Patterson-UTI Energy NASDAQ: PTEN reported higher third-quarter revenue, earnings and adjusted EBITDA as U.S. onshore activity strengthened and pricing improved across its drilling and completion operations.
Total revenue rose 9% sequentially to $1.314 billion in the third quarter. Net income attributable to common shareholders was $28 million, or $0.07 per share, including $18 million of pre-tax other operating income that primarily reflected a $22 million gain from the sale of rigs and components intended for Venezuela. Adjusted EBITDA, excluding the one-time gain, totaled $264 million.
President and Chief Executive Officer Andy Hendricks said the recovery in U.S. onshore activity gained momentum during the quarter, supported by demand for premium equipment, digital technology, automation and natural gas-powered assets. He said the company expects activity to remain relatively steady in the fourth quarter before potentially stepping higher in 2027 as customer budgets reset.
Drilling Activity and Pricing Improve
In drilling services, Patterson-UTI recorded third-quarter revenue of $417 million and adjusted gross profit of $149 million. Its U.S. contract drilling business averaged 101 operating rigs and logged 9,249 operating days during the quarter.
Hendricks said average drilling rates have risen from the low-$30,000-per-day range earlier in the year to the mid-$30,000 range, with leading-edge pricing above that level. Rigs emerging from the company’s upgrade program have secured rates several thousand dollars per day above its company average, according to Hendricks.
The company ended the quarter with its rig count up 16 rigs, or 18%, from the April trough. It said reactivation costs have averaged about $1 million per rig since activity bottomed, excluding upgrades needed to meet customer specifications. Management said it has only 8 to 10 rigs that can be economically reactivated at current market pricing before incremental capital requirements rise materially.
For the fourth quarter, Patterson-UTI expects its drilling services rig count to average about 104 rigs and finish the period above that level. It forecast segment adjusted gross profit of approximately $150 million.
Management said it is weighing domestic opportunities against international prospects, including potential drilling-rig deployments in Argentina. The company has also sold rigs and components for 10 AC electric high-spec rigs from the U.S., along with other rigs from Colombia, for use in Venezuela.
Completion Pricing Rises Despite Supply-Chain Delays
Completion services generated $808 million in third-quarter revenue and $133 million in adjusted gross profit. Pricing increased by a mid-single-digit percentage from the second quarter, although activity was affected by nonproductive time tied to sand availability in South Texas and trucking constraints in the Permian Basin.
Hendricks said the issues were temporary and that operations had returned to full efficiency during the fourth quarter. He added that some customers paid standby charges during the disruption, which he characterized as a change from prior market conditions.
Management expects fourth-quarter completion services adjusted gross profit of approximately $140 million, reflecting higher pricing than the third quarter while accounting for seasonal and weather-related factors.
The company said it sees a more constructive medium-term completion-market outlook as drilling activity rises and older diesel-powered equipment is retired. Patterson-UTI estimates that legacy diesel assets account for about 20% of U.S. completion-industry horsepower and said higher diesel prices are making those assets increasingly uneconomic to maintain.
By year-end, nearly 90% of Patterson-UTI’s active horsepower is expected to be powered at least partly by natural gas. The company plans to continue replacing retiring diesel equipment with Emerald 100% natural gas-powered direct-drive assets in 2027 while keeping total completion capacity relatively steady.
Management said completion pricing had declined about 30% over the preceding three years and has recovered roughly one-third of that decline. Hendricks said the company needs additional price recovery and returns above its cost of capital before committing to expand overall industry capacity.
Drilling Products Posts Record Results Since Ulterra Deal
Drilling products revenue increased 21% sequentially to $110 million, while adjusted gross profit reached $51 million. The segment delivered its highest quarterly revenue and adjusted gross profit since Patterson-UTI acquired Ulterra in 2023.
The company cited revenue growth across U.S., Canadian and international markets, market-share gains in drill bits and stronger pricing. International revenue increased sequentially despite higher costs and operational challenges associated with conflict in the Middle East. Markets outside North America represented more than 20% of drilling products revenue over the past 12 months.
Management said activity in Saudi Arabia is expected to weigh on the segment in the fourth quarter. Patterson-UTI projects drilling products adjusted gross profit will decline 5% to 10% sequentially, primarily due to lower anticipated Middle East drilling activity.
Revenue from new downhole-tool offerings rose more than 40% from the second quarter and represented about 5% of segment revenue. The company expects downhole-tool revenue to roughly double in 2026 compared with 2025. It also said footage drilled using its bits in geothermal applications quadrupled from a year earlier, though geothermal remains less than 5% of annual revenue.
Cash Flow, Capital Spending and Shareholder Returns
Chief Financial Officer Andy Smith said working-capital trends improved in the third quarter, contributing to a significant increase in adjusted free cash flow from first-half levels. The company expects another strong free-cash-flow quarter in the fourth quarter and meaningful improvement in 2027.
Patterson-UTI invested $141 million in capital expenditures during the quarter, including $55 million in drilling services, $63 million in completion services and $20 million in drilling products. It expects 2026 capital expenditures, net of asset-sale proceeds, to be below $600 million.
The company ended the quarter with $339 million in cash, no borrowings on its $500 million revolving credit facility and no senior-note maturities until 2029. During the quarter, it returned $62 million to shareholders through repurchases of 2 million shares and a $0.10-per-share dividend. Its board approved another quarterly dividend of $0.10 per share, payable Dec. 15 to shareholders of record on Dec. 1.
Management said future capital allocation will prioritize investments that improve return on capital and free cash flow per share, while also preserving balance-sheet flexibility, returning cash to shareholders and potentially reducing debt.
About Patterson-UTI Energy (NASDAQ:PTEN)
Patterson-UTI Energy, Inc is an oilfield services company that provides drilling, completion and production-related services to oil and natural gas exploration and production companies. Its operations are primarily focused on onshore oil and gas development in the United States.
The company provides contract land drilling services through a fleet of rigs, as well as directional drilling and related technologies used to guide wellbores. Patterson-UTI also offers pressure pumping and hydraulic fracturing, wireline, well-completion, equipment rental and other services that support the development and maintenance of unconventional wells.
Patterson-UTI expanded its completion-services business through its 2023 merger with NexTier Oilfield Solutions.
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