - The report was signed by C. Andrew Smith, Executive Vice President and Chief Financial Officer, on August 3, 2021[257]