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What changed in PATTERSON UTI ENERGY INC's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of PATTERSON UTI ENERGY INC's 2024 and 2025 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 2025 report.

+351 added−330 removedSource: 10-K (2026-02-10) vs 10-K (2025-02-11)

Top changes in PATTERSON UTI ENERGY INC's 2025 10-K

351 paragraphs added · 330 removed · 255 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

57 edited+18 added−21 removed62 unchanged
Biggest changeThe 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. 9 Table of Contents 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.
Biggest changeThrough 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.
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.
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.
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.
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 have a material adverse effect on our business, financial condition, cash flows and results of operations.
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.
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.” 10 We operate throughout North America and internationally in over 30 countries and, accordingly, are subject to the U.S.
However, each contract contains the actual terms setting forth our rights and obligations and those of the customer or supplier, any of which rights and obligations may deviate from what is customary due to particular industry conditions, customer or supplier requirements, applicable law or other factors. Customers Our customer base includes major, independent and other oil and natural gas operators.
However, each contract contains the actual terms setting forth our rights and obligations and those of the customer or supplier, any of which rights and obligations may deviate from what is customary due to particular industry conditions, customer or supplier requirements, applicable law or other factors. 8 Customers Our customer base includes major, independent and other oil and natural gas operators.
We perform repair and/or upgrade work to our drilling rig equipment at our yard facilities located in Texas, Oklahoma, Wyoming, Colorado, North Dakota, Ohio, Pennsylvania, and internationally in Colombia. Drilling Contracts — Most of our drilling contracts are with established customers on a competitive bid or negotiated basis.
We perform repair and/or upgrade work to our drilling rig equipment at our yard facilities located in Texas, Oklahoma, Wyoming, Colorado, North Dakota, Ohio, Pennsylvania, and internationally in Colombia. 5 Drilling Contracts — Most of our drilling contracts are with established customers on a competitive bid or negotiated basis.
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.
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 6 position of a well. Our HiFi Nav™ offering enhances FDIR by targeting improved vertical placement of the directional well within the reservoir.
Drilling Products Operations Our Ulterra business has manufacturing and distribution sites of drilling equipment in North America and internationally, which are geographically positioned to serve the energy and mining markets in over 30 countries. Ulterra’s drilling equipment is used in oil and natural gas exploration and production and in mining operations.
Drilling Products Operations Our Ulterra business has manufacturing and distribution sites of drilling equipment in North America and internationally, which are geographically positioned to serve the energy and mining markets in over 30 countries. Ulterra’s drilling equipment is used in oil and natural gas exploration and production and in geothermal and mining operations.
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, • 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 10 Table of Contents • 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, • 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.
In addition to price, we believe availability, condition and technical specifications of equipment (including emission reduction capabilities), quality of personnel, service quality and safety record are key factors in determining which contractor is awarded a job. We expect that the market for our services will continue to be highly competitive.
In addition to price, we believe availability, condition and technical specifications of equipment (including fuel efficiency and emission reduction capabilities), quality of personnel, service quality and safety record are key factors in determining which contractor is awarded a job. We expect that the market for our services will continue to be highly competitive.
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.
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 continued focus of local, state, national and international regulatory bodies on greenhouse gas (“GHG”) emissions and climate change issues.
Accordingly, we recorded a charge of $114 million related to this abandonment during the third quarter of 2024. No similar charges were incurred in 2022 or 2023. Drilling Technology — We continue to enhance the technology offerings that can be used with our drilling operations.
Accordingly, we recorded a charge of $114 million related to this abandonment during the third quarter of 2024. No similar charges were incurred in 2023 or 2025. Drilling Technology — We continue to enhance the technology offerings that can be used with our drilling operations.
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 of our equipment during 2024.
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 of our equipment during 2025.
Training and Safety – Our training programs include opportunities for employees to advance in their professional careers through intensive, multi-day classroom training programs in numerous skills and competencies, as well as management training programs. These programs are geared to providing our employees with opportunities to advance throughout our company.
Training and Safety – Our training programs include opportunities for employees to advance in their professional careers through intensive, multi-day classroom training programs in numerous skills and competencies, as well as leadership training programs. These programs are geared to providing our employees with opportunities to advance throughout our company.
Based on the strong customer preference across the industry for Tier-1 super-spec drilling rigs, in addition to efficiency gains and technology advancements that have reduced the total number of rigs needed for the U.S. drilling 6 Table of Contents market, we believe the 42 rigs that were abandoned had limited commercial opportunity.
Based on the strong customer preference across the industry for Tier-1 super-spec drilling rigs, in addition to efficiency gains and technology advancements that have reduced the total number of rigs needed for the U.S. drilling market, we believe the 42 rigs that were abandoned had limited commercial opportunity.
Contract Drilling Activity — Information regarding our contract drilling activity for the last three years follows: Year Ended December 31, 2024 2023 2022 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, 2025 2024 2023 Average rigs operating per day – U.S.
We offer our wireline services in conjunction with our hydraulic fracturing services 7 Table of Contents in “plug-and-perf” well completion to maximize efficiency for our customers. “Plug-and-perf” is a multi-stage well completion technique for cased-hole wells that consists of pumping a plug and perforating guns to a specified depth.
We offer our wireline services in conjunction with our hydraulic fracturing services in “plug-and-perf” well completion to maximize efficiency for our customers. “Plug-and-perf” is a multi-stage well completion technique for cased-hole wells that consists of pumping a plug and perforating guns to a specified depth.
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, maintaining a respectful workplace, as well as methods for reporting of violations.
Over the years, we have made performance and safety improvements to our rig fleet. Our APEX ® rigs are AC-powered electric rigs with high pressure mud systems, walking systems and increased hookload capacity. During fiscal years 2024, 2023 and 2022, we spent approximately $265 million, $335 million, and $272 million, respectively, on capital expenditures in our Drilling Services operations.
Over the years, we have made performance and safety improvements to our rig fleet. Our APEX® rigs are AC-powered electric rigs with high pressure mud systems, walking systems and increased hookload capacity. During fiscal years 2025, 2024 and 2023, we spent approximately $237 million, $265 million, and $335 million, respectively, on capital expenditures in our drilling services operations.
Drilling Products We serve the energy and mining markets by manufacturing and distributing drill bits throughout 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.
Drilling Products We serve the energy and mining markets by manufacturing and distributing drill bits and downhole tools throughout North America and internationally in over 30 countries. Our drilling equipment is used in oil and natural gas exploration and production and in geothermal and mining operations.
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.
Other Drilling Services — 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.
Our revenues, profitability and cash flows are highly dependent upon prevailing prices for oil and natural gas and expectations about future prices, and upon our customers’ ability to access, and willingness to deploy, capital to fund their operating and capital expenditures. Commodity prices have historically been volatile, but have been relatively range-bound since the end of 2022.
Our revenues, profitability and cash flows are highly dependent upon prevailing prices for oil and natural gas, expectations about future prices, and our customers’ ability to access, and willingness to deploy, capital to fund their operating and capital expenditures. Commodity prices have historically been volatile, but were relatively range-bound from the end of 2022 through the first quarter of 2025.
The current demand for equipment and services remains impacted by 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 current demand for equipment and services remains impacted by macro conditions, including commodity prices, geopolitical environment, changes to international tariffs and trade policies, 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.
(1) 112 124 124 Number of wells drilled during the year – U.S. 2,376 2,530 2,489 Number of operating days – U.S. 40,899 45,270 45,216 (1) A rig is considered to be operating if it is earning revenue pursuant to a contract on a given day.
(1) 100 112 124 Number of wells drilled during the year – U.S. 2,090 2,376 2,530 Number of operating days – U.S. 36,371 40,899 45,270 (1) A rig is considered to be operating if it is earning revenue pursuant to a contract on a given day.
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).
We also own rotary steerable systems, which we provide to customers. 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).
Due to evolving customer preferences, we refer to certain premium rigs as “Tier-1, super-spec” rigs, which we 5 Table of Contents 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, 2024, we had 135 Tier-1, super-spec rigs.
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. As of December 31, 2025, we had 137 Tier-1, super-spec rigs marketed.
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.
See Note 3 of Notes to consolidated financial statements in Item 8 of this Report and “Item 1A. Risk Factors – Our backlog of contract drilling revenue has declined in recent years 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.
(2) 121 114 107 105 (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) 106 104 95 93 (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.
We often receive a lower rate when the drilling rig is moving or when drilling operations are interrupted or restricted by adverse weather conditions or other conditions beyond our control. Daywork contracts typically provide separately for mobilization of the drilling rig.
We often receive a lower rate when the drilling rig is moving or when drilling operations are interrupted or restricted by adverse weather conditions or other conditions beyond our control. Daywork contracts typically provide separately for mobilization of the drilling rig. In recent years, we have increased our usage of performance-based contracts.
Human Capital and Sustainability We strive to be a leader in our industry in the area of environmental, social, governance and other sustainability-related issues, and we remain committed to managing these issues for the long-term benefit of our employees, our communities and our business.
Human Capital and Sustainability We strive to be a leader in our industry with regard to sustainability-related issues, and we remain committed to managing these issues for the long-term benefit of our employees, our communities and our business.
Our contract drilling backlog in the United States as of December 31, 2024 and 2023 was approximately $426 million and $700 million, respectively. Approximately 7.1% of our contract drilling backlog in the United States at December 31, 2024 is reasonably expected to remain after 2025.
Our contract drilling backlog in the United States as of December 31, 2025 and 2024 was approximately $291 million and $426 million, respectively. Approximately 9% of our contract drilling backlog in the United States at December 31, 2025 is reasonably expected to remain after 2026.
Other Operations Our oilfield rentals business has a fleet of premium rental tools and equipment 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.
Other Operations Our oilfield rentals business, prior to its divestiture in April 2025, had a fleet of premium rental tools and equipment and provided 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.
Ulterra has manufacturing and repair facilities located in Fort Worth, Texas, Leduc, Alberta and Saudi Arabia and repair facilities located in Argentina, Colombia and Oman. Ulterra’s primary business is the design, manufacture, sale and rental of matrix and steel-bodied polycrystalline diamond compact (“PDC”) drill bits. PDC drill bits are typically rented, except in select international markets where they are sold.
Ulterra has manufacturing and repair facilities located in Fort Worth, Texas, Leduc, Alberta and Saudi Arabia and repair facilities located in Argentina, Colombia and Oman. Ulterra’s primary business is the design, manufacture, sale and rental of matrix and steel-bodied polycrystalline diamond compact (“PDC”) drill bits and other downhole tools.
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.
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.
With respect to our consolidated operating revenues in 2024, we received approximately 53% from our ten largest customers and approximately 38% from our five largest customers. During 2024, one customer accounted for approximately $605 million, or approximately 11%, of our consolidated operating revenues.
With respect to our consolidated operating revenues in 2025, we received approximately 57% from our ten largest customers and approximately 39% from our five largest customers. During 2025, one customer accounted for approximately $597 million, or approximately 12%, of our consolidated operating revenues.
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.
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.
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.
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 Table of Contents Recent Developments Recent Developments in Market Conditions — Quarterly average oil prices and our quarterly average number of rigs operating in the United States for 2022, 2023 and 2024 are as follows: 1 st Quarter 2 nd Quarter 3 rd Quarter 4 th Quarter 2022 Average oil price per Bbl (1) $ 94.45 $ 108.72 $ 93.18 $ 82.79 Average rigs operating per day – U.S.
Other Other consists of our oilfield rentals business, prior to its divestiture in April 2025, along with the results of our non-operating ownership interest 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 2023, 2024 and 2025 are as follows: 1 st Quarter 2 nd Quarter 3 rd Quarter 4 th Quarter 2023 Average oil price per Bbl (1) $ 75.93 $ 73.54 $ 82.25 $ 78.53 Average rigs operating per day – U.S.
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.
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.
We have also elected to retain a greater amount of risk through increased deductibles as compared to prior years, or self-insurance on certain insurance policies.
We have also elected to retain a portion of our risk through deductibles or self insurance on certain insurance policies.
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.
We also 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. It also includes our power solutions natural gas fueling business and our proppant last mile logistics and storage business.
Health and Benefits – Our health and benefits program provides for extensive preventative care and is designed to improve our employees’ fitness for work, personal safety on the job and overall well-being. We have implemented policies allowing many of our office-based employees the flexibility to work from home.
Health and Benefits – Our health and benefits program provides offerings for extensive preventative care and is designed to improve our employees’ fitness for work, personal safety on the job and overall well-being.
Term contracts help support our operating rig count. Based on contracts in place in the United States as of February 5, 2025, we expect an average of 64 rigs operating under term contracts during the first quarter of 2025 and an average of 40 rigs operating under term contracts during 2025.
Based on contracts in place in the United States as of February 4, 2026, we expect an average of 49 rigs operating under term contracts during the first quarter of 2026 and an average of 27 rigs operating under term contracts during 2026.
Our active rig count in the United States at December 31, 2024 of 103 rigs was less than the rig count of 121 rigs at December 31, 2023, reflecting the industry-wide activity declines due to increased drilling efficiencies and market consolidation. We expect our rig count in the United States will average 106 rigs in the first quarter of 2025.
Our active rig count in the United States at December 31, 2025 of 93 rigs was less than the rig count of 105 rigs at December 31, 2024, reflecting the industry-wide activity declines due, in part, to expectations regarding future crude oil prices, increased drilling efficiencies and market consolidation.
As of December 31, 2024, we had 152 marketed land-based drilling rigs based in the following regions: Region Number of Rigs West Texas 70 Appalachia 21 Oklahoma 16 Rockies 15 South Texas 11 East Texas 11 Colombia 7 Ecuador 1 Total 152 All of these drilling rigs are electric rigs.
As of December 31, 2025, we had 152 marketed land-based drilling rigs based in the following regions: Region Number of Rigs West Texas 70 Appalachia 21 Oklahoma 15 Rockies 18 South Texas 11 East Texas (1) 9 Colombia 7 Ecuador 1 Total 152 (1) In January 2026, we signed a multi-year agreement to lease two rigs to DLS Archer Ltd.
Used bits may be repaired and refurbished for the subsequent customer. Ulterra has an industry-leading position in the North American PDC drill bit market. We periodically evaluate our drill bits 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.
We periodically evaluate our drill bits 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.
We are not fully insured against all of these risks and our contractual indemnity provisions may not fully protect us.” Seasonality Seasonality has not significantly affected our overall operations.
Risk Factors – Our operations are subject to a number of operational risks, including environmental and weather risks, which could expose us to significant losses and damage claims. We are not fully insured against all of these risks and our contractual indemnity provisions may not fully protect us.” Seasonality Seasonality has not significantly affected our overall operations.
(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. (2) 131 128 120 118 2024 Average oil price per Bbl (1) $ 77.50 $ 81.81 $ 76.43 $ 70.73 Average rigs operating per day – U.S.
(2) 131 128 120 118 2024 Average oil price per Bbl (1) $ 77.50 $ 81.81 $ 76.43 $ 70.73 Average rigs operating per day – U.S. (2) 121 114 107 105 2025 Average oil price per Bbl (1) $ 71.78 $ 64.57 $ 65.78 $ 59.62 Average rigs operating per day – U.S.
Fracturing fluid mixtures include proppant that becomes lodged in the cracks created by the hydraulic fracturing process, “propping” them open to facilitate the flow of hydrocarbons upward through the well. To address evolving customer preferences for emissions-reducing equipment, we have invested in natural gas-powered equipment, including our 100% natural gas-powered Emerald™ line of hydraulic fracturing equipment.
Fracturing fluid mixtures include proppant that becomes lodged in the cracks created by the hydraulic fracturing process, “propping” them open to facilitate the flow of hydrocarbons upward through the well.
In our drilling services segment, our average active rig count in the United States for the fourth quarter of 2024 was 105 rigs. This was a decrease from our average active rig count for the third quarter of 2024 of 107 rigs.
This was a decrease from our average active rig count for the third quarter of 2025 of 95 rigs.
We embrace our diversity of people, thoughts and talents, and combine these strengths to pursue extraordinary results for our company, our employees and our stockholders. We are committed to recruiting, hiring and retaining the highest caliber talent for our business by utilizing outreach initiatives and partnerships with a diverse group of organizations, industry associations and networks.
We are committed to recruiting, hiring and retaining the highest caliber talent for our business by utilizing outreach initiatives and strategic partnerships with industry-associated organizations, associations and networks.
Oil prices averaged $70.73 per barrel in the fourth quarter of 2024 and closed at $73.52 per barrel on February 3, 2025. Natural gas prices (based on the Henry Hub Spot Market Price) averaged $2.45 per MMBtu in the fourth quarter of 2024 and closed at $3.30 per MMBtu on February 3, 2025.
Natural gas prices (based on the Henry Hub Spot Market Price) averaged $3.73 per MMBtu in the fourth quarter of 2025 and closed at $4.40 per MMBtu on February 2, 2026. In our drilling services segment, our average active rig count in the United States for the fourth quarter of 2025 was 93 rigs.
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. 8 Table of Contents Research, Engineering and Technology We employ research, engineering and technology teams across our businesses, who work on initiatives to enhance our existing product and service offerings and develop new products and services to meet customer demands.
Research, Engineering and Technology We employ research, engineering and technology teams across our businesses, who work on initiatives to enhance our existing product and service offerings and develop new products and services to meet customer demands.
An electric rig converts the power from its diesel or natural gas engines into electricity to power the rig.
S.A. to support Archer’s operations in Argentina’s Vaca Muerta formation. All of these drilling rigs are electric rigs. An electric rig converts the power from its diesel or natural gas engines into electricity to power the rig.
The majority of revenue for this segment is generated by our hydraulic fracturing business. Hydraulic Fracturing — Hydraulic fracturing services are performed to enhance production of oil and natural gas from formations with low permeability and restricted flow of hydrocarbons.
Our completion services are designed in partnership with our customers to enhance both initial production rates and estimated ultimate recovery from new and existing wells. Hydraulic Fracturing — Hydraulic fracturing services are performed to enhance production of oil and natural gas from formations with low permeability and restricted flow of hydrocarbons.
Some of our key human capital areas of focus include: Employees – We had approximately 9,200 full-time employees as of January 31, 2025. 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 7,900 full-time employees as of January 31, 2026. The number of employees fluctuates depending on the current and expected demand for our services.
As part of our wellsite integration strategy to provide and integrate a variety of services for our customers at the wellsite to maximize efficiencies and profitability, in 2022, we acquired sand hauling, wellsite storage, and last mile logistics assets.
We also own sand hauling, wellsite storage, and last mile logistics assets, which are used to provide services relating to the delivery and storage of proppant at the wellsite.
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During the fourth quarter of 2024, our completion services segment was impacted by several long-term dedicated customers reducing sequential completion activity after meeting their annual production targets. We expect a seasonal uptick in activity during the first quarter as customer budgets reset with the start of the new year.
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During the second quarter of 2025, global economic conditions deteriorated, in part, because of enacted and proposed trade policies and tariffs by the United States and other governments, as well as uncertainty regarding potential future changes to global trade policies and tariffs.
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Activity in our drilling products segment was relatively steady in 2024 compared to the prior year. Drilling products demand is expected to remain steady through the first quarter, given the expectation for a steady U.S. market and continued growth in international markets. Our 2025 capital expenditure forecast is approximately $600 million.
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Additionally, during the second quarter of 2025, OPEC+ countries began phasing out voluntary crude oil production cuts, leading to an increase in global supply.
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Recent Developments in Joint Ventures, Business Combinations and Financial Matters — In December 2024, one of our subsidiaries closed a previously announced joint venture with subsidiaries of ADNOC Drilling and SLB.
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These developments, combined with rising geopolitical tensions- particularly in the Middle East- heightened uncertainty in global energy markets, which contributed to a decline in our share price, lowered average crude oil futures prices and increased uncertainty regarding the future economic environment in which we operate.
Removed
Our subsidiary holds a 15 percent interest in a newly created company named Turnwell Industries, which has been awarded a contract to drill and complete 144 unconventional wells for ADNOC.
Added
During the second half of 2025, global economic conditions and the global energy market remained uncertain, with ongoing effects from trade policy uncertainty, the phase-out of voluntary crude oil production cuts by OPEC+ countries, and downward pressure on crude oil futures prices.
Removed
In exchange for the minority equity interest, we are providing unconventional drilling and completion expertise to Turnwell, as well as a limited cash contribution to fund our portion of initial working capital. On September 1, 2023, we completed our merger (the “NexTier merger”) with NexTier Oilfield Solutions Inc.
Added
While the full effects are yet to be determined, prolonged trade tensions and sustained lower crude oil futures prices could adversely affect our future outlook on activity and profitability. Oil prices averaged $59.62 per barrel in the fourth quarter of 2025 and closed at $61.60 per barrel on February 2, 2026.
Removed
(“NexTier”), a predominately U.S. land-focused oilfield service provider, with a diverse set of well completion and production services across a variety of active basins Each share of common stock of NexTier issued and outstanding immediately prior to the effective time (including outstanding restricted shares) was converted into the right to receive 0.752 shares of our common stock, which based on the 4 Table of Contents closing price of our common stock of $14.91 on September 1, 2023, valued the transaction at approximately $2.8 billion, including the assumption of debt.
Added
We expect our rig count in the United States will be in the low-to-mid 90s in the first quarter of 2026. Term contracts help support our operating rig count.
Removed
On August 14, 2023, we completed our acquisition (the “Ulterra acquisition”) of Ulterra Drilling Technologies, L.P. (“Ulterra”), a global provider of specialized drill bit solutions.
Added
In our completion services segment, activity and pricing for the fourth quarter of 2025 were steady compared to the previous quarter. We expect activity to decline slightly in the first quarter due to impacts from first quarter winter weather. In our drilling products segment, U.S. and Canadian activity remains strong.
Removed
Total consideration for the acquisition included the issuance of 34.9 million shares of our common stock and payment of approximately $373 million of cash (after purchase price adjustments), which based on the closing price of our common stock of $14.94 on August 14, 2023, valued the transaction at closing at approximately $894 million.
Added
International revenue was down slightly in the fourth quarter of 2025 compared to the third quarter of 2025 due to lower-than-expected sales in the Middle East, although we delivered revenue growth in several key markets, including Latin America and Asia-Pacific.
Removed
On September 13, 2023, we completed the offering of $400 million in aggregate principal amount of 7.15% Senior Notes due 2033 (the “2033 Notes”). The net proceeds before offering expenses were approximately $396 million, which we used to repay amounts outstanding under our Prior Credit Agreement (as defined below).
Added
We expect slightly lower U.S. revenue in the first quarter in this segment due to lower activity, which we expect will be offset by an increase in activity and revenue from our International business. 4 Our 2026 capital expenditure forecast is expected to be approximately $500 million on a gross basis and less than $500 million, net of asset sales.
Removed
On January 31, 2025, we entered into the Second Amended and Restated Credit Agreement with the lenders party thereto and Wells Fargo Bank, National Association, as administrative agent, and the other parties thereto (the “Credit Agreement”).
Added
Performance-based contracts are contracts pursuant to which we are compensated partly based upon our performance against a mutually agreed upon set of predetermined targets. These types of contracts typically have a lower base dayrate, but give us the opportunity to receive additional compensation by meeting or exceeding certain performance targets agreed to by our customers.
Removed
The Credit Agreement amended and restated our Amended and Restated Credit Agreement dated as of March 27, 2018 (as amended, restated, supplemented or otherwise modified at December 31, 2024, the “Prior Credit Agreement”). The commitments under the Credit Agreement are $500 million, and the loans and commitments under the Credit Agreement mature on January 31, 2030.
Added
To address customer demand for lower-emission and more cost efficient operations, we continue to expand our portfolio of natural gas-powered solutions, including electric, direct drive, and dual fuel pumps, to replace legacy diesel completion services equipment.
Removed
The Credit Agreement provides for a committed senior unsecured credit facility that permits aggregate revolving credit borrowings of up to $500 million, with a letter of credit sub-facility of $100 million and a swing line sub-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.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

75 edited+20 added−16 removed180 unchanged
Biggest changeEven when an attack has been detected, it is not always immediately apparent what the full nature and scope of any potential harm may be, or how best to remediate it. 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.
Biggest changeAs a result, the occurrence of a cyber incident could go unnoticed for a period of time. Even when an attack has been detected, it is not always immediately apparent what the full nature and scope of any potential harm may be, or how best to remediate it.
Our bylaws provide that, to the fullest extent permitted by law, the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have, or declines to accept, jurisdiction, another state court or a federal court located within the State of Delaware) is the exclusive forum for any claims, including claims in the right of Patterson-UTI: (a) that are based upon a violation of a duty by a current or former director, officer, employee or stockholder in such capacity, or (b) as to which the General Corporation Law of the State of Delaware confers jurisdiction upon the Court of Chancery.
Our bylaws provide that, to the fullest extent permitted by law, the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have, or declines to accept, jurisdiction, another state court or a federal court located within the State of Delaware) is the exclusive forum for any claims, including claims in the right of Patterson-UTI: (a) that are based upon a violation of a duty by a current or former director, officer, employee or stockholder in such capacity, or (b) as to which the Delaware General Corporation Law confers jurisdiction upon the Court of Chancery.
Legal and Regulatory Risks • 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. • 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. • Environmental and occupational health and safety laws and regulations, including violations thereof, could materially adversely affect our operating results. • Intellectual property disputes could negatively impact our operations, costs, revenues and competitiveness. • 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. • Legal proceedings and governmental investigations could have a negative impact on our business, financial condition and results of operations. • Political, economic and social instability risk and laws associated with conducting international operations could adversely affect our opportunities and future business. • We are subject to complex and evolving laws and regulations regarding data privacy and security.
Legal and Regulatory Risks • 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. • 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. • Environmental and occupational health and safety laws and regulations, including violations thereof, could materially adversely affect our operating results. • Intellectual property disputes could negatively impact our operations, costs, revenues and competitiveness. • 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. • Legal proceedings and governmental investigations could have a negative impact on our business, financial condition and results of operations. 12 • Political, economic and social instability risk and laws associated with conducting international operations could adversely affect our opportunities and future business. • We are subject to complex and evolving laws and regulations regarding data privacy and security.
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.
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 13 • merger and divestiture activity among oil and natural gas producers.
Financial Risks • Investor sentiment and public perception related to the oil and natural gas industry and to ESG initiatives could increase our costs of capital and our reporting requirements and impact our operations. • Variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly. • 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. • We may not be able to generate sufficient cash to service all of our debt and we may be forced to take other actions to satisfy our obligations under our debt, which may not be successful. • 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 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.
Financial Risks • Investor sentiment and public perception related to the oil and natural gas industry and to ESG initiatives could increase our costs of capital and our reporting requirements and impact our operations. • Variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly. • 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. • We may not be able to generate sufficient cash to service all of our debt, and we may be forced to take other actions to satisfy our obligations under our debt, which may not be successful. • 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 stockholders, including through the payment of dividends and repurchases of our common stock, in the future or at levels anticipated by our stockholders. • 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.
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.
There can be no assurance that we will: • identify attractive opportunities in international markets, • have sufficient capital resources to pursue and consummate international opportunities, 24 • 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.
Threats to information technology systems associated with cybersecurity risks and cyber incidents or attacks continue to grow, and include, among other things, storms and natural disasters, terrorist attacks, utility outages, attempts to gain unauthorized access to data and systems, theft, viruses, malware, ransomware, denial-of-service attacks, design defects, human error, or complications encountered as existing systems are maintained, repaired, replaced, or upgraded.
Threats to information and operational technology systems associated with cybersecurity risks and cyber incidents or attacks continue to grow, and include, among other things, storms and natural disasters, terrorist attacks, utility outages, attempts to gain unauthorized access to data and systems, theft, viruses, malware, ransomware, denial-of-service attacks, design defects, human error or complications encountered as existing systems are maintained, repaired, replaced or upgraded.
In the event hydrocarbons and other materials may have been disposed of, or released in or under properties currently or formerly owned or operated by us or our predecessors, which may have resulted, or may result, in soil and groundwater contamination in certain locations, any contamination found on, under or originating from the properties may be subject to remediation requirements under federal, state, foreign, regional and local laws, rules and regulations.
In the event hydrocarbons and other regulated materials may have been disposed of, or released in or under properties currently or formerly owned or operated by us or our predecessors, which may have resulted, or may result, in soil and groundwater contamination in certain locations, any contamination found on, under or originating from the properties may be subject to remediation requirements under federal, state, foreign, regional and local laws, rules and regulations.
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 armed conflicts between Russia and Ukraine and in the Middle East 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.
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 armed conflicts between Russia and Ukraine and in the Middle East and actions by the United States in Venezuela and other countries, and the continuation of, or any escalation in the severity of, these conflicts or actions, 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.
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 enterprise resource planning, cybersecurity and information technology systems, • effectively manage the growth and increased size, complexity and geography of our organization, and increased scrutiny from governmental authorities, • 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, • 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 any 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 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 into our operations and internal controls, including financial reporting disclosure and enterprise resource planning, cybersecurity and information technology systems, • effectively manage the growth and increased size, complexity and geography of our organization, and increased scrutiny from governmental authorities, • 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, • 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 any 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 any completed acquisition, the building or upgrading equipment or the development of new technology.
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.
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 15 in additional impairments of our assets.
While we generally seek to obtain indemnities or insurance for liabilities arising from events occurring before such acquisitions, we may be unable to do so, and any indemnities or insurance we do obtain will be limited in amount and duration, and indemnities may be held to be unenforceable or the seller may not be able to indemnify us.
While we generally seek to obtain indemnities or insurance for liabilities arising from events occurring before such acquisitions, we may be unable to do so, and any indemnities or insurance we do obtain will be limited in amount and duration. Additionally, indemnities may be held to be unenforceable or the seller may not be able to indemnify us.
If any of the following risks actually occur, our business, financial condition, cash flows and results of operations could be harmed. You should also refer to the other information set forth in this Report, including our consolidated financial statements and the related notes.
If any of the following risks actually occur, our business, financial condition, cash flows and results of operations 11 could be harmed. You should also refer to the other information set forth in this Report, including our consolidated financial statements and the related notes.
Also, OSHA has established a variety of standards related to workplace exposure to hazardous substances and employee health and safety. Other jurisdictions where we may conduct operations have similar environmental, employee health and safety and other regulatory regimes with which we would be required to comply.
Also, OSHA has established a variety of standards related to workplace exposure to hazardous substances and employee health and safety. 22 Other jurisdictions where we may conduct operations have similar environmental, employee health and safety and other regulatory regimes with which we would be required to comply.
In addition, uncertainty in the capital markets, whether due to global economic conditions, low commodity prices or otherwise, may result in reduced access to, or an inability to obtain, financing by us, our customers and our suppliers and result in reduced demand for our services.
In addition, uncertainty in the capital markets, whether due to global economic conditions, low commodity prices or 14 otherwise, may result in reduced access to, or an inability to obtain, financing by us, our customers and our suppliers and result in reduced demand for our services.
Our ESG practices and, through the publishing of our Sustainability Report from time to time, disclosures may be subject to increased scrutiny and may not satisfy the requirements of all stakeholders or their requirements may not be made known to us. We may continue to face pressure regarding our ESG practices and disclosures.
Our ESG practices and, through the publishing of our 25 Sustainability Report from time to time, disclosures may be subject to increased scrutiny and may not satisfy the requirements of all stakeholders or their requirements may not be made known to us. We may continue to face pressure regarding our ESG practices and disclosures.
Risks Related to Our Common Stock and Corporate Structure The market price of our common stock may be highly volatile, and investors may not be able to resell shares at or above the price paid. The trading price of our common stock may be volatile. Securities markets worldwide experience significant price and volume fluctuations.
Risks Related to Our Common Stock and Corporate Structure The market price of our common stock may be highly volatile, and investors may not be able to resell shares at or above the price paid. The trading price of our common stock may be volatile. Securities markets worldwide experience significant price and volume 27 fluctuations.
These exclusive forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and other employees.
These exclusive forum provisions may limit a stockholder’s ability to bring a claim in a judicial 28 forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and other employees.
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, specialized drill bit solutions 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 and completions automation technology and lower-emissions operations and services, specialized drill bit solutions and data analytics.
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 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 stockholders, including through the payment of dividends and repurchases of our common stock, in the future or at levels anticipated by our stockholders.
Even if we are able to increase our prices, we may not be able to do so at a rate that is sufficient to offset rising costs, including capital expenditures, without adversely affecting our activity levels.
Even if we are able to increase our prices, we may not be able to do so at a rate that is sufficient to offset rising costs, including capital expenditures, without adversely affecting our activity.
In addition, even in a period of generally lower demand for our services, if there is a high demand for our services in certain areas, it may be difficult to attract and retain qualified personnel to perform services in such areas.
In addition, even in a period of generally lower demand for our services, if there is a high demand for our services in certain areas, it may be difficult to attract and retain qualified personnel 17 to perform services in such areas.
We cannot assure you that we will maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness.
We cannot assure you that we will 26 maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness.
In addition, environmental laws and regulations in the places that we operate impose a variety of requirements on “responsible parties” related to the prevention of spills and liability for damages from such spills.
In addition, environmental laws and regulations in the places that we operate impose a variety of requirements on “responsible parties” related to the prevention of spills and liability for damages from any such spills.
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 Table of Contents 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. 19 Growth through acquisitions, the building or upgrading of equipment and the development of technology is not assured.
In addition, we may not be able to perform under these contracts due to events beyond our control, and our customers may seek to terminate or renegotiate our contracts for various reasons, including those described above. As a result, we may be unable to realize all of our current contract drilling backlog.
In addition, we may not be able to perform under these contracts due to events beyond our control, and our customers may seek to terminate or renegotiate our contracts 16 for various reasons, including those described above. As a result, we may be unable to realize all of our contract drilling backlog.
Risks associated with these threats include, among other things: • theft or misappropriation of funds, including via “phishing” or similar attacks directed at us or third parties, including our customers and vendors; • loss, corruption, or misappropriation of intellectual property, or other proprietary or confidential information (including customer, supplier, or employee data); • disruption or impairment of our and our customers’ and vendors’ business operations and safety procedures; • personal injuries and destruction or damage to property; • downtime and loss of revenue; • injury to our reputation, including the perception of our products or services as having security vulnerabilities; • negative impacts on our ability to compete; • loss or damage to our and our customers’ and vendors’ information technology systems, including operational technologies and worksite data delivery systems; • exposure to litigation and legal and regulatory liability and costs; and • increased costs to prevent, respond to or mitigate cybersecurity events.
Risks associated with these threats include, among other things: • theft or misappropriation of funds, including via “phishing” or similar attacks directed at us or third parties, including our customers and vendors; 18 • loss, corruption or misappropriation of intellectual property, or other proprietary or confidential information (including customer, supplier, or employee data); • disruption or impairment of our and our customers’ and vendors’ business operations and safety procedures; • personal injuries and destruction or damage to property; • downtime and loss of revenue; • injury to our reputation, including the perception of our products or services as having security vulnerabilities; • negative impacts on our ability to compete; • loss or damage to our and our customers’ and vendors’ information technology systems, including operational technologies and worksite data delivery systems; • diversion of management or workforce attention; • exposure to litigation and legal and regulatory liability and costs; and • increased costs to prevent, respond to or mitigate cybersecurity events.
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 relatively recent legislation such as the Inflation Reduction Act of 2022 (the “Inflation Reduction Act”), 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.
We are not fully insured against all of these risks and our contractual indemnity provisions may not fully protect us. • 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. • 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. • Loss of key personnel and competition for experienced personnel may negatively impact our financial condition and results of operations. • The loss or consolidation of key customers could have a material adverse effect on our financial condition and results of operations. • Shortages, delays in delivery, and interruptions in supply, of equipment and materials could adversely affect our operating results. • Our business is subject to cybersecurity risks and threats. • Our commitments under supply agreements could exceed our requirements, exposing us to risks including price, timing of delivery and quality of equipment and materials upon which our business relies. • Growth through acquisitions, the building or upgrading of equipment and the development of technology is not assured. • Complications with the design or implementation of our new enterprise resource planning system could adversely impact our business and operations. 12 Table of Contents • Fuel conservation measures, alternative fuel requirements and increasing consumer demand for alternatives to oil and natural gas could reduce demand for oil and natural gas, which would, in turn, reduce the demand for our services.
We are not fully insured against all of these risks and our contractual indemnity provisions may not fully protect us. • Our backlog of contract drilling revenue has declined in recent years and may not ultimately be realized, as fixed-term contracts may in certain instances be terminated without an early termination payment. • 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. • Loss of key personnel and competition for experienced personnel may negatively impact our financial condition and results of operations. • The loss or consolidation of key customers could have a material adverse effect on our financial condition and results of operations. • Shortages, delays in delivery, and interruptions in supply, of equipment and materials could adversely affect our operating results. • Our business is subject to cybersecurity risks and threats. • Our commitments under supply agreements could exceed our requirements, exposing us to risks including price, timing of delivery and quality of equipment and materials upon which our business relies. • Growth through acquisitions, the building or upgrading of equipment and the development of technology is not assured. • Complications with the design or implementation of our new enterprise resource planning system could adversely impact our business and operations. • Fuel conservation measures, alternative fuel requirements and increasing consumer demand for alternatives to oil and natural gas could reduce demand for oil and natural gas, which would, in turn, reduce the demand for our services.
A decline in demand for oil and natural gas, prolonged low oil or natural gas prices, expectations of decreases in oil and natural gas prices or a 14 Table of Contents reduction in the ability of our customers to access capital would likely result in reduced capital expenditures by our customers and decreased demand for our services, which could have a material adverse effect on our operating results, financial condition and cash flows.
A decline in demand for oil and natural gas, prolonged low oil or natural gas prices, expectations of decreases in oil and natural gas prices or a reduction in the ability of our customers to access capital would likely result in reduced capital expenditures by our customers and decreased demand for our services, which could have a material adverse effect on our operating results, financial condition and cash flows.
Further, we may experience difficulties in collecting from insurers or such insurers may deny all or a portion of our claims for insurance coverage. Incurring a liability for 16 Table of Contents which we are not fully insured or indemnified could materially adversely affect our business, financial condition, cash flows and results of operations.
Further, we may experience difficulties in collecting from insurers or such insurers may deny all or a portion of our claims for insurance coverage. Incurring a liability for which we are not fully insured or indemnified could materially adversely affect our business, financial condition, cash flows and results of operations.
Our contract drilling backlog may decline, as fixed-term drilling contract coverage over time may not be offset by new contracts or may be reduced by price adjustments to existing contracts, including as a result of a decline in the price of oil and natural gas, capital spending reductions by our customers or other factors.
Our contract drilling backlog may continue to decline, as fixed-term drilling contract coverage over time may not be offset by new contracts or may be reduced by price adjustments to existing contracts, including as a result of a decline in the price of oil and natural gas, capital spending reductions by our customers, oversupply of drilling rigs or other factors.
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. 17 Table of Contents 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.
Debt service requirements could represent a significant burden on our results of operations and financial condition, and the issuance of additional equity or convertible securities 25 Table of Contents could be dilutive to existing stockholders. Also, international expansion could strain our management, operations, employees and other resources.
Debt service requirements could represent a significant burden on our results of operations and financial condition, and the issuance of additional equity or convertible securities could be dilutive to existing stockholders. Also, international expansion could strain our management, operations, employees and other resources.
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 $3.8 million, $7.0 million and $4.5 million in 2024, 2023 and 2022, 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 $32.4 million, $3.8 million and $7.0 million in 2025, 2024 and 2023, respectively.
We periodically seek to increase the prices on our services to offset rising costs, earn returns on our capital investment, and otherwise generate higher returns for our stockholders. However, we operate in a very competitive industry, and we are not always 15 Table of Contents successful in raising or maintaining our existing prices.
We periodically seek to increase the prices on our services to offset rising costs, earn returns on our capital investment and otherwise generate higher returns for our stockholders. However, we operate in a very competitive industry, and we are not always successful in raising or maintaining our existing prices.
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. 28 Table of Contents 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.
Our industry is highly competitive, and available drilling services equipment, completion services equipment, and drilling products often exceeds the demand for such equipment and products.
Our industry is highly competitive, and available drilling services equipment, completion services equipment and drilling products often exceed the demand for such equipment and products.
If any such effects were to occur, they could have an adverse effect on our and our customers’ facilities and operations. 22 Table of Contents 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. Environmental and occupational health and safety laws and regulations, including violations thereof, could materially adversely affect our operating results.
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. One of our subsidiaries recently closed a joint venture in Abu Dhabi.
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. One of our subsidiaries is party to a joint venture in Abu Dhabi.
The ERP system is designed to accurately maintain our financial records, enhance operational functionality and provide 20 Table of Contents timely information to our management team related to the operation of our integrated business. The ERP system implementation process will require the investment of significant personnel and financial resources.
The ERP system is designed to accurately maintain our financial records, enhance operational functionality and provide timely information to our management team related to the operation of our integrated business. The ERP system implementation 20 process has required and will continue to require the investment of significant personnel and financial resources.
The current demand for equipment and services remains impacted by 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 current demand for equipment and services remains impacted by macro conditions, including commodity prices, geopolitical environment, changes to international tariffs and trade policies, 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.
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 • 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.
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, • changes to tariff and import/export regulations by the United States or other countries, • 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.
We also continue to evaluate opportunities from time to time to provide our services and products 24 Table of Contents 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.
Risks Related to Our Common Stock and Corporate Structure • The market price of our common stock may be highly volatile, and investors may not be able to resell shares at or above the price paid. • Anti-takeover measures in our charter documents and under state law could discourage an acquisition and thereby affect the related purchase price. • Our bylaws provide that the Court of Chancery of the State of Delaware and the federal district courts of the United States are the exclusive forums for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees. 13 Table of Contents Business and Operating Risks We are dependent on the oil and natural gas industry and market prices for oil and natural gas.
Risks Related to Our Common Stock and Corporate Structure • The market price of our common stock may be highly volatile, and investors may not be able to resell shares at or above the price paid. • Anti-takeover measures in our charter documents and under state law could discourage an acquisition and thereby affect the related purchase price. • Our bylaws provide that the Court of Chancery of the State of Delaware and the federal district courts of the United States are the exclusive forums for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
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. 18 Table of Contents 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.
Our operations are increasingly dependent on effective and secure information technologies and services, including our own systems and the systems of third party vendors and service providers upon which we rely, such as those providing cloud services to us.
Our business is subject to cybersecurity risks and threats. Our operations are increasingly dependent on effective and secure information and operational technologies and services, including our own systems and the systems of third-party vendors and service providers upon which we rely, such as those providing cloud services to us.
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.” and “Intellectual property disputes could negatively impact our operations, costs, revenues and competitiveness.” Political, economic and social instability risk and laws associated with conducting international operations could adversely affect our opportunities and future business.
Declines in customers’ operating and capital expenditures and in oil and natural gas prices may adversely affect our operating results. 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.
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.
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 backlog of contract drilling revenue has declined in recent years and may not ultimately be realized, as fixed-term contracts may in certain instances be terminated without an early termination payment.
As a result, the acquisition of one or more of our key customers or consolidation among our competitors may have a significant adverse impact on our business, results of operations, financial condition and cash flows.
As a result, the consolidation of one or more of our customers, particularly key customers, or consolidation among other oil and gas operators may have a significant adverse impact on our business, results of operations, financial condition and cash flows.
Some of our office personnel are 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.
During 2025, we significantly reduced the proportion of our office personnel who are on a “remote work” model; however, there remains continued usage 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.
All of these factors are beyond our control. Commodity prices have historically been volatile, but have been relatively range-bound since the end of 2022.
All of these factors are beyond our control. Commodity prices have historically been volatile but were relatively range-bound from the end of 2022 through the first quarter of 2025.
In addition, some of these properties have been operated by third parties over whom we have no control of their treatment of hydrocarbon and other materials or the manner in which they may have disposed of or released such materials.
In addition, some of these properties have been operated by third parties over whom we have no control of their treatment of hydrocarbon and other regulated materials or the manner in which they may have disposed of or released such materials. We could be required to remove or remediate wastes disposed of or released by prior owners or operators.
Such subsidiaries have asserted defenses to the claim and are defending vigorously against this claim. An unfavorable judgment or resolution of this claim not covered by indemnity could have a material impact on our financial results.
Such subsidiaries have asserted defenses to the claim and are defending vigorously against this claim. Ulterra prevailed at the district court level, and NOV has filed a notice of appeal. An unfavorable judgment or resolution of this claim not covered by indemnity could have a material impact on our financial results.
Additional legislation and/or regulations have been adopted or are being considered at the state and local level that could impose further chemical disclosure or other regulatory requirements (such as prohibitions on hydraulic fracturing operations in certain areas) and/or other limitations on hydraulic fracturing operations via time, place, and manner restrictions) that could affect our operations, and it is possible that these state and local efforts may increase in the absence of federal actions and/or in light of federal regulatory uncertainty.
Additional legislation and/or regulations have been adopted or are being considered at the state and local level that could impose further chemical disclosure or other regulatory requirements (such as prohibitions on hydraulic fracturing operations in certain areas) and/or attempt to impose bans and other limitations on hydraulic fracturing operations via time, place and manner restrictions that could affect our operations.
Oil prices averaged $70.73 per barrel in the fourth quarter of 2024 and closed at $73.52 per barrel on February 3, 2025. Natural gas prices (based on the Henry Hub Spot Market Price) averaged $2.45 per MMBtu in the fourth quarter of 2024 and closed at $3.30 per MMBtu on February 3, 2025.
Natural gas prices (based on the Henry Hub Spot Market Price) averaged $3.73 per MMBtu in the fourth quarter of 2025 and closed at $4.40 per MMBtu on February 2, 2026.
Under the Credit Agreement, the applicable margin on SOFR rate loans varies from 1.25% to 2.25% and the applicable margin on base rate loans varies from 0.25% to 1.25%, in each case determined based on our credit rating.
Under the Credit Agreement, the applicable margin on SOFR rate loans varies from 1.25% to 2.25% and the applicable margin on base rate loans varies from 0.25% to 1.25%, in each case determined based on our credit rating. As of December 31, 2025, we had no borrowings outstanding under the Credit Agreement.
Variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly. In January 2025, we put in place a committed senior unsecured revolving credit facility that amended the Prior Credit Agreement.
Variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly. Our Credit Agreement includes a committed senior unsecured revolving credit facility.
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.
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. In recent years, due to market conditions and other factors, our backlog of contract drilling revenue has declined.
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.
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, require us to comply with covenants in our debt agreements as a condition to making restricted payments, including payment of dividends and repurchases of our common stock, and potentially require us to post letters of credit for certain obligations.
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.
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.
As of December 31, 2024, no amounts had been disbursed under any letters of credit, and we had $38.8 million in letters of credit outstanding under the reimbursement agreement. 26 Table of Contents 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.
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.
The physical and regulatory effects of climate change could have a negative impact on our operations, our customers’ operations and the overall demand for our customers’ products and, accordingly, our services. There is an increasing focus of local, state, regional, national and international regulatory bodies on GHG emissions and climate change issues.
The physical and regulatory effects of climate change could have a negative impact on our operations, our customers’ operations and the overall demand for our customers’ products and, accordingly, our services.
With respect to our consolidated operating revenues in 2024, we received approximately 53% from our ten largest customers, approximately 38% from our five largest customers and 11% from our largest customer.
With respect to our consolidated operating revenue s in 2025, we received approximately 57% from our ten largest customers, approximately 39% from our five largest customers and approximately 12% from our largest customer.
It is not possible at this time to predict the timing and effects of climate change or whether additional climate-related legislation, regulations or other measures will be adopted at the local, state, regional, national and international levels.
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 certain emissions reduction goals. 21 It is not possible at this time to predict the timing and effects of climate change or whether additional climate-related legislation, regulations or other measures will be adopted at the local, state, regional, national and international levels.
As of December 31, 2024, 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 $426 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.
As of December 31, 2025, 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 $291 million, as compared to approximately $426 million, approximately $700 million and approximately $830 million, as of December 31, 2024, 2023 and 2022, respectively.
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. 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 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.
As of December 31, 2024, we had approximately $1.5 billion of gross U.S. federal net operating losses, approximately $58.7 million of gross Canadian net operating losses and approximately $910 million of post-apportionment U.S. state net operating losses as of December 31, 2024, before valuation allowances.
As of December 31, 2025, we had approximately $1.4 billion of gross U.S. federal net operating losses, approximately $60.0 million of gross Canadian net operating losses and approximately $889 million of post-apportionment U.S. state net operating losses, before valuation allowances. The majority of the U.S. federal net operating losses were generated after 2017 and can be carried forward indefinitely.
The rapid evolution and increased adoption of artificial intelligence technologies amplifies these concerns. There can be no assurance that the procedures and controls that we implement, or that our third party service providers implement, will be sufficient to protect our people, systems, information or other property.
There can be no assurance that the procedures and controls that we implement, or that our third-party service providers implement, will be sufficient to protect our people, systems, information or other property. Moreover, we have no control over the information and operational technology systems of our customers, suppliers, and others with which our systems may connect and communicate.
We are a Delaware corporation subject to the Delaware General Corporation Law, including Section 203, an anti-takeover law.
Anti-takeover measures in our charter documents and under state law could discourage an acquisition and thereby affect the related purchase price. We are a Delaware corporation subject to the Delaware General Corporation Law, including Section 203, an anti-takeover law.
We could be required to remove or remediate wastes disposed of or released by prior 23 Table of Contents owners or operators. In addition, it is possible we could be held responsible for oil and natural gas properties in which we own an interest but are not the operator.
In addition, it is possible we could be held responsible for oil and natural gas properties in which we own an interest but are not the operator. Intellectual property disputes could negatively impact our operations, costs, revenues and competitiveness.
The majority of the U.S. federal net operating losses are generated after 2017 27 Table of Contents and can be carried forward indefinitely. Canadian net operating losses will expire in varying amounts, if unused, between 2036 and 2044. U.S. state net operating losses will expire in varying amounts, if unused, between 2025 and 2044.
Canadian net operating losses will expire in varying amounts, if unused, between 2036 and 2045. U.S. state net operating losses will expire in varying amounts, if unused, between 2028 and 2045.
These efforts have included consideration of cap-and-trade programs, carbon taxes, GHG reporting, tracking programs, attestation requirements and regulations that directly limit GHG emissions from certain sources. Some of the proposals would require industries to meet stringent new standards that would require substantial reductions in carbon emissions. Those reductions could be costly and difficult to implement.
Initiatives that would impact our industry and regulate GHG emissions have included cap-and-trade programs, carbon taxes, GHG reporting, tracking programs, attestation requirements and regulations that directly limit GHG emissions from certain sources.
As of December 31, 2024, under the Prior Credit Agreement, the applicable margin on SOFR rate loans was 1.75% and the applicable margin on base rate loans was 0.75%. As of December 31, 2024, we had no borrowings outstanding under the Prior Credit Agreement.
As of December 31, 2025, no amounts had been disbursed under any letters of credit, and we had $32.0 million in letters of credit outstanding under the reimbursement agreement.
Removed
Moreover, we have no control over the information technology systems of our customers, suppliers, and others with which our systems may connect and communicate. As a result, the occurrence of a cyber incident could go unnoticed for a period of time.
Added
Business and Operating Risks We are dependent on the oil and natural gas industry and market prices for oil and natural gas. Declines in customers’ operating and capital expenditures and in oil and natural gas prices may adversely affect our operating results.
Removed
Four states (New York, Maryland, Vermont, and Washington) have banned the use of high volume hydraulic fracturing, Oregon has adopted a five-year moratorium, California has taken regulatory action to phase out hydraulic fracturing permitting and activities in the state, and Colorado has enacted legislation providing local governments with regulatory authority over hydraulic fracturing operations.
Added
During the second quarter of 2025, global economic conditions deteriorated, in part, because of enacted and proposed trade policies and tariffs by the United States and other governments, as well as uncertainty regarding potential future changes to global trade policies and tariffs.
Removed
Local jurisdictions in some states have adopted ordinances that restrict or in certain cases prohibit the use of hydraulic fracturing, although many of these ordinances have been challenged and some have been overturned.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

8 edited+1 added−0 removed7 unchanged
Biggest changeSenior leadership communicates with the Audit Committee at least quarterly regarding information security and cybersecurity risk and formally reports to the entire Board of Directors on information security and cybersecurity risk at least annually. 29 Table of Contents At the management level, our Senior Vice President of Information Technology, who has extensive cybersecurity knowledge and skills gained from over 19 years of work experience at our company and elsewhere, heads the team responsible for implementing, monitoring, and maintaining information security and cybersecurity practices across our businesses and reports directly to our Chief Financial Officer.
Biggest changeAt the management level, our Senior Vice President and Chief Information Officer, who has extensive cybersecurity knowledge and skills gained from over 20 years of work experience at our company and elsewhere, heads the team responsible for implementing, monitoring, and maintaining information security and cybersecurity practices across our businesses and reports directly to our Chief Financial Officer.
We have protocols by which certain cybersecurity incidents are escalated within the Company and, where appropriate, reported promptly to the Board of Directors and Audit Committee. Our Audit Committee is responsible for overseeing information security and cybersecurity risk.
We have protocols by which certain cybersecurity incidents are escalated within our company and, where appropriate, reported promptly to the Board of Directors and Audit Committee. Our Audit Committee is responsible for overseeing information security and cybersecurity risk.
As part of such reviews, the Audit Committee receives reports and presentations from members of our senior leadership for overseeing the company’s cybersecurity risk management, including the Senior Vice President of Information Technology, which address a wide range of topics including recent developments, evolving standards, vulnerability assessments, third-party and independent reviews, the threat environment, technological trends and information security considerations arising with respect to the Company’s peers and third parties.
As part of such reviews, the Audit Committee receives reports and presentations from members of our senior leadership for overseeing our company’s cybersecurity risk management, including the Senior Vice President and Chief Information Officer, which address a wide range of topics including recent developments, evolving standards, vulnerability assessments, third-party and independent reviews, the threat environment, technological trends and information security considerations arising with respect to our peers and third parties.
A number of experienced information security team members responsible for various parts of the business also report to the Senior Vice President of Information Technology on an ongoing basis. In addition to our internal cybersecurity capabilities, we also regularly engage assessors, consultants, auditors, and other third parties to assist with assessing, identifying, and managing cybersecurity risks.
A number of experienced information security team members responsible for various parts of the business also report to the Senior Vice President and Chief Information Officer on an ongoing basis. In addition to our internal cybersecurity capabilities, we also regularly engage assessors, consultants, auditors, and other third parties to assist with assessing, identifying, and managing cybersecurity risks.
Governance Our Board of Directors has delegated the primary responsibility to oversee cybersecurity matters to the Audit Committee. The Audit Committee periodically reviews the measures implemented by the Company to identify and mitigate data protection and cybersecurity risks.
Governance Our Board of Directors has delegated the primary responsibility to oversee cybersecurity matters to the Audit Committee. The Audit Committee periodically reviews the measures implemented by us to identify and mitigate data protection and cybersecurity risks.
The Senior Vice President of Information Technology receives reports on information security and cybersecurity threats from our Director of Infrastructure and Cybersecurity and in conjunction with management, regularly reviews risk management measures implemented by our company to identify and mitigate information security and cybersecurity risks.
The Senior Vice President and Chief Information Officer receives reports on information security and cybersecurity threats from our Director of Infrastructure and Cybersecurity and in conjunction with management, regularly reviews risk management measures implemented by our company to identify and mitigate information security and cybersecurity risks.
We also employ processes designed to assess, identify, and manage the potential impact of a security incident at critical third-party vendors, service providers or customers or otherwise implicating the third-party technology and systems we use. All employees with a company-provided email are assigned annual cyber awareness training. In addition, we perform monthly phishing simulations, with remediation training required as necessary.
We also employ processes 29 designed to assess, identify, and manage the potential impact of a security incident at critical third-party vendors, service providers or customers or otherwise implicating the third-party technology and systems we use. All employees with a company-provided email are assigned annual cyber awareness training.
While we have not experienced material cybersecurity threats or incidents, or threats or incidents that are reasonably likely to materially affect us, there can be no guarantee that we will not be the subject of future successful attacks, threats or incidents.
In addition, we perform monthly phishing simulations, with remediation training required as necessary. While we have not experienced material cybersecurity threats or incidents, or threats or incidents that are reasonably likely to materially affect us, there can be no guarantee that we will not be the subject of future successful attacks, threats or incidents.
Added
Senior leadership communicates with the Audit Committee at least quarterly regarding information security and cybersecurity risk and formally reports to the entire Board of Directors on information security and cybersecurity risk at least annually.

Item 2. Properties

Properties — owned and leased real estate

4 edited+0 added−1 removed1 unchanged
Biggest changeOur 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. 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.
Biggest changeCompletion 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. Drilling Products — Our drilling products segment is supported by multiple offices and manufacturing and distributing facilities located throughout North America and internationally in over 30 countries.
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.
Other — 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.
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. 30
Our 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 and Ecuador.
Our 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 and Ecuador. Our electrical controls and automation operation is supported by an office and yard facility in Texas.
Removed
Drilling Products — Our drilling products segment is supported by multiple offices and manufacturing and distributing facilities located throughout North America and internationally in over 30 countries. 30 Table of Contents Other — Our oilfield rental operations are supported by offices and yard facilities located in Texas, Oklahoma and Ohio.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeNOV seeks a declaration that United States Patent No. 8,721,752 (the “’752 Patent”) is a “Licensed RH Patent” per the terms of a license agreement between Ulterra and NOV. NOV also alleges a breach of contract based on the license agreement between NOV and Ulterra and seeks allegedly owed royalties since October 22, 2021. NOV also seeks attorney’s fees.
Biggest changeReedHycalog, LP and National Oilwell Varco, LP (“NOV”) sued Ulterra Drilling Technologies, LP (“Ulterra”) and several other companies in Texas state court. NOV seeks a declaration that United States Patent No. 8,721,752 (the “’752 Patent”) is a “Licensed RH Patent” per the terms of a license agreement between Ulterra and NOV.
No. 7,568,534 and the ’752 patent; (ii) a declaratory judgment of no royalties after Oct. 22, 2021; (iii) a declaratory judgment that certain other identified patents are expired and therefore not infringed after Oct. 22, 2021; and (iv) a declaratory judgment of no breach of contract.
Pat. No. 7,568,534 and the ’752 patent; (ii) a declaratory judgment of no royalties after Oct. 22, 2021; (iii) a declaratory judgment that certain other identified patents are expired and therefore not infringed after Oct. 22, 2021; and (iv) a declaratory judgment of no breach of contract.
Item 3. Legal Proceedings. Certain subsidiaries we acquired in the Ulterra acquisition are defendants in a claim brought by a subsidiary of NOV Inc. alleging breach of a license agreement related to certain patents. Such subsidiaries have asserted defenses to the claim and are defending vigorously against this claim. The case is Grant Prideco, Inc., et al. v.
Item 3. Legal Proceedings. Certain subsidiaries we acquired in the Ulterra acquisition are defendants in a claim brought by a subsidiary of NOV Inc. alleging breach of a license agreement related to certain patents. Such subsidiaries have asserted defenses to the claim and are defending vigorously against this claim. On February 6, 2023, Grant Prideco, Inc., ReedHycalog UK, Ltd.
Additionally, we are party to various legal proceedings arising in the normal course of our business. We do not believe that the outcome of these proceedings, either individually or in the aggregate, will have a material adverse effect on our financial condition, cash flows and results of operations. Item 4. Mine Safety Disclosure.
We do not believe that the outcome of these proceedings, either individually or in the aggregate, will have a material adverse effect on our financial condition, cash flows or results of operations. Item 4. Mine Safety Disclosure. Not applicable. 31 PART II
On February 27, 2023, Ulterra filed a plea to the jurisdiction, and subject thereto, an answer, affirmative defenses and counterclaims. Ulterra’s counterclaims include: (i) declaratory judgments of non-infringement of U.S. Pat.
NOV also alleges a breach of contract based on the license agreement between NOV and Ulterra and seeks allegedly owed royalties since October 22, 2021. NOV also seeks attorney’s fees. On February 27, 2023, Ulterra filed a plea to the jurisdiction, and subject thereto, an answer, affirmative defenses and counterclaims. Ulterra’s counterclaims include: (i) declaratory judgments of non-infringement of U.S.
Removed
Schlumberger Technology Corp., et al., in Texas State Court, District of Harris County, 11th Judicial District. On February 6, 2023, Grant Prideco, Inc., ReedHycalog UK, Ltd. ReedHycalog, LP, National Oilwell Varco, LP (“NOV”) sued Ulterra Drilling Technologies, LP (“Ulterra”) and several other companies.
Added
On March 19, 2024, Ulterra moved for judgment on the pleadings regarding its declaratory judgment that certain other identified patents are expired and therefore not infringed after October 22, 2021. On February 13, 2025, the motion was granted in part and denied in part.
Removed
Discovery is closed and dispositive motions are scheduled to be fully briefed by the end of March 2025. Trial is currently scheduled for March 31, 2025. An unfavorable judgment or resolution of this claim not covered by indemnity could have a material impact on our financial results.
Added
In October and November 2025, the Court resolved certain dispositive motions in Ulterra’s favor, resulting in a Final Judgment in Ulterra’s favor on November 25, 2025. NOV has acknowledged that the Court’s rulings mean it cannot collect any of the royalties it had alleged were owed.
Removed
Not applicable. 31 Table of Contents PART II
Added
On December 12, 2025, NOV filed a Notice of Appeal to the United States Court of Appeals for the Federal Circuit. The appeal is currently pending before the Federal Circuit as Docket No. 26-1266. NOV’s brief is currently due on April 20, 2026. Additionally, we are party to various other legal proceedings arising in the normal course of our business.

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, Company/Index 2019 ($) 2020 ($) 2021 ($) 2022 ($) 2023 ($) 2024 ($) Patterson-UTI Energy, Inc. 100.00 51.19 83.08 167.56 110.30 87.21 S&P 500 Index 100.00 118.39 152.34 124.73 157.48 196.85 S&P SmallCap 600 Index 100.00 111.24 140.98 118.22 137.07 148.91 Oilfield Service Index 100.00 57.92 69.94 112.94 115.10 101.68 The foregoing graph is based on historical data and is not necessarily indicative of future performance.
Biggest changeFiscal Year Ended December 31, Company/Index 2020 ($) 2021 ($) 2022 ($) 2023 ($) 2024 ($) 2025 ($) Patterson-UTI Energy, Inc. 100.00 162.29 327.31 215.47 170.36 132.80 S&P 500 Index 100.00 128.68 105.36 133.03 166.28 195.98 S&P SmallCap 600 Index 100.00 126.74 106.28 123.22 133.87 141.88 Oilfield Service Index 100.00 120.74 194.98 198.71 175.53 181.72 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, 2024.
(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, 2025.
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. Item 6. RESERVED 33 Table of Contents
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. Item 6. RESERVED
(e) Performance Graph The following graph compares the cumulative stockholder return of our common stock for the period from December 31, 2019 through December 31, 2024, with the cumulative total return of the S&P 500 Index, the S&P SmallCap 600 Index and the Oilfield Service Index. 32 Table of Contents The graph assumes investment of $100 on December 31, 2019 and reinvestment of all dividends.
(e) Performance Graph The following graph compares the cumulative stockholder return of our common stock for the period from December 31, 2020 through December 31, 2025, with the cumulative total return of the S&P 500 Index, the S&P SmallCap 600 Index and the Oilfield Service Index. 32 The graph assumes investment of $100 on December 31, 2020 and reinvestment of all dividends.
(b) Holders As of February 6, 2025, there were approximately 800 holders of record of our common stock. (c) Dividends On February 5, 2025, 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 17, 2025 to holders of record as of March 3, 2025.
(b) Holders As of February 4, 2026, there were approximately 750 holders of record of our common stock. (c) Dividends On February 4, 2026, our Board of Directors approved a cash dividend on our common stock in the amount of $0.10 per share to be paid on March 16, 2026 to holders of record as of March 2, 2026.
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 2024 10,599 $ 8.32 — $ 779,655 November 2024 — $ — — $ 779,655 December 2024 2,625,921 $ 7.89 2,625,921 $ 758,934 Total 2,636,520 2,625,921 (1) 10,599 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 (2) Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (in thousands) (2) October 2025 10,854 $ 5.41 — $ 693,661 November 2025 974 $ 5.71 — $ 693,661 December 2025 23,856 $ 6.11 — $ 693,661 Total 35,684 — (1) 35,684 shares were withheld in the fourth quarter with respect to employees’ tax withholding obligations upon the vesting of restricted stock units.

Item 7. Management's Discussion & Analysis

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

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Biggest changeComparison of the years ended December 31, 2024 and 2023 The following tables summarize results of operations by business segment for the years ended December 31, 2024 and 2023: Year Ended December 31, Drilling Services (1) 2024 2023 % Change (Dollars in thousands) Revenues $ 1,727,810 $ 1,919,759 (10.0 %) Direct operating costs 1,029,591 1,119,200 (8.0 %) Adjusted gross profit (2) 698,219 800,559 (12.8 %) Selling, general and administrative 16,502 15,014 9.9 % Depreciation, amortization and impairment 477,398 364,312 31.0 % Other operating income, net — (769) (100.0 %) Operating income $ 204,319 $ 422,002 (51.6 %) Capital expenditures $ 264,667 $ 334,780 (20.9 %) Operating days – U.S.
Biggest changeFor the three years ended December 31, 2025, our operating revenues consisted of the following (dollars in thousands): 2025 2024 2023 Drilling Services $ 1,557,642 32.3 % $ 1,727,810 32.1 % $ 1,919,759 46.3 % Completion Services 2,892,247 59.9 % 3,232,785 60.1 % 2,017,440 48.7 % Drilling Products 343,707 7.1 % 351,651 6.5 % 134,679 3.2 % Other 33,028 0.7 % 65,665 1.3 % 74,578 1.8 % $ 4,826,624 100.0 % $ 5,377,911 100.0 % $ 4,146,456 100.0 % Results of Operations Comparison of the years ended December 31, 2024 and 2023 A discussion of our financial condition and results of operations for the fiscal year ended December 31, 2024 compared to the fiscal year ended December 31, 2023 is included in Part II, Item 7— “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on February 11, 2025. 36 Comparison of the years ended December 31, 2025 and 2024 The following tables summarize results of operations by business segment for the years ended December 31, 2025 and 2024: Year Ended December 31, Drilling Services 2025 2024 % Change (Dollars in thousands) Revenues $ 1,557,642 $ 1,727,810 (9.8 %) Direct operating costs 977,234 1,029,591 (5.1 %) Adjusted gross profit (1) 580,408 698,219 (16.9 %) Selling, general and administrative 16,079 16,502 (2.6) % Depreciation, amortization and impairment 366,763 477,398 (23.2 %) Other operating expense (income), net 530 — NA Operating income (loss) $ 197,036 $ 204,319 (3.6 %) Capital expenditures $ 236,517 $ 264,667 (10.6 %) Operating days – U.S.
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.
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 our customers’ ability to access, and willingness to deploy, capital to fund their operating and capital expenditures.
On March 16, 2015, we entered into a Reimbursement Agreement (as amended from time to time, 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.
Reimbursement Agreement On March 16, 2015, we entered into a Reimbursement Agreement (as amended from time to time, 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.
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, and upon our customers’ ability to access, and willingness to deploy, capital to fund their operating and capital expenditures.
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, expectations about future prices, and our customers’ ability to access, and willingness to deploy, capital to fund their operating and capital expenditures.
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, including the depletion of capital expenditure budgets and/or meeting annual drilling and completion targets, 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, including the depletion of capital expenditure budgets and/or meeting annual drilling and completion targets, which could reduce demand for our services.
The Credit Agreement provides for a committed senior unsecured credit facility that permits aggregate revolving credit borrowings of up to $500 million, with a letter of credit sub-facility of $100 million and a swing line sub-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 provides for a committed senior unsecured credit facility that permits aggregate revolving credit borrowings of up to $500 million, with a letter of credit sub-facility of $100 million and a swing line sub-facility that, at any time outstanding, is 35 limited to the lesser of $50 million and the amount of the swing line provider’s unused commitment.
Our methodology for recording income taxes requires a significant amount of judgment in the use of assumptions and estimates. Additionally, we forecast certain tax elements, such as future taxable income, as well as evaluate the feasibility of implementing tax planning strategies.
Our methodology for recording income taxes requires a significant amount of judgment in the use of assumptions and estimates. 46 Additionally, we forecast certain tax elements, such as future taxable income, as well as evaluate the feasibility of implementing tax planning strategies.
(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.
(2) Adjusted gross profit is defined as revenues less direct operating costs (excluding depreciation, depletion, amortization and impairment expense). See Non-GAAP Financial Measures below for a reconciliation of GAAP gross profit to adjusted gross profit by segment.
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. 47 Table of Contents 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”).
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. 47 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 may also be impacted by delayed customer payments and payment defaults associated with customer liquidity issues and bankruptcies. The North American oil and natural gas services industry is cyclical and, at times, experiences downturns in demand. During these periods, there has been substantially more oil and natural gas service equipment available than necessary to meet demand.
We may also be impacted by delayed customer payments and payment defaults associated with customer liquidity issues and bankruptcies. The oil and natural gas services industry is cyclical and, at times, experiences downturns in demand. During these periods, there has been substantially more oil and natural gas service equipment available than necessary to meet demand.
Assuming all changes are isolated, a decrease of 100 bps in our long-term revenue growth rate for our drilling products reporting unit would reduce our estimated fair value by approximately 5%, while a 100 bps increase to our discount rate would reduce our estimated fair value by approximately 10%.
Assuming all changes are isolated, a decrease of 100 bps in our long-term revenue growth rate for our drilling products reporting unit would reduce our estimated fair value by approximately 7%, while a 100 bps increase to our discount rate would reduce our estimated fair value by approximately 10%.
A decline in demand for oil and natural gas, prolonged low oil or natural gas prices, expectations of decreases in oil and natural gas prices or a reduction in the ability of our customers to access capital would likely result in reduced capital expenditures by our customers and 46 Table of Contents decreased demand for our services, which could have a material adverse effect on our operating results, financial condition and cash flows.
A decline in demand for oil and natural gas, prolonged low oil or natural gas prices, expectations of decreases in oil and natural gas prices or a reduction in the ability of our customers to access capital would likely result in reduced capital expenditures by our customers and decreased demand for our services, which could have a material adverse effect on our operating results, financial condition and cash flows.
If the resulting fair value of goodwill is less than the carrying value of goodwill, an impairment loss would be recognized for the amount of the shortfall. The fair value of a reporting unit is determined using significant unobservable inputs, or level 3 in the fair value hierarchy. These inputs are based on internal management estimates, forecasts, and significant judgment.
If the resulting fair value of goodwill is less than the carrying value of goodwill, an impairment loss would be recognized for the amount of the shortfall. The fair value of a reporting unit is determined using significant unobservable inputs, or level 3 in the fair value hierarchy. These inputs are based on forecasts and significant judgment.
Subject to customary conditions, we may request that the lenders’ aggregate commitments be increased by up to $200 million, not to exceed total commitments of $700 million. 40 Table of Contents Loans under the Credit Agreement bear interest by reference, at our election, to the SOFR rate (in addition to a 0.10% per annum adjustment) or base rate, in each case subject to a 0% floor.
Subject to customary conditions, we may request that the lenders’ aggregate commitments be increased by up to $200 million, not to exceed total commitments of $700 million. Loans under the Credit Agreement bear interest by reference, at our election, to the SOFR rate (plus a 0.10% per annum adjustment) or base rate, in each case subject to a 0% floor.
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, 2024 and 2023 was approximately $426 million and $700 million, respectively.
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, 2025 and 2024 was approximately $291 million and $426 million, respectively.
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 0.150% to 0.350% based on our credit rating.
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 0.15% to 0.35% based on our credit rating.
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. As of December 31, 2024, our rig fleet included 135 Tier-1, super-spec rigs.
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. As of December 31, 2025, our rig fleet included 137 Tier-1, super-spec rigs marketed.
As of December 31, 2024, we had remaining authorization to purchase approximately $759 million of our outstanding common stock under the stock buyback program. Shares of stock purchased under the buyback program are held as treasury shares. We acquired shares of stock from employees during 2024, 2023 and 2022 that are accounted for as treasury stock.
As of December 31, 2025, we had remaining authorization to purchase approximately $694 million of our outstanding common stock under the stock buyback program. Shares of stock purchased under the buyback program are held as treasury shares. We acquired shares of stock from employees during 2025, 2024 and 2023 that are accounted for as treasury stock.
A rig is considered to be operating if it is earning revenue pursuant to a contract on a given day. 37 Table of Contents Total revenues and direct operating costs decreased primarily due to a decrease in operating days in our contract drilling business within the United States.
A rig is considered to be operating if it is earning revenue pursuant to a contract on a given day. Total revenues and direct operating costs decreased primarily due to a decrease in operating days in our contract drilling business within the United States.
We routinely monitor the potential impact of these situations. As of December 31, 2024, we have no unrecognized tax benefits.
We routinely monitor the potential impact of these situations. As of December 31, 2025, we have no unrecognized tax benefits.
Recent Developments in Debt Financing — On January 31, 2025, we entered into the Second Amended and Restated Credit Agreement with the lenders party thereto and Wells Fargo Bank, National Association, as administrative agent, and the other parties thereto (the “Credit Agreement”).
Recent Developments in Financial Matters — On January 31, 2025, we entered into the Second Amended and Restated Credit Agreement with the lenders party thereto and Wells Fargo Bank, National Association, as administrative agent, and the other parties thereto (the “Credit Agreement”).
Geopolitical instability in regions in which we expect to maintain and grow market share, a global decrease in the demand of drilling products, or other unforeseen macroeconomic considerations could negatively impact the key assumptions used in our goodwill assessment for our drilling products reporting unit.
Geopolitical instability in regions in which we expect to maintain and grow market share, an unfavorable legal proceeding outcome, a global decrease in the demand of drilling products or other unforeseen macroeconomic considerations could negatively impact the key assumptions used in our goodwill assessment for our drilling products reporting unit.
Approximately 7.1% of our total contract drilling backlog in the United States at December 31, 2024 is reasonably expected to remain after 2025. See Note 3 of Notes to consolidated financial statements in Item 8 of this Report and “Item 1A.
Approximately 9% of our total contract drilling backlog in the United States at December 31, 2025 is reasonably expected to remain after 2026. See Note 3 of Notes to consolidated financial statements in Item 8 of this Report and “Item 1A.
As such, there was no meaningful year-over-year comparison. Direct operating costs and depreciation, amortization and impairment expense were approximately $7.9 million and $17.7 million higher than they would have otherwise been for the year ended December 31, 2024, respectively, as a result of the step up to fair value of our drill bits in accordance with purchase accounting.
Direct operating costs and depreciation, amortization and impairment expense were approximately $7.9 million and $17.7 million higher than they would have otherwise been for the year ended December 31, 2024, respectively, as a result of the step up to fair value of our drill bits in accordance with purchase accounting.
Natural gas prices (based on the Henry Hub Spot Market Price) averaged $2.45 per MMBtu in the fourth quarter of 2024. In light of these and other factors, we expect oil and natural gas prices to continue to be unpredictable 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 $3.73 per MMBtu in the fourth quarter of 2025. In light of these and other factors, we expect oil and natural gas prices to continue to be unpredictable and to affect our financial condition, operations and ability to access sources of capital.
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. 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.
We also provide electrical controls and automation to the energy, marine and mining industries, in North America and other select markets. 33 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.
We determined our drilling products operating segment consists of a single reporting unit and, accordingly, goodwill acquired from the Ulterra acquisition was allocated to that reporting unit. We determined our completion services operating segment consists of two reporting units; completion services, which is primarily comprised of our hydraulic fracturing operations and other integrated service offerings, and cementing services.
We determined our drilling products operating segment consists of a single reporting unit to which the goodwill from our 2023 acquisition of Ulterra was allocated. We determined our completion services operating segment consisted of two reporting units: completion services, which was primarily comprised of our hydraulic fracturing operations and other integrated service offerings, and cementing services.
The current demand for equipment and services remains impacted by 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 current demand for equipment and services remains impacted by macro conditions, including commodity prices, geopolitical environment, changes to international tariffs and trade policies, 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.
Income Taxes The effective tax rate decreased to (1.0)% for 2024 compared to 19.9% for 2023. 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.
Income Taxes The effective tax rate increased to 9.6% for 2025 compared to (1.0%) for 2024. 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.
We define Adjusted EBITDA as net income (loss) plus income tax expense (benefit), net interest expense, depreciation, depletion, amortization and impairment expense (including impairment of goodwill) and merger and integration expense.
We define Adjusted EBITDA as net income (loss) plus income tax expense (benefit), net interest expense, depreciation, depletion, amortization and impairment expense, legal accruals and settlements, impairment of goodwill, and merger and integration expense.
Direct operating costs and depreciation, amortization and impairment expense were approximately $11.0 million and $18.0 million higher than they would have otherwise been for the year ended December 31, 2023, respectively, as a result of the step up to fair value of our drill bits in accordance with purchase accounting.
Direct operating costs and depreciation, amortization and impairment expense were approximately $2.6 million and $6.5 million higher than they would have otherwise been for the year ended December 31, 2025, respectively, as a result of the step up to fair value of our drill bits in accordance with purchase accounting.
During the third quarter of 2024, we viewed the reduction in activity forecasts combined with the recent decline in the market price of our common stock as a triggering event that warranted a quantitative assessment for goodwill impairment. We estimated the fair value of the drilling products and the completion services reporting units using the income approach.
During the second quarter of 2025, we viewed the reduction in activity forecasts combined with the decline in the market price of our common stock as a triggering event that warranted a quantitative assessment for goodwill impairment. 45 We estimated the fair value of the drilling products and cementing services reporting units using the income approach.
As of December 31, 2024, we had $38.8 million in letters of credit outstanding 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 of our letters of credit issued thereunder.
As of December 31, 2025, we had $32.0 million in letters of credit outstanding 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 of our letters of credit issued thereunder.
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, 2024: Useful Lives Change Impact (in thousands) Drilling services equipment 1-15 years 10% $ 54,444 Completion services equipment 1-25 years 10% 46,973 $ 101,417 Impairment of long-lived assets — We review our long-lived assets, including property and equipment and definite-lived intangible assets, 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”).
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, 2025: Useful Lives Change Impact (in thousands) Drilling services equipment 1-15 years 10% $ 58,353 Completion services equipment 1-25 years 10% 38,971 $ 97,324 Impairment of long-lived assets — We review our long-lived assets, including property and equipment and definite-lived intangible assets, 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”).
We were in compliance with the covenants under the Prior Credit Agreement at December 31, 2024.
We were in compliance with the covenants under the Credit Agreement at December 31, 2025.
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 the undiscounted future cash flows over the life of the respective asset or the primary asset in an asset group.
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 undiscounted future cash flows over the life of the respective assets or asset groupings in our assessment of its recoverability.
(2) 121 114 107 105 (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) 106 104 95 93 (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.
In our drilling services segment, our average active rig count in the United States for the fourth quarter of 2024 was 105 rigs. This was a decrease from our average active rig count for the third quarter of 2024 of 107 rigs.
In our drilling services segment, our average active rig count in the United States for the fourth quarter of 2025 was 93 rigs. This was a decrease from our average active rig count for the third quarter of 2025 of 95 rigs.
Under this approach, we used a discounted cash flow model, which utilized present values of cash flows to estimate fair value. Forecasted cash flows reflected known market conditions in the third quarter of 2024 and management’s anticipated business outlook for each reporting unit.
Under this approach, we used a discounted cash flow model, which utilized present values of cash flows to estimate fair value. Forecasted cash flows reflected known market conditions in the second quarter of 2025 and management’s anticipated business outlook for the asset group.
Depreciation and amortization — Our industry is very capital intensive, as property and equipment represented 51.6% of our total assets as of December 31, 2024 and depreciation, depletion, amortization and impairment represented 18.7% of our total operating costs and expenses in 2024. Our property and equipment is carried at cost less accumulated depreciation and amortization.
Depreciation and amortization — Our industry is very capital intensive, as property and equipment represented 48.7% of our total assets as of December 31, 2025 and depreciation, depletion, amortization and impairment represented 19.3% of our total operating costs and expenses in 2025. Our property and equipment is carried at cost less accumulated depreciation and amortization.
Goodwill is tested at the reporting unit level, which is at or one level below our operating segments. We determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value after considering qualitative, market and other factors. Any necessary goodwill impairment is determined using a quantitative impairment test.
We determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value after considering qualitative, market and other factors. Any necessary goodwill impairment is determined using a quantitative impairment test.
The applicable margin on SOFR rate loans varies from 1.25% to 2.25% and the applicable margin on base rate loans varies from 0.25% to 1.25%, in each case determined based on our credit rating.
The applicable margin on SOFR rate loans varies from 1.25% to 2.25% and the applicable margin on base rate loans varies from 0.25% to 1.25%, in each case determined based on our credit rating. As of December 31, 2025, the applicable margin on SOFR rate loans was 1.75% and the applicable margin on base rate loans was 0.75%.
We had $42.9 million of outstanding letters of credit at December 31, 2024, which was comprised of $38.8 million outstanding under the Reimbursement Agreement, $2.1 million outstanding under the Prior Credit Agreement, and $2.0 million outstanding with financial institutions providing for short-term borrowing capacity, overdraft protection and bonding requirements.
We had $39.1 million of outstanding letters of credit at December 31, 2025, which was comprised of $32.0 million outstanding under the Reimbursement Agreement, $5.0 million outstanding under the Credit Agreement, and $2.0 million outstanding with financial institutions providing for short-term borrowing capacity, overdraft protection and bonding requirements.
As of December 31, 2024, we had no borrowings outstanding under our Prior Credit Agreement. We had $2.1 million in letters of credit outstanding under the Prior Credit Agreement at December 31, 2024 and, as a result, had available borrowing capacity of approximately $613 million under the Prior Credit Agreement at that date.
As of December 31, 2025, we had no borrowings outstanding under our Credit Agreement. We had $5.0 million in letters of credit outstanding under the Credit Agreement at December 31, 2025 and, as a result, had available borrowing capacity of approximately $495 million under the Credit Agreement at that date.
Natural gas prices (based on the Henry Hub Spot Market Price) averaged $2.45 per MMBtu in the fourth quarter of 2024 and closed at $3.30 per MMBtu on February 3, 2025. 34 Table of Contents Quarterly average oil prices and our quarterly average number of rigs operating in the United States for 2022, 2023 and 2024 are as follows: 1 st Quarter 2 nd Quarter 3 rd Quarter 4 th Quarter 2022 Average oil price per Bbl (1) $ 94.45 $ 108.72 $ 93.18 $ 82.79 Average rigs operating per day – U.S.
Natural gas prices (based on the Henry Hub Spot Market Price) averaged $3.73 per MMBtu in the fourth quarter of 2025 and closed at $4.40 per MMBtu on February 2, 2026. 34 Quarterly average oil prices and our quarterly average number of rigs operating in the United States for 2023, 2024 and 2025 are as follows: 1 st Quarter 2 nd Quarter 3 rd Quarter 4 th Quarter 2023 Average oil price per Bbl (1) $ 75.93 $ 73.54 $ 82.25 $ 78.53 Average rigs operating per day – U.S.
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 2025 to be approximately $600 million. The majority of these expenditures are expected to be used for normal, recurring items necessary to support our business.
The majority of our capital expenditures are expected to be used for normal, recurring items necessary to support our business. A portion of our capital expenditures can be adjusted and managed by us to match market demand and activity.
The current demand for equipment and services remains impacted by 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 $70.73 per barrel in the fourth quarter of 2024.
The current demand for equipment and services remains impacted by macro conditions, including commodity prices, geopolitical environment, changes to international tariffs and trade policies, 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.
We invest cash primarily in highly liquid, short-term investments such as overnight deposits and money market accounts. 43 Table of Contents Critical Accounting Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
Critical Accounting Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
Depreciation, amortization and impairment expense increased primarily due to a charge of $114 million related to the abandonment of 42 legacy, non-Tier-1 super-spec drilling rigs and related equipment. See Note 6 of Notes to consolidated financial statements for additional information.
This decrease was partially offset by a $23 million increase in directional drilling operating costs from higher activity. Depreciation, amortization and impairment expense decreased primarily due to a charge of $114 million related to the abandonment of 42 legacy, non-Tier-1 super-spec drilling rigs and related equipment in 2024. See Note 6 of Notes to consolidated financial statements for additional information.
Our Board of Directors may, without advance notice, reduce or suspend our dividend for any reason, including to improve our financial flexibility and position our company for long-term success.
Our Board of Directors may, without advance notice, reduce or suspend our dividend for any reason, including to improve our financial flexibility and position our company for long-term success. There can be no assurance that we will pay a dividend in the future.
The allocation of the purchase price may be modified up to one year after the acquisition date as more information is obtained about the fair value of assets acquired and liabilities assumed.
The allocation of the purchase price may be modified up to one year after the acquisition date as more information is obtained about the fair value of assets acquired and liabilities assumed. See Note 2 of Notes to consolidated financial statements included as a part of Item 8 of this Report.
Commodity prices have historically been volatile, but have been relatively range-bound since the end of 2022.
Commodity prices have historically been volatile, but were relatively range-bound from the end of 2022 through the first quarter of 2025.
We have also agreed that if obligations under the Credit Agreement are secured by liens on any of our or our subsidiaries’ property, then our reimbursement obligations and (to the extent similar obligations would be secured under the Credit Agreement) other obligations under the Reimbursement Agreement and any letters of credit will be equally and ratably secured by all property subject to such liens securing the Credit Agreement.
We have also agreed that if obligations under the Credit Agreement are secured by liens on any of our or our subsidiaries’ property, then our reimbursement obligations and (to the extent similar obligations would be secured under the Credit Agreement) other obligations under the Reimbursement Agreement and any letters of credit will be equally and ratably secured by all property subject to such liens securing the Credit Agreement. 41 Pursuant to a Continuing Guaranty dated as of March 16, 2015, our payment obligations under the Reimbursement Agreement are jointly and severally guaranteed as to payment and not as to collection by our subsidiaries that from time to time guarantee payment under the Credit Agreement.
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, 2024. Operating lease liabilities totaled $47.6 million and finance lease liabilities totaled $25.4 million at December 31, 2024.
Operating lease liabilities totaled $46.3 million and finance lease liabilities totaled $13.2 million at December 31, 2025. See Note 13 of Notes to consolidated financial statements in Item 8 of this Report for additional information on our operating and finance leases as of December 31, 2025.
The forecast for the completion services reporting unit assumed lower activity in 2025 compared to average activity levels for full year 2024 and increases in estimated activity of 2% to 8% beginning in 2026 through 2029. Those estimates were based on future drilling rig and pressure pumping fleet count forecasts during the third quarter of 2024 and estimated market share.
The forecast for the cementing services reporting unit assumed lower activity in 2026 compared to estimated average activity for full year 2025 and moderate growth estimates thereafter. Those estimates were based on future drilling rig count forecasts during the second quarter of 2025 and estimated market share.
Year Ended December 31, 2024 2023 2022 (in thousands) Net income (loss) $ (966,399) $ 245,952 $ 154,658 Income tax expense (benefit) 9,453 61,152 13,204 Net interest expense 66,234 46,748 39,896 Depreciation, depletion, amortization and impairment 1,171,873 731,416 483,945 Impairment of goodwill 885,240 — — Merger and integration expense 33,037 98,077 2,069 Adjusted EBITDA $ 1,199,438 $ 1,183,345 $ 693,772 48 Table of Contents Adjusted Gross Profit We define “Adjusted gross profit” as revenues less direct operating costs (excluding depreciation, depletion, amortization and impairment expense, which does not include impairment of goodwill).
Year Ended December 31, 2025 2024 2023 (in thousands) Net income (loss) $ (93,054) $ (966,399) $ 245,952 Income tax expense (benefit) (9,937) 9,453 61,152 Net interest expense 63,859 66,234 46,748 Depreciation, depletion, amortization and impairment 940,264 1,171,873 731,416 Legal accruals and settlements 15,415 (17,792) — Impairment of goodwill — 885,240 — Merger and integration expense 1,016 33,037 98,077 Adjusted EBITDA $ 917,563 $ 1,181,646 $ 1,183,345 48 Adjusted Gross Profit We define “Adjusted gross profit” as revenues less direct operating costs (excluding depreciation, depletion, amortization and impairment expense, which does not include impairment of goodwill).
Future cash flows were projected based on estimates of revenue growth rates, gross profit, selling, general and administrative expense, changes in working capital, and capital expenditures. The terminal period used within the discounted cash flow model for each reporting unit consisted of a 1% growth estimate.
Future cash flows were projected based on estimates of revenue growth rates, gross profit, selling, general and administrative expense, changes in working capital, and capital expenditures. The terminal period used within the discounted cash flow model included a growth rate. Future cash flows were then discounted using a market-participant, risk-adjusted weighted average cost of capital.
During 2024, our sources of cash flow included: • $1.2 billion from operating activities, and • $25.8 million in proceeds from the disposal of property and equipment.
Sources and Uses of Cash During 2025, our sources of cash flow included: • $1.0 billion from operating activities, and • $44.1 million in proceeds from the disposal of property and equipment, including insurance recoveries.
Term contracts help support our operating rig count. Based on contracts in place in the United States as of February 5, 2025, we expect an average of 64 rigs operating under term contracts during the first quarter of 2025 and an average of 40 rigs operating under term contracts during 2025.
Based on contracts in place in the United States as of February 4, 2026, we expect an average of 49 rigs operating under term contracts during the first quarter of 2026 and an average of 27 rigs operating under term contracts during 2026.
Drilling Services Completion Services Drilling Products Other (in thousands) For the year ended December 31, 2024 Revenues $ 1,727,810 $ 3,232,785 $ 351,651 $ 65,665 Less direct operating costs (1,029,591) (2,658,170) (191,107) (41,001) Less depreciation, depletion, amortization and impairment (477,398) (564,155) (100,610) (24,043) GAAP gross profit 220,821 10,460 59,934 621 Depreciation, depletion, amortization and impairment 477,398 564,155 100,610 24,043 Adjusted gross profit $ 698,219 $ 574,615 $ 160,544 $ 24,664 For the year ended December 31, 2023 Revenues $ 1,919,759 $ 2,017,440 $ 134,679 $ 74,578 Less direct operating costs (1,119,200) (1,567,940) (81,555) (42,624) Less depreciation, depletion, amortization and impairment (364,312) (283,230) (48,467) (28,237) GAAP gross profit 436,247 166,270 4,657 3,717 Depreciation, depletion, amortization and impairment 364,312 283,230 48,467 28,237 Adjusted gross profit $ 800,559 $ 449,500 $ 53,124 $ 31,954 For the year ended December 31, 2022 Revenues $ 1,544,820 $ 1,022,413 $ — $ 80,359 Less direct operating costs (1,025,904) (781,385) — (39,261) Less depreciation, depletion, amortization and impairment (354,116) (98,162) — (26,496) GAAP gross profit 164,800 142,866 — 14,602 Depreciation, depletion, amortization and impairment 354,116 98,162 — 26,496 Adjusted gross profit $ 518,916 $ 241,028 $ — $ 41,098 49 Table of Contents
Drilling Services Completion Services Drilling Products Other (in thousands) For the year ended December 31, 2025 Revenues $ 1,557,642 $ 2,892,247 $ 343,707 $ 33,028 Less direct operating costs (977,234) (2,461,539) (196,130) (21,599) Less depreciation, depletion, amortization and impairment (366,763) (463,599) (88,301) (13,226) GAAP gross profit (loss) 213,645 (32,891) 59,276 (1,797) Depreciation, depletion, amortization and impairment 366,763 463,599 88,301 13,226 Adjusted gross profit (loss) $ 580,408 $ 430,708 $ 147,577 $ 11,429 For the year ended December 31, 2024 Revenues $ 1,727,810 $ 3,232,785 $ 351,651 $ 65,665 Less direct operating costs (1,029,591) (2,658,170) (191,107) (41,001) Less depreciation, depletion, amortization and impairment (477,398) (564,155) (100,610) (24,043) GAAP gross profit (loss) 220,821 10,460 59,934 621 Depreciation, depletion, amortization and impairment 477,398 564,155 100,610 24,043 Adjusted gross profit (loss) $ 698,219 $ 574,615 $ 160,544 $ 24,664 For the year ended December 31, 2023 Revenues $ 1,919,759 $ 2,017,440 $ 134,679 $ 74,578 Less direct operating costs (1,119,200) (1,567,940) (81,555) (42,624) Less depreciation, depletion, amortization and impairment (364,312) (283,230) (48,467) (28,237) GAAP gross profit (loss) 436,247 166,270 4,657 3,717 Depreciation, depletion, amortization and impairment 364,312 283,230 48,467 28,237 Adjusted gross profit (loss) $ 800,559 $ 449,500 $ 53,124 $ 31,954 49
Our active rig count in the United States at December 31, 2024 of 103 rigs was less than the rig count of 121 rigs at December 31, 2023, reflecting the industry-wide activity declines due to increased drilling efficiencies and market consolidation. We expect our rig count in the United States will average 106 rigs in the first quarter of 2025.
Our active rig count in the United States at December 31, 2025 of 93 rigs was less than the rig count of 105 rigs at December 31, 2024, reflecting the industry-wide activity declines due, in part, to expectations regarding future crude oil prices, increased drilling efficiencies and market consolidation.
There can be no assurance that we will pay a dividend in the future. 42 Table of Contents We may, at any time and from time to time, seek to retire or purchase our outstanding debt for cash through open-market purchases, privately negotiated transactions, redemptions or otherwise.
We may, at any time and from time to time, seek to retire or purchase our outstanding debt for cash through open-market purchases, privately negotiated transactions, redemptions or otherwise.
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.” During the fourth quarter of 2024, our completion services segment was impacted by several long-term dedicated customers reducing sequential completion activity after meeting their annual production targets.
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.” In our completion services segment, activity and pricing for the fourth quarter of 2025 were steady compared to the previous quarter.
(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. (2) 131 128 120 118 2024 Average oil price per Bbl (1) $ 77.50 $ 81.81 $ 76.43 $ 70.73 Average rigs operating per day – U.S.
(2) 131 128 120 118 2024 Average oil price per Bbl (1) $ 77.50 $ 81.81 $ 76.43 $ 70.73 Average rigs operating per day – U.S. (2) 121 114 107 105 2025 Average oil price per Bbl (1) $ 71.78 $ 64.57 $ 65.78 $ 59.62 Average rigs operating per day – U.S.
These estimates of cash flows are based on historical trends in the industry as well as our expectations regarding the continuation of these trends in the future. As of December 31, 2024, no impairment was indicated for our long-lived tangible or definite-lived intangible assets.
These estimates of cash flows are based on historical trends in the industry as well as our expectations regarding the continuation of these trends in the future.
See Note 6 of Notes to consolidated financial statements included as a part of Item 8 of this Report.
For a full description of the Credit Agreement, the Reimbursement Agreement and our senior notes, see Note 9 of Notes to consolidated financial statements included as a part of Item 8 of this Report.
Such changes could result in impairment charges in the future, which could be material to our results of operations and financial statements as a whole. Fair values of assets acquired and liabilities assumed in acquisitions — Assets acquired and liabilities assumed in a business combination are recorded at their estimated fair values on the date of acquisition.
Fair values of assets acquired and liabilities assumed in acquisitions — Assets acquired and liabilities assumed in a business combination are recorded at their estimated fair values on the date of acquisition.
Negative market indicators such as lower industry-wide drilling rig and pressure pumping fleet count forecasts, increased volatility and pricing declines in the pressure pumping market, and continued efficiency gains and technology advancements reducing operating days have led to our reduced outlook for activity.
During the second quarter of 2025, negative market indicators such as lower industry-wide drilling rig and pressure pumping fleet count forecasts, increased volatility and margin compression for certain of our asset groups led to our reduced outlook for activity.
Merger and integration expense decreased due to the timing of the NexTier merger and the Ulterra acquisition, which both closed in the third quarter of 2023.
Merger and integration expense decreased due to the timing of the NexTier merger and the Ulterra acquisition, which both closed in the third quarter of 2023. 39 Depreciation expense increased due to the enhancement of our main corporate office, primarily arising from office consolidation following the NexTier merger and the completion of our digital performance center.
Other operating income, net in 2024 was due to gain on legal settlements. 38 Table of Contents Year Ended December 31, Drilling Products 2024 2023 % Change (Dollars in thousands) Revenues $ 351,651 $ 134,679 161.1 % Direct operating costs 191,107 81,555 134.3 % Adjusted gross profit (1) 160,544 53,124 202.2 % Selling, general and administrative 35,860 11,158 221.4 % Depreciation, amortization and impairment 100,610 48,467 107.6 % Operating income (loss) $ 24,074 $ (6,501) (470.3) % Capital expenditures $ 61,687 $ 24,572 151.0 % (1) Adjusted gross profit is defined as revenues less direct operating costs (excluding depreciation, amortization and impairment expense).
Year Ended December 31, Drilling Products 2025 2024 % Change (Dollars in thousands) Revenues $ 343,707 $ 351,651 (2.3) % Direct operating costs 196,130 191,107 2.6 % Adjusted gross profit (1) 147,577 160,544 (8.1) % Selling, general and administrative 33,167 35,860 (7.5) % Depreciation, amortization and impairment 88,301 100,610 (12.2) % Operating income (loss) $ 26,109 $ 24,074 8.5 % Capital expenditures $ 61,421 $ 61,687 (0.4) % (1) Adjusted gross profit is defined as revenues less direct operating costs (excluding depreciation, amortization and impairment expense).
Treasury stock acquisitions during the years ended December 31, 2024, 2023 and 2022 were as follows (dollars in thousands): 2024 2023 2022 Shares Cost Shares Cost Shares Cost Treasury shares at beginning of period 105,580,011 $ 1,657,675 88,758,722 $ 1,453,079 84,128,995 $ 1,372,641 Purchases pursuant to stock buyback program 26,646,698 280,327 14,086,229 168,631 3,254,599 57,173 Acquisitions pursuant to long-term incentive plan 1,213,319 13,065 2,735,060 35,965 1,372,101 23,237 Other — — — — 3,027 28 Treasury shares at end of period 133,440,028 $ 1,951,067 105,580,011 $ 1,657,675 88,758,722 $ 1,453,079 As of December 31, 2024, we had unrecognized compensation costs of $42.8 million and $12.8 million related to our unvested restricted stock units and our unvested Performance Units, respectively.
Treasury stock acquisitions during the years ended December 31, 2025, 2024 and 2023 were as follows (dollars in thousands): 2025 2024 2023 Shares Cost Shares Cost Shares Cost Treasury shares at beginning of period 133,440,028 $ 1,951,067 105,580,011 $ 1,657,675 88,758,722 $ 1,453,079 Purchases pursuant to stock buyback program 10,278,723 65,274 26,646,698 280,327 14,086,229 168,631 Acquisitions pursuant to long-term incentive plan 716,501 4,373 1,213,319 13,065 2,735,060 35,965 Treasury shares at end of period 144,435,252 $ 2,020,714 133,440,028 $ 1,951,067 105,580,011 $ 1,657,675 Commitments — As of December 31, 2025, we had commitments to purchase major equipment totaling approximately $47.5 million. 43 Our completion services segment has entered into agreements to purchase minimum quantities of proppants from certain vendors.
A decrease in fair value resulting from unfavorable changes to these assumptions, or others, could result in goodwill impairment in future periods that could be material to our results of operations and financial statements as a whole. 45 Table of Contents Accruals for self-insured levels of insurance coverage — We maintain insurance coverage for fire, windstorm and other risks of physical loss to our equipment and certain other assets, employers’ liability, automobile liability, commercial general liability, workers’ compensation and insurance for other specific risks.
A decrease in fair value resulting from unfavorable changes to these assumptions, or others, could result in goodwill impairment in future periods that could be material to our results of operations and financial statements as a whole.
See Non-GAAP Financial Measures below for a reconciliation of GAAP gross profit to adjusted gross profit by segment. (3) Operational data relates to our contract drilling business.
(2) 36,371 40,899 (11.1 %) (1) 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. (2) Operational data relates to our contract drilling business.
During times of volatility, significant judgment must be applied to determine whether credit market changes are a short-term or long-term trend. We estimated the fair value of the cementing services reporting unit in our completion services operating segment using a market approach.
Financial and credit market volatility directly impacts our fair value measurement through the weighted average cost of capital used to determine a discount rate. During times of volatility, significant judgment must be applied to determine whether credit market changes are a short-term or long-term trend.
The incremental capital spending related to these assets was partially offset by a decrease in business activity in 2024. Additionally, we received proceeds from sale of assets or idle equipment of $25.8 million and $26.5 million in 2024 and 2023, respectively. Based on our current outlook for activity, we expect our capital expenditures for 2025 to be approximately $600 million.
This was a decrease from the $678 million of cash capital expenditures in 2024 due to a decrease in business activity in 2025. Additionally, we received proceeds from sale of assets or idle equipment and insurance recoveries of $44.1 million and $25.8 million in 2025 and 2024, respectively.
Recent Developments in Market Conditions and Outlook — Commodity prices have historically been volatile but have been relatively range-bound since the end of 2022.
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. Recent Developments in Market Conditions and Outlook — Commodity prices have historically been volatile but were relatively range-bound from the end of 2022 through the first quarter of 2025.
We anticipate $52.2 million of expenditures in 2025 related to various contractual obligations such as certain commitments to purchase proppants and lease liabilities.
We anticipate $45.1 million of expenditures in 2026 related to various contractual obligations such as certain commitments to purchase proppants and lease liabilities. Trading and Investing — We have not engaged in trading activities that include high-risk securities, such as derivatives and non-exchange traded contracts.
Year Ended December 31, Other 2024 2023 % Change (Dollars in thousands) Revenues $ 65,665 $ 74,578 (12.0) % Direct operating costs 41,001 42,624 (3.8 %) Adjusted gross profit (1) 24,664 31,954 (22.8) % Selling, general and administrative 708 888 (20.3 %) Depreciation, depletion, amortization and impairment 24,043 28,237 (14.9 %) Operating income (loss) $ (87) $ 2,829 (103.1 %) Capital expenditures $ 21,813 $ 24,645 (11.5) % (1) Adjusted gross profit is defined as revenues less direct operating costs (excluding depreciation, depletion, amortization and impairment expense).
Year Ended December 31, Other (1) 2025 2024 % Change (Dollars in thousands) Revenues $ 33,028 $ 65,665 (49.7) % Direct operating costs 21,599 41,001 (47.3 %) Adjusted gross profit (2) 11,429 24,664 (53.7) % Selling, general and administrative 110 708 (84.5 %) Depreciation, depletion, amortization and impairment 13,226 24,043 (45.0 %) Operating income (loss) $ (1,907) $ (87) 2092.0 % Capital expenditures $ 10,954 $ 21,813 (49.8) % (1) Other includes our oilfield rentals business, prior to its divestiture in April 2025, and oil and natural gas working interests.
Based on the results of the goodwill impairment tests performed during the third quarter of 2024, the fair values of the drilling products and cementing services reporting units exceeded their carrying values by approximately 13% and 73%, respectively. Accordingly, no impairment was recorded for the drilling products and cementing services reporting units.
Based on the results of the goodwill impairment test, the fair value of the drilling products reporting unit exceeded its carrying value by approximately 8%. Accordingly, no impairment was recorded in the second quarter of 2025.
As of December 31, 2024, no amounts had been drawn under the letters of credit. Our outstanding long-term debt at December 31, 2024 was $1.2 billion and consisted of $483 million of our 2028 Notes, $345 million of our 2029 Notes, $400 million of our 2033 Notes and $6.4 million of Equipment Loans.
Our outstanding long-term debt at December 31, 2025 was $1.2 billion and consisted of $483 million of our 3.95% Senior Notes due 2028, $345 million of our 5.15% Senior Notes due 2029 and $400 million of our 7.15% Senior Notes due 2033. We were in compliance with all covenants under the associated agreements and indentures at December 31, 2025.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

7 edited+1 added−0 removed2 unchanged
Biggest changeAs of December 31, 2024, we had $2.1 million in letters of credit outstanding and, as a result, had available borrowing capacity of approximately $613 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.
Biggest changeAs of December 31, 2025, we had $5.0 million in letters of credit outstanding under the Credit Agreement and, as a result, had available borrowing capacity of approximately $495 million at that date.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk As of December 31, 2024, we would have had exposure to interest rate market risk associated with any outstanding borrowings and letters of credit that we had under the Prior Credit Agreement and amounts owed under the Reimbursement Agreement.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk As of December 31, 2025, 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.
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.
However, a portion 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.
Loans under the Prior Credit Agreement bore 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.
Loans under the Credit Agreement bear interest by reference, at our election, to the SOFR rate (plus a 0.10% per annum adjustment) or base rate, in each case subject to a 0% floor.
The applicable margin on SOFR rate loans varied from 1.00% to 2.00% and the applicable margin on base rate loans varied from 0% to 1.00%, in each case determined based on our credit rating. As of December 31, 2024, 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 1.25% to 2.25% and the applicable margin on base rate loans varies from 0.25% to 1.25%, in each case determined based on our credit rating. As of December 31, 2025, 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 was 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 varied from 0.10% to 0.30% based on our credit rating.
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 0.15% to 0.35% based on our credit rating.
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 Prime rate plus 2.00% per annum.
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. 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 Prime rate plus 2.00% per annum.
Added
Our functional currency is primarily the U.S. dollar. Approximately 98% of our revenue during 2025 was denominated in U.S. dollars. As such, we do not believe we are significantly exposed to foreign currency exchange risk.

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