Patterson-UTI Energy Q1 Earnings Call Highlights

Key Points

• Management says demand is tightening and supply is constrained — completions are “sold out” of top-tier equipment and active completions assets are near full utilization, supporting a gradual pricing recovery with leading-edge rigs moving up from the low $30k/day and upgraded APEX rigs approaching $40k/day.
• Q1 results: revenue was $1.117 billion with a net loss of $25 million (‑$0.06/share) and adjusted EBITDA of $205 million; the company exited the quarter with $337 million cash, no borrowings on its $500 million revolver, and the board approved a $0.10 quarterly dividend.
• Patterson‑UTI is prioritizing returns over reactivating old diesel fleets and is directing capital to expand its Emerald natural gas‑powered fleet (targeting >15% of active horsepower by year‑end), while estimating modest reactivation and new‑build economics that require only incremental pricing improvement.

Patterson-UTI Energy NASDAQ: PTEN executives said first-quarter results reflected strong execution across the company’s drilling and completions operations, while a shifting commodity backdrop is driving more constructive customer conversations about higher U.S. land activity later this year.

Management highlights: improving macro tone and “sold out” top-tier equipment

President and CEO Andy Hendricks said the company entered 2026 with momentum from 2025, supported by “technology and digital offerings” across drilling and completions, and continued focus on cost discipline and customer service. Hendricks also argued that geopolitical risk and Middle East oil supply disruptions have “shifted materially” the commodity outlook since the start of the year, reinforcing the strategic role of U.S. oil and natural gas production.

Hendricks said customer budgets were largely set with crude assumptions “well below the current strip,” but noted oil prices are now “significantly above the mid-December levels assumed in many customers’ 2026 budgets.” He added that Patterson-UTI is “increasingly hearing that the strip is likely to incentivize additional incremental oil-directed drilling and completion activity in the H2 of this year,” and pointed to a WTI strip exiting 2027 at about $70 as supportive if it holds.

On the supply side, Hendricks said the company is already tight on capacity in completions: “We’re sold out of our top-tier equipment. We’re essentially sold out of everything that can burn natural gas.” He emphasized the company’s priority is to improve pricing and returns before adding capacity, given pricing pressure “over the last couple of years.”

First-quarter financial results and balance sheet

EVP and CFO Andy Smith reported total revenue of $1.117 billion for the quarter. Patterson-UTI posted a net loss attributable to common shareholders of $25 million, or $0.06 per share. Adjusted EBITDA totaled $205 million and included $3 million of early contract termination revenue in Drilling Services.

Smith said free cash flow was pressured by seasonal working-capital headwinds in the first quarter, but the company expects working capital to become a tailwind in the second half of the year. The company ended the quarter with $337 million in cash and nothing drawn on its $500 million revolver, and Smith noted the company has no senior note maturities until 2028.

The board approved a quarterly dividend of $0.10 per share, payable June 15 to shareholders of record as of June 1.

First-quarter capital spending totaled $117 million, including:

• $54 million in Drilling Services
• $45 million in Completion Services
• $16 million in Drilling Products
• $1 million in other and corporate

Segment performance: drilling steady, completions disrupted by weather, products pressured by Middle East costs

Drilling Services generated $352 million of revenue and $134 million of adjusted gross profit, including the $3 million early termination payments. Smith said U.S. contract drilling totaled 8,301 operating days with an average of 92 operating rigs. Excluding the termination revenue, pricing was “relatively steady versus the fourth quarter,” and cost reduction actions implemented late last year continued to benefit results.

Completion Services posted $680 million in revenue and $98 million in adjusted gross profit. Results were impacted by a January winter storm that “effectively paused the completions business for five days.” Later in the Q&A, Smith quantified the EBITDA impact at about $9 million, near the high end of prior guidance of $5 million to $10 million. Hendricks said that excluding the storm, frack operations ran near capacity and the company’s natural gas-powered assets were near fully utilized.

Drilling Products revenue was $80 million with adjusted gross profit of $33 million. Hendricks said Middle East conflict-related disruption affected one of the company’s key regions, which contributes roughly 10% to 15% of segment revenue, primarily Saudi Arabia. He also cited inflation in inputs, particularly tungsten, as well as higher logistics and personnel costs. Even so, he said the business delivered “only a modest decline in adjusted gross profit versus the fourth quarter,” and the company believes it has reached record market share in several markets, including Saudi Arabia.

Second-quarter outlook: rig reactivations and near-full completions utilization

For the second quarter, Smith guided to Drilling Services adjusted gross profit of about $130 million, with an average rig count around 90 rigs. He said the company expects to exit the quarter above the average as rigs are reactivated in the back half of the quarter. Guidance includes $5 million of rig reactivation and mobilization costs and assumes minimal revenue contribution from those reactivations in the second quarter.

Hendricks separately said Patterson-UTI expects to exit the second quarter around 92 to 95 rigs, depending on timing. In response to investor questions about reactivation costs, Hendricks said bringing back rigs that worked within the last year could require “probably a range of $2 million CapEx to put them back to work,” while Smith clarified that the $5 million included in second-quarter guidance is OpEx tied to the reactivations discussed for the quarter.

In Completion Services, Smith forecast second-quarter adjusted gross profit of approximately $105 million with “near full utilization” of active assets. Hendricks said the completions calendar was dynamic, with some second-quarter “white space” present as of the prior week but “basically filled” as of two days before the call. He added the company felt “fully loaded in the third quarter” based on current visibility.

For Drilling Products, Smith said second-quarter adjusted gross profit is expected to decline slightly due to lower profitability in international business (particularly the Middle East) and the normal impact of spring breakup in Canada.

Pricing and technology: gradual reset expected, with emphasis on natural gas-powered fleets

Across the Q&A, management repeatedly pointed to tightening conditions and an expectation for pricing improvement, though not necessarily in a single step-change. Hendricks said leading-edge rig pricing had been in the low $30,000s per day fully loaded and is “starting to move up from the low $30s,” while larger upgraded APEX XC+ rigs are “pushing $40,000 a day.” He added he expects those upgraded rigs could exceed $40,000 per day “towards the end of this year and early next year.”

On completions, Hendricks said the company has seen “anecdotal evidence” of 10% price increases from some customers, and he expects pricing to rise “steadily over the next months through the end of the year.” When asked about cadence, he told Stifel’s Stephen Gengaro that he expects “a smoother increase in pricing… over multi-quarters,” extending into 2027.

Hendricks reiterated Patterson-UTI’s strategy not to prioritize reactivation of older diesel equipment. He said the company has nearly 250,000 cold-stacked horsepower that could technically be reactivated, but it represents “the oldest diesel equipment” and reactivating a single fleet would require “more than a $10 million investment,” with uncertain long-term returns. Instead, the company is directing capital toward expanding its Emerald fleet of 100% natural gas-powered assets. By year-end, he said the company expects more than 15% of active horsepower to be powered entirely by natural gas, with about 90% powered at least partially by natural gas.

In discussing newbuild economics, Smith said the company may not need “a huge amount of pricing” improvement to justify some new builds in a market with more visibility, but suggested “probably… 5%-10% additional” pricing could be needed.

About Patterson-UTI Energy NASDAQ: PTEN

Patterson-UTI Energy provides a comprehensive suite of onshore contract drilling and pressure pumping services to exploration and production companies in North America. The company's core offerings include land-based drilling rigs, directional drilling, hydraulic fracturing services, downhole tool rental and well-servicing equipment. By integrating drilling and completion capabilities, Patterson-UTI Energy offers operators a streamlined solution designed to improve operational efficiency and well performance.

Headquartered in Houston, Texas, Patterson-UTI Energy traces its origins to its founding in 1978 and was later incorporated in Delaware in 1996.

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