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What changed in PATTERSON UTI ENERGY INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of PATTERSON UTI ENERGY INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+503 added−414 removedSource: 10-K (2024-02-27) vs 10-K (2023-02-13)

Top changes in PATTERSON UTI ENERGY INC's 2023 10-K

503 paragraphs added · 414 removed · 276 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

67 edited+41 added−70 removed30 unchanged
Biggest changeOn November 9, 2022, we entered into Amendment No. 3 to Amended and Restated Credit Agreement (“Amendment No.3”), which amended our amended and restated credit agreement, dated as of March 27, 2018 (as amended, the “Credit Agreement”), among us, as borrower, Wells Fargo Bank, National Association, as administrative agent, letter of credit issuer, swing line lender and lender and each of the other letter of credit issuers and lenders party thereto. 4 Amendment No. 3, among other things, (i) revised the capacity under the letter of credit facility to $100 million; (ii) revised the capacity under the swing line facility to the lesser of $50 million and the amount of the swing line provider’s unused commitment; (iii) changed the LIBOR reference rate to a SOFR reference rate; and (iv) extended the maturity date for $416.7 million of revolving credit commitments of certain lenders under the Credit Agreement from March 27, 2025 to March 27, 2026.
Biggest changeOn August 29, 2023, we entered into Amendment No. 4 to Amended and Restated Credit Agreement (the “Credit Agreement Amendment”), which amended our Amended and Restated Credit Agreement, dated as of March 27, 2018 (as amended, the “Credit Agreement”), by and among us, as borrower, Wells Fargo Bank, National Association, as administrative agent, letter of credit issuer, swing line lender and lender and each of the other letter of credit issuers and lenders party thereto.
We also have a substantial inventory of drill pipe and drilling rig components, which may be used in the activation of additional drilling rigs or as upgrades or replacement parts for marketed rigs. 5 Drilling rigs are typically equipped with engines, drawworks, top drives, masts, pumps to circulate the drilling fluid, blowout preventers, drill pipe and other related equipment.
We also have a substantial inventory of drill pipe and drilling rig components, which may be used in the activation of additional drilling rigs or as upgrades or replacement parts for marketed rigs. Drilling rigs are typically equipped with engines, drawworks, top drives, masts, pumps to circulate the drilling fluid, blowout preventers, drill pipe and other related equipment.
Although these materials and services have historically been available, there is no assurance that such materials and services will continue to be available on favorable terms or at all. We also utilize numerous independent subcontractors from various trades. 13
Although these materials and services have historically been available, there is no assurance that such materials and services will continue to be available on favorable terms or at all. We also utilize numerous independent subcontractors from various trades.
The components of equipment that will no longer be marketed are evaluated, and those components with continuing utility will be used as parts to support active equipment. The remaining components of this equipment are retired. We had no impairment related to the marketability or condition of our equipment during 2022.
The components of equipment that will no longer be marketed are evaluated, and those components with continuing utility will be used as parts to support active equipment. The remaining components of this equipment are retired. We had no impairment related to the marketability or condition of our equipment during 2023.
While we carry insurance to cover physical damage to, or loss of, a substantial portion of our equipment and certain other assets, such insurance does not cover the full replacement cost of such equipment or other assets. We have also elected in some cases to accept a greater amount of risk through increased deductibles on certain insurance policies.
While we carry insurance to cover physical damage to, or loss of, a substantial portion of our equipment and certain other assets, such insurance does not cover the full replacement cost of such equipment or other assets. We have also elected in some 11 cases to retain a greater amount of risk through increased deductibles on certain insurance policies.
We had no impairment related to the marketability or condition of our drilling rigs during 2022. Drilling Technology — We continue to enhance the technology offerings that can be used with our drilling operations. Our proprietary operating system for APEX® drilling rigs, Cortex®, can allow for the deployment of custom applications for rig performance, control and optimization.
We had no impairment related to the marketability or condition of our drilling rigs during 2023. 6 Drilling Technology — We continue to enhance the technology offerings that can be used with our drilling operations. Our proprietary operating system for APEX® drilling rigs, Cortex®, can allow for the deployment of custom applications for rig performance, control and optimization.
Our measurement-while-drilling (MWD) Survey FDIR (fault detection, isolation and recovery) service is a data analytics technology to analyze MWD survey data in real-time and more accurately identify the position of a well. Our HiFi Nav™ offering enhances FDIR by targeting improved vertical placement of the directional well within the reservoir.
Our MWD Survey FDIR (fault detection, isolation and recovery) service is a data analytics technology to analyze MWD survey data in real-time and more accurately identify the position of a well. Our HiFi Nav™ offering enhances FDIR by targeting improved vertical placement of the directional well within the reservoir.
Contract Drilling Activity — Information regarding our contract drilling activity for the last three years follows: Year Ended December 31, 2022 2021 2020 Average rigs operating per day - U.S.
Contract Drilling Activity — Information regarding our contract drilling activity for the last three years follows: Year Ended December 31, 2023 2022 2021 Average rigs operating per day – U.S.
Our HiFi Guidance™ service utilizes trajectory optimization algorithms to determine optimal steering recommendations that enhance well placement within the reservoir, targeting minimal sliding, faster ROP, and a higher percentage of the wellbore placed in the desired drilling window. We provide these services to customers with onshore and offshore operations.
Our HiFi Guidance™ service utilizes trajectory optimization to determine optimal steering recommendations and placement within the reservoir, targeting minimal sliding, faster ROP, and a higher percentage of the wellbore placed in the desired drilling window. We provide these services to customers with onshore and offshore operations.
Directional Drilling Operations General — We generally utilize our own proprietary downhole motors and equipment to provide a comprehensive suite of directional drilling services, including directional drilling, measurement-while-drilling (MWD) and supply and rental of downhole performance motors, in most major onshore oil and natural gas basins in the United States.
Directional Drilling — We generally utilize our own proprietary downhole motors and equipment to provide a comprehensive suite of directional drilling services, including directional drilling, measurement-while-drilling (“MWD”) and supply and rental of downhole performance motors, in most major onshore oil and natural gas basins in the United States.
(2) 115 121 128 131 3 (1) The average oil price represents the average monthly West Texas Intermediate (WTI) spot price as reported by the United States Energy Information Administration. (2) A rig is considered to be operating if it is earning revenue pursuant to a contract on a given day.
(2) 131 128 120 118 (1) The average oil price represents the average monthly West Texas Intermediate (WTI) spot price as reported by the United States Energy Information Administration. (2) A rig is considered to be operating if it is earning revenue pursuant to a contract on a given day.
As a result, of the $600 million of revolving credit commitments under the Credit Agreement, the maturity date for $416.7 million of such commitments is March 27, 2026; the maturity date for $133.3 million of such commitments is March 27, 2025; and the maturity date for the remaining $50 million of such commitments is March 27, 2024.
As a result, of the $600 million of revolving credit commitments under the Credit Agreement, the maturity date for $501.7 million of such commitments is March 27, 2026; the maturity date for $48.3 million of such commitments is March 27, 2025; and the maturity date for the remaining $50 million of such commitments is March 27, 2024.
Over time, components on a drilling rig are replaced or rebuilt. We spend significant funds each year as part of a program to modify, upgrade and maintain our drilling rigs. To address our customers’ needs for drilling horizontal wells in shale and other unconventional resource plays, we have improved the capability of our drilling fleet.
Over time, components on a drilling rig are replaced or rebuilt. We spend significant funds each year as part of a program to modify, upgrade and maintain our drilling rigs. We have addressed our customers’ needs for drilling horizontal wells in shale and other unconventional resource plays by improving the capabilities of our drilling fleet.
The insurance coverage that we maintain includes insurance for fire, windstorm and other risks of physical loss to our equipment and certain other assets, employer’s liability, automobile liability, commercial general liability, workers’ compensation and insurance for other specific risks.
The insurances that we maintain include coverage for fire, windstorm and other risks of physical loss to our equipment and certain other assets, employer’s liability, automobile liability, commercial general liability, workers’ compensation as well as insurance for other specific risks.
During the fourth quarter of 2022, we elected to repurchase portions of our 3.95% Senior Notes due 2028 (the “2028 Notes”) and our 5.15% Senior Notes due 2029 (the “2029 Notes”) in the open market. The principal amounts retired through these transactions totaled $21.0 million of our 2028 Notes and $1.4 million of our 2029 Notes, plus accrued interest.
During the first quarter of 2023, we elected to repurchase portions of our 3.95% Senior Notes due 2028 (the “2028 Notes”) and our 5.15% Senior Notes due 2029 (the “2029 Notes”) in the open market. The principal amounts retired through these transactions totaled $6.0 million of our 2028 Notes and $3.0 million of our 2029 Notes, plus accrued interest.
Government and Environmental Regulation All of our operations and facilities are subject to numerous federal, state, foreign, regional and local laws, rules and regulations related to various aspects of our business, including: • drilling of oil and natural gas wells, • hydraulic fracturing, cementing and acidizing and related well servicing activities, • directional drilling services, • services that improve the accuracy of directional and horizontal wellbores, including for customers with offshore operations, wellbore quality, and on-bottom ROP, • containment and disposal of hazardous materials, oilfield waste, other waste materials and acids, • use of underground storage tanks and injection wells, • servicing of equipment for drilling contractors, • provision of electrical controls and automation, and • our employees.
Government and Environmental Regulation Our operations and facilities are subject to numerous federal, state, foreign, regional and local laws, rules and regulations related to various aspects of our business and the oil and natural gas industry including: • drilling of oil and natural gas wells, • hydraulic fracturing, wireline and pumping, completion support and cementing, • provision of specialized drill bit solutions, • directional drilling services, 10 • services that improve the accuracy of directional and horizontal wellbores, including for customers with offshore operations, wellbore quality, and on-bottom ROP, • containment and disposal of hazardous materials, oilfield waste, other waste materials and acids, • use of underground storage tanks and injection wells, • servicing of equipment for drilling contractors, • provision of electrical controls and automation, • conducting international operations, and • our employees.
We recorded corresponding gains on the extinguishment of these amounts totaling $2.3 million and $0.1 million, respectively, net of the proportional write-off of associated deferred financing costs and original issuance discounts. These gains are included in “Interest expense, net of amount capitalized” in our consolidated statements of operations.
We recorded corresponding gains on the extinguishment of these amounts totaling $0.8 million and $0.3 million, respectively, net of the proportional write-off of associated deferred financing costs and original issuance discounts. These gains are included in “Interest expense, net of amount capitalized” in our consolidated statements of operations included as a part of Item 8 of this Report.
(1) 124 82 82 Number of rigs operated during the year - U.S. 132 118 131 Number of wells drilled during the year - U.S. 2,489 1,662 1,324 Number of operating days - U.S. 45,216 29,960 29,857 (1) A rig is considered to be operating if it is earning revenue pursuant to a contract on a given day.
(1) 124 124 82 Number of wells drilled during the year – U.S. 2,530 2,489 1,662 Number of operating days – U.S. 45,270 45,216 29,960 (1) A rig is considered to be operating if it is earning revenue pursuant to a contract on a given day.
Materials — Our pressure pumping operations require the use of acids, chemicals, proppants, fluid supplies and other materials, any of which can be in short supply, including severe shortages, from time to time. We purchase these materials from various suppliers.
Materials — Our completion services operations require the use of acids, chemicals, proppants, fluid supplies and other materials, any of which can be in short supply, including severe shortages, from time to time, and can be subject to significant price volatility. We purchase these materials from various suppliers.
The adoption of laws, rules and regulations affecting the oil and natural gas industry for economic, environmental and other policy reasons could increase costs relating to drilling, completion and production, delay the permitting of, or related to, such operations, restrict or prohibit oil and gas development in certain areas, reduce the demand for oil and natural gas and otherwise have an adverse effect on our operations or business, and could have a material adverse effect on our business, financial condition, cash flows and results of operations.
Risk Factors – Political, economic and social instability risk and laws associated with conducting international operations could adversely affect our opportunities and future business.” The adoption of laws, rules and regulations affecting the oil and natural gas industry for economic, environmental and other policy reasons could increase costs relating to drilling, completion and production, delay the permitting of, or related to, such operations, restrict or prohibit oil and natural gas development in certain areas, reduce the demand for oil and natural gas and otherwise have an adverse effect on our operations or business, and could have a material adverse effect on our business, financial condition, cash flows and results of operations.
We aim to minimize our environmental impact in the communities in which we work and live, while providing services for our customers in a safe and responsible manner. We invest extensively in the safety, health and well-being of our people, who are our most important asset and our greatest strength.
We aim to minimize our environmental impact in the communities in which we work and live, while providing services for our customers in a safe and responsible manner. We invest extensively in the safety, health and well-being of our people, who, through the diversity of their backgrounds, experiences and talents, are our greatest strength.
As of December 31, 2022, we had 192 marketed land-based drilling rigs based in the following regions: Region Number of Rigs West Texas 80 Appalachia 27 Rockies 23 Oklahoma 20 South Texas 17 East Texas 17 Colombia 8 Total 192 All of these drilling rigs are electric rigs.
As of December 31, 2023, we had 192 marketed land-based drilling rigs based in the following regions: Region Number of Rigs West Texas 82 Appalachia 27 Rockies 23 Oklahoma 19 South Texas 18 East Texas 15 Colombia 8 Total 192 All of these drilling rigs are electric rigs.
Industry Segments Our revenues, operating loss and identifiable assets are primarily attributable to three industry segments: • contract drilling services, • pressure pumping services, and • directional drilling services. Contract Drilling Operations General — We market our contract drilling services to oil and natural gas operators in the United States and Colombia.
Industry Segments Our revenues, operating income and loss and identifiable assets are primarily attributable to three industry segments: • drilling services, • completion services, and • drilling products. Drilling Services Operations General — We provide our contract drilling services to oil and natural gas operators in the United States and Colombia.
As of December 31, 2022, we had no borrowings outstanding under our revolving credit facility. We had no letters of credit outstanding under the Credit Agreement at December 31, 2022 and, as a result, had available borrowing capacity of $600 million at that date.
As of December 31, 2023, we had no borrowings outstanding under our revolving credit facility. We had $2.6 million in letters of credit outstanding under the Credit Agreement at December 31, 2023 and, as a result, had available borrowing capacity of approximately $597 million at that date.
Contracts We believe that our contract drilling, pressure pumping, directional drilling and other contracts generally provide for indemnification rights and obligations that are customary for the markets in which we conduct those operations.
Contracts We believe that our contracts for drilling services, completion services, drilling products and other services and products generally provide for indemnification rights and obligations that are customary for the markets in which we conduct those operations.
Due to evolving customer preferences, we refer to certain premium rigs as “Tier-1, super-spec” rigs, which we consider as being a super-spec rig that also has a third mud pump and raised drawworks that allow for more clearance underneath the rig floor. We have 172 super-spec rigs, of which 118 were Tier-1, super-spec rigs.
Due to evolving customer preferences, we refer to certain premium rigs as “Tier-1, super-spec” rigs, 5 which we consider as being a super-spec rig that also has a third mud pump and raised drawworks that allows for more clearance underneath the rig floor. As of December 31, 2023, we had 173 super-spec rigs, of which 131 were Tier-1, super-spec rigs.
We cannot assure, however, that any insurance obtained by us will be adequate to cover any losses or liabilities, or that this insurance will continue to be available, or available on terms that are acceptable to us.
We cannot assure that any insurance obtained by us will be adequate to cover any losses or liabilities nor can we assure that any insurance obtained by us will continue to be made available for purchase or made available on acceptable terms.
For example, in the United States we generally maintain a $1.5 million per occurrence deductible on our workers’ compensation insurance coverage, a $1.0 million per occurrence deductible on our equipment insurance coverage, a $5.0 million per occurrence deductible on our pressure pumping equipment without fire suppression systems, a $10.0 million per occurrence deductible on our general liability coverage, a $2.0 million per occurrence deductible on our primary automobile liability insurance coverage, and a $5.0 million per occurrence deductible on our excess automobile liability insurance coverage.
For example, in the United States we generally maintain a $1.5 million per occurrence deductible on our workers’ compensation insurance coverage, a $1.0 million per occurrence deductible on our equipment insurance coverage, a $10.0 million per occurrence deductible on our general liability coverage, and, for our automobile insurance coverage, a per occurrence deductible ranging from $2.0 million to $10.0 million.
All other employees are educated annually on our commitment to a respectful workplace for all to ensure they understand their role as they engage with co-workers. 9 Maintaining our Core Values – We provide annual training for our employees on our Code of Business Conduct and Ethics, which addresses conflicts of interest, confidentiality, fair dealing with others, proper use of company assets, compliance with laws, insider trading, keeping of books and records, zero tolerance for discrimination and harassment in the work environment, as well as reporting of violations.
Maintaining our Core Values – We provide annual training for our employees on our Code of Business Conduct and Ethics, which addresses conflicts of interest, confidentiality, fair dealing with others, proper use of company assets, compliance with laws, insider trading, keeping of books and records, zero tolerance for discrimination and harassment in the work environment, as well as reporting of violations.
Although some of our Colombian employees may be union members, we have not entered into any collective bargaining arrangements with the unions with which those employees are affiliated.
We consider our employee relations to be satisfactory. None of our U.S. employees are represented by a union. Although some of our Colombian employees may be union members, we have not entered into any collective bargaining arrangements with the unions with which those employees are affiliated.
We periodically evaluate our pressure pumping assets for marketability based on the condition of inactive equipment, expenditures that would be necessary to bring the equipment to working condition and the expected demand for such equipment.
Equipment — We have well completion equipment used in providing hydraulic fracturing services as well as cementing and acid pumping services. We periodically evaluate our completion services assets for marketability based on the condition of inactive equipment, expenditures that would be necessary to bring the equipment to working condition and the expected demand for such equipment.
For example, we utilize natural gas engines, dual-fuel equipment and other technologies that reduce our carbon and other greenhouse gas emissions as compared to our traditional diesel-only equipment, and we employ spill prevention plans and use additional protective measures in environmentally sensitive areas.
For example, we utilize natural gas engines, dual-fuel equipment and other technologies that reduce our carbon and other greenhouse gas emissions as compared to our traditional diesel-only equipment, and we employ spill prevention plans and use additional protective measures in environmentally sensitive areas. 9 We have strengthened our position as a leader in alternative fuel technology with the commercialization of our EcoCell® lithium battery hybrid energy management system.
Over the years, we have made performance and safety improvements to our rig fleet. Our APEX ® rigs are AC-powered electric rigs with many having high pressure mud systems, walking systems and increased hookload capacity.
Over the years, we have made performance and safety improvements to our rig fleet. Our APEX ® rigs are AC-powered electric rigs with many having high pressure mud systems, walking systems and increased hookload capacity. During fiscal years 2023, 2022 and 2021, we spent approximately $335 million, $256 million, and $110 million, respectively, on these capital expenditures.
We maintain insurance coverage of types and amounts that we believe to be customary in the industry, but we are not fully insured against all risks, either because insurance is not available or because of the high premium costs.
In addition, we maintain insurance coverage of the types and in the amounts we believe to be customary in the industry, but we do not insure against all risks, either because insurance is not available or because it is not commercially justifiable.
We also provide a comprehensive suite of directional drilling services in most major producing onshore oil and gas basins in the United States. Our directional drilling services include directional drilling, measurement-while-drilling and supply and rental of downhole performance motors. We also provide services that improve the statistical accuracy of directional and horizontal wellbores.
We also provide a comprehensive suite of directional drilling services in most major producing onshore oil and natural gas basins in the United States, and we provide services that improve the statistical accuracy of wellbore placement for directional and horizontal wells.
Several states and geographic regions in the United States have also adopted legislation and regulations to reduce emissions of GHGs, including cap and trade regimes and commitments to contribute to meeting the goals of the Paris Agreement.
Several states and geographic regions in the United States, as well as foreign jurisdictions, have adopted legislation and regulations to reduce emissions of GHGs, including cap and trade regimes and commitments to contribute to meeting the goals of international treaties related to GHG emissions. See “Item 1A.
Other Operations Our oilfield rentals business has a fleet of premium rental tools and provides specialized services for land-based oil and natural gas drilling, completion and workover activities in many of the major producing onshore oil and gas basins in the United States.
Other Operations Our oilfield rentals business has a fleet of premium rental tools and provides specialized services for land-based oil and natural gas drilling, completion and workover activities in many of the major producing oil and natural gas basins in the United States. 8 In addition, we own and invest, as a non-operating working interest owner, in oil and natural gas assets that are primarily located in Texas and New Mexico.
Historically, available equipment used in our contract drilling, pressure pumping and directional drilling businesses has frequently exceeded demand, particularly in an industry downturn. The price for our services is a key competitive factor, in part because equipment used in these businesses can be moved from one area to another in response to market conditions.
The price for our services is a key competitive factor, in part because equipment used in these businesses can be moved from one area to another in response to market conditions.
We also self-insure a number of other risks, including loss of earnings and business interruption and most cybersecurity risks, and we do not carry a significant amount of insurance to cover risks of underground reservoir damage. Our insurance may not in all situations provide sufficient funds to protect us from all liabilities that could result from our operations.
We also self-insure a number of risks, including loss of earnings and business interruption and most of our cybersecurity risks, and we do not carry a significant amount of insurance to cover risks of underground reservoir damage.
Our active U.S. rig count at December 31, 2022 of 132 rigs was more than the rig count of 111 rigs at December 31, 2021, due in large part to the recovery of oil prices and improved demand for drilling services in the United States. Term contracts help support our operating rig count.
Our active U.S. rig count at December 31, 2023 of 121 rigs was less than the rig count of 132 rigs at December 31, 2022, due in large part to the decline in commodity prices and reduced demand for drilling services in the United States.
Our average active U.S. rig count for the fourth quarter of 2022 was 131 rigs. This was an increase from our average active rig count for the third quarter of 2022 of 128 rigs.
Our average active U.S. rig count for the fourth quarter of 2023 was 118 rigs. This was a decrease from our average active rig count for the third quarter of 2023 of 120 rigs.
The term contracts are generally entered into for a specified period of time and may include minimum revenue, usage or stage requirements. We are compensated based on a combination of charges for equipment, personnel, materials, mobilization and other items.
Completion Service Contracts — Our completion services operations are conducted pursuant to a work order for a specific job or pursuant to a contract generally for a specified period of time, which may include minimum revenue, usage or stage requirements. We are compensated based on a combination of charges for equipment, personnel, materials, mobilization and other items.
Risk Factors – Our Current Backlog of Contract Drilling Revenue May Decline and May Not Ultimately Be Realized, as Fixed-Term Contracts May in Certain Instances Be Terminated Without an Early Termination Payment” for information pertaining to backlog. 8 Competition The businesses in which we operate are highly competitive.
See Note 3 of Notes to consolidated financial statements in Item 8 of this Report and “Item 1A. Risk Factors – Our current backlog of contract drilling revenue may decline and may not ultimately be realized, as fixed-term contracts may in certain instances be terminated without an early termination payment” for information pertaining to backlog.
With respect to our consolidated operating revenues in 2022, we received approximately 49% from our ten largest customers and approximately 34% from our five largest customers. During 2022, one customer accounted for approximately $476 million, or approximately 18%, of our consolidated operating revenues. These revenues were earned in both our contract drilling and pressure pumping businesses.
With respect to our consolidated operating revenues in 2023, we received approximately 49% from our ten largest customers and approximately 35% from our five largest customers. During 2023, one customer accounted for approximately $588 million, or approximately 14%, of our consolidated operating revenues.
The current demand for equipment and services and strong pricing environment remain dependent on macro conditions, including commodity prices, geopolitical environment, inflationary pressures, economic conditions in the United States and elsewhere, response to the COVID-19 pandemic (including any resurgences and/or lockdowns in the United States and abroad) and continued focus by exploration and production companies and service companies on capital discipline.
The current demand for equipment and services remains dependent on macro conditions, including commodity prices, geopolitical environment, inflationary pressures, economic conditions in the United States and elsewhere, as well as customer consolidation and focus by exploration and production companies and service companies on capital returns.
Oil prices averaged $82.79 per barrel in the fourth quarter of 2022 and closed at $77.97 per barrel on January 30, 2023. Natural gas prices (based on the Henry Hub Spot Market Price) averaged $5.55 per MMBtu in the fourth quarter of 2022 and closed at $2.82 per MMBtu on January 30, 2023.
Oil prices averaged $78.53 per barrel in the fourth quarter of 2023 and closed at $78.72 per barrel on February 20, 2024. Natural gas prices (based on the Henry Hub Spot Market Price) averaged $2.74 per MMBtu in the fourth quarter of 2023 and closed at $1.50 per MMBtu on February 20, 2024.
Importantly, we maintain a rigorous focus on ethics and integrity at every level of our operations, a practice on which all of our success depends. Environment – We continue to pursue initiatives to mitigate climate change risk and make improvements in air quality, water quality, land usage, use of energy and reducing waste materials.
Environment – We continue to pursue initiatives to mitigate climate change risk and make improvements in air quality, water quality, land usage, use of energy and reducing waste materials.
We generally design, assemble and maintain our own fleet of downhole drilling motors and MWD equipment. Our customers primarily consist of oil and natural gas operators in the United States.
We generally design, assemble and maintain our own fleet of downhole drilling motors and MWD equipment. Our customers primarily consist of oil and natural gas operators in the United States. Wellbore Placement Optimization Services — We provide software and services used to improve the accuracy of directional and horizontal wellbores, wellbore quality, and on-bottom ROP (rate of penetration).
Risk Factors – Our and Our Customers’ Operations are Subject to a Number of Risks Arising Out of the Threat of Climate Change That Could Result in Increased Operating and Capital Costs, Limit the Areas in Which Oil and Natural Gas Production May Occur and Reduce Demand for Our Services.” 12 Risks and Insurance Our operations are subject to many hazards inherent in the businesses in which we operate, including inclement weather, blowouts, explosions, fires, loss of well control, motor vehicle accidents, pollution, exposure and reservoir damage.
Risk Factors – Our and our customers’ operations are subject to a number of risks arising out of the threat of climate change that could result in increased operating and capital costs, limit the areas in which oil and natural gas production may occur and reduce demand for our services.” We operate throughout North America and internationally in over 30 countries and, accordingly, are subject to the U.S.
(2) 123 82 60 62 2021: Average oil price per Bbl (1) $ 57.79 $ 66.09 $ 70.62 $ 77.45 Average rigs operating per day - U.S. (2) 69 73 80 106 2022: Average oil price per Bbl (1) $ 94.45 $ 108.72 $ 93.18 $ 82.79 Average rigs operating per day - U.S.
(2) 69 73 80 106 2022: Average oil price per Bbl (1) $ 94.45 $ 108.72 $ 93.18 $ 82.79 Average rigs operating per day – U.S. (2) 115 121 128 131 2023: Average oil price per Bbl (1) $ 75.93 $ 73.54 $ 82.25 $ 78.53 Average rigs operating per day – U.S.
In general, our contracts typically contain provisions requiring our customers to indemnify us for, among other things, reservoir and certain pollution damage. Our right to indemnification may, however, be unenforceable or limited due to negligent or willful acts or omissions by us, our subcontractors and/or suppliers.
In general, our contracts typically contain provisions requiring our customers to indemnify us for, among other things, reservoir and certain pollution damage.
The loss of, or reduction in business from, one or more of our larger customers could have a material adverse effect on our business, financial condition, cash flows and results of operations. Backlog Our contract drilling backlog in the United States as of December 31, 2022 and 2021 was approximately $830 million and $325 million, respectively.
The loss of, or reduction in business from, one or more of our larger customers could have a material adverse effect on our business, financial condition, cash flows and results of operations. Backlog We maintain a backlog of commitments for contract drilling services under term contracts, which we define as contracts with a duration of six months or more.
The value of this technology is enhanced when used in combination with our Cortex® power management system and our dual-fuel engines, as the natural gas substitution rate can be optimized. Through our Current Power business, we provide in-house electrical engineering, control system automation and installation services to connect drilling rigs to utility electrical lines.
The EcoCell® system is capable of efficiently displacing one of the gensets on a drilling rig to reduce both fuel consumption and emissions. The value of this technology is enhanced when used in combination with our Cortex® power management system and our dual-fuel engines, as the natural gas substitution rate can be optimized.
Our EcoCell™ lithium battery hybrid energy management system is capable of utilizing stored energy to help reduce fuel consumption and emissions. 6 Pressure Pumping Operations General — We provide pressure pumping services to oil and natural gas operators, primarily in Texas and the Appalachian region (Northeast Region).
Our EcoCell® lithium battery hybrid energy management system is capable of utilizing stored energy to help reduce fuel consumption and emissions.
We have other operations through which we provide oilfield rental tools in select markets in the United States. We also service equipment for drilling contractors, and we provide electrical controls and automation to the energy, marine and mining industries in North America and other select markets.
Other Drilling Services — We service and re-certify equipment for drilling contractors, and we provide electrical controls and automation to the energy, marine and mining industries in North America and other select markets. Completion Services Operations Our completion services business consists of services for hydraulic fracturing, wireline and pumping, completion support, and cementing.
Recent Developments Recent Developments in Market Conditions — Quarterly average oil prices and our quarterly average number of rigs operating in the United States for 2020, 2021 and 2022 are as follows: 1 st 2 nd 3 rd 4 th Quarter Quarter Quarter Quarter 2020: Average oil price per Bbl (1) $ 45.76 $ 27.81 $ 40.89 $ 42.45 Average rigs operating per day - U.S.
Other Other consists of our oilfield rentals business, with a fleet of premium oilfield rental tools, along with the results of our ownership, as a non-operating working interest owner, in oil and natural gas assets located in Texas and New Mexico . 3 Recent Developments Recent Developments in Market Conditions — Quarterly average oil prices and our quarterly average number of rigs operating in the United States for 2021, 2022 and 2023 are as follows: 1 st 2 nd 3 rd 4 th Quarter Quarter Quarter Quarter 2021: Average oil price per Bbl (1) $ 57.79 $ 66.09 $ 70.62 $ 77.45 Average rigs operating per day – U.S.
Based on contracts currently in place in the United States, we expect an average of 87 rigs operating under term contracts during the first quarter of 2023 and an average of 56 rigs operating under term contracts during 2023. Our average active spread count was 12 in the fourth quarter of 2022, consistent with the third quarter of 2022.
Based on contracts in place in the United States as of February 14, 2024, we expect 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 during 2024.
Approximately 32% of our contract drilling backlog in the United States at December 31, 2022 is reasonably expected to remain after 2023. See Note 3 of Notes to consolidated financial statements in Item 8 of this Report and “Item 1A.
Our contract drilling backlog in the United States as of December 31, 2023 and 2022 was approximately $700 million and $830 million, respectively. Approximately 16% of our contract drilling backlog in the United States at December 31, 2023 is reasonably expected to remain after 2024.
Also, OSHA has established a variety of standards related to workplace exposure to hazardous substances and employee health and safety. Our activities include the performance of hydraulic fracturing services to enhance the production of oil and natural gas from formations with low permeability, such as shale and other unconventional formations.
Risk Factors – Environmental and occupational health and safety laws and regulations, including violations thereof, could materially adversely affect our operating results. Our activities include the performance of hydraulic fracturing services to enhance the production of oil and natural gas from formations with low permeability, such as shale and other unconventional formations. See “Item 1A.
Some of our key human capital areas of focus include: Employees – We had approximately 6,500 full-time employees as of January 31, 2023. The number of employees fluctuates depending on the current and expected demand for our services. We consider our employee relations to be satisfactory. None of our U.S. employees are represented by a union.
Using utility power is an optimal power solution for our drilling rigs as it minimizes emission impacts at the wellsite. Some of our key human capital areas of focus include: Employees – We had approximately 10,600 full-time employees as of January 31, 2024. The number of employees fluctuates depending on the current and expected demand for our services.
Our contract drilling business operates in the continental United States and internationally in Colombia and, from time to time, we pursue contract drilling opportunities in other select markets. As of December 31, 2022, we had a drilling fleet that consisted of 184 marketed land-based drilling rigs in the United States and eight in Colombia.
We operate under three reportable business segments: (i) drilling services, (ii) completion services, and (iii) drilling products. Drilling Services Our contract drilling business operates in the continental United States and internationally in Colombia and, from time to time, we pursue contract drilling opportunities in other select markets.
(“Pioneer”) by acquiring 100% of its equity interests. Total consideration for the acquisition included the issuance of approximately 26.3 million shares of our common stock and payment of $30 million cash, which based on the closing price of our common stock of $9.44 on October 1, 2021, valued the transaction at approximately $278 million.
Total consideration for the acquisition included the issuance of 34.9 million shares of our common stock and payment of approximately $376 million cash, which based on the closing price of 4 our common stock of $14.94 on August 14, 2023, valued the transaction at closing at approximately $897 million. Ulterra is a global provider of specialized drill bit solutions.
However, compliance costs under existing laws or under any new requirements could become material, and we could incur liability in any instance of noncompliance. Our business is generally affected by political developments and by federal, state, foreign, regional and local laws, rules and regulations that relate to the oil and natural gas industry.
However, compliance costs under existing laws or under any new requirements could become material, and we could incur liability in any instance of noncompliance. Risks and Insurance We have indemnification agreements with many of our customers, and we also maintain liability and other forms of insurance.
For more information, please refer to our discussion under “Item 1A. Risk Factors – Environmental and Occupational Health and Safety Laws and Regulations, Including Violations Thereof, Could Materially Adversely Affect Our Operating Results.” There has been an increasing focus of local, state, national and international regulatory bodies on greenhouse gas (“GHG”) emissions and climate change issues.
Risk Factors – The adoption of any future federal, state, or local laws or implementing regulations imposing reporting obligations on, or limiting or banning, the hydraulic fracturing process could make it more difficult to complete natural gas and oil wells and could have a material adverse effect on our business, results of operations, and financial condition.” There has been an increasing focus of local, state, national and international regulatory bodies on greenhouse gas (“GHG”) emissions and climate change issues.
Pricing for our drilling and completion services increased in 2022 due in part to the limited supply of readily available, high-quality drilling and completion equipment. Our 2023 capital expenditure forecast is approximately $550 million. Recent Developments in Financial Matters and Merger and Acquisition Activity — On October 1, 2021, we completed the acquisition of Pioneer Energy Services Corp.
Our 2024 capital expenditure forecast is approximately $740 million. Recent Developments in Business Combinations and Financial Matters — On September 1, 2023, we completed the NexTier merger.
We service equipment for drilling contractors, and we provide electrical controls and automation to the energy, marine and mining industries in North America and other select markets. In addition, we own and invest, as a non-operating working interest owner, in oil and natural gas assets that are primarily located in Texas and New Mexico.
We also service and re-certify equipment for drilling contractors, and we provide electrical controls and automation to the energy, marine and mining industries, in North America and other select markets. Completion Services Our well completion services business consists of services for hydraulic fracturing, wireline and pumping, completion support, and cementing.
This capability enables our customers to use utility power, instead of natural gas or diesel fuel, to power drilling operations. Using utility power is an optimal power solution for our drilling rigs as it minimizes emission impacts at the wellsite.
Through our Current Power business, we provide in-house electrical engineering, control system automation and installation services to connect drilling rigs to utility electrical lines. This capability enables our customers to use utility power, instead of natural gas or diesel fuel, to power drilling operations.
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Overview We are a Houston, Texas-based oilfield services company that primarily owns and operates one of the largest fleets of land-based drilling rigs in the United States and a large fleet of pressure pumping equipment.
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Overview We are a Houston, Texas-based 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 drill bit solutions in the United States, Middle East and many other regions around the world.
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A drilling rig includes the structure, power source and machinery necessary to cause a drill bit to penetrate the earth to a depth desired by the customer. We also have a substantial inventory of drill pipe and drilling rig components that support our contract drilling operations.
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It also includes our power solutions natural gas fueling business and our proppant last mile logistics and storage business. Our completion services business operates in several of the most active basins in the continental United States, including the Permian, the Marcellus Shale/Utica, the Eagle Ford, Mid-Continental, Haynesville, and the Bakken/Rockies.
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We provide pressure pumping services to oil and natural gas operators primarily in Texas and the Appalachian region. Substantially all of the revenue in the pressure pumping segment is from well stimulation services (such as hydraulic fracturing) for completion of new wells and remedial work on existing wells.
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The high density of our operations in the basins in which we are most active provides us the opportunity to leverage our fixed costs and to quickly respond with what we believe are highly efficient, integrated solutions that are best suited to address customer requirements.
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Well stimulation involves processes inside a well designed to enhance the flow of oil, natural gas, or other desired substances from the well. As of December 31, 2022, we had approximately 1.2 million fracturing horsepower to provide these services. We also provide cementing services through the pressure pumping segment.
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Drilling Products We serve the energy and mining markets by manufacturing and distributing drill bits through North America and internationally in over 30 countries. Our drilling equipment is used in oil and natural gas exploration and production and in mining operations.
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Cementing is the process of inserting material between the wall of the well bore and the casing to support and stabilize the casing.
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We have manufacturing and repair facilities located in Fort Worth, Texas, Leduc, Alberta and Saudi Arabia and repair facilities located in Argentina, Colombia and Oman .
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Our pressure pumping operations are supported by a fleet of other equipment, including blenders, tractors, manifold trailers and numerous trailers for transportation of materials to and from the worksite as well as bins for storage of materials at the worksite.
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Our revenues, profitability and cash flows are highly dependent upon prevailing prices for oil and natural gas and expectations about future prices. Crude oil prices and demand for drilling and completion equipment and services increased from 2021 to 2022, and industry supply of Tier-1, super-spec rigs became constrained.
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In addition, we own and invest, as a non-operating working interest owner, in oil and natural gas assets that are primarily located in Texas and New Mexico.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeSuch public health crises, pandemics and epidemics are continuously evolving, and we are not able to enumerate all potential risks to our business from such events, including the COVID-19 pandemic and related volatility in crude oil prices; however, we believe that in addition to the impacts described above, other current and potential impacts include, but are not limited to: liquidity challenges; customers, suppliers and other third parties seeking to terminate, reject, renegotiate or otherwise avoid, and otherwise failing to perform, their contractual obligations to us; credit rating downgrades of our corporate debt and potentially higher borrowing costs in the future; a need to preserve liquidity; cybersecurity issues; litigation risk and possible loss contingencies; disruption to our supply chain; loss of workers and labor shortages; general oilfield cost inflation; a reduction of our workforce; costs associated with rationalization of our portfolio of real estate facilities; asset impairments and other accounting charges; infections and quarantining of our employees and the personnel of our customers, suppliers and other third parties; actions undertaken by international, national, regional and local governments and health officials; and a structural shift in the global economy and its demand for oil and natural gas. 20 The full extent of the impact of public health crises, pandemics and epidemics on our business, liquidity, results of operations and financial condition will depend largely on future developments, including the duration and further spread of a subject pathogen, including any new strains thereof, and the related impact on the oil and gas industry, the impact of governmental actions designed to prevent the spread thereof and the further development, availability, timely distribution and acceptance of effective treatments and vaccines, all of which are highly uncertain.
Biggest changeWe are not able to enumerate all potential risks to our business from the emergence of a public health crisis, pandemic or epidemic; however, we believe that in addition to the impacts described above, other current and potential impacts include, but are not limited to: volatility in oil and natural gas prices; liquidity challenges; customers, suppliers and other third parties seeking to terminate, reject, renegotiate or otherwise avoid, and otherwise failing to perform, their contractual obligations to us; credit rating downgrades of our corporate debt and potentially higher borrowing costs in the future; a need to preserve liquidity; cybersecurity issues; litigation risk and possible loss contingencies; disruption to our supply chain; loss of workers and labor shortages; general oilfield cost inflation; a reduction of our workforce; costs associated with rationalization of our portfolio of real estate facilities; asset impairments and other accounting charges; infections and quarantining of our employees and the personnel of our customers, suppliers and other third parties; actions undertaken by international, national, regional and local governments and health officials; and a structural shift in the global economy and its demand for oil and natural gas.
Some parts of the world where our services could be provided or where our consumers for products are located have experienced governmental corruption to some degree and, in certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practice and could impact business.
Some parts of the world where our services are or could be provided or where our consumers for products are located have experienced governmental corruption to some degree and, in certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practice and could impact business.
The following factors, in addition to other factors described in this “Risk Factors” section and elsewhere in this Report, may have a significant impact on the market price of our common stock: • investor perception of us and the industry and markets in which we operate; • general financial, domestic, international, economic, and market conditions, including overall fluctuations in the U.S. equity markets; • increased focus by the investment community on sustainability practices at our company and in the oil and natural gas industry generally; • changes in customer needs, expectations or trends and our ability to maintain relationships with key customers; • our ability to implement our business strategy; • changes in our capital structure, including the issuance of additional debt; • public announcements (including the timing of these announcements) regarding our business, financial performance and prospects or new services or products, service or product enhancements, technological advances or strategic actions, such as acquisitions or divestitures, restructurings or significant contracts, by our competitors or us; • trading activity in our stock, including portfolio transactions in our stock by us, our executive officers and directors, and significant stockholders or trading activity that results from the ordinary course rebalancing of stock indices in which we may be included; • any elimination of, or downward revision in, our stock buyback program or dividend payments; • short-interest in our common stock, which could be significant from time to time; • our inclusion in, or removal from, any stock indices; • changes in earnings estimates or buy/sell recommendations by securities analysts; • whether or not we meet earnings estimates of securities analysts who follow us; and • regulatory or legal developments in the United States and foreign countries where we operate. 27 Anti-takeover Measures in Our Charter Documents and Under State Law Could Discourage an Acquisition and Thereby Affect the Related Purchase Price.
The following factors, in addition to other factors described in this “Risk Factors” section and elsewhere in this Report, may have a significant impact on the market price of our common stock: • investor perception of us and the industry and markets in which we operate; • general financial, domestic, international, economic, and market conditions, including overall fluctuations in the U.S. equity markets; • increased focus by the investment community on sustainability practices at our company and in the oil and natural gas industry generally; • changes in customer needs, expectations or trends and our ability to maintain relationships with key customers; • our ability to implement our business strategy; • changes in our capital structure, including the issuance of additional debt; • public announcements (including the timing of these announcements) regarding our business, financial performance and prospects or new services or products, service or product enhancements, technological advances or strategic actions, such as acquisitions or divestitures, restructurings or significant contracts, by our competitors or us; • trading activity in our stock, including portfolio transactions in our stock by us, our executive officers and directors, and significant stockholders or trading activity that results from the ordinary course rebalancing of stock indices in which we may be included; • any elimination of, or downward revision in, our stock buyback program or dividend payments; • short-interest in our common stock, which could be significant from time to time; • our inclusion in, or removal from, any stock indices; • changes in earnings estimates or buy/sell recommendations by securities analysts; • whether or not we meet earnings estimates of securities analysts who follow us; and • regulatory or legal developments in the United States and the foreign countries where we operate. 30 Anti-takeover measures in our charter documents and under state law could discourage an acquisition and thereby affect the related purchase price.
There are increasing financial risks for oil and natural gas producers, as stockholders and bondholders currently invested in oil and natural gas companies and concerned about the potential effects of climate change, ESG and other sustainability-related issues may elect in the future to shift some or all of their investments into non-fossil fuel energy related sectors, or into competitors who are perceived to have stronger ESG practices and disclosures.
There are financial risks for oil and natural gas producers, as stockholders and bondholders currently invested in oil and natural gas companies and concerned about the potential effects of climate change, ESG and other sustainability-related issues may elect in the future to shift some or all of their investments into non-fossil fuel energy related sectors, or into competitors who are perceived to have stronger ESG practices and disclosures.
In November 2021, the United States and other countries entered into the Glasgow Climate Pact, which includes a range of measures designed to address climate change, including but not limited to the phase-out of fossil fuel subsidies, reducing methane emissions 30% by 2030, and cooperating toward the advancement of the development of clean energy.
In November 2021, the United States and other countries entered into the Glasgow Climate Pact, which 23 includes a range of measures designed to address climate change, including but not limited to the phase-out of fossil fuel subsidies, reducing methane emissions 30% by 2030, and cooperating toward the advancement of the development of clean energy.
We also self-insure a number of other risks, including loss of earnings and business interruption and most of our cybersecurity risks, and we do not carry a significant amount of insurance to cover risks of underground reservoir damage. Our insurance may not in all situations provide sufficient funds to protect us from all liabilities that could result from our operations.
We also self-insure a number of risks, including loss of earnings and business interruption and most of our cybersecurity risks, and we do not carry a significant amount of insurance to cover risks of underground reservoir damage. Our insurance may not in all situations provide sufficient funds to protect us from all liabilities that could result from our operations.
Such an accident or other event could cause us to incur substantial expenses in connection with the investigation, remediation and resolution, as well as cause lasting damage to our reputation, loss of customers and an inability to obtain insurance. We have indemnification agreements with many of our customers, and we also maintain liability and other forms of insurance.
Such an accident or other event could cause us to incur substantial expenses in connection with the investigation, remediation and resolution, as well as cause lasting damage to our reputation, loss of customers and an inability to obtain insurance. 16 We have indemnification agreements with many of our customers, and we also maintain liability and other forms of insurance.
For these and other reasons, our contract drilling backlog may not generate sufficient liquidity for us during periods of reduced demand for our services or otherwise. New Technologies May Cause Our Operating Methods, Equipment and Services to Become Less Competitive, and Higher Levels of Capital Expenditures May Be Necessary to Remain Competitive.
For these and other reasons, our contract drilling backlog may not generate sufficient liquidity for us during periods of reduced demand for our services or otherwise. New technologies may cause our operating methods, equipment, products and services to become less competitive, and higher levels of capital expenditures may be necessary to remain competitive.
In this instance, we could be required to purchase materials that we do not have a present need for, pay for materials that we do not take delivery of or pay prices in excess of market prices at the time of purchase. 19 Growth Through Acquisitions, the Building or Upgrading of Equipment and the Development of Technology Is Not Assured.
In this instance, we could be required to purchase materials that we do not have a present need for, pay for materials that we do not take delivery of or pay prices in excess of market prices at the time of purchase. Growth through acquisitions, the building or upgrading of equipment and the development of technology is not assured.
Additionally, new technologies, services or standards could render some of our equipment and services obsolete, which could reduce our competitiveness and have a material adverse impact on our business, financial condition, cash flows and results of operation. Loss of Key Personnel and Competition for Experienced Personnel May Negatively Impact Our Financial Condition and Results of Operations.
Additionally, new technologies, services or standards could render some of our equipment, services and products obsolete, which could reduce our competitiveness and have a material adverse impact on our business, financial condition, cash flows and results of operation. Loss of key personnel and competition for experienced personnel may negatively impact our financial condition and results of operations.
There can be no assurance that acquisition opportunities will be available in the future or that we will be able to execute timely or efficiently any plans for building or upgrading equipment or developing new technology. We are also likely to continue to face intense competition from other companies for available acquisition opportunities.
There can be no assurance that acquisition opportunities will be available in the future or that we will be able to execute timely or efficiently any plans for building or upgrading equipment or developing or acquiring new technology. We are also likely to continue to face intense competition from other companies for available acquisition opportunities.
Because of the impact of local laws, any future international operations in certain areas may be conducted through entities in which local citizens own interests and through entities (including joint ventures) in which we hold only a minority interest or pursuant to arrangements under which we conduct operations under contract to local entities.
Because of the impact of local laws, any current and future international operations in certain areas may be conducted through entities in which local citizens own interests and through entities (including joint ventures) in which we hold only a minority interest or pursuant to arrangements under which we conduct operations under contract to local entities.
We Are Not Fully Insured Against All of These Risks and Our Contractual Indemnity Provisions May Not Fully Protect Us.” Political, Economic and Social Instability Risk and Laws Associated with Conducting International Operations Could Adversely Affect Our Opportunities and Future Business.
We are not fully insured against all of these risks and our contractual indemnity provisions may not fully protect us.” 26 Political, economic and social instability risk and laws associated with conducting international operations could adversely affect our opportunities and future business.
Should we be targeted by any 22 such litigation or investigations, we may incur liability, which, to the extent that societal pressures or political or other factors are involved, could be imposed without regard to the causation of or contribution to the asserted damage, or to other mitigating factors.
Should we be targeted by any such litigation or investigations, we may incur liability, which, to the extent that societal pressures or political or other factors are involved, could be imposed without regard to the causation of or contribution to the asserted damage, or to other mitigating factors.
If any such effects were to occur, they could have an adverse effect on our and our customers’ facilities and operations. Environmental and Occupational Health and Safety Laws and Regulations, Including Violations Thereof, Could Materially Adversely Affect Our Operating Results.
If any such effects were to occur, they could have an adverse effect on our and our customers’ facilities and operations. 24 Environmental and occupational health and safety laws and regulations, including violations thereof, could materially adversely affect our operating results.
In addition, the termination or renegotiation of fixed-term contracts without the receipt of early termination payments could have a material adverse effect on our business, financial condition, cash flows and results of operations.
In addition, the termination, suspension or renegotiation of fixed-term contracts without the receipt of early termination payments could have a material adverse effect on our business, financial condition, cash flows and results of operations.
Accordingly, high competition and a surplus of equipment can cause oil and natural gas service contractors to have difficulty maintaining pricing, utilization and profit margins and, at times, result in operating losses.
Accordingly, high competition and a surplus of equipment and products can cause oil and natural gas service contractors to have difficulty maintaining pricing, utilization and profit margins and, at times, result in operating losses.
In 2021, President Biden issued an executive order imposing a moratorium on new oil and gas leasing on federal lands and offshore waters pending completion of a comprehensive review and reconsideration of federal oil and gas permitting and leasing practices.
In 2021, President Biden issued an executive order imposing a moratorium on new oil and natural gas leasing on federal lands and offshore waters pending completion of a comprehensive review and reconsideration of federal oil and natural gas permitting and leasing practices.
International operations are subject to certain political, economic and other uncertainties generally not encountered in U.S. operations, including increased risks of social and political unrest, changing political conditions and changing laws and policies affecting trade and investment, strikes, work stoppages, labor disputes and other slowdowns, terrorism, war, kidnapping of employees, blockades, regional economic downturns, nationalization, forced negotiation or modification of contracts, difficulty resolving disputes and enforcing contractual rights, difficulty in collecting international accounts receivable, potentially longer payment cycles, expropriation of equipment as well as expropriation of oil and gas exploration and drilling rights, foreign taxation and customs regulations, the overlap of different tax structures, changes in taxation policies, foreign exchange restrictions and restrictions on repatriation of income and capital, currency rate fluctuations, increased governmental ownership and regulation of the economy and industry in the markets in which we may operate, economic and financial instability of national oil companies, and restrictive governmental regulation, bureaucratic delays and general hazards associated with foreign sovereignty over certain areas in which operations are conducted.
International operations and sales or rentals of products are subject to certain political, economic and other uncertainties generally not encountered in U.S. operations, including increased risks of social and political unrest, changing political conditions and changing laws and policies affecting trade and investment, strikes, work stoppages, labor disputes and other slowdowns, terrorism, war, kidnapping of employees, blockades, regional economic downturns, nationalization, forced negotiation or modification of contracts, difficulty resolving disputes and enforcing contractual rights, difficulty in collecting international accounts receivable, potentially longer payment cycles, expropriation of equipment as well as expropriation of oil and natural gas exploration and drilling rights, foreign taxation and customs regulations, the overlap of different tax structures, changes in taxation policies, foreign exchange restrictions and restrictions on repatriation of income and capital, currency rate fluctuations, increased governmental ownership and regulation of the economy and industry in the markets in which we may operate, economic and financial instability of national oil companies, and restrictive governmental regulation, bureaucratic delays and general hazards associated with foreign sovereignty over certain areas in which operations are conducted.
Additionally, during depressed market conditions or otherwise, customers may be unable to satisfy their contractual obligations or may seek to terminate or renegotiate or otherwise fail to honor their contractual obligations, including as a result of their bankruptcy.
Additionally, during depressed market conditions or otherwise, customers may be unable to satisfy their contractual obligations or may seek to terminate, suspend or renegotiate or otherwise fail to honor their contractual obligations, including as a result of their bankruptcy.
We may not be able to consummate those dispositions, and any proceeds may not be adequate to meet any debt service obligations then due. 26 Our Return of Capital to Stockholders, Including Through the Payment of Dividends and Repurchases of our Common Stock, is within the Discretion of our Board of Directors, and There is No Guarantee That We Will Return Capital to Shareholders, Including Through the Payment of Dividends and Repurchases of our Common Stock, in the Future or at Levels Anticipated by our Stockholders.
We may not be able to consummate those dispositions, and any proceeds may not be adequate to meet any debt service obligations then due. 29 Our return of capital to stockholders, including through the payment of dividends and repurchases of our common stock, is within the discretion of our Board of Directors, and there is no guarantee that we will return capital to shareholders, including through the payment of dividends and repurchases of our common stock, in the future or at levels anticipated by our stockholders.
Our customers’ willingness to explore, develop and produce depends largely upon prevailing industry conditions that are influenced by numerous factors over which we have no control, such as: • the supply of and demand for oil and natural gas, including current natural gas storage capacity and usage, • the prices, and expectations about future prices, of oil and natural gas, • the supply of and demand for drilling, pressure pumping and directional drilling services, • the cost of exploring for, developing, producing and delivering oil and natural gas, • the availability of capital for oil and natural gas industry participants, including our customers, and the extent to which they are willing or able to deploy capital, • the availability of and constraints in pipeline, storage and other transportation capacity in the basins in which we operate, • the environmental, tax and other laws and governmental regulations regarding the exploration, development, production, use and delivery of oil and natural gas, and in particular, public pressure on, and legislative and regulatory interest within, federal, state, foreign, regional and local governments to stop, significantly limit or regulate drilling and pressure pumping activities, including hydraulic fracturing, • increased focus by the investment and financing community on sustainability practices in the oil and natural gas industry, and • merger and divestiture activity among oil and natural gas producers.
Our customers’ willingness to explore, develop and produce depends largely upon prevailing industry conditions that are influenced by numerous factors over which we have no control, such as: • the supply of and demand for oil and natural gas, including current natural gas storage capacity and usage, • the prices, and expectations about future prices, of oil and natural gas, • the supply of and demand for drilling services, completion services and drilling products, • the cost of exploring for, developing, producing and delivering oil and natural gas, • the availability of capital for oil and natural gas industry participants, including our customers, and the extent to which they are willing or able to deploy capital, • the availability of and constraints in pipeline, storage and other transportation capacity in the basins in which we operate, • the environmental, tax and other laws and governmental regulations regarding the exploration, development, production, use and delivery of oil and natural gas, and in particular, public pressure on, and legislative and regulatory interest within, federal, state, foreign, regional and local governments to stop, significantly limit or regulate drilling services and completion services activities, including hydraulic fracturing, • increased focus by the investment and financing community and the general public on sustainability practices in the oil and natural gas industry, and • merger and divestiture activity among oil and natural gas producers.
As of December 31, 2022, we had no borrowings outstanding under our revolving credit facility. We also have in place a reimbursement agreement pursuant to which we are required to reimburse the issuing bank on demand for any amounts that it has disbursed under any of our letters of credit issued thereunder.
As of December 31, 2023, we had no borrowings outstanding under our revolving credit facility. We also have in place a reimbursement agreement pursuant to which we are required to reimburse the issuing bank on demand for any amounts that it has disbursed under any of our letters of credit issued thereunder.
If we are unable to meet the ESG standards or investment criteria set by our customers, investors and other parties, which continue to evolve, if we are unable to successfully continue our sustainability enhancement efforts, or if, notwithstanding our own efforts, our industry becomes the focus of increasing ESG and sustainability related pressures, we may lose customers, we may lose investors, our cost of capital may increase, 25 our stock price may be negatively impacted, our reputation may be negatively affected, and it may be more difficult for us to effectively compete.
If we are unable to meet the ESG standards or investment criteria set by our customers, investors and other parties, which continue to evolve, if we are unable to successfully continue our sustainability enhancement efforts, or if, notwithstanding our own efforts, our industry becomes the focus of increasing ESG and sustainability related pressures, we may lose customers, we may lose investors, our cost of capital may increase, our stock price may be negatively impacted, our reputation may be negatively affected, and it may be more difficult for us to effectively compete or assess acquisitions.
There can be no assurance that we will: • identify attractive opportunities in international markets, • have sufficient capital resources to pursue and consummate international opportunities, • successfully integrate international drilling and completion operations or other assets or businesses, • effectively manage the start-up, development and growth of an international organization and assets, • hire, attract and retain the personnel necessary to successfully conduct international operations, or • receive awards for work and successfully improve our financial condition, results of operations, business or prospects as a result of the entry into one or more international markets. 24 In addition, the U.S.
There can be no assurance that we will: • identify attractive opportunities in international markets, • have sufficient capital resources to pursue and consummate international opportunities, • successfully integrate international drilling and completion operations or other assets or businesses, • effectively manage the start-up, development and growth of an international organization and assets, • hire, attract and retain the personnel necessary to successfully conduct international operations, or • receive awards for work and successfully improve our financial condition, results of operations, business or prospects as a result of the entry into one or more international markets.
President Biden and the Democratic Party have identified climate change as a priority, and it is likely that additional executive orders and/or regulatory action targeting greenhouse gas emissions, or prohibiting or restricting oil and gas development activities in certain areas, will be proposed and/or promulgated during the Biden Administration.
President Biden and the Democratic Party have identified climate change as a priority, and it is possible that additional executive orders and/or regulatory action targeting greenhouse gas emissions, or prohibiting or restricting oil and natural gas development activities in certain areas, will be proposed and/or promulgated during the Biden Administration.
Higher oil and natural gas prices do not necessarily result in increased activity because demand for our services is generally driven by our customers’ expectations of future oil and natural gas prices, as well as our customers’ ability to access sources of capital to fund their operating and capital expenditures.
Higher oil and natural gas prices do not necessarily result in increased activity because demand for our services is generally driven by our customers’ expectations of future oil and natural gas prices, as well as our customers’ ability to access, and willingness to deploy, capital to fund their operating and capital expenditures.
As an owner and operator of land-based drilling rigs and pressure pumping equipment, a manufacturer and servicer of equipment and automation to the energy, marine and mining industries and a provider of directional drilling and other services, we may be deemed to be a responsible party under these laws and regulations.
As an owner and operator of land-based drilling rigs and completion services equipment, a manufacturer and servicer of equipment and automation to the energy, marine and mining industries and a provider of directional drilling and other services, we may be deemed to be a responsible party under these laws and regulations.
Foreign Corrupt Practices Act (“FCPA”) and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to foreign officials for the purpose of obtaining or retaining business.
In addition, the U.S. Foreign Corrupt Practices Act (“FCPA”) and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to foreign officials for the purpose of obtaining or retaining business.
The applicable margin on SOFR rate loans varies from 1.00% to 2.00% and the applicable margin on base rate loans varies from 0.00% to 1.00%, in each case determined based upon our credit rating. As of December 31, 2022, the applicable margin on SOFR rate loans was 1.75% and the applicable margin on base rate loans was 0.75%.
The applicable margin on SOFR rate loans varies from 1.00% to 2.00% and the applicable margin on base rate loans varies from 0.00% to 1.00%, in each case determined based on our credit rating. As of December 31, 2023, the applicable margin on SOFR rate loans was 1.75% and the applicable margin on base rate loans was 0.75%.
Many of our office personnel have moved to a “remote work” model. This model has significantly increased the use of remote networking and online conferencing services that enable employees to work outside of our corporate infrastructure and, in some cases, use their own personal devices. This may expose us to additional cybersecurity risks or related incidents.
Some of our office personnel remain on a “remote work” model. This model has significantly increased the use of remote networking and online conferencing services that enable employees to work outside of our corporate infrastructure and, in some cases, use their own personal devices. This may expose us to additional cybersecurity risks or related incidents.
We continually attempt to develop or acquire new technologies for use in our business. In the event that we are successful in developing or acquiring new technologies for use in our business, there is no guarantee of future demand for those technologies. Customers may be reluctant or unwilling to adopt our new technologies.
In the event that we are successful in developing or acquiring new technologies for use in our business, there is no guarantee of future demand for those technologies. Customers may be reluctant or unwilling to adopt our new technologies.
A prolonged period of lower oil and natural gas prices or changes in customer preferences and requirements could result in future impairment to our long-lived assets. For example, we recognized impairment charges of $4.5 million, $267 million and $423 million in 2022, 2021 and 2020, respectively.
A prolonged period of lower oil and natural gas prices or changes in customer preferences and requirements could result in future impairment to our long-lived assets. For example, we recognized impairment charges of $7.0 million, $4.5 million and $267 million in 2023, 2022 and 2021, respectively.
Periodically, the oilfield services industry has experienced shortages of equipment for upgrades, drill pipe, replacement parts and other equipment and materials, including, in the case of our pressure pumping operations, proppants, cement, acid, gel and water.
Periodically, the oilfield services industry has experienced shortages of equipment for upgrades, drill pipe, raw materials, replacement parts and other equipment and materials, including, in the case of our completion services operations, proppants, cement, acid, gel and water.
The global economic environment in the past has experienced significant deterioration in a relatively short period, such as a result of the COVID-19 pandemic or the conflict in Ukraine, and there is no assurance that the global economic environment, or expectations for the global economic environment, will not quickly deteriorate again due to one or more factors, including as a result of actual or perceived threats to geopolitical stability and changes in production from OPEC, its members and other oil-producing nations.
The global economic environment in the past has experienced significant deterioration in a relatively short period, such as a result of the COVID-19 pandemic or the ongoing armed conflicts between Russia and Ukraine and Israel and Hamas, and there is no assurance that the global economic environment, or expectations for the global economic environment, will not quickly deteriorate again due to one or more factors, including as a result of actual or perceived threats to geopolitical stability and changes in production from OPEC, its members and other oil-producing nations.
In addition, technological changes, process improvements and other factors that increase operational efficiencies could continue to result in oil and natural gas wells being drilled 17 and completed more quickly, which could reduce the number of revenue earning days. Technological and process developments in the pressure pumping and directional drilling businesses could have similar effects.
In addition, technological changes, process improvements and other factors that increase operational efficiencies could continue to result in oil and natural gas wells being drilled and completed more quickly, which could reduce the number of revenue earning days. Technological and process developments in the completion services and other drilling services businesses could have similar effects.
Prices, and expectations about future prices, are affected by factors such as: • market supply and demand, • the desire and ability of the Organization of Petroleum Exporting Countries (“OPEC”), its members and other oil-producing nations, such as Russia, to set and maintain production and price targets, • the level of production by OPEC and non-OPEC countries, • domestic and international military, political, economic, health and weather conditions, including the impacts of war, including the impact of the ongoing conflict in Ukraine, or terrorist activity, pandemics and other unexpected disasters or events, • changes to tax, tariff and import/export regulations and sanctions by the United States or other countries, • legal and other limitations or restrictions on exportation and/or importation of oil and natural gas, • technical advances affecting energy consumption and production, and • the development, price, availability and market acceptance of alternative fuels and energy sources. 14 All of these factors are beyond our control.
Prices, and expectations about future prices, are affected by factors such as: • market supply and demand, • the desire and ability of the Organization of Petroleum Exporting Countries (“OPEC”), its members and other oil-producing nations, such as Russia, to set and maintain production and price targets, • the level of production by OPEC and non-OPEC countries, 14 • domestic and international military, political, economic, health and weather conditions, including the impacts of war, including the impact of the ongoing armed conflicts between Russia and Ukraine and Israel and Hamas and the continuation of, or any escalation in the severity of, these conflicts, or terrorist activity, pandemics and other unexpected disasters or events, • changes to tax, tariff and import/export regulations and sanctions by the United States or other countries, • legal and other limitations or restrictions on exportation and/or importation of oil and natural gas, • technical advances affecting energy consumption and production, and • the development, price, availability and market acceptance of alternative fuels and energy sources.
We depend on our customers’ willingness to make operating and capital expenditures to explore for, develop and produce oil and natural gas in the United States. When these expenditures decline, our business may suffer.
We depend on our customers’ willingness to make operating and capital expenditures to explore for, develop and produce oil and natural gas. When these expenditures decline, our business may suffer.
In the absence of federal GHG-limiting legislation, the EPA has determined that GHG emissions present a danger to public health and the environment and has adopted regulations that, among other things, establish construction and operating permit reviews for GHG emissions from certain large stationary sources, require the monitoring and annual reporting of GHG emissions from certain oil and natural gas system sources, implement CAA emission standards directing the reduction of methane emissions from certain new, modified, or reconstructed facilities in the oil and natural gas sector, and together with the DOT, implement GHG emissions limits on vehicles manufactured for operation in the United States.
In the absence of federal GHG-limiting legislation, the EPA has determined that GHG emissions present a danger to public health and the environment and has adopted regulations that, among other things, establish construction and operating permit reviews for GHG emissions from certain large stationary sources, require the monitoring and annual reporting of GHG emissions from certain oil and natural gas system sources, implement CAA emission standards directing the reduction of methane emissions from certain new, modified, or reconstructed facilities in the oil and natural gas sector, and together with the U.S.
The cost of compliance with these laws and regulations could be substantial. A failure to comply with these requirements could expose us to: • substantial civil, criminal and/or administrative penalties or judgments, • modification, denial or revocation of permits or other authorizations, • imposition of limitations on our operations, and • performance of site investigatory, remedial or other corrective actions.
A failure to comply with these requirements could expose us to: • substantial civil, criminal and/or administrative penalties or judgments, • modification, denial or revocation of permits or other authorizations, • imposition of limitations on our operations, and • performance of site investigatory, remedial or other corrective actions.
The market for our services is characterized by continual technological and process developments that have resulted in, and will likely continue to result in, substantial improvements in the functionality and performance, including environmental performance, of drilling rigs and pressure pumping and other equipment.
The market for our services and products is characterized by continual technological and process developments that have resulted in, and will likely continue to result in, substantial improvements in the functionality and performance, including environmental performance, of drilling services equipment, completion services equipment, and drilling products.
Accordingly, we may have to allocate a higher proportion of our capital expenditures to maintain and improve existing rigs and pressure pumping and other equipment, purchase and construct newer, higher specification drilling rigs and pressure pumping and other equipment to meet the increasingly sophisticated needs of our customers, and develop new and improved technology and data analytics.
Accordingly, we may have to allocate a higher proportion of our capital expenditures to maintain and improve existing rigs and completion services and other equipment, purchase and construct newer, higher specification drilling rigs and completion services and other equipment to meet the increasingly sophisticated needs of our customers, and develop new and improved technology, specialized drill bit solutions and data analytics.
A surplus of operable land drilling rigs, increasing rig specialization and surplus of pressure pumping and directional drilling equipment, which can be exacerbated by capital spending reductions by our customers, could affect the fair market value of our contract drilling, pressure pumping and directional drilling equipment, which in turn could result in additional impairments of our assets.
A surplus of operable land drilling rigs, other drilling services equipment and drilling products, increasing rig specialization and surplus of completion services equipment, which can be exacerbated by capital spending reductions by our customers, could affect the fair market value of our drilling services equipment, completion services equipment, and drilling products, which in turn could result in additional impairments of our assets.
Our ability to access capital markets for financing could be limited by oil and gas prices, our existing capital structure, our credit ratings, the state of the economy, the health or market perceptions of the drilling and overall oil and gas industry, the liquidity of the capital markets and ESG considerations and other factors.
Our ability to access capital markets for financing could be limited by oil and natural gas prices, our existing capital structure, the state of the economy, the health or market perceptions of the drilling and overall oil and natural gas industry, the liquidity of the capital markets and ESG-related regulatory and investor requirements and other factors.
Other actions impacting oil and natural gas production activities that could be pursued by the Biden administration may include more restrictive requirements for the establishment of pipeline infrastructure or the permitting of liquified natural gas export facilities.
Other actions impacting oil and natural gas production activities that could be pursued by the Biden administration may include more restrictive requirements for the establishment of pipeline infrastructure or the permitting of liquified natural gas export facilities, such as the January 2024 pause on permitting of certain new liquified natural gas export facilities.
We provide products, including electrical controls, to customers involved in oil and gas exploration, development and production and in the marine and mining industries.
We provide products, including specialized drill bit solutions and electrical controls, to customers involved in oil and natural gas exploration, development and production and in the marine and mining industries.
We cannot predict the future level of competition or surplus equipment in the oil and natural gas service businesses or the level of demand for our contract drilling, pressure pumping or directional drilling services.
We cannot predict the future level of competition or surplus equipment and products in the oil and natural gas service businesses or the level of demand for our drilling services, completion services or drilling products.
Our customers are increasingly demanding the services of newer, higher specification drilling rigs and pressure pumping and other equipment, as well as new and improved technology, such as drilling automation technology and lower-emissions operations and services, and data analytics.
Our customers are increasingly demanding the services of newer, higher specification drilling rigs and completion services and other equipment, as well as new and improved technology, such as drilling automation technology and lower-emissions operations and services, 17 specialized drill bit solutions and data analytics.
Our operations are subject to many hazards inherent in the businesses in which we operate, including inclement weather, blowouts, explosions, fires, loss of well control, motor vehicle accidents, equipment failure, pollution, exposure and reservoir damage.
Our operations are subject to many hazards inherent in the businesses in which we operate, including inclement weather, blowouts, explosions, fires, loss of well control, motor vehicle accidents, equipment failure, unplanned power outages and surges, computer system disruptions or cybersecurity incidents, pollution, exposure and reservoir damage.
Severe shortages, delays in delivery and interruptions in supply could increase our costs and limit our ability to operate, maintain, upgrade and construct our drilling rigs and pressure pumping and other equipment and could have a material adverse effect on our business, financial condition, cash flows and results of operations. Our Business Is Subject to Cybersecurity Risks and Threats.
Severe shortages, delays in delivery and interruptions in supply could increase our costs and limit our ability to construct, operate, maintain and upgrade drilling services equipment, completion services equipment, drilling products and other equipment and could have a material adverse effect on our business, financial condition, cash flows and results of operations.
With respect to our consolidated operating revenues in 2022, we received approximately 49% from our ten largest customers, approximately 34% from our five largest customers and 18% from our largest customer.
With respect to our consolidated operating revenues in 2023, we received approximately 49% from our ten largest customers, approximately 35% from our five largest customers and 14% from our largest customer.
Some of these agreements are take-or-pay agreements with minimum purchase obligations. If demand for our services decreases from current levels, demand for the equipment that we use and the materials that we supply as part of these services will also decrease. In addition, our customers may self-source certain materials.
If demand for our services decreases from current levels, demand for the equipment that we use and the materials that we supply as part of these services will also decrease. In addition, our customers may self-source certain materials.
A low commodity price environment or capital spending reductions by our customers due to customer consolidation, investor requirements or other reasons can result in substantially more drilling rigs and pressure pumping equipment being available than are needed to meet demand.
A low commodity price environment or capital spending reductions by our customers due to customer consolidation (which is currently occurring in the industry), investor requirements or other reasons can result in substantially more equipment and products being available than are needed to meet demand.
There can be no assurance that we will: • successfully complete any acquisitions we attempt on the terms announced, or at all, • have sufficient capital resources to complete additional acquisitions, build or upgrade equipment or develop new technology, • through due diligence conducted prior to an acquisition, successfully uncover situations that could result in financial or legal exposure, or appropriately quantify the exposure from known risks, • successfully integrate additional equipment, acquired or developed technology or other assets or businesses into our operations and internal controls, including financial reporting disclosure and cybersecurity and information technology systems, • effectively manage the growth and increased size, complexity and geography of our organization, including as a result of any completed merger or acquisition, • successfully deploy idle, stacked, upgraded or additional equipment and acquired or developed technology, • maintain the crews necessary to operate additional equipment or the personnel necessary to evaluate, acquire, develop and deploy new technology, or • successfully improve our financial condition, results of operations, business or prospects, or provide an adequate return of capital, as a result of any completed acquisition, the building or upgrading equipment or the development of new technology.
There can be no assurance that we will: • successfully complete any acquisitions we attempt on the terms announced, or at all, • have sufficient capital resources to complete additional acquisitions, build or upgrade equipment or develop or acquire new technology, • through due diligence conducted prior to an acquisition, successfully uncover situations that could result in financial or legal exposure, or appropriately quantify the exposure from known risks, • successfully integrate additional equipment, acquired or developed technology or other assets or businesses, including the combination of our business with the businesses of NexTier and Ulterra, into our operations and internal controls, including financial reporting disclosure and cybersecurity and information technology systems, • effectively manage the growth and increased size, complexity and geography of our organization, and increased scrutiny from governmental authorities, including as a result of the NexTier merger, Ulterra acquisition or any other completed merger or acquisition, • maintain existing business relationships and contract terms with our customers, distributors, suppliers, vendors, landlords, joint venture partners and other business partners, as well as with those of any acquired business, such as NexTier or Ulterra, • successfully deploy idle, stacked, upgraded or additional equipment and acquired or developed technology, • maintain key employees, the crews necessary to operate additional equipment, and the personnel necessary to evaluate, acquire, develop and deploy new technology, or be successful in hiring replacements for departing personnel, • avoid unknown liabilities and unforeseen increased expenses or delays associated with the NexTier merger, Ulterra acquisition or any other merger or acquisition, or • successfully improve our financial condition, results of operations, business or prospects, or provide an adequate return of capital, as a result of the NexTier merger, Ulterra acquisition or any other completed acquisition, the building or upgrading equipment or the development of new technology.
Because of applications that use our products and services, a failure of such equipment, or a failure of our customer to maintain or operate the equipment properly, could cause harm to our reputation, contractual and warranty-related liability, damage to the equipment, damage to the property of customers and others, personal injury and environmental contamination, leading to claims against us. 23 Legal Proceedings and Governmental Investigations Could Have a Negative Impact on Our Business, Financial Condition and Results of Operations.
Because of applications that use our products and services, a failure of such equipment, or a failure of our customer to maintain or operate the equipment properly, could cause harm to our reputation, contractual and warranty-related liability, damage to the equipment, damage to the property of customers and others, personal injury and environmental contamination, leading to claims against us.
Additionally, the increased competitiveness of alternative energy sources (such as wind, solar geothermal, tidal, and biofuels) or increased focus on reducing the use of oil and natural gas (such as governmental mandates that ban the sale of new gasoline-powered automobiles, and new legislation such as the Inflation Reduction Act of 2022, which contains tax inducements and other provisions that incentivize investment, development, and deployment of alternative energy sources and technologies) could reduce demand for oil and natural gas and therefore for our services, which would lead to a reduction in our revenues.
Additionally, the increased competitiveness of alternative energy sources (such as wind, solar geothermal, tidal, and biofuels) or increased focus on reducing the use of oil and natural gas (such as governmental mandates that ban the sale of new gasoline-powered automobiles, and new legislation such as the Inflation Reduction Act of 2022, which contains tax inducements and other provisions that incentivize investment, development, and deployment of alternative energy sources and technologies) could reduce demand for oil and natural gas and therefore for our services, which would lead to a reduction in our revenues. 21 Risks Relating to the NexTier Merger and Ulterra Acquisition Our ability to utilize our historic U.S. net operating loss carryforwards is expected to be limited as a result of the completion of the NexTier merger.
As a result, the occurrence of a cyber incident could go unnoticed for a period of time. We self-insure most of our cybersecurity risks, and any such incident could have a material adverse effect on our business, financial condition, cash flows and results of operations.
We self-insure most of our cybersecurity risks, and any such incident could have a material adverse effect on our business, financial condition, cash flows and results of operations.
Lawsuits or claims against us could have a material adverse effect on our business, financial condition and results of operations. Any legal proceedings or claims, even if fully indemnified or insured, could negatively affect our reputation among our customers and the public, and make it more difficult for us to compete effectively or obtain adequate insurance in the future.
Any legal proceedings or claims, even if fully indemnified or insured, could negatively affect our reputation among our customers and the public, and make it more difficult for us to compete effectively or obtain adequate insurance in the future.
The occurrence of one or more events arising from the types of risks described above could have a material adverse impact on our business, financial condition and results of operations.
The occurrence of one or more events arising from the types of risks described above could have a material adverse impact on our business, financial condition and results of operations. We are subject to complex and evolving laws and regulations regarding data privacy and security.
Interruptions may be caused by, among other reasons: • lingering effects of the COVID-19 pandemic, • weather issues, whether short-term such as a hurricane, or long-term such as a drought, • labor shortages or other labor issues, • transportation, fuel shortages and other logistical challenges, and • a shortage in the number of vendors able or willing to provide the necessary equipment and materials, including as a result of commitments of vendors to other customers or third parties or bankruptcies or consolidation. 18 These price increases, delays in delivery and interruptions in supply may require us to delay operations, increase capital and repair expenditures or otherwise incur higher operating costs.
Interruptions may be caused by, among other reasons: • weather issues, whether short-term such as a hurricane, or long-term such as a drought, • labor shortages or other labor issues, • transportation, fuel shortages and other logistical challenges, and 18 • a shortage in the number of vendors able or willing to provide the necessary equipment and materials, including as a result of commitments of vendors to other customers or third parties or bankruptcies or consolidation.
The effects of public health crises, pandemics and epidemics, such as the COVID-19 pandemic, including related governmental actions and restrictions related thereto, have had, and may continue to have, a significant adverse impact on the global economy, including the worldwide demand for oil and natural gas, and the level of demand for our services, which has impacted and may continue to impact our business, liquidity, results of operations and our financial condition.
The effects of public health crises, pandemics and epidemics, including related governmental actions and restrictions related thereto, have had, and may in the future have, a significant adverse impact on the global economy, including the worldwide demand for oil and natural gas, and the level of demand for our services.
Our Ability to Access Capital Markets Could be Limited. From time to time, we may need to access capital markets to obtain financing.
Our ability to access capital markets could be limited, and a downgrade in our credit rating could negatively impact our cost of and ability to access capital. From time to time, we may need to access capital markets to obtain financing.
As of December 31, 2022, our contract drilling backlog in the United States for future revenues under term contracts, which we define as contracts with a fixed term of six months or more, was approximately $830 million.
As of December 31, 2023, our contract drilling backlog in the United States for future revenues under term contracts, which we define as contracts with a duration of six months or more, was approximately $700 million. Please see Note 3 of Notes to consolidated financial statements in Item 8 of this Report for a description of our calculation of backlog.
Factors that may impact our credit ratings include debt levels, liquidity, asset quality, cost structure, commodity pricing levels, industry conditions and other considerations. A ratings downgrade could adversely impact our ability in the future to access debt markets, increase the cost of future debt, and potentially require us to post letters of credit for certain obligations.
A ratings downgrade could adversely impact our ability in the future to access debt markets, increase the cost of future debt, impact the terms of future amendments to our senior unsecured credit facility and potentially require us to post letters of credit for certain obligations.
Oil prices averaged $82.79 per barrel in the fourth quarter of 2022 and closed at $77.97 per barrel on January 30, 2023. Natural gas prices (based on the Henry Hub Spot Market Price) averaged $5.55 per MMBtu in the fourth quarter of 2022 and closed at $2.82 per MMBtu on January 30, 2023.
Oil prices averaged $78.53 per barrel in the fourth quarter of 2023 and closed at $78.72 per barrel on February 20, 2024. Natural gas prices (based on the Henry Hub Spot Market Price) averaged $2.74 per MMBtu in the fourth quarter of 2023 and closed at $1.50 per MMBtu on February 20, 2024.
During recent years, there have been significant disruptions and delays across the global supply chain, which have created a tightening of supplies and shortages in a number of areas, including basic raw materials.
These price increases, delays in delivery and interruptions in supply may require us to delay operations, increase capital and repair expenditures or otherwise incur higher operating costs. During recent years, there have been significant disruptions and delays across the global supply chain, which have created a tightening of supplies and shortages in a number of areas, including basic raw materials.
The current demand for equipment and services and improved market fundamentals remain dependent on macro conditions, including commodity prices, geopolitical environment, inflationary pressures, economic conditions in the United States and elsewhere, response to the COVID-19 pandemic (including any resurgences and/or lockdowns in the United States and abroad) and continued focus by exploration and production companies and service companies on capital discipline.
The current demand for equipment and services remains dependent on macro conditions, including commodity prices, geopolitical environment, inflationary pressures, economic conditions in the United States and elsewhere, as well as customer consolidation and focus by exploration and production companies and service companies on capital returns.
The nature of our business makes us susceptible to legal proceedings and governmental investigations from time to time. In addition, during periods of depressed market conditions, we may be subject to an increased risk of our customers, vendors, current and former employees and others initiating legal proceedings against us.
In addition, during periods of depressed market conditions, we may be subject to an increased risk of our customers, vendors, current and former employees and others initiating legal proceedings against us. Lawsuits or claims against us could have a material adverse effect on our business, financial condition and results of operations.
In particular, U.S. sanctions are targeted against certain countries that are heavily involved in the oil and gas industry. The laws and regulations concerning import and export activity, recordkeeping and reporting, including customs, export controls and economic sanctions, are complex and constantly changing.
The laws and regulations concerning import and export activity, recordkeeping and reporting, including customs, export controls and economic sanctions, are complex and constantly changing.
We could also face fines, sanctions and other penalties from authorities in the relevant foreign jurisdictions, including prohibition of our participating in or curtailment of business operations in those jurisdictions and the seizure of drilling rigs, pressure pumping equipment or other assets.
We could also face fines, sanctions and other penalties from authorities in the relevant foreign jurisdictions, including prohibition of our participating in or curtailment of business operations in those jurisdictions and the seizure of drilling rigs, completion services equipment, manufacturing facilities, drilling products or other assets. 27 Many countries, including the United States, control the import and export of certain goods, services and technology and impose related import and export recordkeeping and reporting obligations.
As of December 31, 2022, no amounts had been disbursed under any letters of credit, and we had $65.0 million in letters of credit outstanding under the reimbursement agreement. Interest rates could rise for various reasons in the future and increase our total interest expense, depending upon the amounts borrowed at floating rates under these agreements or under future agreements.
Interest rates could rise for various reasons in the future and increase our total interest expense, depending upon the amounts borrowed at floating rates under these agreements or under future agreements, as well as the terms of any future amendments to our existing agreements or future agreements.
A Downgrade in Our Credit Rating Could Negatively Impact Our Cost of and Ability to Access Capital. Our ability to access capital markets or to otherwise obtain sufficient financing is enhanced by our senior unsecured debt ratings as provided by major U.S. credit rating agencies.
Additionally, our ability to access capital markets or to otherwise obtain sufficient financing is enhanced by our senior unsecured debt ratings as provided by major U.S. credit rating agencies. Factors that may impact our credit ratings include debt levels, liquidity, asset quality, cost structure, commodity pricing levels, industry conditions and other considerations.
We have grown our drilling rig fleet and pressure pumping fleet and expanded our business lines and use of technology in the past through mergers, acquisitions, upgrades, new construction and technology development.
We have grown our drilling rig fleet and completion services fleet and expanded our business lines and use of technology in the past through mergers, acquisitions, upgrades, new construction and technology development. For example, in 2023, we significantly expanded our completions business through the NexTier merger, and we added a specialized drill bit solutions business through the Ulterra acquisition.
We could also be required to pay license fees or royalties for the use of equipment or technology or provision of services or products. In addition, we may lose a competitive advantage in the event we are unsuccessful in enforcing our rights against third parties.
We could also be required to pay license fees or royalties for the use of equipment or technology or provision of services or products.
Technology disputes involving us or our customers or supplying vendors could have a material adverse impact on our business, financial condition, cash flows and results of operations. The Design, Manufacture, Sale and Servicing of Products, including Electrical Controls, May Subject Us to Liability for Personal Injury, Property Damage and Environmental Contamination Should Such Equipment Fail to Perform to Specifications.
The design, manufacture, sale or rental and servicing of products, including drill bits and electrical controls, may subject us to liability for personal injury, property damage and environmental contamination should such equipment fail to perform to specifications.
The United States is currently a member of the Paris Agreement, which requires countries to review and “represent a progression” in their nationally determined contributions, which set emissions reduction goals, every five years. Under the Paris Agreement, the Biden Administration has committed the United States to reducing its greenhouse gas emissions by 50-52% from 2005 levels by 2030.
Department of Transportation, implement GHG emissions limits on vehicles manufactured for operation in the United States. The United States is currently a member of the Paris Agreement, which requires countries to review and “represent a progression” in their nationally determined contributions, which set emissions reduction goals, every five years.
Interest is paid on the outstanding principal amount of borrowings under the credit facility at a floating rate based on, at our election, the SOFR rate or base rate.
We have in place a committed senior unsecured credit facility that includes a revolving credit facility. Interest is paid on the outstanding principal amount of borrowings under the credit facility at a floating rate based on, at our election, the SOFR rate (subject to a 0.10% per annum adjustment) or base rate, in each case subject to a 0% floor.
We provide contract drilling services in Colombia, we sell products, including electrical controls, for use in numerous oil and gas producing regions outside of North America, and through our Superior QC business, we occasionally provide remote data analytics and other services to customers to support their operations outside of the United States.
In addition, through our Superior QC business, we occasionally provide remote data analytics and other services to customers to support their operations outside of the United States. We also continue to evaluate opportunities from time to time to provide our services and products outside of the United States.
Incurring a liability for which we are not fully indemnified or insured could have a material adverse effect on our business, financial condition, cash flows and results of operations. 16 We maintain insurance coverage of types and amounts that we believe to be customary in the industry, but we are not fully insured against all risks, either because insurance is not available or because of the high premium costs.
Incurring a liability for which we are not fully indemnified or insured could have a material adverse effect on our business, financial condition, cash flows and results of operations.
The majority of the intellectual property rights relating to our drilling rigs, pressure pumping equipment and directional drilling services are owned by us or certain of our supplying vendors.
Our services and products use proprietary technology and equipment, which can involve potential infringement of a third party’s rights, or a third party’s infringement of our rights, including patent rights. The majority of the intellectual property rights relating to our drilling services equipment, completion services equipment, and drilling products are owned by us or certain of our supplying vendors.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changePressure Pumping — Our pressure pumping services are supported by multiple offices and yard facilities located in Texas and Pennsylvania. Directional Drilling — Our directional drilling services are supported by multiple offices and yard facilities located throughout our areas of operations, including Texas, North Dakota, and Ohio.
Biggest changeOur telephone number at that address is (281) 765-7100. Drilling Services — Our drilling services are supported by multiple offices and yard facilities located throughout our areas of operations, including Texas, Oklahoma, Colorado, North Dakota, Wyoming, Pennsylvania, Ohio, and internationally in Colombia. Our servicing of equipment for drilling contractors is supported by offices and yard facilities located in Texas.
Item 2. Properties Our property consists primarily of drilling rigs, pressure pumping equipment and related equipment. We own substantially all of the equipment used in our businesses. Our corporate headquarters is in leased office space and is located at 10713 W. Sam Houston Parkway N., Suite 800, Houston, Texas, 77064. Our telephone number at that address is (281) 765-7100.
Item 2. Properties Our property consists primarily of drilling rigs and related equipment, completion services equipment and rental bits. We own substantially all of the equipment used in our businesses. Our corporate headquarters is in leased office space and is located at 10713 W. Sam Houston Parkway N., Suite 800, Houston, Texas, 77064.
We believe that our existing facilities are suitable and adequate to meet our needs. We incorporate by reference in response to this item the information set forth in Item 1 of this Report and the information set forth in Note 6 of the Notes to Consolidated Financial Statements included in Item 8 of this Report.
We incorporate by reference in response to this item the information set forth in Item 1 of this Report and the information set forth in Note 6 of the Notes to Consolidated Financial Statements included in Item 8 of this Report.
Our interests in oil and natural gas properties are primarily located in Texas and New Mexico. We own our administrative offices in Snyder, Texas, as well as several other facilities. We also lease a number of facilities, and we do not believe that any one of the owned or leased facilities is individually material to our operations.
Our interests in oil and natural gas assets are primarily located in Texas and New Mexico. We own or lease administrative offices, manufacturing facilities, research centers, and other facilities throughout the world, none of which is individually material. We believe that our existing facilities are suitable and adequate to meet our needs.
Our oilfield rental operations are supported by offices and yard facilities located in Texas, Oklahoma and Ohio. Our servicing of equipment for drilling contractors is supported by offices and yard facilities located in Texas. Our electrical controls and automation operation is supported by an office and yard facility in Texas.
Our electrical controls and automation operation is supported by an office and yard facility in Texas. 32 Completion Services — Our completion services are supported by multiple offices and yard facilities located in the Permian, Marcellus Shale/Utica Basins, Haynesville and Eagle Ford, among others.
Removed
Our primary administrative office, which is located in Snyder, Texas, is owned and includes approximately 37,000 square feet of office and storage space. Contract Drilling — Our drilling services are supported by multiple offices and yard facilities located throughout our areas of operations, including Texas, Oklahoma, Colorado, North Dakota, Wyoming, Pennsylvania, Ohio, and internationally in Colombia.
Added
Drilling Products — Our drilling products segment is supported by multiple offices and manufacturing and distributing facilities located through North America and internationally in over 30 countries. Other — Our oilfield rental operations are supported by offices and yard facilities located in Texas, Oklahoma and Ohio.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeFiscal Year Ended December 31, 2017 2018 2019 2020 2021 2022 Company/Index ($) ($) ($) ($) ($) ($) Patterson-UTI Energy, Inc. 100.00 45.37 46.77 23.94 38.85 78.35 S&P 500 Index 100.00 95.62 125.72 148.85 191.58 156.88 S&P SmallCap 600 Index 100.00 91.52 112.37 125.05 158.59 133.06 Oilfield Service Index 100.00 54.78 54.48 31.56 38.10 61.53 Old Peer Group Index 100.00 63.49 63.03 37.28 48.05 76.33 The foregoing graph is based on historical data and is not necessarily indicative of future performance.
Biggest changeFiscal Year Ended December 31, 2018 2019 2020 2021 2022 2023 Company/Index ($) ($) ($) ($) ($) ($) Patterson-UTI Energy, Inc. 100.00 103.08 52.77 85.63 172.71 113.70 S&P 500 Index 100.00 131.47 155.65 200.29 163.98 207.04 S&P SmallCap 600 Index 100.00 122.74 136.53 173.04 145.10 168.23 Oilfield Service Index 100.00 99.45 57.60 69.55 112.31 114.47 The foregoing graph is based on historical data and is not necessarily indicative of future performance.
(d) Issuer Purchases of Equity Securities The table below sets forth the information with respect to purchases of our common stock made by us during the quarter ended December 31, 2022.
(d) Issuer Purchases of Equity Securities The table below sets forth the information with respect to purchases of our common stock made by us during the quarter ended December 31, 2023.
This graph shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulations 14A or 14C under the Exchange Act or to the liabilities of Section 18 under such Act. 30
This graph shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulations 14A or 14C under the Exchange Act or to the liabilities of Section 18 under such Act. 35
There is no expiration date associated with the buyback program. 29 (e) Performance Graph The following graph compares the cumulative stockholder return of our common stock for the period from December 31, 2017 through December 31, 2022, with the cumulative total return of the S&P 500 Index, the S&P SmallCap 600 Index and the Oilfield Service Index.
There is no expiration date associated with the buyback program. 34 (e) Performance Graph The following graph compares the cumulative stockholder return of our common stock for the period from December 31, 2018 through December 31, 2023, with the cumulative total return of the S&P 500 Index, the S&P SmallCap 600 Index and the Oilfield Service Index.
(b) Holders As of February 9, 2023, there were approximately 800 holders of record of our common stock. (c) Dividends On February 8, 2023, our Board of Directors approved a cash dividend on our common stock in the amount of $0.08 per share to be paid on March 16, 2023 to holders of record as of March 2, 2023.
(b) Holders As of February 9, 2024, there were approximately 800 holders of record of our common stock. (c) Dividends On February 14, 2024, our Board of Directors approved a cash dividend on our common stock in the amount of $0.08 per share to be paid on March 15, 2024 to holders of record as of March 1, 2024.
We elected to replace our previous peer group with the Oilfield Service Index to improve consistency of disclosures between reporting periods. The graph assumes investment of $100 on December 31, 2017 and reinvestment of all dividends. Index Data: Copyright Standard and Poor’s, Inc. Used with permission. All rights reserved.
The graph assumes investment of $100 on December 31, 2018 and reinvestment of all dividends. Index Data: Copyright Standard and Poor’s, Inc. Used with permission. All rights reserved.
Period Covered Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares (or Units) 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) (2) October 2022 — $ — — $ 300,000 November 2022 2,247,013 $ 18.08 2,247,013 $ 259,380 December 2022 1,007,586 $ 16.43 1,007,586 $ 242,827 Total 3,254,599 3,254,599 (1) No shares were withheld in the fourth quarter with respect to employees’ tax withholding obligations upon the vesting of restricted stock units.
Period Covered Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares (or Units) 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) (2) October 2023 58,178 $ 12.87 — $ 281,031 November 2023 1,858,670 $ 11.91 1,834,546 $ 259,183 December 2023 5,121,552 $ 11.07 4,825,639 $ 205,676 Total 7,038,400 6,660,185 (1) 378,215 shares were withheld in the fourth quarter with respect to employees’ tax withholding obligations upon the settlement of performance unit awards and the vesting of restricted stock units.
Purchases may be made at any time without prior notice. Shares of stock purchased under the buyback program are held as treasury shares.
Purchases under the buyback program are made at management’s discretion, at prevailing prices, subject to market conditions and other factors. Purchases may be made at any time without prior notice.
Removed
(2) We have a stock buyback program, which was originally approved by our Board of Directors on September 9, 2013. Our Board of Directors most recently approved an increase of the authorization under the stock buyback program on October 26, 2022.
Added
These shares were acquired at fair market value. These acquisitions were made pursuant to the terms of the Patterson-UTI Energy, Inc. Amended and Restated 2014 Long-Term Incentive Plan, as amended, the Patterson-UTI Energy, Inc. 2021 Long-Term Incentive Plan, as amended, the NexTier Oilfield Solutions Inc. Equity and Incentive Award Plan and the NexTier Oilfield Solutions Inc.
Removed
Under the program, we are authorized to repurchase up to $300 million of our common stock in open market or privately negotiated transactions after October 26, 2022. All purchases executed to date have been through open market transactions. Purchases under the program are made at management’s discretion, at prevailing prices, subject to market conditions and other factors.
Added
(Former C&J Energy) Management Incentive Plan, and not pursuant to the stock buyback program. (2) In September 2013, our Board of Directors approved a stock buyback program. In April 2023, our Board of Directors approved an increase of the authorization under the stock buyback program to allow for an aggregate of $300 million of future share repurchases.
Removed
The graph also shows our previous company-determined 2021 peer group, which consisted of Archrock, Inc., Bristow Group Inc., Cactus, Inc., ChampionX Corp., EQT Corporation, Helix Energy Solutions Group, Inc., Helmerich & Payne, Inc., Liberty Oilfield Services, Inc., Nabors Industries Ltd., NexTier Oilfield Solutions, Inc., NOV Inc., Oceaneering International, Inc., Oil States International, Inc., PDC Energy, Inc., Precision Drilling Corporation, Range Resources Corporation, TechnipFMC Plc. and Transocean Ltd.
Added
In February 2024, our Board of Directors approved an increase of the authorization under the stock buyback program to allow for an aggregate of $1 billion of future share repurchases. All purchases executed to date have been through open market transactions.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

95 edited+96 added−40 removed39 unchanged
Biggest changeThe increase in capital expenditures was primarily due to rig reactivations, higher maintenance capital expenditures and upgrading certain rig components. 34 Year Ended December 31, Pressure Pumping 2022 2021 % Change (Dollars in thousands) Revenues $ 1,022,413 $ 523,756 95.2 % Direct operating costs 781,385 475,953 64.2 % Adjusted gross margin (1) 241,028 47,803 404.2 % Selling, general and administrative 8,763 7,361 19.0 % Depreciation, amortization and impairment 98,162 159,305 (38.4 )% Operating income (loss) $ 134,103 $ (118,863 ) NA Average active spreads (2) 12 8 44.6 % Fracturing jobs 558 422 32.2 % Other jobs 669 754 (11.3 )% Total jobs 1,227 1,176 4.3 % Average revenue per fracturing job $ 1,799.97 $ 1,187.29 51.6 % Average revenue per other job $ 26.95 $ 30.13 (10.6 )% Average revenue per total job $ 833.26 $ 445.37 87.1 % Average direct operating costs per total job $ 636.83 $ 404.72 57.4 % Average adjusted gross margin per total job (3) $ 196.44 $ 40.65 383.2 % Adjusted gross margin as a percentage of revenues (3) 23.6 % 9.1 % 159.3 % Capital expenditures $ 137,935 $ 34,676 297.8 % (1) Adjusted gross margin is defined as revenues less direct operating costs (excluding depreciation, amortization and impairment expense).
Biggest changeYear Ended December 31, Completion Services (1) 2022 2021 % Change (Dollars in thousands) Revenues $ 1,022,413 $ 523,756 95.2 % Direct operating costs 781,385 475,953 64.2 % Adjusted gross profit (2) 241,028 47,803 404.2 % Selling, general and administrative 8,763 7,361 19.0 % Depreciation, amortization and impairment 98,162 159,305 (38.4 )% Operating income (loss) $ 134,103 $ (118,863 ) N/A Capital expenditures $ 137,935 $ 34,676 297.8 % (1) Completion services in 2022 and 2021 represents only our legacy pressure pumping business as the NexTier merger was completed in 2023 .
As a result, oil and natural gas service contractors have had difficulty sustaining profit margins and, at times, have incurred losses during the 32 downturn periods. We cannot predict either the future level of demand for our oil and natural gas services or future conditions in the oil and natural gas service businesses.
As a result, oil and natural gas service contractors have had difficulty sustaining profit margins and, at times, have incurred losses during the downturn periods. We cannot predict either the future level of demand for our oil and natural gas services or future conditions in the oil and natural gas service businesses.
The ability to recognize a portion of our U.S. federal and state net operating losses resulted in a significant impact, through changes in valuation allowances, in our effective tax rate for the year ended December 31, 2022. This benefit was partly offset by state and local income taxes and various other permanent adjustments.
The ability to recognize a portion of our U.S. federal and state net operating losses resulted in a significant impact, through changes in valuation allowances, in our effective tax rate for the year ended December 31, 2023. This benefit was partly offset by state and local income taxes and various other permanent adjustments.
During the fourth quarter of 2022, we elected to repurchase portions of our 2028 Notes and 2029 Notes (as defined below) in the open market. The principal amounts retired through these transactions totaled $21.0 million of our 2028 Notes and $1.4 million of our 2029 Notes, plus accrued interest.
During the fourth quarter of 2022, we elected to repurchase portions of our 2028 Notes and 2029 Notes (as defined above) in the open market. The principal amounts retired through these transactions totaled $21.0 million of our 2028 Notes and $1.4 million of our 2029 Notes, plus accrued interest.
Due to evolving customer preferences, we refer to certain premium rigs as “Tier-1, super spec” rigs, which we consider as being a super-spec rig that also has a third mud pump and raised drawworks that allow for more clearance underneath the rig floor.
Due to evolving customer preferences, we refer to certain premium rigs as “Tier-1, super spec” rigs, which we consider as being a super-spec rig that also has a third mud pump and raised drawworks that allows for more clearance underneath the rig floor.
Depreciation, amortization and impairment expense decreased due to a lower depreciable asset base in 2022 partially as a result of a $32.2 million impairment charge taken in 2021. This impairment charge was related to the abandonment of approximately 0.2 million horsepower within our pressure pumping fleet.
Depreciation, amortization and impairment expense decreased due to a lower depreciable asset base in 2022 partially as a result of a $32.2 million impairment charge taken in 2021. This impairment charge was related to the abandonment of approximately 0.2 million horsepower within our fleet.
Conversely, in periods when oil and natural gas prices are relatively low or when our customers have a reduced ability to access capital, the demand for our services generally weakens, and we experience downward pressure on pricing for our services.
Conversely, in periods when oil and natural gas prices are relatively low or when our customers have a reduced ability to access, or willingness to deploy capital, the demand for our services generally weakens, and we experience downward pressure on pricing for our services.
Higher oil and natural gas prices do not necessarily result in increased activity because demand for our services is generally driven by our customers’ expectations of future oil and natural gas prices, as well as our customers’ ability to access sources of capital to fund their operating and capital expenditures.
Higher oil and natural gas prices do not necessarily result in increased activity because demand for our services is generally driven by our customers’ expectations of future oil and natural gas prices, as well as our customers’ ability to access, and willingness to deploy, capital to fund their operating and capital expenditures.
(2) 115 121 128 131 (1) The average oil price represents the average monthly WTI spot price as reported by the United States Energy Information Administration. (2) A rig is considered to be operating if it is earning revenue pursuant to a contract on a given day.
(2) 131 128 120 118 (1) The average oil price represents the average monthly WTI spot price as reported by the United States Energy Information Administration. (2) A rig is considered to be operating if it is earning revenue pursuant to a contract on a given day.
Adjusted gross margin is included as a supplemental disclosure because it is a useful indicator of our operating performance.
Adjusted gross profit is included as a supplemental disclosure because it is a useful indicator of our operating performance.
Cash Requirements We believe our current liquidity, together with cash expected to be generated from operations, should provide us with sufficient ability to fund our current plans to maintain and make improvements to our existing equipment, service our debt and pay cash dividends for at least the next 12 months.
Cash Requirements We believe our current liquidity, together with cash expected to be generated from operations, should provide us with sufficient ability to fund our current plans to maintain and make improvements to our existing equipment, service our debt, pay cash dividends and repurchase our common stock and senior notes for at least the next 12 months.
See Non-GAAP Financial Measures below for a reconciliation of GAAP gross margin to adjusted gross margin by segment.
See Non-GAAP Financial Measures below for a reconciliation of GAAP gross profit to adjusted gross profit by segment.
As a result, of the $600 million of revolving credit commitments under the Credit Agreement, the maturity date for $416.7 million of such commitments is March 27, 2026; the maturity date for $133.3 million of such commitments is March 27, 2025; and the maturity date for the remaining $50 million of such commitments is March 27, 2024.
As a result, of the $600 million of revolving credit commitments under the Credit Agreement, the maturity date for $501.7 million of such commitments is March 27, 2026; the maturity date for $48.3 million of such commitments is March 27, 2025; and the maturity date for the remaining $50 million of such commitments is March 27, 2024.
Our insurance accruals are based on claims filed and estimates of claims incurred but not reported and are developed by our management with assistance from our third-party actuary and third-party claims administrator. The insurance accruals are influenced by our past claims experience factors, which have a limited history, and by published industry development factors.
Our insurance accruals are based on claims filed and estimates of claims incurred but not reported and are developed by our management with assistance from our third-party actuary and third-party claims administrator. The insurance accruals are influenced by our past claims experience factors and by published industry development factors.
We recorded corresponding gains on the extinguishment of these amounts totaling $2.3 million and $0.1 million, respectively, net of the proportional write-off of associated deferred financing costs and original issuance discounts. These gains are included in “Interest expense, net of amount capitalized” in our consolidated statements of operations.
We recorded corresponding gains on the extinguishment of these amounts totaling $2.3 million and $0.1 million, respectively, net of the proportional write-off of associated deferred financing costs and original issuance discounts. These gains are included in “Interest expense, net of amount capitalized” in our consolidated statements of operations included as a part of Item 8 of this Report.
Under the terms of the Reimbursement Agreement, we will reimburse Scotiabank on demand for any amounts that Scotiabank has disbursed under any 37 letters of credit.
Under the terms of the Reimbursement Agreement, we will reimburse Scotiabank on demand for any amounts that Scotiabank has disbursed under any of our letters of credit issued thereunder.
Even during periods of historically moderate or high prices for oil and natural gas, companies exploring for oil and natural gas may cancel or curtail programs 41 or reduce their levels of capital expenditures for exploration and production for a variety of reasons, which could reduce demand for our services.
Even during periods of historically moderate or high prices for oil and natural gas, companies exploring for oil and natural gas may cancel or curtail programs or reduce their levels of capital expenditures for exploration and production for a variety of reasons, which could reduce demand for our services. Impact of Inflation Inflation rates have begun to moderate.
In addition to the dependence on oil and natural gas prices and demand for our services, we are highly impacted by operational risks, competition, labor issues, weather, the availability, from time to time, of products used in our pressure pumping business, supplier delays and various other factors that could materially adversely affect our business, financial condition, cash flows and results of operations, including as a result of the COVID-19 pandemic.
In addition to the dependence on oil and natural gas prices and demand for our services, we are highly impacted by operational risks, competition, labor issues, weather, the availability, from time to time, of products used in our businesses, supplier delays and various other factors that could materially adversely affect our business, financial condition, cash flows and results of operations.
We acquired shares of stock from employees during 2022, 2021 and 2020 that are accounted for as treasury stock. Certain of these shares were acquired to satisfy the exercise price and employees’ tax withholding obligations upon the exercise of stock options.
Shares of stock purchased under the buyback program are held as treasury shares. We acquired shares of stock from employees during 2023, 2022 and 2021 that are accounted for as treasury stock. Certain of these shares were acquired to satisfy the exercise price and employees’ tax withholding obligations upon the exercise of stock options.
We have an amended and restated credit agreement (as amended, the “Credit Agreement”), which is a committed senior unsecured revolving credit facility that permits aggregate borrowings of up to $600 million, including a letter of credit facility that, at any time outstanding, is limited to $100 million and a swing line facility that, at any time outstanding, is limited to, the lesser of $50 million and the amount of the swing line provider’s unused commitment.
The Credit Agreement is a committed senior unsecured revolving credit facility that permits aggregate borrowings of up to $600 million, including a letter of credit facility that, at any time outstanding, is limited to $100 million and a swing line facility that, at any time outstanding, is limited to the lesser of $50 million and the amount of the swing line provider’s unused commitment.
As of December 31, 2022, we had no borrowings outstanding under our revolving credit facility, and no letters of credit outstanding under the Credit Agreement and, as a result, had available borrowing capacity of approximately $600 million at that date.
As of December 31, 2023, we had no borrowings outstanding under our revolving credit facility. We had $2.6 million in letters of credit outstanding under the Credit Agreement at December 31, 2023 and, as a result, had available borrowing capacity of approximately $597 million at that date.
Liquidity and Capital Resources Our primary sources of liquidity are cash and cash equivalents, availability under our revolving credit facility and cash provided by operating activities. As of December 31, 2022, we had approximately $278 million in working capital, including $138 million of cash and cash equivalents, and approximately $600 million available under our revolving credit facility.
Liquidity and Capital Resources Our primary sources of liquidity are cash and cash equivalents, availability under our revolving credit facility and cash provided by operating activities. As of December 31, 2023, we had approximately $435 million in working capital, including $193 million of cash and cash equivalents, and approximately $597 million available under our revolving credit facility.
(2) 45,216 29,960 50.9 % Average revenue per operating day - U.S. $ 27.57 $ 21.64 27.4 % Average direct operating costs per operating day - U.S. $ 17.32 $ 15.11 14.6 % Average adjusted gross margin per operating day - U.S. (3) $ 10.25 $ 6.53 56.9 % Average rigs operating - U.S.
(3) 45,216 29,960 50.9 % Average revenue per operating day – U.S. $ 27.57 $ 21.64 27.4 % Average direct operating costs per operating day – U.S. $ 17.32 $ 15.11 14.6 % Average adjusted gross profit per operating day – U.S.
For a full description of the Credit Agreement, the Reimbursement Agreement, the 2028 Notes and the 2029 Notes, see Note 9 of Notes to consolidated financial statements in Item 8 of this Report.
For a full description of the Credit Agreement, the Reimbursement Agreement, the 2028 Notes, the 2029 Notes, the 2033 Notes and the Equipment Loans, see Note 9 of Notes to consolidated financial statements included as a part of Item 8 of this Report.
We determined no triggering events occurred in 2022. See Note 6 of Notes to consolidated financial statements included as a part of Item 8 of this Report.
We determined no triggering events occurred in 2023 related to our long-lived assets. See Note 6 of Notes to consolidated financial statements included as a part of Item 8 of this Report.
As of December 31, 2022, we had working capital of $278 million, including cash and cash equivalents of $138 million, compared to working capital of $148 million, including cash and cash equivalents of $118 million, at December 31, 2021.
As of December 31, 2023, we had working capital of $435 million, including cash and cash equivalents of $193 million, compared to working capital of $278 million, including cash and cash equivalents of $138 million, at December 31, 2022.
If the carrying amount of the asset is not recoverable based on its estimated undiscounted cash flows expected to result from the use and eventual disposition, an impairment loss is recognized in 40 an amount by which its carrying amount exceeds its estimated fair value.
If estimated undiscounted cash flows expected to result from the use and eventual disposition of an asset or asset group is less than its respective carrying amount, an impairment loss is recognized in the amount by which the carrying amount exceeds its estimated fair value.
Additionally, the actual costs to settle the self-insurance liabilities could materially differ from the original estimates and cause us to incur additional costs in future periods associated with prior year claims. Income taxes — We are subject to income taxes in the United States and other foreign jurisdictions.
Additionally, the actual costs to settle the self-insurance liabilities could materially differ from the original estimates and cause us to incur additional costs in future periods associated with prior year claims.
Year Ended December 31, Corporate 2022 2021 % Change (Dollars in thousands) Selling, general and administrative $ 91,973 $ 73,495 25.1 % Merger and integration expenses $ 2,069 $ 12,060 (82.8 )% Depreciation $ 5,171 $ 5,859 (11.7 )% Other operating (income) expenses, net Net gain on asset disposals $ (12,075 ) $ (1,426 ) 746.8 % Legal-related expenses and settlements, net of insurance reimbursements (349 ) 762 NA Research and development 992 1,371 (27.6 )% Other (1,126 ) 31 NA Other operating expense (income), net $ (12,558 ) $ 738 NA Credit loss expense $ — $ (1,500 ) NA Interest income $ 360 $ 222 62.2 % Interest expense $ 40,256 $ 41,978 (4.1 )% Other expense $ (3,273 ) $ (275 ) 1,090.2 % Capital expenditures $ 1,126 $ 1,521 (26.0 )% 36 Selling, general and administrative expense increased primarily due to increased personnel costs as a result of higher headcount, wage growth and changes in stock-based compensation.
The increase in capital expenditures was primarily related to incremental spending in our oilfield rentals and oil and natural gas businesses. 43 Year Ended December 31, Corporate 2022 2021 % Change (Dollars in thousands) Selling, general and administrative $ 91,973 $ 73,495 25.1 % Merger and integration expenses $ 2,069 $ 12,060 (82.8 )% Depreciation $ 5,171 $ 5,859 (11.7 )% Other operating (income) expenses, net $ (12,558 ) $ 738 N/A Credit loss expense $ — $ (1,500 ) N/A Interest income $ 360 $ 222 62.2 % Interest expense $ 40,256 $ 41,978 (4.1 )% Other expense $ (3,273 ) $ (275 ) 1,090.2 % Capital expenditures $ 1,126 $ 1,521 (26.0 )% Selling, general and administrative expense increased primarily due to increased personnel costs as a result of higher headcount, wage growth and changes in stock-based compensation.
The weighted-average remaining vesting periods for these awards were 1.40 years and 1.20 years, respectively as of December 31, 2022. See Note 12 of Notes to consolidated financial statements in Item 8 of this Report for additional discussion regarding our stock-based compensation.
The weighted-average remaining vesting periods for these awards were 1.63 years and 1.13 years, respectively as of December 31, 2023. See Note 12 of Notes to consolidated financial statements in Item 8 of this Report for additional discussion regarding our stock-based compensation. Commitments — As of December 31, 2023, we had commitments to purchase major equipment totaling approximately $153 million.
If we pursue opportunities for growth that require capital, we believe we would be able to satisfy these needs through a combination of working capital, cash flows from operating activities, borrowing capacity under our revolving credit facility or additional debt or equity financing.
If we pursue other opportunities that require capital, we believe we would be able to satisfy these needs through a combination of working capital, cash flows from operating activities, borrowing capacity under our revolving credit facility or additional debt or equity financing. However, there can be no assurance that such capital will be available on reasonable terms, if at all.
Our revenues, profitability and cash flows are highly dependent upon prevailing prices for oil and natural gas and upon our customers’ ability to access capital to fund their operating and capital expenditures.
Impact on our Business from Oil and Natural Gas Prices and Other Factors — Our revenues, profitability and cash flows are highly dependent upon prevailing prices for oil and natural gas, expectations about future prices, and upon our customers’ ability to access, and willingness to deploy, capital to fund their operating and capital expenditures.
Income Taxes The effective tax rate decreased by approximately 0.8% to 7.9% for 2022 compared to 8.7% for 2021. Our effective income tax rate fluctuates based on, among other factors, changes in pre-tax income in countries with varying statutory tax rates, changes in valuation allowances, and the impacts of various other permanent adjustments.
Our effective income tax rate fluctuates based on, among other factors, changes in pre-tax income in countries with varying statutory tax rates, changes in valuation allowances, and the impacts of various other permanent adjustments.
In connection with this review, assets are grouped at the lowest level at which identifiable cash flows are largely independent of other asset groupings. We estimate future cash flows over the life of the respective assets or asset groupings in our assessment of impairment.
Assets are grouped at the lowest level at which identifiable cash flows are largely independent of other asset groupings for impairment assessment. If there is a triggering event, we estimate future cash flows over the life of the respective assets or asset groupings in our assessment of its recoverability.
Recently Issued Accounting Standards For a discussion of recently issued accounting standards, see Note 1 of Notes to consolidated financial statements included as a part of Item 8 of this Report.
For additional information on our accounting policies, see Note 1 of Notes to consolidated financial statements included as a part of Item 8 of this Report.
In October 2022, our Board of Directors approved an increase of the authorization under the stock buyback program to allow for an aggregate of $300 million of future share repurchases. All purchases executed to date have been through open market transactions. Purchases under the program are made at management’s discretion, at prevailing prices, subject to market conditions and other factors.
In April 2023, our Board of Directors approved an increase of the authorization under the stock buyback program to allow for an aggregate of $300 million of future share repurchases. All purchases executed to date have been through open market transactions.
(2) 124 82 50.9 % Capital expenditures $ 255,634 $ 109,894 132.6 % (1) Adjusted gross margin is defined as revenues less direct operating costs (excluding depreciation, amortization and impairment expense). See Non-GAAP Financial Measures below for a reconciliation of GAAP gross margin to adjusted gross margin by segment.
(2) Adjusted gross profit is defined as revenues less direct operating costs (excluding depreciation, amortization and impairment expense). See Non-GAAP Financial Measures below for a reconciliation of GAAP gross profit to adjusted gross profit by segment.
The $12.1 million gain on asset disposals in 2022 was primarily due to the release of an $11.5 million cumulative translation adjustment from accumulated other comprehensive income into net income (loss) in our consolidated statements of operations upon substantially completing our exit from our Canadian operations.
Accordingly, the related gains or losses have been excluded from the results of specific segments. The $12.5 million other operating income in 2022 was primarily due to the release of an $11.5 million cumulative translation adjustment from accumulated other comprehensive income into net income (loss) in our consolidated statements of operations upon substantially completing our exit from our Canadian operations.
Treasury stock acquisitions during the years ended December 31, 2022, 2021 and 2020 were as follows (dollars in thousands): 2022 2021 2020 Shares Cost Shares Cost Shares Cost Treasury shares at beginning of period 84,128,995 $ 1,372,641 83,402,322 $ 1,366,313 77,336,387 $ 1,345,134 Purchases pursuant to stock buyback program 3,254,599 57,173 — — 5,826,266 20,000 Acquisitions pursuant to long-term incentive plan 1,372,101 23,237 451,196 3,727 239,669 1,179 Purchases in connection with Pioneer acquisition — — 275,477 2,601 — — Other 3,027 28 — — — — Treasury shares at end of period 88,758,722 $ 1,453,079 84,128,995 $ 1,372,641 83,402,322 $ 1,366,313 As of December 31, 2022, we had unrecognized compensation costs of $26.0 million and $11.1 million related to our unvested restricted stock units and our unvested Performance Units, respectively.
Upon the issuance of shares for the Pioneer acquisition in October 2021, we withheld shares with respect to Pioneer employees’ tax withholding obligations. 47 Treasury stock acquisitions during the years ended December 31, 2023, 2022 and 2021 were as follows (dollars in thousands): 2023 2022 2021 Shares Cost Shares Cost Shares Cost Treasury shares at beginning of period 88,758,722 $ 1,453,079 84,128,995 $ 1,372,641 83,402,322 $ 1,366,313 Purchases pursuant to stock buyback program 14,086,229 168,631 3,254,599 57,173 — — Acquisitions pursuant to long-term incentive plan 2,735,060 35,965 1,372,101 23,237 451,196 3,727 Purchases in connection with Pioneer acquisition — — — — 275,477 2,601 Other — — 3,027 28 — — Treasury shares at end of period 105,580,011 $ 1,657,675 88,758,722 $ 1,453,079 84,128,995 $ 1,372,641 As of December 31, 2023, we had unrecognized compensation costs of $51.4 million and $11.1 million related to our unvested restricted stock units and our unvested Performance Units, respectively.
Directional Drilling We provide a comprehensive suite of directional drilling services in most major producing onshore oil and gas basins in the United States. Our directional drilling services include directional drilling, measurement-while-drilling and supply and rental of downhole performance motors. We also provide services that improve the statistical accuracy of directional and horizontal wellbores.
We also provide a comprehensive suite of directional drilling services in most major producing onshore oil and natural gas basins in the United States, and we provide services that improve the statistical accuracy of wellbore placement for directional and horizontal wells.
Our active U.S. rig count at December 31, 2022 of 132 rigs was more than the rig count of 111 rigs at December 31, 2021, due in large part to the recovery of oil prices and improved demand for drilling services in the United States. Term contracts help support our operating rig count.
Our active U.S. rig count at December 31, 2023 of 121 rigs was less than the rig count of 132 rigs at December 31, 2022, due in large part to the decline in commodity prices and reduced demand for drilling services in the United States.
Our average active U.S. rig count for the fourth quarter of 2022 was 131 rigs. This was an increase from our average active rig count for the third quarter of 2022 of 128 rigs.
Our average active U.S. rig count for the fourth quarter of 2023 was 118 rigs. This was a decrease from our average active rig count for the third quarter of 2023 of 120 rigs.
In light of these and other factors, we expect oil and natural gas prices to continue to be volatile and to affect our financial condition, operations and ability to access sources of capital.
Natural gas prices (based on the Henry Hub Spot Market Price) averaged $2.74 per MMBtu in the fourth quarter of 2023. In light of these and other factors, we expect oil and natural gas prices to continue to be volatile and to affect our financial condition, operations and ability to access sources of capital.
During 2022, our sources of cash flow included: • $566 million from operating activities, and • $26.1 million in proceeds from the disposal of property and equipment.
During 2023, our sources of cash flow included: • $1.0 billion from operating activities, • $26 million in proceeds from the disposal of property and equipment; and • $396 million in net proceeds before offering expenses from the issuance of our 2033 Notes.
We continue to monitor income tax developments in the United States and other countries where we have legal entities. We recognize tax benefits related to uncertain tax positions when, in our judgment, it is more likely than not that such positions will be sustained on examination, including resolutions of any related appeals or litigation, based on the technical merits.
We recognize tax benefits related to uncertain tax positions when, in our judgment, it is more likely than not that such positions will be sustained on examination, including resolutions of any related appeals or litigation, based on the technical merits. We adjust our liabilities for uncertain tax positions when our judgment changes as a result of new information previously unavailable.
We also have a Reimbursement Agreement (the “Reimbursement Agreement”) with The Bank of Nova Scotia (“Scotiabank”), pursuant to which we may from time to time request that Scotiabank issue an unspecified amount of letters of credit.
On March 16, 2015, we entered into a Reimbursement Agreement (the “Reimbursement Agreement”) with The Bank of Nova Scotia (“Scotiabank”), pursuant to which we may from time to time request that Scotiabank issue an unspecified amount of letters of credit. As of December 31, 2023, we had $87.7 million in letters of credit outstanding under the Reimbursement Agreement.
Depreciation, depletion, amortization and impairment increased primarily due to a $4.5 million impairment in our oil and natural gas business in 2022. The increase in capital expenditures was primarily related to incremental spending in our oilfield rentals and oil and natural gas businesses.
Depreciation, depletion, amortization and impairment increased primarily due to a $4.5 million impairment in our oil and natural gas assets in 2022.
Volatility of Oil and Natural Gas Prices and its Impact on Operations and Financial Condition Our revenue, profitability and cash flows are highly dependent upon prevailing prices for oil and natural gas and expectations about future prices.
We routinely monitor the potential impact of these situations. As of December 31, 2023, we have no unrecognized tax benefits. Volatility of Oil and Natural Gas Prices and its Impact on Operations and Financial Condition Our revenues, profitability and cash flows are highly dependent upon prevailing prices for oil and natural gas and expectations about future prices.
Of the revolving credit commitments, $50 million expires on March 27, 2024, $133.3 million expires on March 27, 2025, and the remaining $416.7 million expires on March 27, 2026. Subject to customary conditions, we may request that the lenders’ aggregate commitments be increased by up to $300 million, not to exceed total commitments of $900 million.
Subject to customary conditions, we may request that the lenders’ aggregate commitments be increased by up to $300 million, not to exceed total commitments of $900 million.
The current demand for equipment and services and strong pricing environment remain dependent on macro conditions, including commodity prices, geopolitical environment, inflationary pressures, economic conditions in the United States and elsewhere, response to the COVID-19 pandemic (including any resurgences and/or lockdowns in the United States and abroad) and continued focus by exploration and production companies and service companies on capital discipline.
The current demand for equipment and services remains dependent on macro conditions, including commodity prices, geopolitical environment, inflationary pressures, economic conditions in the United States and elsewhere, as well as customer consolidation and focus by exploration and production companies and service companies on capital returns.
During 2022, our uses of cash flow included: • $439 million to make capital expenditures for the betterment and refurbishment of drilling and pressure pumping equipment and, to a much lesser extent, equipment for our other businesses, to acquire and procure equipment to support our contract drilling, pressure pumping, directional drilling, oilfield rentals and manufacturing operations, and to fund investments in oil and natural gas properties on a non-operating working interest basis, • $70.1 million for repurchases of our common stock, • $43.1 million to pay dividends on our common stock, • $18.6 million for repurchases of our 2028 Notes, and • $1.2 million for repurchases of our 2029 Notes. 38 We paid cash dividends during the year ended December 31, 2022 as follows: Per Share Total (in thousands) Paid on March 17, 2022 $ 0.04 $ 8,611 Paid on June 16, 2022 0.04 8,652 Paid on September 15, 2022 0.04 8,673 Paid on December 15, 2022 0.08 17,160 Total cash dividends $ 0.20 $ 43,096 On February 8, 2023, our Board of Directors approved a cash dividend on our common stock in the amount of $0.08 per share to be paid on March 16, 2023 to holders of record as of March 2, 2023.
During 2023, our uses of cash flow and borrowings under our revolving credit facility included: • $616 million to make capital expenditures for the betterment and refurbishment of drilling services and completion services equipment and, to a much lesser extent, equipment for our other businesses, to acquire and procure equipment to support our drilling services, completion services, drilling products, oilfield rentals and manufacturing operations, to acquire an aircraft and to fund investments in oil and natural gas properties on a non-operating working interest basis, • $357 million, net of acquired cash, for the Ulterra acquisition, • $65 million, net of acquired cash, for the NexTier merger, 46 • $201 million for repurchases of our common stock, • $100 million to pay dividends on our common stock, • $16 million for payments related to finance leases, • $8 million for repurchases of our 2028 Notes and 2029 Notes, and • $12 million for other investing and financing activities We paid cash dividends during the year ended December 31, 2023 as follows: Per Share Total (in thousands) Paid on March 16, 2023 $ 0.08 $ 16,916 Paid on June 15, 2023 0.08 16,591 Paid on September 21, 2023 0.08 33,217 Paid on December 15, 2023 0.08 33,310 Total cash dividends $ 0.32 $ 100,034 On February 14, 2024, our Board of Directors approved a cash dividend on our common stock in the amount of $0.08 per share to be paid on March 15, 2024 to holders of record as of March 1, 2024.
Direct operating costs increased primarily due to an increase in the number of higher cost fracturing jobs as well as inflationary cost pressure on labor and supplies. Our average revenue per total job increased primarily as a result of a shift in the mix of total jobs toward higher revenue fracturing jobs.
Revenues increased primarily due to an increase in the number of higher revenue fracturing jobs, improved pricing and continued improvement in asset utilization and efficiency. 42 Direct operating costs increased primarily due to an increase in the number of higher cost fracturing jobs as well as inflationary cost pressure on labor and supplies.
(2) 123 82 60 62 2021: Average oil price per Bbl (1) $ 57.79 $ 66.09 $ 70.62 $ 77.45 Average rigs operating per day - U.S. (2) 69 73 80 106 2022: Average oil price per Bbl (1) $ 94.45 $ 108.72 $ 93.18 $ 82.79 Average rigs operating per day - U.S.
(2) 69 73 80 106 2022: Average oil price per Bbl (1) $ 94.45 $ 108.72 $ 93.18 $ 82.79 Average rigs operating per day – U.S. (2) 115 121 128 131 2023: Average oil price per Bbl (1) $ 75.93 $ 73.54 $ 82.25 $ 78.53 Average rigs operating per day – U.S.
Our contract drilling business operates in the continental United States and internationally in Colombia and, from time to time, we pursue contract drilling opportunities in other select markets. Our pressure pumping business operates primarily in Texas and the Appalachian region.
We operate under three reportable business segments: (i) drilling services, (ii) completion services, and (iii) drilling products. Drilling Services Our contract drilling business operates in the continental United States and internationally in Colombia and, from time to time, we pursue contract drilling opportunities in other select markets.
Depreciation, amortization and impairment expense decreased primarily due to a $220 million impairment charge related to the abandonment of 43 legacy non-super-spec rigs and equipment in 2021. Additionally, depreciation, amortization and impairment expense decreased partially due to a lower depreciable asset base during 2022 as a result of the impairment charge taken in 2021.
Depreciation, amortization and impairment expense decreased primarily due to a $220 million impairment charge related to the abandonment of 43 legacy non-super-spec rigs and contract drilling equipment and the abandonment of an $11.4 million developed technology intangible asset and $2.5 million of directional drilling equipment in 2021.
The method of depreciation does not change whenever equipment becomes idle. Maintenance and repairs are charged to expense when incurred. Renewals and betterments which extend the life or improve existing property and equipment are capitalized. See Note 1 of Notes to consolidated financial statements included as a part of Item 8 of this Report.
These estimates may change due to a number of factors such as changes in operating conditions or advances in technology. The method of depreciation does not change whenever equipment becomes idle. Maintenance and repairs are charged to expense when incurred. Renewals and betterments which extend the life or improve existing property and equipment are capitalized.
We had $65.0 million letters of credit outstanding at December 31, 2022 under the Reimbursement Agreement. We maintain letters of credit primarily for the benefit of various insurance companies as collateral for retrospective premiums and retained losses which could become payable under terms of the underlying insurance contracts.
We maintain these letters of credit primarily for the benefit of various insurance companies as collateral for retrospective premiums and retained losses which could become payable under terms of the underlying insurance contracts and compliance with contractual obligations. These letters of credit expire annually at various times during the year and are typically renewed.
We calculate depreciation and amortization on our assets based on the estimated useful lives that we believe are reasonable. The estimated useful lives are subject to key assumptions such as maintenance, utilization and job variation. These estimates may change due to a number of factors such as changes in operating conditions or advances in technology.
No provision for salvage value is considered in determining depreciation of our property and equipment. We calculate depreciation and amortization on our assets based on the estimated useful lives that we believe are reasonable. The estimated useful lives are subject to key assumptions such as maintenance, utilization and job variation.
Year Ended December 31, 2022 2021 2020 (in thousands) Net income (loss) from continuing operations $ 154,658 $ (657,079 ) $ (803,692 ) Income tax expense (benefit) 13,204 (62,702 ) (127,326 ) Net interest expense 39,896 41,756 39,516 Depreciation, depletion, amortization and impairment 483,945 849,178 670,910 Impairment of goodwill — — 395,060 Adjusted EBITDA $ 691,703 $ 171,153 $ 174,468 42 Adjusted Gross Margin We define “Adjusted gross margin” as revenues less direct operating costs (excluding depreciation, depletion, amortization and impairment expense).
Year Ended December 31, 2023 2022 2021 (in thousands) Net income (loss) from continuing operations $ 245,952 $ 154,658 $ (657,079 ) Income tax expense (benefit) 61,152 13,204 (62,702 ) Net interest expense 46,748 39,896 41,756 Depreciation, depletion, amortization and impairment 731,416 483,945 849,178 Merger and integration expense 98,077 2,069 12,060 Adjusted EBITDA $ 1,183,345 $ 693,772 $ 183,213 Adjusted Gross Profit We define “Adjusted gross profit” as revenues less direct operating costs (excluding depreciation, depletion, amortization and impairment expense).
As of December 31, 2022, our rig fleet included 172 super-spec rigs, of which 118 were Tier-1, super-spec rigs. We maintain a backlog of commitments for contract drilling services under term contracts, which we define as contracts with a duration of six months or more.
We maintain a backlog of commitments for contract drilling services under term contracts, which we define as contracts with a duration of six months or more. Our contract drilling backlog in the United States as of December 31, 2023 and 2022 was approximately $700 million and $830 million, respectively.
We invest cash primarily in highly liquid, short-term investments such as overnight deposits and money market accounts.
Trading and Investing — We have not engaged in trading activities that include high-risk securities, such as derivatives and non-exchange traded contracts. We invest cash primarily in highly liquid, short-term investments such as overnight deposits and money market accounts.
We apply significant judgment in estimating the fair value of assets acquired and liabilities assumed, which involves the use of significant estimates and assumptions with respect to market day rates, direct operating costs, rig utilization percentages, expectations regarding the amount of future capital and operating costs, and discount rates.
We apply significant judgment in estimating the fair value of assets acquired and liabilities assumed, which involves the use of significant estimates and assumptions with respect to rig counts, cash flow projections, estimated economic useful lives, operating and capital cost estimates, customer attrition rates, contributory asset charges, royalty rates and discount rates.
Operating lease liabilities totaled $24.7 million at December 31, 2022. See Note 13 of Notes to consolidated financial statements in Item 8 of this Report for additional information on our operating leases as of December 31, 2022. Trading and Investing — We have not engaged in trading activities that include high-risk securities, such as derivatives and non-exchange traded contracts.
Operating lease liabilities totaled $51.4 million and finance lease liabilities totaled $56.9 million at December 31, 2023. See Note 13 of Notes to consolidated financial statements in Item 8 of this Report for additional information on our operating leases as of December 31, 2023.
Total consideration for the acquisition included the issuance of approximately 26.3 million shares of our common stock and payment of $30 million cash, which based on the closing price of our common stock of $9.44 on October 1, 2021, valued the transaction at approximately $278 million.
Total consideration for the acquisition included the issuance of 34.9 million shares of our common stock and payment of approximately $376 million cash, which based on the closing price of our common stock of $14.94 on August 14, 2023, valued the transaction at closing at approximately $897 million. Ulterra is a global provider of specialized drill bit solutions.
We are obligated to pay to Scotiabank interest on all amounts not paid by us on the date of demand or when otherwise due at the LIBOR rate plus 2.25% per annum. A letter of credit fee is payable by us equal to 1.50% times the amount of outstanding letters of credit.
We are obligated to pay to Scotiabank interest on all amounts not paid by us on the date of demand or when otherwise due at the LIBOR rate plus 2.25% per annum, calculated daily and payable monthly, in arrears, on the basis of a calendar year for the actual number of days elapsed, with interest on overdue interest at the same rate as on the reimbursement amounts.
Quarterly average oil prices and our quarterly average number of rigs operating in the United States for 2020, 2021 and 2022 are as follows: 1 st 2 nd 3 rd 4 th Quarter Quarter Quarter Quarter 2020: Average oil price per Bbl (1) $ 45.76 $ 27.81 $ 40.89 $ 42.45 Average rigs operating per day - U.S.
Natural gas prices (based on the Henry Hub Spot Market Price) averaged $2.74 per MMBtu in the fourth quarter of 2023 and closed at $1.50 per MMBtu on February 20, 2024. 36 Quarterly average oil prices and our quarterly average number of rigs operating in the United States for 2021, 2022 and 2023 are as follows: 1 st 2 nd 3 rd 4 th Quarter Quarter Quarter Quarter 2021: Average oil price per Bbl (1) $ 57.79 $ 66.09 $ 70.62 $ 77.45 Average rigs operating per day – U.S.
On November 9, 2022, we entered into Amendment No. 3 to Amended and Restated Credit Agreement (“Amendment No. 3”), which amended our Credit Agreement (as defined below), among us, as borrower, Wells Fargo Bank, National Association, as administrative agent, letter of credit issuer, swing line lender and lender and each of the other letter of credit issuers and lenders party thereto.
The net proceeds before offering expenses were approximately $396 million, which we used to repay amounts outstanding under our revolving credit facility. 37 On August 29, 2023, we entered into Amendment No. 4 to Amended and Restated Credit Agreement (the “Credit Agreement Amendment”), which amended our Amended and Restated Credit Agreement, dated as of March 27, 2018 (as amended, the “Credit Agreement”), by and among us, as borrower, Wells Fargo Bank, National Association, as administrative agent, letter of credit issuer, swing line lender and lender and each of the other letter of credit issuers and lenders party thereto.
Based on contracts currently in place in the United States, we expect an average of 87 rigs operating under term contracts during the first quarter of 2023 and an average of 56 rigs operating under term contracts during 2023. Our average active spread count was 12 in the fourth quarter of 2022, consistent with the third quarter of 2022.
Based on contracts in place in the United States as of February 14, 2024, we expect 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 during 2024.
The current demand for equipment and services and strong pricing environment remain dependent on macro conditions, including commodity prices, geopolitical environment, inflationary pressures, economic conditions in the United States and elsewhere, response to the COVID-19 pandemic (including any resurgences and/or lockdowns in the United States and abroad) and continued focus by exploration and production companies and service companies on capital discipline.
The current demand for equipment and services remains dependent on macro conditions, including commodity prices, geopolitical environment, inflationary pressures, economic conditions in the United States and elsewhere, as well as customer consolidation and focus by exploration and production companies and service companies on capital returns. Oil prices averaged $78.53 per barrel in the fourth quarter of 2023.
However, there can be no assurance that such capital will be available on reasonable terms, if at all. A portion of our capital expenditures can be adjusted and managed by us to match market demand and activity levels. Based on our current outlook for activity, we expect our capital expenditures for 2023 to be approximately $550 million.
A portion of our capital expenditures can be adjusted and managed by us to match market demand and activity levels. Based on our current outlook for activity, we expect our capital expenditures for 2024 to be approximately $740 million. The majority of these expenditures are expected to be used for normal, recurring items necessary to support our business.
Amended and Restated 2014 Long-Term Incentive Plan, as amended (the “2014 Plan”) and the Patterson-UTI Energy, Inc. 2021 Long-Term Incentive Plan (the “2021 Plan”), and not pursuant to the stock buyback program. Upon the issuance of shares for the Pioneer acquisition in October 2021, we withheld shares with respect to Pioneer employees’ tax withholding obligations.
Amended and Restated 2014 Long-Term Incentive Plan, as amended (the “2014 Plan”) and the Patterson-UTI Energy, Inc. 2021 Long-Term Incentive Plan (the “2021 Plan”), the NexTier Oilfield Solutions Inc. Equity and Incentive Award Plan and the NexTier Oilfield Solutions Inc. (Former C&J Energy) Management Incentive Plan, and not pursuant to the stock buyback program.
Our contract drilling backlog in the United States as of December 31, 2022 and 2021 was approximately $830 million and $325 million, respectively. Approximately 32% of the total contract drilling backlog in the United States at December 31, 2022 is reasonably expected to remain after 2023.
Approximately 16% of our total contract drilling backlog in the United States at December 31, 2023 is reasonably expected to remain after 2024. See Note 3 of Notes to consolidated financial statements in Item 8 of this Report and “Item 1A.
Risk Factors – Our Current Backlog of Contract Drilling Revenue May Decline and May Not Ultimately Be Realized, as Fixed-Term Contracts May in Certain Instances Be Terminated Without an Early Termination Payment.” Pressure Pumping As of December 31, 2022, we had approximately 1.2 million horsepower in our pressure pumping fleet.
Risk Factors – Our current backlog of contract drilling revenue may decline and may not ultimately be realized, as fixed-term contracts may in certain instances be terminated without an early termination payment.” Our completion services business was impacted by calendar inefficiencies during the second half of 2023 resulting from a decline in customer activity during the third quarter.
As of December 31, 2022, the remaining minimum obligation under these agreements was approximately $25.6 million, of which approximately $22.6 million and $3.0 million relate to the remainder of 2023 and 2024, respectively. 39 See Note 10 of Notes to consolidated financial statements in Item 8 of this Report for additional information on our current commitments and contingencies as of December 31, 2022.
See Note 10 of Notes to consolidated financial statements in Item 8 of this Report for additional information on our current commitments and contingencies as of December 31, 2023. As part of the Ulterra acquisition and NexTier merger, we acquired additional operating and finance leases.
Non-GAAP Financial Measures Adjusted EBITDA 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) from continuing operations plus income tax expense (benefit), net interest expense, and depreciation, depletion, amortization and impairment expense (including impairment of goodwill).
Recently Issued Accounting Standards For a discussion of recently issued accounting standards, see Note 1 of Notes to consolidated financial statements included as a part of Item 8 of this Report. 51 Non-GAAP Financial Measures Adjusted EBITDA 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”).
Average revenue per operating day increased primarily due to improved pricing. Direct operating costs increased due to an increase in operating days, increased reactivation costs and inflationary cost pressure on labor and supplies.
Direct operating costs increased due to an increase in operating days, increased reactivation costs and inflationary cost pressure on labor and supplies within our contract drilling business. A portion of the increase in direct operating costs related to increased job activity and cost inflation within our directional drilling business.
If our credit rating is below investment grade at both Moody’s and S&P, we will become subject to a restricted payment covenant. The Credit Agreement also contains a financial covenant that requires our total debt to capitalization ratio, expressed as a percentage, not exceed 50%.
If our credit rating is below investment grade at both Moody’s and S&P, we will become subject to a restricted payment covenant, which would generally require us to have a Pro Forma Debt Service Coverage Ratio (as defined in the Credit Agreement) greater than or equal to 1.50 to 1.00 immediately before and immediately after making any restricted payment.
The majority of these expenditures are expected to be used for normal, recurring items necessary to support our business. We anticipate $28.5 million of expenditures in 2023 related to various contractual obligations such as certain purchase commitments and operating lease liabilities.
We anticipate $96.4 million of expenditures in 2024 related to various contractual obligations such as certain commitments to purchase proppants and lease liabilities.
Impairment of long-lived assets — We review our long-lived assets, including property and equipment, for impairment whenever events or changes in circumstances indicate that the carrying amounts of certain assets may not be recovered over their estimated remaining useful lives (“triggering events”).
See Note 1 of Notes to consolidated financial statements included as a part of Item 8 of this Report. 48 The following table outlines a 10% change in the useful lives on our major categories of property and equipment and the impact on operating income for the year ended December 31, 2023: Useful Lives Change Impact (in thousands) Drilling services equipment 1-15 years 10% $ 47,423 Completion services equipment 1-25 years 10% 13,567 $ 60,990 Impairment of long-lived assets — We review our long-lived assets, including property and equipment, for impairment whenever events or changes in circumstances indicate that the carrying amounts of certain assets may not be recovered over their estimated remaining useful lives (“triggering events”).
Year Ended December 31, Other Operations 2022 2021 % Change (Dollars in thousands) Revenues $ 92,009 $ 57,814 59.1 % Direct operating costs 53,850 40,911 31.6 % Adjusted gross margin (1) 38,159 16,903 125.8 % Selling, general and administrative 2,678 1,943 37.8 % Depreciation, depletion, amortization and impairment 27,671 24,865 11.3 % Operating income (loss) $ 7,810 $ (9,905 ) NA Capital expenditures $ 25,504 $ 11,638 119.1 % (1) Adjusted gross margin is defined as revenues less direct operating costs (excluding depreciation, depletion, amortization and impairment expense).
Year Ended December 31, Other 2022 2021 % Change (Dollars in thousands) Revenues $ 80,359 $ 49,107 63.6 % Direct operating costs 39,261 28,012 40.2 % Adjusted gross profit (1) 41,098 21,095 94.8 % Selling, general and administrative 826 665 24.2 % Depreciation, depletion, amortization and impairment 26,496 23,612 12.2 % Operating income (loss) $ 13,776 $ (3,182 ) N/A Capital expenditures $ 25,215 $ 11,627 116.9 % (1) Adjusted gross profit is defined as revenues less direct operating costs (excluding depreciation, depletion, amortization and impairment expense).

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

5 edited+3 added−1 removed0 unchanged
Biggest changeLoans under the Credit Agreement bear interest by reference, at our election, to the SOFR rate or base rate. The applicable margin on SOFR rate loans varies from 1.00% to 2.00% and the applicable margin on base rate loans varies from 0.00% to 1.00%, in each case determined based upon our credit rating.
Biggest changeThe applicable margin on SOFR rate loans varies from 1.00% to 2.00% and the applicable margin on base rate loans varies from 0.00% to 1.00%, in each case determined based on our credit rating. As of December 31, 2023, the applicable margin on SOFR rate loans was 1.75% and the applicable margin on base rate loans was 0.75%.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk As of December 31, 2022, we would have had exposure to interest rate market risk associated with any outstanding borrowings and letters of credit that we had under the Credit Agreement and amounts owed under the Reimbursement Agreement.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk As of December 31, 2023, we would have had exposure to interest rate market risk associated with any outstanding borrowings and letters of credit that we had under the Credit Agreement and amounts owed under the Reimbursement Agreement.
Under the terms of the Reimbursement Agreement, we will reimburse Scotiabank on demand for any amounts that Scotiabank has disbursed under any letters of credit. We are obligated to pay Scotiabank interest on all amounts not paid by us on the date of demand or when otherwise due at the LIBOR rate plus 2.25% per annum.
We are obligated to pay Scotiabank interest on all amounts not paid by us on the date of demand or when otherwise due at the LIBOR rate plus 2.25% per annum.
As of December 31, 2022, the applicable margin on SOFR rate loans was 1.75% and the applicable margin on base rate loans was 0.75%. A letter of credit fee is payable by us equal to the applicable margin for SOFR rate loans times the daily amount available to be drawn under outstanding letters of credit.
A letter of credit fee is payable by us equal to the applicable margin for SOFR rate loans times the daily amount available to be drawn under outstanding letters of credit. The commitment fee rate payable to the lenders varies from 0.10% to 0.30% based on our credit rating.
As of December 31, 2022, no amounts had been disbursed under any letters of credit. The carrying values of cash and cash equivalents, trade receivables and accounts payable approximate fair value due to the short-term maturity of these items.
Similarly, some of our revenues are denominated in foreign currencies, but have associated U.S. dollar costs, which also give rise to foreign currency exchange rate exposure. The carrying values of cash and cash equivalents, trade receivables and accounts payable approximate fair value due to the short-term maturity of these items.
Removed
The commitment fee rate payable to the lenders varies from 0.10% to 0.30% based upon our credit rating. As of December 31, 2022, we had no borrowings or letters of credit outstanding under the Credit Agreement.
Added
Loans under the Credit Agreement bear interest by reference, at our election, to the SOFR rate (subject to a 0.10% per annum adjustment) or base rate, in each case subject to a 0% floor.
Added
As of December 31, 2023, we had $2.6 million in letters of credit outstanding and, as a result, had available borrowing capacity of approximately $597 million at that date. Under the terms of the Reimbursement Agreement, we will reimburse Scotiabank on demand for any amounts that Scotiabank has disbursed under any of our letters of credit issued thereunder.
Added
Some of our revenues in foreign countries are denominated in U.S. dollars, and therefore, changes in foreign currency exchange rates impact our earnings to the extent that costs associated with those U.S. dollar revenues are denominated in the local currency.

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