Patterson-UTI Energy Reports Financial Results for the Quarter Ended December 31, 2023
HOUSTON, TX / ACCESSWIRE / February 14, 2024 / PATTERSON-UTI ENERGY, INC. (NASDAQ:PTEN) today reported financial results for the quarter ended December 31, 2023.
Fourth Quarter 2023 Financial Results and Other Key Items
Total revenue of $1.58 billion
Net income attributable to common stockholders of $62 million, or $0.15 per share
Includes $20 million in merger and integration expenses
Adjusted net income attributable to common stockholders of $78 million, or $0.19 per share
Excludes merger and integration expenses
Adjusted EBITDA of $409 million
Excludes merger and integration expenses
Cash from Operations of $453 million, Free Cash Flow of $247 million
Returned $110 million to shareholders in the fourth quarter, bringing the total to $301 million in 2023
Used $76 million to repurchase 7 million shares in the fourth quarter
Declared a quarterly dividend on its common stock of $0.08 per share, payable on March 15, 2024 to holders of record as of March 1, 2024
Board of Directors approved an increase in stock repurchase authorization to a new total authorization of $1 billion
Management Commentary
"We achieved exceptionally strong results in our first full quarter following the closing of the NexTier and Ulterra transactions," said Andy Hendricks, Chief Executive Officer. "Throughout the year, our U.S. Contract Drilling activity outpaced the overall industry rig count, and our outperformance in both activity and adjusted gross profit per operating day is evidence that there remains high demand for our top-tier drilling assets. Our Completion Services segment significantly beat our expectations in the fourth quarter and is performing at a high level through the ongoing integration. We are confident that our size and scale as well as our standing as a technology leader across both U.S. onshore drilling and completions positions us for success as the industry continues to evolve."
Mr. Hendricks continued, "The NexTier and Ulterra transactions have exceeded our expectations through the first 5+ months, and both still offer incremental opportunities to grow profitability beyond what we are realizing today. For the NexTier merger, by the start of 2024 we achieved an annualized synergy run-rate of more than $100 million towards our $200 million synergy target, and for the Ulterra acquisition we see significant international growth potential over the next several years. NexTier and Ulterra will make us a stronger company over the long-term and create significant value for our shareholders as we realize the benefits of our combined expertise and continue to advance our technology lead over much of the industry."
"The outlook for U.S. drilling and completion activity reflects a shift in our industry towards reduced cyclicality compared to historical trends," said Mr. Hendricks. "For Patterson-UTI, this creates opportunities for profitability growth, and in a steady market we would expect our returns to improve as this year progresses. To meet our customer demand for further well performance improvements, we continue to invest in technology in both our drilling and completions businesses, including investments in automation, rig component upgrades, and next generation natural gas and electric assets, where we see higher returns. By mid-year, we expect to be operating approximately 140,000 horsepower of electric frac equipment, with nearly 80% of our active fleets capable of being powered by natural gas by that time. We believe we are positioned to outperform the industry over the next year, with strong market fundamentals for high-quality drilling and completion assets."
"The reduced cyclicality in U.S. shale is allowing us to reduce the year-to-year variability of our own capital expenditures," said Andy Smith, Chief Financial Officer. "Our $740 million capital expenditure budget for 2024 includes sufficient strategic and conversion spending to allow us to enhance our fleet to improve our competitiveness over the long-term, while still generating substantial free cash flow through the cycle. Importantly, we are focused on growing our profitability in the most capital efficient manner, and we believe the investments we are making will allow us to improve our returns through the year even without higher industry activity. Our 2024 capital expenditure budget is down substantially from the combined company capex in 2023, and we expect to generate significant free cash flow in 2024, with a goal to convert at least 40% of our adjusted EBITDA to free cash flow on an annual basis. Given where our shares are trading today, we believe the best use of our free cash flow at this time is to accelerate our shareholder returns to more than 50% of free cash flow over the near-term. For 2024, our expectation is that we will use at least $400 million to pay dividends and repurchase our shares."
Drilling Services
During the fourth quarter, Drilling Services revenue totaled $464 million. The prior quarter included the recognition of $29 million of previously deferred revenue from a customer prepayment, without which revenue in the fourth quarter would have grown 1% sequentially. Drilling Services adjusted gross profit totaled $187 million during the quarter compared to $209 million during the prior quarter. The prior quarter included $9 million in costs associated with insurance reserve adjustments and inventory write-downs. Excluding the impact of the previously deferred revenue and referenced costs in the prior quarter, fourth quarter Drilling Services gross profit would have been relatively flat.
Within the Drilling Services segment, for the fourth quarter U.S. Contract Drilling revenue was $393 million and adjusted gross profit was $177 million. U.S. operating days totaled 10,841. Average rig revenue per day decreased $1,830 sequentially to $36,280, although the prior quarter included the previously deferred revenue that positively impacted reported revenue per day by $2,630. Average rig operating costs per day increased $70 to $19,940, although the prior quarter included $790 per day from the previously mentioned insurance reserve adjustments and inventory write-downs. The average rig adjusted gross profit per operating day in U.S. Contract Drilling was $16,330, a $1,910 decrease from the previous quarter. Excluding the impact of the previously mentioned revenue and costs in the prior quarter, fourth quarter adjusted gross profit per operating day would have been down $70 from the prior quarter.
As of December 31, 2023, the Company had term contracts for drilling rigs in the United States providing for future dayrate drilling revenue of approximately $700 million. Based on contracts currently in place, the Company expects an average of 79 rigs operating under term contracts during the first quarter of 2024 and an average of 52 rigs operating under term contracts over the four quarters ending December 31, 2024.
For the fourth quarter, other Drilling Services revenue, which primarily includes International Contract Drilling and Directional Drilling, was up 2% sequentially to $70 million, with adjusted gross profit of $10 million. The improvement was largely due to better results in our Directional Drilling business.
Completion Services
The fourth quarter was the first full quarter of reported results since we completed the merger with NexTier Oilfield Solutions.
Completion Services utilization was stronger than expected in the fourth quarter. Fourth quarter Completion Services revenue totaled $1,014 million, with adjusted gross profit of $232 million. Fourth quarter revenue in the Completion Services segment was down 2% sequentially, which outperformed the market, compared to the third quarter combined revenue of NexTier and the Company's legacy Pressure Pumping segment. Our Completion Services segment saw improved returns in the quarter even on slightly lower revenue, a function of the benefit from the ongoing merger integration as well as from the benefit of our wellsite integration strategy that delivered strong results for both our company and our customers.
We continued to see strong demand for natural gas-powered completion equipment as well as for our wellsite integration services, including wireline, Power Solutions CNG, and last mile logistics, which helped revenue and profitability in the segment outperform our expectations for the quarter. There has been strong adoption of our wellsite integration services onto legacy Patterson-UTI fleets, which gives us confidence that the merger with NexTier is likely to unlock significant value over the long-term.
Drilling Products
The fourth quarter was the first full quarter of reported results since we completed the acquisition of Ulterra Drilling Technologies.
As a result of the Ulterra transaction, the Company was required to record certain assets and liabilities of Ulterra at fair value, resulting in a step-up in value of drill bits that Ulterra held at the time the transaction was closed. This step-up in value will continue to impact the reported results for Ulterra until the Company has fully consumed the impacted assets. During the fourth quarter, the step-up in value increased reported segment direct operating costs by $5 million and increased reported segment depreciation and amortization by $10 million, all of which was non-cash in nature.
Fourth quarter Drilling Products revenue totaled $88 million, with adjusted gross profit of $39 million. Fourth quarter revenue in the Drilling Products business was up 1% sequentially compared to the business in the third quarter. Revenue increased sequentially despite a decline in the global rig count, with Ulterra drill bits continuing strong penetration across various domestic and international markets on steady pricing.
Other
During the fourth quarter, Other revenue totaled $18 million, a 10 percent sequential increase relative to the prior period. Other adjusted gross profit totaled $8 million during the quarter.
Outlook
At current commodity prices, we expect oil basin activity to remain relatively steady throughout the year. Activity in natural gas basins could see an impact from current low natural gas prices.
In the Drilling Services segment, we expect to operate an average of 120 U.S. rigs in the first quarter, up from an average of 118 in the fourth quarter. We believe our sequential activity will outperform the industry average in the first quarter. We expect first quarter Drilling Services adjusted gross profit will be relatively flat compared to the fourth quarter, with a relatively flat adjusted gross profit in U.S. Contract Drilling.
Completion Services activity has mostly been steady through the first quarter, although we are seeing some white space as we strategically reposition our fleets in response to natural gas prices. After finishing a stronger than expected fourth quarter, for the first quarter, Completion Services revenue is expected to be $940-950 million with approximately $750 million in direct operating costs and an adjusted gross profit of $190-200 million.
Drilling Products demand is expected to remain steady through the first quarter, given the expectation for a steady market in both the U.S. and International markets relative to what we saw in the fourth quarter. For the first quarter, Drilling Products revenue is expected to be approximately $90 million, with $50 million in direct operating costs and an adjusted gross profit of $40 million. We expect $5 million in non-cash direct operating costs associated with the step-up in value at Ulterra, without which our segment adjusted gross profit expectation would be $45 million.
For the first quarter, Other revenue and adjusted gross profit is expected to be roughly flat with the fourth quarter.
For the first quarter, we expect selling, general and administrative expense of approximately $65 million, and depreciation, depletion, amortization, and impairment expense of approximately $280 million.
For 2024, we expect an effective tax rate of approximately 24%, with annual cash taxes expected to be $35-45 million after utilizing tax attributes to offset a portion of our taxable income.
For 2024, we expect capital expenditures of approximately $740 million, comprised of $285 million for Drilling Services, $360 million for Completion Services, $55 million for Drilling Products, and $40 million for Other and Corporate.
For purposes of the shareholder return target, the Company defines free cash flow as net cash provided by operating activities less capital expenditures. The shareholder return target, including the amount and timing of any dividend payments and/or share repurchases are subject to the discretion of the Company's Board of Directors and will depend upon business conditions, results of operations, financial condition, terms of the Company's debt agreements and other factors.
All references to "per share" in this press release are diluted earnings per common share as defined within Accounting Standards Codification Topic 260.
Fourth Quarter Earnings Conference Call
The Company's quarterly conference call to discuss the operating results for the quarter ended December 31, 2023, is scheduled for February 15, 2024, at 9:00 a.m. Central Time. The dial-in information for participants is (888) 550-5422 (Domestic) and (646) 960-0676 (International). The conference ID for both numbers is 3822955. The call is also being webcast and can be accessed through the Investor Relations section of the Company's website at investor.patenergy.com. A replay of the conference call will be on the Company's website for two weeks.
About Patterson-UTI
Patterson-UTI is a leading provider of drilling and completion services to oil and natural gas exploration and production companies in the United States and other select countries, including contract drilling services, integrated well completion services and directional drilling services in the United States, and specialized bit solutions in the United States, Middle East and many other regions around the world. For more information, visit www.patenergy.com.
Cautionary Statement Regarding Forward-Looking Statements
This press release contains forward-looking statements which are protected as forward-looking statements under the Private Securities Litigation Reform Act of 1995 that are not limited to historical facts, but reflect Patterson-UTI's current beliefs, expectations or intentions regarding future events. Words such as "anticipate," "believe," "budgeted," "continue," "could," "estimate," "expect," "intend," "may," "plan," "predict," "potential," "project," "pursue," "should," "strategy," "target," or "will," and similar expressions are intended to identify such forward-looking statements. The statements in this press release that are not historical statements, including statements regarding Patterson-UTI's future expectations, beliefs, plans, objectives, financial conditions, assumptions or future events or performance that are not historical facts, are forward-looking statements within the meaning of the federal securities laws. These statements are subject to numerous risks and uncertainties, many of which are beyond Patterson-UTI's control, which could cause actual results to differ materially from the results expressed or implied by the statements. These risks and uncertainties include, but are not limited to: the successful integration and expected benefits of the recently completed NexTier merger and Ulterra acquisition on our financial condition, results of operations, strategy and plans and our ability to realize those benefits; synergies, costs and financial and operating impacts of acquisitions, including the NexTier merger and the Ulterra acquisition; the successful integration of NexTier and Ulterra operations and the future financial and operating results of the combined company; the combined company's plans, objectives, expectations and intentions with respect to future operations and services; adverse oil and natural gas industry conditions; global economic conditions, including inflationary pressures and risks of economic downturns or recessions in the United States and elsewhere; volatility in customer spending and in oil and natural gas prices that could adversely affect demand for Patterson-UTI's services and their associated effect on rates; excess availability of land drilling rigs, completion services and drilling equipment, including as a result of reactivation, improvement or construction; competition and demand for Patterson-UTI's services; the impact of the ongoing Ukraine/Russia and Israel/Hamas conflicts and instability in other international regions; strength and financial resources of competitors; utilization, margins and planned capital expenditures; ability to obtain insurance coverage on commercially reasonable terms and liabilities from operational risks for which Patterson-UTI does not have and receive full indemnification or insurance; operating hazards attendant to the oil and natural gas business; failure by customers to pay or satisfy their contractual obligations (particularly with respect to fixed-term contracts); the ability to realize backlog; specialization of methods, equipment and services and new technologies, including the ability to develop and obtain satisfactory returns from new technology; the ability to retain management and field personnel; loss of key customers; shortages, delays in delivery, and interruptions in supply, of equipment and materials; cybersecurity events; difficulty in building and deploying new equipment; governmental regulation, including climate legislation, regulation and other related risks; environmental, social and governance practices, including the perception thereof; environmental risks and ability to satisfy future environmental costs; technology-related disputes; legal proceedings and actions by governmental or other regulatory agencies; the ability to effectively identify and enter new markets; public health crises, pandemics and epidemics; weather; operating costs; expansion and development trends of the oil and natural gas industry; financial flexibility, including availability of capital and the ability to repay indebtedness when due; adverse credit and equity market conditions; our return of capital to stockholders, including timing and amounts of dividends and share repurchases; stock price volatility; and compliance with covenants under Patterson-UTI's debt agreements.
Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained from time to time in Patterson-UTI's SEC filings. Patterson-UTI's filings may be obtained by contacting Patterson-UTI or the SEC or through Patterson-UTI's website at http://www.patenergy.com or through the SEC's Electronic Data Gathering and Analysis Retrieval System (EDGAR) at http://www.sec.gov. Patterson-UTI undertakes no obligation to publicly update or revise any forward-looking statement.
PATTERSON-UTI ENERGY, INC.
Condensed Consolidated Statements of Operations
(unaudited, in thousands, except per share data)
Three Months Ended | Twelve Months Ended | |||||||||||||||||||
December 31, | September 30, | December 31, | December 31, | |||||||||||||||||
2023 | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||
REVENUES | $ | 1,584,317 | $ | 1,011,452 | $ | 788,476 | $ | 4,146,456 | $ | 2,647,592 | ||||||||||
COSTS AND EXPENSES: | ||||||||||||||||||||
Direct operating costs | 1,119,117 | 691,458 | 515,817 | 2,811,319 | 1,846,550 | |||||||||||||||
Depreciation, depletion, amortization and impairment | 278,787 | 197,635 | 123,304 | 731,416 | 483,945 | |||||||||||||||
Selling, general and administrative | 61,037 | 45,102 | 34,577 | 169,962 | 116,589 | |||||||||||||||
Credit loss expense | 842 | - | - | 842 | - | |||||||||||||||
Merger and integration expense | 19,949 | 70,188 | - | 98,077 | 2,069 | |||||||||||||||
Other operating income, net | (7,120 | ) | (2,635 | ) | (2,027 | ) | (17,114 | ) | (12,592 | ) | ||||||||||
Total operating costs and expenses | 1,472,612 | 1,001,748 | 671,671 | 3,794,502 | 2,436,561 | |||||||||||||||
OPERATING INCOME | 111,705 | 9,704 | 116,805 | 351,954 | 211,031 | |||||||||||||||
OTHER INCOME (EXPENSE): | ||||||||||||||||||||
Interest income | 1,539 | 2,131 | 273 | 6,122 | 360 | |||||||||||||||
Interest expense, net of amount capitalized | (18,681 | ) | (15,625 | ) | (8,058 | ) | (52,870 | ) | (40,256 | ) | ||||||||||
Other | (1,293 | ) | (618 | ) | (629 | ) | 1,898 | (3,273 | ) | |||||||||||
Total other expense | (18,435 | ) | (14,112 | ) | (8,414 | ) | (44,850 | ) | (43,169 | ) | ||||||||||
INCOME (LOSS) BEFORE INCOME TAXES | 93,270 | (4,408 | ) | 108,391 | 307,104 | 167,862 | ||||||||||||||
INCOME TAX EXPENSE (BENEFIT) | 31,332 | (4,130 | ) | 8,294 | 61,152 | 13,204 | ||||||||||||||
NET INCOME (LOSS) | 61,938 | (278 | ) | 100,097 | 245,952 | 154,658 | ||||||||||||||
NET LOSS ATTRIBUTABLE TO | (12 | ) | (328 | ) | - | (340 | ) | - | ||||||||||||
NET INCOME ATTRIBUTABLE TO COMMON | $ | 61,950 | $ | 50 | $ | 100,097 | $ | 246,292 | $ | 154,658 | ||||||||||
NET INCOME ATTRIBUTABLE TO COMMON | ||||||||||||||||||||
Basic | $ | 0.15 | $ | 0.00 | $ | 0.46 | $ | 0.88 | $ | 0.72 | ||||||||||
Diluted | $ | 0.15 | $ | 0.00 | $ | 0.46 | $ | 0.88 | $ | 0.70 | ||||||||||
WEIGHTED AVERAGE NUMBER OF COMMON | ||||||||||||||||||||
Basic | 415,656 | 280,218 | 215,475 | 279,501 | 215,935 | |||||||||||||||
Diluted | 418,751 | 281,984 | 219,838 | 280,061 | 219,496 | |||||||||||||||
CASH DIVIDENDS PER COMMON SHARE | $ | 0.08 | $ | 0.08 | $ | 0.08 | $ | 0.32 | $ | 0.20 | ||||||||||
PATTERSON-UTI ENERGY, INC.
Condensed Consolidated Statements of Cash Flows
(unaudited, in thousands)
Three Months Ended | Twelve Months Ended | |||||||||||
December 31, | December 31, | |||||||||||
2023 | 2023 | 2022 | ||||||||||
Cash flows from operating activities: | ||||||||||||
Net income | 61,938 | $ | 245,952 | $ | 154,658 | |||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Depreciation, depletion, amortization and impairment | 278,787 | 731,416 | 483,945 | |||||||||
Deferred income tax expense | 29,543 | 51,866 | 6,998 | |||||||||
Stock-based compensation | 13,412 | 46,750 | 21,099 | |||||||||
Net gain on asset disposals | (2,225 | ) | (1,798 | ) | (12,075 | ) | ||||||
Gain on early debt extinguishment | - | (1,112 | ) | (2,461 | ) | |||||||
Other | 135 | 59 | 954 | |||||||||
Changes in operating assets and liabilities | 71,042 | (67,219 | ) | (86,930 | ) | |||||||
Net cash provided by operating activities | 452,632 | 1,005,914 | 566,188 | |||||||||
Cash flows from investing activities: | ||||||||||||
Acquisitions, net of cash acquired - NexTier | - | (65,185 | ) | - | ||||||||
Acquisitions, net of cash acquired - Ulterra | - | (357,314 | ) | - | ||||||||
Purchases of property and equipment | (205,273 | ) | (615,690 | ) | (436,797 | ) | ||||||
Proceeds from disposal of assets and insurance claims | 6,928 | 26,494 | 26,074 | |||||||||
Other | (5,609 | ) | (5,895 | ) | (2,504 | ) | ||||||
Net cash used in investing activities | (203,954 | ) | (1,017,590 | ) | (413,227 | ) | ||||||
Cash flows from financing activities: | ||||||||||||
Purchases of treasury stock | (76,424 | ) | (200,710 | ) | (70,070 | ) | ||||||
Dividends paid | (33,310 | ) | (100,034 | ) | (43,096 | ) | ||||||
Proceeds from borrowings under revolving credit facility | - | 420,000 | 150,000 | |||||||||
Repayment of borrowings under revolving credit facility | - | (420,000 | ) | (150,000 | ) | |||||||
Proceeds from issuance of senior notes | - | 396,412 | - | |||||||||
Repayment of senior notes | - | (7,837 | ) | (19,760 | ) | |||||||
Payment on finance leases | (9,594 | ) | (15,915 | ) | - | |||||||
Debt issuance costs | (442 | ) | (2,395 | ) | (455 | ) | ||||||
Other | (2,974 | ) | (3,954 | ) | - | |||||||
Net cash provided by (used in) financing activities | (122,744 | ) | 65,567 | (133,381 | ) | |||||||
Effect of foreign exchange rate changes on cash, cash equivalents | (302 | ) | 1,236 | 449 | ||||||||
Net increase in cash, cash equivalents and restricted cash | 125,632 | 55,127 | 20,029 | |||||||||
Cash, cash equivalents and restricted cash at beginning of period | 67,048 | 137,553 | 117,524 | |||||||||
Cash, cash equivalents and restricted cash at end of period | $ | 192,680 | $ | 192,680 | $ | 137,553 | ||||||
PATTERSON-UTI ENERGY, INC.
Additional Financial and Operating Data
(unaudited, dollars in thousands)
Three Months Ended | Twelve Months Ended | |||||||||||||||||||
December 31, | September 30, | December 31, | December 31, | |||||||||||||||||
2023 | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||
Drilling Services | ||||||||||||||||||||
Revenues | $ | 463,598 | $ | 488,775 | $ | 461,491 | $ | 1,919,759 | $ | 1,544,820 | ||||||||||
Direct operating costs | $ | 276,439 | $ | 279,927 | $ | 284,587 | $ | 1,119,200 | $ | 1,025,904 | ||||||||||
Adjusted gross profit (1) | $ | 187,159 | $ | 208,848 | $ | 176,904 | $ | 800,559 | $ | 518,916 | ||||||||||
Other operating income, net | $ | (676 | ) | $ | (127 | ) | $ | (30 | ) | $ | (769 | ) | $ | (34 | ) | |||||
Selling, general and administrative | $ | 3,204 | $ | 3,570 | $ | 4,595 | $ | 15,014 | $ | 15,027 | ||||||||||
Depreciation, amortization and impairment | $ | 91,951 | $ | 90,668 | $ | 91,161 | $ | 364,312 | $ | 354,116 | ||||||||||
Operating income | $ | 92,680 | $ | 114,737 | $ | 81,178 | $ | 422,002 | $ | 149,807 | ||||||||||
Capital expenditures | $ | 73,625 | $ | 89,242 | $ | 90,767 | $ | 334,780 | $ | 272,521 | ||||||||||
Operating days - U.S. (2) | 10,841 | 11,009 | 12,072 | 45,270 | 45,216 | |||||||||||||||
Average revenue per operating day - U.S. (2) | $ | 36.28 | $ | 38.11 | $ | 31.83 | $ | 36.24 | $ | 27.57 | ||||||||||
Average direct operating costs per operating day - U.S. (2) | $ | 19.94 | $ | 19.87 | $ | 18.38 | $ | 19.42 | $ | 17.32 | ||||||||||
Average adjusted gross profit per operating day - U.S. (2) | $ | 16.33 | $ | 18.24 | $ | 13.45 | $ | 16.83 | $ | 10.25 | ||||||||||
Completion Services | ||||||||||||||||||||
Revenues | $ | 1,014,357 | $ | 459,574 | $ | 306,783 | $ | 2,017,440 | $ | 1,022,413 | ||||||||||
Direct operating costs | $ | 782,482 | $ | 368,869 | $ | 220,758 | $ | 1,567,940 | $ | 781,385 | ||||||||||
Adjusted gross profit (1) | $ | 231,875 | $ | 90,705 | $ | 86,025 | $ | 449,500 | $ | 241,028 | ||||||||||
Selling, general and administrative | $ | 13,662 | $ | 7,205 | $ | 2,465 | $ | 26,050 | $ | 8,763 | ||||||||||
Depreciation, amortization and impairment | $ | 147,891 | $ | 83,338 | $ | 24,918 | $ | 283,230 | $ | 98,162 | ||||||||||
Operating income | $ | 70,322 | $ | 162 | $ | 58,642 | $ | 140,220 | $ | 134,103 | ||||||||||
Capital expenditures | $ | 107,217 | $ | 56,464 | $ | 23,266 | $ | 214,746 | $ | 137,935 | ||||||||||
Drilling Products | ||||||||||||||||||||
Revenues | $ | 88,109 | $ | 46,570 | $ | - | $ | 134,679 | $ | - | ||||||||||
Direct operating costs | $ | 49,484 | $ | 32,071 | $ | - | $ | 81,555 | $ | - | ||||||||||
Adjusted gross profit (1) | $ | 38,625 | $ | 14,499 | $ | - | $ | 53,124 | $ | - | ||||||||||
Selling, general and administrative | $ | 7,494 | $ | 3,664 | $ | - | $ | 11,158 | $ | - | ||||||||||
Depreciation, amortization and impairment | $ | 31,392 | $ | 17,075 | $ | - | $ | 48,467 | $ | - | ||||||||||
Operating loss | $ | (261 | ) | $ | (6,240 | ) | $ | - | $ | (6,501 | ) | $ | - | |||||||
Capital expenditures | $ | 16,632 | $ | 7,940 | $ | - | $ | 24,572 | $ | - | ||||||||||
Other | ||||||||||||||||||||
Revenues | $ | 18,253 | $ | 16,533 | $ | 20,202 | $ | 74,578 | $ | 80,359 | ||||||||||
Direct operating costs | $ | 10,712 | $ | 10,591 | $ | 10,472 | $ | 42,624 | $ | 39,261 | ||||||||||
Adjusted gross profit (1) | $ | 7,541 | $ | 5,942 | $ | 9,730 | $ | 31,954 | $ | 41,098 | ||||||||||
Selling, general and administrative | $ | 232 | $ | 188 | $ | 250 | $ | 888 | $ | 826 | ||||||||||
Depreciation, depletion, amortization and impairment | $ | 6,291 | $ | 5,319 | $ | 6,001 | $ | 28,237 | $ | 26,496 | ||||||||||
Operating income | $ | 1,018 | $ | 435 | $ | 3,479 | $ | 2,829 | $ | 13,776 | ||||||||||
Capital expenditures | $ | 6,258 | $ | 5,972 | $ | 5,561 | $ | 24,645 | $ | 25,215 | ||||||||||
Corporate | ||||||||||||||||||||
Selling, general and administrative | $ | 36,445 | $ | 30,475 | $ | 27,267 | $ | 116,852 | $ | 91,973 | ||||||||||
Merger and integration expense | $ | 19,949 | 70,188 | $ | - | $ | 98,077 | $ | 2,069 | |||||||||||
Depreciation | $ | 1,262 | $ | 1,235 | $ | 1,224 | $ | 7,170 | $ | 5,171 | ||||||||||
Credit loss expense | 842 | - | $ | - | $ | 842 | $ | - | ||||||||||||
Other operating income, net | $ | (6,444 | ) | $ | (2,508 | ) | $ | (1,997 | ) | $ | (16,345 | ) | $ | (12,558 | ) | |||||
Capital expenditures | $ | 1,541 | $ | 804 | $ | (350 | ) | $ | 16,947 | $ | 1,126 | |||||||||
Total Capital Expenditures | $ | 205,273 | $ | 160,422 | $ | 119,244 | $ | 615,690 | $ | 436,797 | ||||||||||
Adjusted gross profit is defined as revenues less direct operating costs (excluding depreciation, depletion, amortization and impairment expense). See Non-GAAP Financial Measures below for a reconciliation of GAAP gross profit to adjusted gross profit by segment.
Operational data relates to our contract drilling business. A rig is considered to be operating if it is earning revenue pursuant to a contract on a given day.
December 31, | December 31, | |||||||||||||||
Selected Balance Sheet Data (unaudited, in thousands): | 2023 | 2022 | ||||||||||||||
Cash, cash equivalents and restricted cash | $ | 192,680 | $ | 137,553 | ||||||||||||
Current assets | $ | 1,485,698 | $ | 829,419 | ||||||||||||
Current liabilities | $ | 1,050,435 | $ | 550,966 | ||||||||||||
Working capital | $ | 435,263 | $ | 278,453 | ||||||||||||
Long-term debt | $ | 1,224,941 | $ | 830,937 | ||||||||||||
PATTERSON-UTI ENERGY, INC.
Non-GAAP Financial Measures
Adjusted EBITDA
(unaudited, dollars in thousands)
Three Months Ended | Twelve Months Ended | |||||||||||||||||||
December 31, | September 30, | December 31, | December 31, | |||||||||||||||||
2023 | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||
Adjusted Earnings Before Interest, Taxes, Depreciation | ||||||||||||||||||||
Net income (loss) | $ | 61,938 | $ | (278 | ) | $ | 100,097 | $ | 245,952 | $ | 154,658 | |||||||||
Income tax expense (benefit) | 31,332 | (4,130 | ) | 8,294 | 61,152 | 13,204 | ||||||||||||||
Net interest expense | 17,142 | 13,494 | 7,785 | 46,748 | 39,896 | |||||||||||||||
Depreciation, depletion, amortization and impairment | 278,787 | 197,635 | 123,304 | 731,416 | 483,945 | |||||||||||||||
Merger and integration expense | 19,949 | 70,188 | - | 98,077 | 2,069 | |||||||||||||||
Adjusted EBITDA | $ | 409,148 | $ | 276,909 | $ | 239,480 | $ | 1,183,345 | $ | 693,772 | ||||||||||
Total revenues | $ | 1,584,317 | $ | 1,011,452 | $ | 788,476 | $ | 4,146,456 | $ | 2,647,592 | ||||||||||
Adjusted EBITDA margin | 25.8 | % | 27.4 | % | 30.4 | % | 28.5 | % | 26.2 | % | ||||||||||
Adjusted EBITDA by Operating Segment: | ||||||||||||||||||||
Drilling Services | $ | 184,631 | $ | 205,405 | $ | 172,339 | $ | 786,314 | $ | 503,923 | ||||||||||
Completion Services | 218,213 | 83,500 | 83,560 | 423,450 | 232,265 | |||||||||||||||
Drilling Products | 31,131 | 10,835 | - | 41,966 | - | |||||||||||||||
Other | 7,309 | 5,754 | 9,480 | 31,066 | 40,272 | |||||||||||||||
Corporate | (32,136 | ) | (28,585 | ) | (25,899 | ) | (99,451 | ) | (82,688 | ) | ||||||||||
Adjusted EBITDA | $ | 409,148 | $ | 276,909 | $ | 239,480 | $ | 1,183,345 | $ | 693,772 | ||||||||||
Adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") is not defined by accounting principles generally accepted in the United States of America ("GAAP"). We define Adjusted EBITDA as net income (loss) plus income tax expense (benefit), net interest expense, depreciation, depletion, amortization and impairment expense and merger and integration expense. We present Adjusted EBITDA as a supplemental disclosure because we believe it provides to both management and investors additional information with respect to the performance of our fundamental business activities and a comparison of the results of our operations from period to period and against our peers without regard to our financing methods or capital structure. We exclude the items listed above from net income (loss) in arriving at Adjusted EBITDA because these amounts can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Adjusted EBITDA should not be construed as an alternative to the GAAP measure of net income (loss). Our computations of Adjusted EBITDA may not be the same as similarly titled measures of other companies.
PATTERSON-UTI ENERGY, INC.
Non-GAAP Financial Measures
Free Cash Flow
(unaudited, dollars in thousands)
Three Months Ended | Twelve Months Ended | |||||||||||
December 31, | December 31, | |||||||||||
2023 | 2023 | 2022 | ||||||||||
Free Cash Flow (1): | ||||||||||||
Net cash provided by operating activities | 452,632 | $ | 1,005,914 | $ | 566,188 | |||||||
Less capital expenditures | (205,273 | ) | (615,690 | ) | (436,797 | ) | ||||||
Free cash flow$ | 247,359 | $ | 390,224 | $ | 129,391 | |||||||
We define free cash flow as net cash provided by operating activities less capital expenditures. We present free cash flow as a supplemental disclosure because we believe that it is an important liquidity measure and that it is useful to investors and management as a measure of the company's ability to generate cash flow, after reinvesting in the company, that could be available for financing cash flows, such as dividend payments, share repurchases and/or repurchases of long-term indebtedness. Our computations of free cash flow may not be the same as similarly titled measures of other companies. Free cash flow is not intended to represent our residual cash flow available for discretionary expenditures. Free cash flow is a non-GAAP financial measure that should be considered in addition to, not as a substitute for or superior to, cash flows from operations reported in accordance with GAAP.
PATTERSON-UTI ENERGY, INC.
Non-GAAP Financial Measures
Adjusted Gross Profit
(unaudited, dollars in thousands)
Three Months Ended | Twelve Months Ended | |||||||||||||||||||
December 31, | September 30, | December 31, | December 31, | |||||||||||||||||
2023 | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||
Drilling Services | ||||||||||||||||||||
Revenues | $ | 463,598 | $ | 488,775 | $ | 461,491 | $ | 1,919,759 | $ | 1,544,820 | ||||||||||
Less direct operating costs | (276,439 | ) | (279,927 | ) | (284,587 | ) | (1,119,200 | ) | (1,025,904 | ) | ||||||||||
Less depreciation, amortization and impairment | (91,951 | ) | (90,668 | ) | (91,161 | ) | (364,312 | ) | (354,116 | ) | ||||||||||
GAAP gross profit | 95,208 | 118,180 | 85,743 | 436,247 | 164,800 | |||||||||||||||
Depreciation, amortization and impairment | 91,951 | 90,668 | 91,161 | 364,312 | 354,116 | |||||||||||||||
Adjusted gross profit (1) | $ | 187,159 | $ | 208,848 | $ | 176,904 | $ | 800,559 | $ | 518,916 | ||||||||||
Completion Services | ||||||||||||||||||||
Revenues | $ | 1,014,357 | $ | 459,574 | $ | 306,783 | $ | 2,017,440 | $ | 1,022,413 | ||||||||||
Less direct operating costs | (782,482 | ) | (368,869 | ) | (220,758 | ) | (1,567,940 | ) | (781,385 | ) | ||||||||||
Less depreciation, amortization and impairment | (147,891 | ) | (83,338 | ) | (24,918 | ) | (283,230 | ) | (98,162 | ) | ||||||||||
GAAP gross profit | 83,984 | 7,367 | 61,107 | 166,270 | 142,866 | |||||||||||||||
Depreciation, amortization and impairment | 147,891 | 83,338 | 24,918 | 283,230 | 98,162 | |||||||||||||||
Adjusted gross profit (1) | $ | 231,875 | $ | 90,705 | $ | 86,025 | $ | 449,500 | $ | 241,028 | ||||||||||
Drilling Products | ||||||||||||||||||||
Revenues | $ | 88,109 | $ | 46,570 | $ | - | $ | 134,679 | $ | - | ||||||||||
Less direct operating costs | (49,484 | ) | (32,071 | ) | - | (81,555 | ) | - | ||||||||||||
Less depreciation, amortization and impairment | (31,392 | ) | (17,075 | ) | - | (48,467 | ) | - | ||||||||||||
GAAP gross profit | 7,233 | (2,576 | ) | - | 4,657 | - | ||||||||||||||
Depreciation, amortization and impairment | 31,392 | 17,075 | - | 48,467 | - | |||||||||||||||
Adjusted gross profit (1) | $ | 38,625 | $ | 14,499 | $ | - | $ | 53,124 | $ | - | ||||||||||
Other | ||||||||||||||||||||
Revenues | $ | 18,253 | $ | 16,533 | $ | 20,202 | $ | 74,578 | $ | 80,359 | ||||||||||
Less direct operating costs | (10,712 | ) | (10,591 | ) | (10,472 | ) | (42,624 | ) | (39,261 | ) | ||||||||||
Less depreciation, depletion, amortization and impairment | (6,291 | ) | (5,319 | ) | (6,001 | ) | (28,237 | ) | (26,496 | ) | ||||||||||
GAAP gross profit | 1,250 | 623 | 3,729 | 3,717 | 14,602 | |||||||||||||||
Depreciation, depletion, amortization and impairment | 6,291 | 5,319 | 6,001 | 28,237 | 26,496 | |||||||||||||||
Adjusted gross profit (1) | $ | 7,541 | $ | 5,942 | $ | 9,730 | $ | 31,954 | $ | 41,098 | ||||||||||
We define "Adjusted gross profit" as revenues less direct operating costs (excluding depreciation, depletion, amortization and impairment expense). Adjusted gross profit is included as a supplemental disclosure because it is a useful indicator of our operating performance.
PATTERSON-UTI ENERGY, INC.
Non-GAAP Financial Measures
Drilling Services Adjusted Gross Profit
(unaudited, dollars in thousands)
Three Months Ended | ||||||||
December 31, | September 30, | |||||||
2023 | 2023 | |||||||
U.S. Contract Drilling | ||||||||
Revenues | $ | 393,296 | $ | 419,564 | ||||
Less direct operating costs | (216,219 | ) | (218,767 | ) | ||||
Less depreciation, amortization and impairment | (85,966 | ) | (84,374 | ) | ||||
GAAP gross profit | 91,111 | 116,423 | ||||||
Depreciation, amortization and impairment | 85,966 | 84,374 | ||||||
Adjusted gross profit (1) | $ | 177,077 | $ | 200,797 | ||||
Other Drilling Services | ||||||||
Revenues | $ | 70,302 | $ | 69,211 | ||||
Less direct operating costs | (60,220 | ) | (61,160 | ) | ||||
Less depreciation, amortization and impairment | (5,985 | ) | (6,294 | ) | ||||
GAAP gross profit | 4,097 | 1,757 | ||||||
Depreciation, amortization and impairment | 5,985 | 6,294 | ||||||
Adjusted gross profit (1) | $ | 10,082 | $ | 8,051 | ||||
We define "Adjusted gross profit" as revenues less direct operating costs (excluding depreciation, amortization and impairment expense). Adjusted gross profit is included as a supplemental disclosure because it is a useful indicator of our operating performance.
PATTERSON-UTI ENERGY, INC.
Non-GAAP Financial Measures
Adjusted Net Income and Adjusted Earnings Per Share
(unaudited, in thousands, except per share data)
Three Months Ended December 31, 2023 | ||||||||||||||||
As Reported | Adjusted | |||||||||||||||
Total | Per Share | Total | Per Share (1) | |||||||||||||
Net income attributable to common stockholders as reported | $ | 61,950 | $ | 0.15 | $ | 61,950 | $ | 0.15 | ||||||||
Reverse certain item: | ||||||||||||||||
Merger and integration expense | 19,949 | |||||||||||||||
Income tax benefit | (4,189 | ) | ||||||||||||||
Net income attributable to common stockholders | $ | 61,950 | $ | 0.15 | $ | 77,710 | $ | 0.19 | ||||||||
Weighted average number of common shares outstanding, excluding | ||||||||||||||||
non-vested shares of restricted stock | 415,656 | 415,656 | ||||||||||||||
Add dilutive effect of potential common shares | 3,095 | 3,095 | ||||||||||||||
Weighted average number of diluted common shares outstanding | 418,751 | 418,751 | ||||||||||||||
Federal statutory tax rate | 21.0 | % | ||||||||||||||
We define adjusted net income as net income attributable to common stockholders as reported, excluding merger and integration expense, less income tax benefit. We present adjusted net income and adjusted earnings per share in order to convey to investors our performance on a basis that, by excluding merger and integration expense, is more comparable to our net income and earnings per share information reported in previous periods. Adjusted net income and adjusted earnings per share should not be construed as an alternative to GAAP net income and earnings per share.
PATTERSON-UTI ENERGY, INC.
Non-GAAP Financial Measures
Pro Forma Revenues
(unaudited, dollars in thousands)
Three Months Ended | ||||||||
December 31, | September 30, | |||||||
2023 | 2023 | |||||||
Completion Services | ||||||||
Revenues as reported | $ | 1,014,357 | $ | 459,574 | ||||
Pro forma adjustment | - | 577,604 | ||||||
Pro forma revenues (1) | $ | 1,014,357 | $ | 1,037,178 | ||||
Drilling Products | ||||||||
Revenues as reported | $ | 88,109 | $ | 46,570 | ||||
Pro forma adjustment | - | 40,830 | ||||||
Pro forma revenues (1) | $ | 88,109 | $ | 87,400 | ||||
Pro forma revenue has been included for comparative purposes and is not necessarily indicative of the results that might have actually occurred had the NexTier merger or Ulterra acquisition taken place on January 1, 2022. Furthermore, the financial information is not intended to be a projection of future results.
SOURCE: Patterson-UTI Energy, Inc.
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