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What changed in PATTERSON UTI ENERGY INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of PATTERSON UTI ENERGY INC's 2023 and 2024 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 2024 report.

+364 added−410 removedSource: 10-K (2025-02-11) vs 10-K (2024-02-27)

Top changes in PATTERSON UTI ENERGY INC's 2024 10-K

364 paragraphs added · 410 removed · 288 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

57 edited+14 added−12 removed69 unchanged
Biggest changeWe had no impairment related to the marketability or condition of our drilling rigs during 2023. 6 Drilling Technology — We continue to enhance the technology offerings that can be used with our drilling operations. Our proprietary operating system for APEX® drilling rigs, Cortex®, can allow for the deployment of custom applications for rig performance, control and optimization.
Biggest changeOur proprietary operating system for APEX® drilling rigs, Cortex®, can allow for the deployment of custom applications for rig performance, control and optimization. For instance, our GenAssist® application can employ smart engine logic turning engines on and off to reduce fuel consumption and emissions.
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.
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.
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.
These purchases are made in the spot market or pursuant to other arrangements that may not cover all of our required supply. These supply arrangements sometimes require us to purchase the supply or pay liquidated damages if we do not purchase the material.
These purchases are made in the spot market or pursuant to other arrangements that may or may not cover all of our required supply. These supply arrangements sometimes require us to purchase the supply or pay liquidated damages if we do not purchase the material.
Risk Factors – Environmental and occupational health and safety laws and regulations, including violations thereof, could materially adversely affect our operating results. Our activities include the performance of hydraulic fracturing services to enhance the production of oil and natural gas from formations with low permeability, such as shale and other unconventional formations. See “Item 1A.
Risk Factors – Environmental and occupational health and safety laws and regulations, including violations thereof, could materially adversely affect our operating results.” Our activities include the performance of hydraulic fracturing services to enhance the production of oil and natural gas from formations with low permeability, such as shale and other unconventional formations. See “Item 1A.
Government and Environmental Regulation Our operations and facilities are subject to numerous federal, state, foreign, regional and local laws, rules and regulations related to various aspects of our business and the oil and natural gas industry including: • drilling of oil and natural gas wells, • hydraulic fracturing, wireline and pumping, completion support and cementing, • provision of specialized drill bit solutions, • directional drilling services, 10 • services that improve the accuracy of directional and horizontal wellbores, including for customers with offshore operations, wellbore quality, and on-bottom ROP, • containment and disposal of hazardous materials, oilfield waste, other waste materials and acids, • use of underground storage tanks and injection wells, • servicing of equipment for drilling contractors, • provision of electrical controls and automation, • conducting international operations, and • our employees.
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.
We operate under three reportable business segments: (i) drilling services, (ii) completion services, and (iii) drilling products. Drilling Services Our contract drilling business operates in the continental United States and internationally in Colombia and, from time to time, we pursue contract drilling opportunities in other select markets.
We operate under three reportable business segments: (i) drilling services, (ii) completion services, and (iii) drilling products. Drilling Services Our contract drilling business operates in the continental United States and internationally in Colombia and Ecuador and, from time to time, we pursue contract drilling opportunities in other select markets.
Industry Segments Our revenues, operating income and loss and identifiable assets are primarily attributable to three industry segments: • drilling services, • completion services, and • drilling products. Drilling Services Operations General — We provide our contract drilling services to oil and natural gas operators in the United States and Colombia.
Industry Segments Our revenues, operating income and loss and identifiable assets are primarily attributable to three industry segments: • drilling services, • completion services, and • drilling products. Drilling Services Operations General — We provide our contract drilling services to oil and natural gas operators in the United States, Colombia and Ecuador.
Our contract drilling operations depend on the availability of drill pipe, drill bits, replacement parts and other related rig equipment, fuel and other materials and qualified personnel. Some of these have been in short supply from time to time.
Our contract drilling operations depend on the availability of drill pipe, replacement parts and other related rig equipment, fuel and other materials and qualified personnel. Some of these have been in short supply from time to time.
All other employees are educated annually on our commitment to a respectful workplace for all to ensure they understand their role as they engage with co-workers.
All employees are educated annually on our commitment to a respectful workplace for all to ensure they understand their role as they engage with co-workers.
Over time, components on a drilling rig are replaced or rebuilt. We spend significant funds each year as part of a program to modify, upgrade and maintain our drilling rigs. We have addressed our customers’ needs for drilling horizontal wells in shale and other unconventional resource plays by improving the capabilities of our drilling fleet.
Over time, components on a drilling rig are replaced or rebuilt. We invest significant funds each year as part of a program to modify, upgrade and maintain our drilling rigs. We have addressed our customers’ needs for drilling horizontal wells in shale and other unconventional resource plays by improving the capabilities of our drilling fleet.
We offer our wireline services in conjunction with our hydraulic 7 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.
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.
The current demand for equipment and services remains dependent on macro conditions, including commodity prices, geopolitical environment, inflationary pressures, economic conditions in the United States and elsewhere, as well as customer consolidation and focus by exploration and production companies and service companies on capital returns.
The 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.
Drilling Products We serve the energy and mining markets by manufacturing and distributing drill bits through North America and internationally in over 30 countries. Our drilling equipment is used in oil and natural gas exploration and production and in mining operations.
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.
Contract Drilling Activity — Information regarding our contract drilling activity for the last three years follows: Year Ended December 31, 2023 2022 2021 Average rigs operating per day – U.S.
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.
The assets acquired were combined with NexTier’s existing last mile logistics assets to create a leading player in the delivery and storage of proppant at the wellsite.
The assets acquired were combined with our existing last mile logistics assets to create a leading player in the delivery and storage of proppant at the wellsite.
The components of equipment that will no longer be marketed are evaluated, and those components with continuing utility will be used as parts to support active equipment. The remaining components of this equipment are retired. We had no impairment related to the marketability or condition of our equipment during 2023.
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 insurances that we maintain include coverage for fire, windstorm and other risks of physical loss to our equipment and certain other assets, employer’s liability, automobile liability, commercial general liability, workers’ compensation as well as insurance for other specific risks.
The insurances that we maintain include 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 as well as insurance for other specific risks, together with excess loss liability insurance coverage.
Toward the end of calendar years, we experience slower activity in connection with the holidays and as customers’ capital expenditure budgets are depleted. Occasionally, our operations have been negatively impacted by severe weather conditions. Raw Materials and Subcontractors We use many suppliers of raw materials and services.
Toward the end of calendar years, we experience slower activity in connection with the holidays and as customers’ capital expenditure budgets are depleted and/or their annual drilling and completion targets have been met. Occasionally, our operations are negatively impacted by severe weather conditions. Raw Materials and Subcontractors We use many suppliers of raw materials and services.
On September 13, 2023, we completed the offering of $400 million in aggregate principal amount of our 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 revolving credit facility.
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).
Due to evolving customer preferences, we refer to certain premium rigs as “Tier-1, super-spec” rigs, 5 which we consider as being a super-spec rig that also has a third mud pump and raised drawworks that allows for more clearance underneath the rig floor. As of December 31, 2023, we had 173 super-spec rigs, of which 131 were Tier-1, super-spec rigs.
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.
(2) 131 128 120 118 (1) The average oil price represents the average monthly West Texas Intermediate (WTI) spot price as reported by the United States Energy Information Administration. (2) A rig is considered to be operating if it is earning revenue pursuant to a contract on a given day.
(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.
An electric rig converts the power from its diesel engines into electricity to power the rig. The U.S. land rig industry has in recent years referred to certain high specification rigs as “super-spec” rigs, which we consider to be at least a 1,500 horsepower, AC-powered rig that has at least a 750,000-pound hookload, a 7,500-psi circulating system, and is pad-capable.
The U.S. land rig industry has in recent years referred to certain high specification rigs as “super-spec” rigs, which we consider to be at least a 1,500 horsepower, AC-powered rig that has at least a 750,000-pound hookload, a 7,500-psi circulating system, and is pad-capable.
(1) 124 124 82 Number of wells drilled during the year – U.S. 2,530 2,489 1,662 Number of operating days – U.S. 45,270 45,216 29,960 (1) A rig is considered to be operating if it is earning revenue pursuant to a contract on a given day.
(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.
Other Other consists of our oilfield rentals business, with a fleet of premium oilfield rental tools, along with the results of our ownership, as a non-operating working interest owner, in oil and natural gas assets located in Texas and New Mexico . 3 Recent Developments Recent Developments in Market Conditions — Quarterly average oil prices and our quarterly average number of rigs operating in the United States for 2021, 2022 and 2023 are as follows: 1 st 2 nd 3 rd 4 th Quarter Quarter Quarter Quarter 2021: Average oil price per Bbl (1) $ 57.79 $ 66.09 $ 70.62 $ 77.45 Average rigs operating per day – U.S.
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.
Our contract drilling backlog in the United States as of December 31, 2023 and 2022 was approximately $700 million and $830 million, respectively. Approximately 16% of our contract drilling backlog in the United States at December 31, 2023 is reasonably expected to remain after 2024.
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.
As part of NexTier’s wellsite integration strategy to provide and integrate a variety of services for its customers at the wellsite to maximize efficiencies and profitability, in 2022, NexTier acquired sand hauling, wellsite storage, and last mile logistics assets and rebranded its entire last mile logistics operation as NexMile Logistics.
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.
Over the years, we have made performance and safety improvements to our rig fleet. Our APEX ® rigs are AC-powered electric rigs with many having high pressure mud systems, walking systems and increased hookload capacity. During fiscal years 2023, 2022 and 2021, we spent approximately $335 million, $256 million, and $110 million, respectively, on these capital expenditures.
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.
As of December 31, 2023, we had no borrowings outstanding under our revolving credit facility. We had $2.6 million in letters of credit outstanding under the Credit Agreement at December 31, 2023 and, as a result, had available borrowing capacity of approximately $597 million at that date.
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.
We generally design, assemble and maintain our own fleet of downhole drilling motors and MWD equipment. Our customers primarily consist of oil and natural gas operators in the United States. Wellbore Placement Optimization Services — We provide software and services used to improve the accuracy of directional and horizontal wellbores, wellbore quality, and on-bottom ROP (rate of penetration).
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).
The components of equipment that will no longer be marketed are evaluated, and those components with continuing utility will be used as parts to support active equipment. The remaining components of this equipment are retired. We had no impairment related to the marketability or condition of our equipment during 2023.
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.
With respect to our consolidated operating revenues in 2023, we received approximately 49% from our ten largest customers and approximately 35% from our five largest customers. During 2023, one customer accounted for approximately $588 million, or approximately 14%, of our consolidated operating revenues.
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.
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.
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.
In 2021, NexTier launched its Power Solutions business, which focuses on gas sourcing, compression, transport, decompression, treatment and related services for fracturing operations. We believe this integration solution assists our customers by reducing emissions at the wellsite and throughout their operations.
Completion Support Services — Our Power Solutions business is an integrated natural gas treatment and delivery solution, which focuses on gas sourcing, compression, transport, decompression, treatment and related services for oilfield service operations. We believe this integration solution assists our customers by reducing emissions at the wellsite and throughout their operations.
For example, we utilize natural gas engines, dual-fuel equipment and other technologies that reduce our carbon and other greenhouse gas emissions as compared to our traditional diesel-only equipment, and we employ spill prevention plans and use additional protective measures in environmentally sensitive areas. 9 We have strengthened our position as a leader in alternative fuel technology with the commercialization of our EcoCell® lithium battery hybrid energy management system.
For example, we utilize natural gas engines, dual-fuel equipment and other technologies that reduce our carbon and other greenhouse gas emissions as compared to our traditional diesel-only equipment, and we employ spill prevention plans and use additional protective measures in environmentally sensitive areas.
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 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.
(“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.
Total consideration for the acquisition included the issuance of 34.9 million shares of our common stock and payment of approximately $376 million cash, which based on the closing price of 4 our common stock of $14.94 on August 14, 2023, valued the transaction at closing at approximately $897 million. Ulterra is a global provider of specialized drill bit solutions.
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.
As of December 31, 2023, we had 192 marketed land-based drilling rigs based in the following regions: Region Number of Rigs West Texas 82 Appalachia 27 Rockies 23 Oklahoma 19 South Texas 18 East Texas 15 Colombia 8 Total 192 All of these drilling rigs are electric rigs.
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.
Based on contracts in place in the United States as of February 14, 2024, we expect an average of 79 rigs operating under term contracts during the first quarter of 2024 and an average of 52 rigs operating under term contracts during 2024.
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.
Other Operations Our oilfield rentals business has a fleet of premium rental tools and provides specialized services for land-based oil and natural gas drilling, completion and workover activities in many of the major producing oil and natural gas basins in the United States. 8 In addition, we own and invest, as a non-operating working interest owner, in oil and natural gas assets that are primarily located in Texas and New Mexico.
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.
Oil prices averaged $78.53 per barrel in the fourth quarter of 2023 and closed at $78.72 per barrel on February 20, 2024. Natural gas prices (based on the Henry Hub Spot Market Price) averaged $2.74 per MMBtu in the fourth quarter of 2023 and closed at $1.50 per MMBtu on February 20, 2024.
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.
Directional Drilling — We generally utilize our own proprietary downhole motors and equipment to provide a comprehensive suite of directional drilling services, including directional drilling, measurement-while-drilling (“MWD”) and supply and rental of downhole performance motors, in most major onshore oil and natural gas basins in the United States.
Directional Drilling — We generally utilize our own proprietary downhole motors and equipment to provide a comprehensive suite of directional drilling services, including directional drilling, measurement-while-drilling (“MWD”) and supply and rental of downhole performance motors, such as our Mpact® drilling motors, and MWD equipment, such as our Mpower™ MWD systems.
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.
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) 69 73 80 106 2022: Average oil price per Bbl (1) $ 94.45 $ 108.72 $ 93.18 $ 82.79 Average rigs operating per day – U.S. (2) 115 121 128 131 2023: Average oil price per Bbl (1) $ 75.93 $ 73.54 $ 82.25 $ 78.53 Average rigs operating per day – U.S.
(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.
Our average active U.S. rig count for the fourth quarter of 2023 was 118 rigs. This was a decrease from our average active rig count for the third quarter of 2023 of 120 rigs.
In 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.
For instance, our GenAssist® application can employ smart engine logic turning engines on and off to reduce fuel consumption and emissions. Our Cortex® Key edge server can connect to various systems at the well site, streaming large data sets and providing a single, high-speed data aggregation source.
Our Cortex® Key edge server can connect to various systems at the well site, streaming large data sets and providing a single, high-speed data aggregation source. Our EcoCell® lithium battery hybrid energy management system is capable of utilizing stored energy to help reduce fuel consumption and emissions.
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.
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.
The EcoCell® system is capable of efficiently displacing one of the gensets on a drilling rig to reduce both fuel consumption and emissions. The value of this technology is enhanced when used in combination with our Cortex® power management system and our dual-fuel engines, as the natural gas substitution rate can be optimized.
The value of this technology is enhanced when used in combination with our Cortex® power management system and our dual-fuel engines, as the natural gas substitution rate can be optimized. 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.
While we carry insurance to cover physical damage to, or loss of, a substantial portion of our equipment and certain other assets, such insurance does not cover the full replacement cost of such equipment or other assets. We have also elected in some 11 cases to retain a greater amount of risk through increased deductibles on certain insurance policies.
While we carry insurance to cover physical damage to, or loss of, a substantial portion of our equipment and certain other assets, such insurance does not cover the full replacement cost of such equipment or other assets, and in certain cases, such as losses arising from or attributable to fire and/or explosion resulting from our hydraulic fracturing operations at the wellsite, is subject to significantly higher deductibles than are applicable to our other coverages.
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. Completion Support Services — In late 2020, NexTier began evolving its completion service offerings to develop an integrated natural gas treatment and delivery solution.
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.
Using utility power is an optimal power solution for our drilling rigs as it minimizes emission impacts at the wellsite. Some of our key human capital areas of focus include: Employees – We had approximately 10,600 full-time employees as of January 31, 2024. The number of employees fluctuates depending on the current and expected demand for our services.
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.
On August 29, 2023, we entered into Amendment No. 4 to Amended and Restated Credit Agreement (the “Credit Agreement Amendment”), which amended our Amended and Restated Credit Agreement, dated as of March 27, 2018 (as amended, the “Credit Agreement”), by and among us, as borrower, Wells Fargo Bank, National Association, as administrative agent, letter of credit issuer, swing line lender and lender and each of the other letter of credit issuers and lenders party thereto.
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”).
Drilling products demand increased from the third quarter of 2023 despite a decline in the global rig count. Drilling Products demand is expected to remain steady through the first quarter, given the expectation for a steady market in the U.S. and moderate growth in international markets relative to what we saw in the fourth quarter.
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.
Our EcoCell® lithium battery hybrid energy management system is capable of utilizing stored energy to help reduce fuel consumption and emissions.
We have strengthened our position as a leader in alternative fuel technology with the commercialization of our EcoCell® lithium battery hybrid energy management system. The EcoCell® system is capable of efficiently displacing one of the gensets on a drilling rig to reduce both fuel consumption and emissions.
Our active U.S. rig count at December 31, 2023 of 121 rigs was less than the rig count of 132 rigs at December 31, 2022, due in large part to the decline in commodity prices and reduced demand for drilling services in the United States.
Our 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.
Through our Current Power business, we provide in-house electrical engineering, control system automation and installation services to connect drilling rigs to utility electrical lines. This capability enables our customers to use utility power, instead of natural gas or diesel fuel, to power drilling operations.
This capability enables our customers to use utility power, instead of natural gas or diesel fuel, to power drilling operations. Using utility power is an optimal power solution for our drilling rigs as it minimizes emission impacts at the wellsite.
Our revenues, profitability and cash flows are highly dependent upon prevailing prices for oil and natural gas and expectations about future prices. Crude oil prices and demand for drilling and completion equipment and services increased from 2021 to 2022, and industry supply of Tier-1, super-spec rigs became constrained.
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.
Removed
Commodity price volatility in the second quarter of 2023 resulted in a decline in industry activity; commodity prices subsequently increased during the third quarter before declining in the fourth quarter of 2023. We expect our rig count in the United States will average 120 rigs in the first quarter.
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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.
Removed
We expect our rig count in the United States will average 120 rigs in the first quarter of 2024. Term contracts help support our operating rig count.
Added
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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Our completion services business was impacted by calendar inefficiencies during the second half of 2023 resulting from a decline in customer activity during the third quarter. Completion services activity stabilized in the fourth quarter of 2023. We believe activity will modestly decline in the first quarter of 2024.
Added
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.
Removed
Our 2024 capital expenditure forecast is approximately $740 million. Recent Developments in Business Combinations and Financial Matters — On September 1, 2023, we completed the NexTier merger.
Added
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.
Removed
NexTier is 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. On August 14, 2023, we completed the Ulterra acquisition.
Added
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.
Removed
The Credit Agreement Amendment, among other things, (i) deemed certain outstanding letters of credit issued for the account of BEP Diamond Holdings Corp.
Added
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.
Removed
(the entity we acquired in the Ulterra acquisition) with a face amount of $2.5 million to have been issued under the Credit Agreement, and (ii) extended the maturity date for $85 million of revolving credit commitments of certain lenders under the Credit Agreement from March 27, 2025 to March 27, 2026.
Added
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.
Removed
As a result, of the $600 million of revolving credit commitments under the Credit Agreement, the maturity date for $501.7 million of such commitments is March 27, 2026; the maturity date for $48.3 million of such commitments is March 27, 2025; and the maturity date for the remaining $50 million of such commitments is March 27, 2024.
Added
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. For a description of the Credit Agreement, see “Liquidity and Capital Resources” included in Part II, Item 7— “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Report.
Removed
During the first quarter of 2023, we elected to repurchase portions of our 3.95% Senior Notes due 2028 (the “2028 Notes”) and our 5.15% Senior Notes due 2029 (the “2029 Notes”) in the open market. The principal amounts retired through these transactions totaled $6.0 million of our 2028 Notes and $3.0 million of our 2029 Notes, plus accrued interest.
Added
An electric rig converts the power from its diesel or natural gas engines into electricity to power the rig.
Removed
We recorded corresponding gains on the extinguishment of these amounts totaling $0.8 million and $0.3 million, respectively, net of the proportional write-off of associated deferred financing costs and original issuance discounts. These gains are included in “Interest expense, net of amount capitalized” in our consolidated statements of operations included as a part of Item 8 of this Report.
Added
During the third quarter of 2024, we identified 42 legacy, non-Tier-1 super-spec drilling rigs and related equipment to be abandoned.
Removed
We require new supervisors and managers in the United States to attend an instructor-led course relative to diversity, inclusion and respect to ensure they understand our expectations regarding their obligations to promote a work environment where all employees are valued and respected. Supplemental diversity, inclusion and respect training for supervisors and managers is required on a biannual basis.
Added
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.
Removed
For example, in the United States we generally maintain a $1.5 million per occurrence deductible on our workers’ compensation insurance coverage, a $1.0 million per occurrence deductible on our equipment insurance coverage, a $10.0 million per occurrence deductible on our general liability coverage, and, for our automobile insurance coverage, a per occurrence deductible ranging from $2.0 million to $10.0 million.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

85 edited+26 added−42 removed160 unchanged
Biggest changeWe 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 of large customers could have a material adverse effect on our financial condition and results of operations. 12 • 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. • Our business relationships may be subject to disruption due to uncertainty associated with any pending or recently completed acquisitions, including the NexTier merger or the Ulterra acquisition, which could have a material adverse effect on our results of operations, cash flows and financial position. • Public health crises, pandemics and epidemics may have a significant adverse impact on our business, liquidity, results of operations and financial condition. • Fuel conservation measures could reduce demand for oil and natural gas, which would, in turn, reduce the demand for our services.
Biggest changeWe 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.
There can be no assurance that insurance will be available to cover any or all of our operational risks, or, even if available, that insurance premiums or other costs will not rise significantly in the future, so as to make the cost of such insurance prohibitive, or that our coverage will cover a specific loss.
There can be no assurance that insurance will be available to cover any or all of our operational or other risks, or, even if available, that insurance premiums or other costs will not rise significantly in the future, so as to make the cost of such insurance prohibitive, or that our coverage will cover a specific loss.
Fuel conservation measures could reduce demand for oil and natural gas, which would, in turn, reduce the demand for our services. 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.
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. 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.
Interruptions may be caused by, among other reasons: • weather issues, whether short-term such as a hurricane, or long-term such as a drought, • labor shortages or other labor issues, • transportation, fuel shortages and other logistical challenges, and 18 • a shortage in the number of vendors able or willing to provide the necessary equipment and materials, including as a result of commitments of vendors to other customers or third parties or bankruptcies or consolidation.
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.
In November 2021, the United States and other countries entered into the Glasgow Climate Pact, which 23 includes a range of measures designed to address climate change, including but not limited to the phase-out of fossil fuel subsidies, reducing methane emissions 30% by 2030, and cooperating toward the advancement of the development of clean energy.
In November 2021, the United States and other countries entered into the Glasgow Climate Pact, which includes a range of measures designed to address climate change, including but not limited to the phase-out of fossil fuel subsidies, reducing methane emissions 30% by 2030, and cooperating toward the advancement of the development of clean energy.
The following factors, in addition to other factors described in this “Risk Factors” section and elsewhere in this Report, may have a significant impact on the market price of our common stock: • investor perception of us and the industry and markets in which we operate; • general financial, domestic, international, economic, and market conditions, including overall fluctuations in the U.S. equity markets; • increased focus by the investment community on sustainability practices at our company and in the oil and natural gas industry generally; • changes in customer needs, expectations or trends and our ability to maintain relationships with key customers; • our ability to implement our business strategy; • changes in our capital structure, including the issuance of additional debt; • public announcements (including the timing of these announcements) regarding our business, financial performance and prospects or new services or products, service or product enhancements, technological advances or strategic actions, such as acquisitions or divestitures, restructurings or significant contracts, by our competitors or us; • trading activity in our stock, including portfolio transactions in our stock by us, our executive officers and directors, and significant stockholders or trading activity that results from the ordinary course rebalancing of stock indices in which we may be included; • any elimination of, or downward revision in, our stock buyback program or dividend payments; • short-interest in our common stock, which could be significant from time to time; • our inclusion in, or removal from, any stock indices; • changes in earnings estimates or buy/sell recommendations by securities analysts; • whether or not we meet earnings estimates of securities analysts who follow us; and • regulatory or legal developments in the United States and the foreign countries where we operate. 30 Anti-takeover measures in our charter documents and under state law could discourage an acquisition and thereby affect the related purchase price.
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.
Such an accident or other event could cause us to incur substantial expenses in connection with the investigation, remediation and resolution, as well as cause lasting damage to our reputation, loss of customers and an inability to obtain insurance. 16 We have indemnification agreements with many of our customers, and we also maintain liability and other forms of insurance.
Such an accident or other event could cause us to incur substantial expenses in connection with the investigation, remediation and resolution, as well as cause lasting damage to our reputation, loss of customers and an inability to obtain insurance. We have indemnification agreements with many of our customers, and we also maintain liability and other forms of insurance.
These hazards could cause personal injury or death, work stoppage, and serious damage to equipment and other property, as well as significant environmental and reservoir damages. These risks could expose us to substantial liability for personal injury, wrongful death, property damage, loss of oil and natural gas production, pollution and other environmental damages.
These hazards could cause personal injury or death, work stoppage, and serious damage to equipment and other property, as well as significant environmental and reservoir damages. These risks could expose us to substantial liability for personal injury, wrongful death, property damage, loss of oil and natural gas production, pollution and other environmental damages, and consequential damages.
While we generally seek to obtain indemnities for liabilities arising from events occurring before such acquisitions, we may be unable to do so, and any indemnities we do obtain will be limited in amount and duration, 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, and indemnities may be held to be unenforceable or the seller may not be able to indemnify us.
We provide specialized drill bit solutions throughout North America and internationally in over 30 countries, as well as contract drilling services in Colombia. We also sell products, including electrical controls, for use in numerous oil and natural gas producing regions outside of North America.
We provide specialized drill bit solutions throughout North America and internationally in over 30 countries, as well as contract drilling services in Colombia and Ecuador. We also sell products, including electrical controls, for use in numerous oil and natural gas producing regions outside of North America.
We are not fully insured against all of these risks and our contractual indemnity provisions may not fully protect us.” 26 Political, economic and social instability risk and laws associated with conducting international operations could adversely affect our opportunities and future business.
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.
There can be no assurance that we will: • successfully complete any acquisitions we attempt on the terms announced, or at all, • have sufficient capital resources to complete additional acquisitions, build or upgrade equipment or develop or acquire new technology, • through due diligence conducted prior to an acquisition, successfully uncover situations that could result in financial or legal exposure, or appropriately quantify the exposure from known risks, • successfully integrate additional equipment, acquired or developed technology or other assets or businesses, including the combination of our business with the businesses of NexTier and Ulterra, into our operations and internal controls, including financial reporting disclosure and cybersecurity and information technology systems, • effectively manage the growth and increased size, complexity and geography of our organization, and increased scrutiny from governmental authorities, including as a result of the NexTier merger, Ulterra acquisition or any other completed merger or acquisition, • maintain existing business relationships and contract terms with our customers, distributors, suppliers, vendors, landlords, joint venture partners and other business partners, as well as with those of any acquired business, such as NexTier or Ulterra, • successfully deploy idle, stacked, upgraded or additional equipment and acquired or developed technology, • maintain key employees, the crews necessary to operate additional equipment, and the personnel necessary to evaluate, acquire, develop and deploy new technology, or be successful in hiring replacements for departing personnel, • avoid unknown liabilities and unforeseen increased expenses or delays associated with the NexTier merger, Ulterra acquisition or any other merger or acquisition, or • successfully improve our financial condition, results of operations, business or prospects, or provide an adequate return of capital, as a result of the NexTier merger, Ulterra acquisition or any other completed acquisition, the building or upgrading equipment or the development of new technology.
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.
Our customers are increasingly demanding the services of newer, higher specification drilling rigs and completion services and other equipment, as well as new and improved technology, such as drilling automation technology and lower-emissions operations and services, 17 specialized drill bit solutions and data analytics.
Our 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.
Some of our office personnel remain on a “remote work” model. This model has significantly increased the use of remote networking and online conferencing services that enable employees to work outside of our corporate infrastructure and, in some cases, use their own personal devices. This may expose us to additional cybersecurity risks or related incidents.
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.
Prices, and expectations about future prices, are affected by factors such as: • market supply and demand, • the desire and ability of the Organization of Petroleum Exporting Countries (“OPEC”), its members and other oil-producing nations, such as Russia, to set and maintain production and price targets, • the level of production by OPEC and non-OPEC countries, 14 • domestic and international military, political, economic, health and weather conditions, including the impacts of war, including the impact of the ongoing armed conflicts between Russia and Ukraine and Israel and Hamas and the continuation of, or any escalation in the severity of, these conflicts, or terrorist activity, pandemics and other unexpected disasters or events, • changes to tax, tariff and import/export regulations and sanctions by the United States or other countries, • legal and other limitations or restrictions on exportation and/or importation of oil and natural gas, • technical advances affecting energy consumption and production, and • the development, price, availability and market acceptance of alternative fuels and energy sources.
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.
The current demand for equipment and services remains dependent on macro conditions, including commodity prices, geopolitical environment, inflationary pressures, economic conditions in the United States and elsewhere, as well as customer consolidation and focus by exploration and production companies and service companies on capital returns.
The 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.
Section 382 of the Code (“Section 382”) generally imposes an annual limitation on the amount of NOLs that may be used to offset taxable income when a corporation has undergone an “ownership change” (as determined under Section 382).
Section 382 of the Internal Revenue Code (“Section 382”) generally imposes an annual limitation on the amount of NOLs that may be used to offset taxable income when a corporation has undergone an “ownership change” (as determined under Section 382).
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. • Technology 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 should such equipment fail to perform to specifications. • 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. • 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.
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.
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.
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.
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.
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.
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.
In this instance, we could be required to purchase materials that we do not have a present need for, pay for materials that we do not take delivery of or pay prices in excess of market prices at the time of purchase. Growth through acquisitions, the building or upgrading of equipment and the development of technology is not assured.
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 light of these and other factors, we expect oil and natural gas prices to continue to be volatile and to affect our financial condition, operations and ability to access sources of capital.
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.
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.
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.
As of December 31, 2023, our contract drilling backlog in the United States for future revenues under term contracts, which we define as contracts with a duration of six months or more, was approximately $700 million. Please see Note 3 of Notes to consolidated financial statements in Item 8 of this Report for a description of our calculation of backlog.
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.
We may also see corporate consolidations among both our customers and competitors, which could significantly alter industry conditions and competition within the industry, and have a material adverse effect on our business, financial condition, cash flows and results of operations.
We may also see corporate consolidations among our customers, competitors and/or vendors, which could significantly alter industry conditions and competition within the industry, and have a material adverse effect on our business, financial condition, cash flows and results of operations.
The loss of key employees, the failure to attract and retain qualified personnel and the increase in labor costs could have a material adverse effect on our business, financial condition, cash flows and results of operations. The loss of large customers could have a material adverse effect on our financial condition and results of operations.
The loss of key employees, the failure to attract and retain qualified personnel and the increase in labor costs could have a material adverse effect on our business, financial condition, cash flows 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.
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.
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.
The loss of, or reduction in business from, one or more of our larger customers could have a material adverse effect on our business, financial condition, cash flows and results of operations. Shortages, delays in delivery, and interruptions in supply, of equipment and materials could adversely affect our operating results.
The loss of, or reduction in business from, one or more of our larger customers, due to consolidation or otherwise, could have a material adverse effect on our business, financial condition, cash flows and results of operations. Shortages, delays in delivery, and interruptions in supply, of equipment and materials could adversely affect our operating results.
A prolonged period of lower oil and natural gas prices or changes in customer preferences and requirements could result in future impairment to our long-lived assets. For example, we recognized impairment charges of $7.0 million, $4.5 million and $267 million in 2023, 2022 and 2021, respectively.
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.
Alternatively, if a court were to find either exclusive forum provision in our bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could have a material adverse effect on our business, financial condition, and results of operations.
Alternatively, if a court were to find either exclusive forum provision in our bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could have a material adverse effect on our business, financial condition, and results of operations. Item 1B. Unresolved Staff Comments. None.
We are obligated to pay the issuing bank interest on all amounts not paid by us on the date of demand or when otherwise due at the LIBOR rate plus 2.25% per annum.
We are obligated to pay the issuing bank 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.
The global economic environment in the past has experienced significant deterioration in a relatively short period, such as a result of the COVID-19 pandemic or the ongoing armed conflicts between Russia and Ukraine and Israel and Hamas, and there is no assurance that the global economic environment, or expectations for the global economic environment, will not quickly deteriorate again due to one or more factors, including as a result of actual or perceived threats to geopolitical stability and changes in production from OPEC, its members and other oil-producing nations.
The global economic environment in the past has experienced significant deterioration in a relatively short period, such as a result of the COVID-19 pandemic or the ongoing armed conflicts between Russia and Ukraine and in the Middle East, and there is no assurance that the global economic environment, or expectations for the global economic environment, will not quickly deteriorate again due to one or more factors, including as a result of actual or perceived threats to geopolitical stability, changes in production from OPEC, its members and other oil-producing nations, or governmental actions or restrictions in response to events such as a global pandemic.
Because of the impact of local laws, any current and future international operations in certain areas may be conducted through entities in which local citizens own interests and through entities (including joint ventures) in which we hold only a minority interest or pursuant to arrangements under which we conduct operations under contract to local entities.
Because of the impact of local laws, any current and future international operations in certain areas may be conducted through entities in which local citizens own interests and through entities (including joint ventures, such as our Abu Dhabi joint venture) in which we hold only a minority interest or pursuant to arrangements under which we conduct operations under contract to local entities.
If any such effects were to occur, they could have an adverse effect on our and our customers’ facilities and operations. 24 Environmental and occupational health and safety laws and regulations, including violations thereof, could materially adversely affect our operating results.
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.
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. 13 • 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.
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.
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.
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.
We continually attempt to develop or acquire new technologies for use in our business. For example, we have invested in natural gas-powered equipment, including electric pumps, to replace legacy diesel completion services equipment.
We continually attempt to develop or acquire new technologies for use in our business. For example, we have invested in natural gas-powered equipment, including electric, direct drive, and dual fuel pumps, to replace legacy diesel completion services equipment.
Our business is subject to cybersecurity risks and threats. 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 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.
In the absence of federal GHG-limiting legislation, the EPA has determined that GHG emissions present a danger to public health and the environment and has adopted regulations that, among other things, establish construction and operating permit reviews for GHG emissions from certain large stationary sources, require the monitoring and annual reporting of GHG emissions from certain oil and natural gas system sources, implement CAA emission standards directing the reduction of methane emissions from certain new, modified, or reconstructed facilities in the oil and natural gas sector, and together with the U.S.
In addition to such legislative efforts, the EPA has determined that GHG emissions present a danger to public health and the environment and has adopted regulations that, among other things, establish construction and operating permit reviews for GHG emissions from certain large stationary sources, require the monitoring and annual reporting of GHG emissions from certain oil and natural gas system sources, implement CAA emission standards directing the reduction of methane emissions from certain new, 21 Table of Contents modified, or reconstructed facilities in the oil and natural gas sector, and together with the U.S.
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 adverse effect on our business, financial condition and results of operations.
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.
A low commodity price environment or capital spending reductions by our customers due to customer consolidation (which is currently occurring in the industry), investor requirements or other reasons can result in substantially more equipment and products being available than are needed to meet demand.
A low commodity price environment or capital spending reductions by our customers due to additional customer consolidation, investor requirements or other reasons can result in substantially more equipment and products being available than are needed to meet demand.
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.
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.
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.
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.
Four states (New York, Maryland, Vermont, and Washington) have banned the use of high volume hydraulic fracturing, Oregon has adopted a five-year moratorium, and Colorado has enacted legislation providing local governments with regulatory authority over hydraulic fracturing operations.
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.
As of December 31, 2023, we had no borrowings outstanding under our revolving credit facility. We also have in place a reimbursement agreement pursuant to which we are required to reimburse the issuing bank on demand for any amounts that it has disbursed under any of our letters of credit issued thereunder.
We also have in place a reimbursement agreement pursuant to which we are required to reimburse the issuing bank on demand for any amounts that it has disbursed under any of our letters of credit issued thereunder.
Our industry is highly competitive, and at times available drilling services equipment, completion services equipment, and drilling products exceed the demand for such equipment and products.
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.
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. We could be required to remove or remediate wastes disposed of or released by prior owners or operators.
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.
Our processes and controls for reporting on ESG and sustainability matters, including our goals and objectives, may not always comply with evolving and disparate standards for identifying, measuring, and reporting such metrics, including any climate change and sustainability-related public company disclosure requirements adopted by the SEC, and such standards may change over time, which could result in significant revisions to our current ESG practices and disclosures.
Our processes and controls for reporting on ESG and sustainability matters, including our goals and objectives, may not always comply with evolving and disparate standards for identifying, measuring, disclosing and reporting such metrics, and such standards may change over time, which could result in significant revisions to our current ESG practices and disclosures.
We have in place a committed senior unsecured credit facility that includes a revolving credit facility. Interest is paid on the outstanding principal amount of borrowings under the credit facility at a floating rate based on, at our election, the SOFR rate (subject to a 0.10% per annum adjustment) or base rate, in each case subject to a 0% floor.
Under the Credit Agreement, interest is paid on the outstanding principal amount of borrowings under the credit facility at a floating rate based on, at our election, the SOFR rate (plus a 0.10% per annum adjustment) or base rate, in each case subject to a 0.00% floor.
If demand for our services decreases from current levels, demand for the equipment that we use and the materials that we supply as part of these services will also decrease. In addition, our customers may self-source certain materials.
Some of these agreements are take-or-pay or similar agreements with minimum purchase obligations. If demand for our services decreases from current levels, demand for the equipment that we use and the materials that we supply as part of these services will also decrease. In addition, our customers may self-source certain materials.
Additionally, the increased competitiveness of alternative energy sources (such as wind, solar geothermal, tidal, and biofuels) or increased focus on reducing the use of oil and natural gas (such as governmental mandates that ban the sale of new gasoline-powered automobiles, and new legislation such as the Inflation Reduction Act of 2022, which contains tax inducements and other provisions that incentivize investment, development, and deployment of alternative energy sources and technologies) could reduce demand for oil and natural gas and therefore for our services, which would lead to a reduction in our revenues. 21 Risks Relating to the NexTier Merger and Ulterra Acquisition Our ability to utilize our historic U.S. net operating loss carryforwards is expected to be limited as a result of the completion of the NexTier merger.
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.
The majority of U.S. federal net operating losses will expire in varying amounts, if unused, between 2030 and 2037. U.S. federal net operating losses generated after 2017 can be carried forward indefinitely. Canadian net operating losses will expire in varying amounts, if unused, between 2036 and 2043.
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.
Legislation, regulations, and/or policies have also been adopted at the state level that impose other types of requirements on hydraulic fracturing operations (such as limits on operations in the event of certain levels of seismic activity).
For example, legislation and/or regulations have been adopted in many U.S. states that require additional disclosure regarding chemicals used in the hydraulic fracturing process. Legislation, regulations, and/or policies have also been adopted at the state level that impose other types of requirements on hydraulic fracturing operations (such as limits on operations in the event of certain levels of seismic activity).
With respect to our consolidated operating revenues in 2023, we received approximately 49% from our ten largest customers, approximately 35% from our five largest customers and 14% from our largest customer.
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.
We could also face fines, sanctions and other penalties from authorities in the relevant foreign jurisdictions, including prohibition of our participating in or curtailment of business operations in those jurisdictions and the seizure of drilling rigs, completion services equipment, manufacturing facilities, drilling products or other assets. 27 Many countries, including the United States, control the import and export of certain goods, services and technology and impose related import and export recordkeeping and reporting obligations.
We could also face fines, sanctions and other penalties from authorities in the relevant foreign jurisdictions, including prohibition of our participating in or curtailment of business operations in those jurisdictions and the seizure of drilling rigs, completion services equipment, manufacturing facilities, drilling products or other assets.
The applicable margin on SOFR rate loans varies from 1.00% to 2.00% and the applicable margin on base rate loans varies from 0.00% to 1.00%, in each case determined based on our credit rating. As of December 31, 2023, the applicable margin on SOFR rate loans was 1.75% and the applicable margin on base rate loans was 0.75%.
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, 2023, we had approximately $1.9 billion of gross U.S. federal net operating losses, approximately $62.3 million of gross Canadian net operating losses, approximately $22.6 million of gross Colombian net operating losses and approximately $1.1 billion of post-apportionment U.S. state net operating losses as of December 31, 2023, before valuation allowances.
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.
Even during periods of historically moderate or high prices for oil and natural gas, companies exploring for oil and natural gas may cancel or curtail programs or reduce their levels of capital expenditures for exploration and production for a variety of reasons, which could reduce demand for our services. Global economic conditions may adversely affect our operating results.
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.
We may not be able to consummate those dispositions, and any proceeds may not be adequate to meet any debt service obligations then due. 29 Our return of capital to stockholders, including through the payment of dividends and repurchases of our common stock, is within the discretion of our Board of Directors, and there is no guarantee that we will return capital to shareholders, including through the payment of dividends and repurchases of our common stock, in the future or at levels anticipated by our stockholders.
Our 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.
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) that could affect our operations.
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.
At the same time, some stakeholders and 28 regulators have increasingly expressed or pursued opposing views, legislation, and investment expectations with respect to ESG, including the enactment or proposal of “anti-ESG” legislation or policies.
At the same time, some stakeholders and regulators have increasingly expressed or pursued opposing views, legislation, and investment expectations with respect to ESG, including the enactment or proposal of “anti-ESG” legislation or policies. In addition, other parties such institutional lenders may consider sustainability factors in lending to us or our customers.
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.
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.
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.
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.
Oil prices averaged $78.53 per barrel in the fourth quarter of 2023 and closed at $78.72 per barrel on February 20, 2024. Natural gas prices (based on the Henry Hub Spot Market Price) averaged $2.74 per MMBtu in the fourth quarter of 2023 and closed at $1.50 per MMBtu on February 20, 2024.
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.
Concerns regarding global economic conditions, energy costs, geopolitical issues, supply chain disruptions, inflation and the availability and cost of credit have contributed to increased economic uncertainty.
Global economic conditions may adversely affect our operating results. Concerns regarding global economic conditions, energy costs, geopolitical issues, supply chain disruptions, public health crises or global pandemics, inflation and the availability and cost of credit have contributed, and may in the future contribute, to increased economic uncertainty.
In addition, through our Superior QC business, we occasionally provide remote data analytics and other services to customers to support their operations outside of the United States. We also continue to evaluate opportunities from time to time to provide our services and products outside of the United States.
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.
Limitation of investments in and financings for oil and natural gas could result in the restriction, delay, or cancellation of drilling and completion programs or development of production activities. An increasing number of our customers consider sustainability factors in awarding work.
Limitations of investments in and financing for oil and natural gas could result in the restriction, delay, or cancellation of drilling and completion programs or development of production activities.
Low commodity prices and a rise in new and upgraded equipment or products can result in excess capacity and substantial competition for a declining number of drilling services and completion services contracts and drilling products rentals and sales. 15 Operating costs for our drilling services and completion services businesses include all direct and indirect costs associated with the operation, maintenance and support of our equipment, which is often not affected by changes in our rates and utilization.
Operating costs for our drilling services and completion services businesses include all direct and indirect costs associated with the operation, maintenance and support of our equipment, which is often not affected by changes in our rates and utilization.
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.
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.
Several states and geographic regions in the United States have also adopted legislation and regulations to reduce emissions of GHGs, including cap and trade regimes and commitments to contribute to meeting the goals of the Paris Agreement.
Several states and geographic regions in the United States 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. Governmental, scientific, and public concern over the threat of climate change arising from GHG emissions has resulted in increasing political risks in the United States.
The laws and regulations concerning import and export activity, recordkeeping and reporting, including customs, export controls and economic sanctions, are complex and constantly changing.
In particular, U.S. sanctions are targeted against certain countries that are heavily involved in the oil and natural gas industry. The laws and regulations concerning import and export activity, recordkeeping and reporting, including customs, export controls and economic sanctions, are complex and constantly changing.
In addition, any elimination of, or downward revision in, our stock buyback program or dividend payments could have an adverse effect on the market price of our common stock.
In addition, any elimination of, or downward revision in, our stock buyback program or dividend payments could have an adverse effect on the market price of our common stock. 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.
Statements related to these goals and objectives made in our published Sustainability Report and other public disclosure reflect our current plans and do not constitute a guarantee that they will be achieved. Our ability to achieve any stated goal or objective is subject to numerous factors and conditions, some of which are outside of our control.
We have developed, and will continue to develop, goals and other objectives related to ESG and sustainability matters. Statements related to these goals and objectives made in our published Sustainability Report and other public disclosure reflect our current plans and do not constitute a guarantee that they will be achieved.
Our efforts to accurately report on ESG and sustainability matters, including our efforts to research, establish, accomplish and accurately report on our goals and objectives, expose us to numerous operational, reputational, financial, legal, and other risks. Standards for tracking and reporting on ESG and sustainability matters, including climate-related matters, have not been harmonized and continue to evolve.
Standards for tracking and reporting on ESG and sustainability matters, including climate-related matters, have not been harmonized and continue to evolve.
As cyber incidents continue to evolve, we may be required to incur additional costs to continue to modify or enhance our protective measures or to investigate or remediate the effects of cyber incidents. 19 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.
As cyber incidents continue to evolve, we may be required to incur additional costs to continue to modify or enhance our protective measures or to investigate or remediate the effects of cyber incidents.
Although we utilize various procedures and controls to mitigate our exposure to the risks described above, cybersecurity attacks and other cyber events are evolving and unpredictable. 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.
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.
We have purchase commitments with certain vendors to supply equipment and materials, including, in the case of our completion services business, proppants. Some of these agreements are take-or-pay or similar agreements with minimum purchase obligations.
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. We have purchase commitments with certain vendors to supply equipment and materials, including, in the case of our completion services business, proppants.
In addition, because we, NexTier and Ulterra previously operated independently, it is possible that the integration process could result in: • diversion of the attention of our management; and • the disruption of, or the loss of momentum in, our ongoing businesses or inconsistencies in standards, controls, procedures and policies. 20 Our failure to achieve consolidation savings, to integrate acquired businesses and technology and other assets into our existing operations successfully or to minimize any unforeseen operational difficulties could have a material adverse effect on our business.
Our failure to achieve consolidation savings, to integrate acquired businesses and technology and other assets into our existing operations successfully or to minimize any unforeseen operational difficulties could have a material adverse effect on our business.
Our ESG practices and disclosures may not satisfy investor requirements or their requirements may not be made known to us. We may continue to face pressure regarding our ESG practices and disclosures. We have developed, and will continue to develop, goals and other objectives related to ESG and sustainability matters.
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.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeAt the management level, our Vice President of Information Technology, who has extensive cybersecurity knowledge and skills gained from over 18 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 the Chief Financial Officer.
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.
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 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 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.
A number of experienced information security team members responsible for various parts of the business also report to the 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 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.
Item 1C. Cybersecurity We have implemented and maintain a cybersecurity program that is aligned with the NIST Framework and reasonably designed to protect our information and to assess, identify, and manage risks from cybersecurity threats that may result in material adverse effects on the confidentiality, integrity, and availability of our information systems.
Item 1C. Cybersecurity We have implemented and maintain a cybersecurity program that is aligned with the NIST Framework and designed to protect our information and to assess, identify, and manage risks from cybersecurity threats that may result in material adverse effects on the confidentiality, integrity, and availability of our information systems.
The 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 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.
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 receive annual cyber awareness training. In addition, we perform monthly phishing simulations, with remediation training required as necessary.
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.
Governance Our Board has delegated the primary responsibility to oversee cybersecurity matters to the Audit Committee. The Audit Committee regularly 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 the Company to identify and mitigate data protection and cybersecurity risks.
We have adopted a cybersecurity incident reporting process (“IRP”) that applies in the event of a cybersecurity threat or incident to provide a standardized framework for responding to security incidents.
We have adopted a cybersecurity incident reporting process (“IRP”) that applies in the event of a cybersecurity threat or incident to provide a standardized framework for response.
We have protocols by which certain cybersecurity incidents that meet established reporting thresholds are escalated within the Company and, where appropriate, reported promptly to the Board and Audit Committee. 31 Our Audit Committee is responsible for overseeing information security and cybersecurity risk.
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.
The IRP sets out a coordinated approach to investigating, containing, documenting, and mitigating incidents, including reporting findings and keeping senior management, the Board and other key stakeholders informed and involved as appropriate. Risk Management and Strategy Our senior management and representatives from our business units regularly communicate with the Board of Directors on risk management matters, including cybersecurity risks.
The IRP sets out a coordinated approach to investigating, containing, documenting, and mitigating incidents, including reporting findings and keeping senior management, the Board of Directors and other key stakeholders informed and involved as appropriate.
Removed
Such members of our senior leadership also report to the Board at least annually on cybersecurity matters, including information security and cybersecurity risk.
Added
Risk Management and Strategy Our senior management and representatives from our business units regularly communicate with the Board of Directors on risk management matters, including cybersecurity risks.
Removed
Senior leadership communicates with the Audit Committee at least quarterly regarding information security and cybersecurity risk and formally reports to the entire Board on information security and cybersecurity risk at least annually.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeOur electrical controls and automation operation is supported by an office and yard facility in Texas. 32 Completion Services — Our completion services are supported by multiple offices and yard facilities located in the Permian, Marcellus Shale/Utica Basins, Haynesville and Eagle Ford, among others.
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.
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. Our servicing of equipment for drilling contractors is supported by offices and yard facilities located in Texas.
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.
Drilling Products — Our drilling products segment is supported by multiple offices and manufacturing and distributing facilities located through North America and internationally in over 30 countries. Other — Our oilfield rental operations are supported by offices and yard facilities located in Texas, Oklahoma and Ohio.
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 changeItem 3. Legal Proceedings. 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.
Biggest changeAdditionally, 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.
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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.
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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.
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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. 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.
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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.
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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.
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On the same day, Ulterra filed a notice of removal in federal court for the Southern District of Texas, Houston Division (SDTX 4:23-cv-00730), as well as a corresponding notice in Texas state court. NOV moved to dismiss and remand the case back to state court. On February 17, 2024, the Court denied NOV’s motion.
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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.
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Not applicable. 31 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThese shares were acquired at fair market value. These acquisitions were made pursuant to the terms of the Patterson-UTI Energy, Inc. Amended and Restated 2014 Long-Term Incentive Plan, as amended, the Patterson-UTI Energy, Inc. 2021 Long-Term Incentive Plan, as amended, the NexTier Oilfield Solutions Inc. Equity and Incentive Award Plan and the NexTier Oilfield Solutions Inc.
Biggest changeThese shares were acquired at fair market value. These acquisitions were made pursuant to the terms of the Patterson-UTI Energy, Inc. 2021 Long-Term Incentive Plan, as amended and the NexTier Oilfield Solutions Inc. Equity and Incentive Award Plan and not pursuant to the stock buyback program. (2) In September 2013, our Board of Directors approved a stock buyback program.
In February 2024, our Board of Directors approved an increase of the authorization under the stock buyback program to allow for an aggregate of $1 billion of future share repurchases. All purchases executed to date have been through open market transactions.
In February 2024, our Board of Directors approved an increase of the authorization under the stock buyback program to allow for an aggregate of $1.0 billion of future share repurchases. All purchases executed to date have been through open market transactions.
(d) Issuer Purchases of Equity Securities The table below sets forth the information with respect to purchases of our common stock made by us during the quarter ended December 31, 2023.
(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.
Our Board of Directors may, without advance notice, reduce or suspend our dividend in order 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.
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.
Purchases under the buyback program are made at management’s discretion, at prevailing prices, subject to market conditions and other factors. Purchases may be made at any time without prior notice.
Purchases under the buyback program are made at management’s discretion, at prevailing prices, subject to market conditions and other factors. Purchases may be made at any time without prior notice. There is no expiration date associated with the buyback program.
This graph shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulations 14A or 14C under the Exchange Act or to the liabilities of Section 18 under such Act. 35
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
(b) Holders As of February 9, 2024, there were approximately 800 holders of record of our common stock. (c) Dividends On February 14, 2024, our Board of Directors approved a cash dividend on our common stock in the amount of $0.08 per share to be paid on March 15, 2024 to holders of record as of March 1, 2024.
(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.
There is no expiration date associated with the buyback program. 34 (e) Performance Graph The following graph compares the cumulative stockholder return of our common stock for the period from December 31, 2018 through December 31, 2023, with the cumulative total return of the S&P 500 Index, the S&P SmallCap 600 Index and the Oilfield Service Index.
(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.
The graph assumes investment of $100 on December 31, 2018 and reinvestment of all dividends. Index Data: Copyright Standard and Poor’s, Inc. Used with permission. All rights reserved.
Index Data: Copyright Standard and Poor’s, Inc. Used with permission. All rights reserved.
Period Covered Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (in thousands) (2) October 2023 58,178 $ 12.87 — $ 281,031 November 2023 1,858,670 $ 11.91 1,834,546 $ 259,183 December 2023 5,121,552 $ 11.07 4,825,639 $ 205,676 Total 7,038,400 6,660,185 (1) 378,215 shares were withheld in the fourth quarter with respect to employees’ tax withholding obligations upon the settlement of performance unit awards and the vesting of restricted stock units.
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.
Fiscal Year Ended December 31, 2018 2019 2020 2021 2022 2023 Company/Index ($) ($) ($) ($) ($) ($) Patterson-UTI Energy, Inc. 100.00 103.08 52.77 85.63 172.71 113.70 S&P 500 Index 100.00 131.47 155.65 200.29 163.98 207.04 S&P SmallCap 600 Index 100.00 122.74 136.53 173.04 145.10 168.23 Oilfield Service Index 100.00 99.45 57.60 69.55 112.31 114.47 The foregoing graph is based on historical data and is not necessarily indicative of future performance.
Fiscal 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.
Removed
(Former C&J Energy) Management Incentive Plan, and not pursuant to the stock buyback program. (2) In September 2013, our Board of Directors approved a stock buyback program. In April 2023, our Board of Directors approved an increase of the authorization under the stock buyback program to allow for an aggregate of $300 million of future share repurchases.

Item 7. Management's Discussion & Analysis

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

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Biggest changeDuring 2023, our uses of cash flow and borrowings under our revolving credit facility included: • $616 million to make capital expenditures for the betterment and refurbishment of drilling services and completion services equipment and, to a much lesser extent, equipment for our other businesses, to acquire and procure equipment to support our drilling services, completion services, drilling products, oilfield rentals and manufacturing operations, to acquire an aircraft and to fund investments in oil and natural gas properties on a non-operating working interest basis, • $357 million, net of acquired cash, for the Ulterra acquisition, • $65 million, net of acquired cash, for the NexTier merger, 46 • $201 million for repurchases of our common stock, • $100 million to pay dividends on our common stock, • $16 million for payments related to finance leases, • $8 million for repurchases of our 2028 Notes and 2029 Notes, and • $12 million for other investing and financing activities We paid cash dividends during the year ended December 31, 2023 as follows: Per Share Total (in thousands) Paid on March 16, 2023 $ 0.08 $ 16,916 Paid on June 15, 2023 0.08 16,591 Paid on September 21, 2023 0.08 33,217 Paid on December 15, 2023 0.08 33,310 Total cash dividends $ 0.32 $ 100,034 On February 14, 2024, our Board of Directors approved a cash dividend on our common stock in the amount of $0.08 per share to be paid on March 15, 2024 to holders of record as of March 1, 2024.
Biggest changeDuring 2024, our uses of cash flow included: • $678 million to make capital expenditures for the betterment and refurbishment of drilling services and completion services equipment and, to a much lesser extent, equipment for our other businesses, to acquire and procure equipment to support our drilling services, completion services, drilling products, oilfield rentals and manufacturing operations and to fund investments in oil and natural gas properties on a non-operating working interest basis, • $290 million for repurchases of our common stock, • $127 million to pay dividends on our common stock, • $45.5 million for payments related to finance leases, and • $17.5 million for other investing and financing activities.
Future cash flows were projected based on estimates of revenue, 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 for each reporting unit consisted of a 1% growth estimate.
We operate under three reportable business segments: (i) drilling services, (ii) completion services, and (iii) drilling products. Drilling Services Our contract drilling business operates in the continental United States and internationally in Colombia and, from time to time, we pursue contract drilling opportunities in other select markets.
We operate under three reportable business segments: (i) drilling services, (ii) completion services, and (iii) drilling products. Drilling Services Our contract drilling business operates in the continental United States and internationally in Colombia and Ecuador and, from time to time, we pursue contract drilling opportunities in other select markets.
We also self-insure a number of other risks, including loss of earnings and business interruption and most cybersecurity risks, and do not carry a significant amount of insurance to cover risks of underground reservoir damage.
We also self-insure a number of other risks, including loss of earnings and business interruption and most of our cybersecurity risks, and do not carry a significant amount of insurance to cover risks of underground reservoir damage.
We exclude the items listed above from net income (loss) from continuing operations in arriving at Adjusted EBITDA because these amounts can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired.
We exclude the items listed above from net income (loss) in arriving at Adjusted EBITDA because these amounts can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired.
The current demand for equipment and services remains dependent on macro conditions, including commodity prices, geopolitical environment, inflationary pressures, economic conditions in the United States and elsewhere, as well as customer consolidation and focus by exploration and production companies and service companies on capital returns.
The 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.
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 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.
Each share of common stock of NexTier issued and outstanding immediately prior to the effective time (including outstanding restricted 35 Table of Contents shares) was converted into the right to receive 0.752 shares of our common stock, which based on the 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.
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.
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.
Recently Issued Accounting Standards For a discussion of recently issued accounting standards, see Note 1 of Notes to consolidated financial statements included as a part of Item 8 of this Report. 51 Non-GAAP Financial Measures Adjusted EBITDA Adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) is not defined by accounting principles generally accepted in the United States of America (“GAAP”).
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”).
We are obligated to pay to Scotiabank interest on all amounts not paid by us on the date of demand or when otherwise due at the LIBOR rate plus 2.25% per annum, calculated daily and payable monthly, in arrears, on the basis of a calendar year for the actual number of days elapsed, with interest on overdue interest at the same rate as on the reimbursement amounts.
We are obligated to pay to Scotiabank interest on all amounts not paid by us on the date of demand or when otherwise due at the Prime rate plus 2.00% per annum, calculated daily and payable monthly, in arrears, on the basis of a calendar year for the actual number of days elapsed, with interest on overdue interest at the same rate as on the reimbursement amounts.
A portion of our capital expenditures can be adjusted and managed by us to match market demand and activity levels. Based on our current outlook for activity, we expect our capital expenditures for 2024 to be approximately $740 million. The majority of these expenditures are expected to be used for normal, recurring items necessary to support our business.
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.
We maintain a backlog of commitments for contract drilling services under term contracts, which we define as contracts with a duration of six months or more. Our contract drilling backlog in the United States as of December 31, 2023 and 2022 was approximately $700 million and $830 million, respectively.
We 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.
A letter of credit fee is payable by us equal to the applicable margin for SOFR rate loans times the daily amount available to be drawn under outstanding letters of credit. The commitment fee rate payable to the lenders varies from 0.10% to 0.30% based on our credit rating.
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.
Approximately 16% of our total contract drilling backlog in the United States at December 31, 2023 is reasonably expected to remain after 2024. See Note 3 of Notes to consolidated financial statements in Item 8 of this Report and “Item 1A.
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.
Natural gas prices (based on the Henry Hub Spot Market Price) averaged $2.74 per MMBtu in the fourth quarter of 2023. In light of these and other factors, we expect oil and natural gas prices to continue to be volatile and to affect our financial condition, operations and ability to access sources of capital.
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.
(3) $ 16.83 $ 10.25 64.2 % (1) Drilling services segment represents our contract drilling, directional drilling, oilfield technology and electrical controls and automation businesses. (2) Adjusted gross profit is defined as revenues less direct operating costs (excluding depreciation, amortization and impairment expense).
(3) $ 16.06 $ 16.83 (4.6 %) (1) Drilling services segment represents our contract drilling, directional drilling, oilfield technology and electrical controls and automation businesses. (2) Adjusted gross profit is defined as revenues less direct operating costs (excluding depreciation, amortization and impairment expense).
The current demand for equipment and services remains dependent on macro conditions, including commodity prices, geopolitical environment, inflationary pressures, economic conditions in the United States and elsewhere, as well as customer consolidation and focus by exploration and production companies and service companies on capital returns. Oil prices averaged $78.53 per barrel in the fourth quarter of 2023.
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 weighted-average remaining vesting periods for these awards were 1.63 years and 1.13 years, respectively as of December 31, 2023. See Note 12 of Notes to consolidated financial statements in Item 8 of this Report for additional discussion regarding our stock-based compensation. Commitments — As of December 31, 2023, we had commitments to purchase major equipment totaling approximately $153 million.
The weighted-average remaining vesting periods for these awards were 1.71 years and 1.04 years, respectively as of December 31, 2024. See Note 12 of Notes to consolidated financial statements in Item 8 of this Report for additional discussion regarding our stock-based compensation. Commitments — As of December 31, 2024, we had commitments to purchase major equipment totaling approximately $65.9 million.
The changes for the year ended December 31, 2023 as compared to December 31, 2022 can be primarily attributed to the NexTier merger, which closed on September 1, 2023. The NexTier merger had a material impact on our reported results of operations.
The changes in the results of our completion services segment for the year ended December 31, 2024 as compared to December 31, 2023 can be primarily attributed to the NexTier merger, which closed on September 1, 2023. The NexTier merger had a material impact on our reported results of operations.
The Credit Agreement is a committed senior unsecured revolving credit facility that permits aggregate borrowings of up to $600 million, including a letter of credit facility that, at any time outstanding, is limited to $100 million and a swing line facility that, at any time outstanding, is limited to the lesser of $50 million and the amount of the swing line provider’s unused commitment.
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.
(2) 131 128 120 118 (1) The average oil price represents the average monthly WTI spot price as reported by the United States Energy Information Administration. (2) A rig is considered to be operating if it is earning revenue pursuant to a contract on a given day.
(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.
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.
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.
Our completion services segment has entered into agreements to purchase minimum quantities of proppants from certain vendors. As of December 31, 2023, the remaining minimum obligation under these agreements was approximately $39.7 million, of which approximately $33.7 million, $4.0 million and $2.0 million relate to the remainder of 2024, 2025 and 2026, respectively.
Our completion services segment has entered into agreements to purchase minimum quantities of proppants from certain vendors. As of December 31, 2024, the remaining minimum obligation under these agreements was approximately $19.8 million, of which approximately, $17.4 million and $2.4 million relate to 2025 and 2026, respectively.
Assuming all changes are isolated, a decrease of 100 bps in our long-term revenue growth rate for our completion services reporting unit would reduce our estimated fair value by approximately 6%, while a 100 bps increase to our discount rate would reduce our estimated fair value by approximately 8%.
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%.
Depreciation and amortization — Our industry is very capital intensive, as property and equipment represented 45% of our total assets as of December 31, 2023 and depreciation, depletion, amortization and impairment represented 19% of our total operating costs and expenses in 2023. 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 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.
Even during periods of historically moderate or high prices for oil and natural gas, companies exploring for oil and natural gas may cancel or curtail programs or reduce their levels of capital expenditures for exploration and production for a variety of reasons, which could reduce demand for our services.
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.
In April 2023, our Board of Directors approved an increase of the authorization under the stock buyback program to allow for an aggregate of $300 million of future share repurchases. All purchases executed to date have been through open market transactions.
In February 2024, our Board of Directors approved an increase of the authorization under the stock buyback program to allow for an aggregate of $1.0 billion of future share repurchases. All purchases executed to date have been through open market transactions.
We anticipate $96.4 million of expenditures in 2024 related to various contractual obligations such as certain commitments to purchase proppants and lease liabilities.
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 define Adjusted EBITDA as net income (loss) from continuing operations plus income tax expense (benefit), net interest expense, depreciation, depletion, amortization and impairment expense 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 (including impairment of goodwill) and merger and integration expense.
On March 16, 2015, we entered into a Reimbursement Agreement (the “Reimbursement Agreement”) with The Bank of Nova Scotia (“Scotiabank”), pursuant to which we may from time to time request that Scotiabank issue an unspecified amount of letters of credit. As of December 31, 2023, we had $87.7 million in letters of credit outstanding under the Reimbursement Agreement.
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.
As of December 31, 2023, we had no borrowings outstanding under our revolving credit facility. We had $2.6 million in letters of credit outstanding under the Credit Agreement at December 31, 2023 and, as a result, had available borrowing capacity of approximately $597 million at that date.
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.
The Credit Agreement generally defines the total debt to capitalization ratio as the ratio of (a) total borrowed money indebtedness to (b) the sum of such indebtedness plus consolidated net worth, with consolidated net worth determined as of the end of the most recently ended fiscal quarter. We were in compliance with these covenants at December 31, 2023.
The Credit Agreement generally defines the total debt to capitalization ratio as the ratio of (a) total borrowed money indebtedness to (b) the sum of such indebtedness plus consolidated net worth, with consolidated net worth determined as of the end of the most recently ended fiscal quarter.
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, and if that is the case, any necessary goodwill impairment is determined using a quantitative impairment test.
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.
As of December 31, 2023, we had working capital of $435 million, including cash and cash equivalents of $193 million, compared to working capital of $278 million, including cash and cash equivalents of $138 million, at December 31, 2022.
As of December 31, 2024, we had working capital of $453 million, including cash, cash equivalents and restricted cash of $241 million, compared to working capital of $435 million, including cash, cash equivalents and restricted cash of $193 million, at December 31, 2023.
See “Risk Factors” in Item 1A of this Report. 38 For the three years ended December 31, 2023, our operating revenues and net income consisted of the following (dollars in thousands): 2023 2022 2021 Drilling services $ 1,919,759 46.3 % $ 1,544,820 58.3 % $ 784,218 57.8 % Completion services 2,017,440 48.7 % 1,022,413 38.6 % 523,756 38.6 % Drilling products 134,679 3.2 % — 0.0 % — 0.0 % Other 74,578 1.8 % 80,359 3.1 % 49,107 3.6 % $ 4,146,456 100.0 % $ 2,647,592 100.0 % $ 1,357,081 100.0 % Net income (loss) $ 245,952 $ 154,658 $ (654,545 ) Results of Operations Effective as of the third quarter of 2023, we revised our reportable segments to align with certain changes in how our Chief Operating Decision Maker (“CODM”) manages and allocates resources to our business as a result of the Ulterra acquisition and NexTier merger.
See “Risk Factors” in Item 1A of this Report. 36 Table of Contents For the three years ended December 31, 2024, our operating revenues consisted of the following (dollars in thousands): 2024 2023 2022 Drilling Services $ 1,727,810 32.1 % $ 1,919,759 46.3 % $ 1,544,820 58.3 % Completion Services 3,232,785 60.1 % 2,017,440 48.7 % 1,022,413 38.6 % Drilling Products 351,651 6.5 % 134,679 3.2 % — 0.0 % Other 65,665 1.3 % 74,578 1.8 % 80,359 3.1 % $ 5,377,911 100.0 % $ 4,146,456 100.0 % $ 2,647,592 100.0 % Results of Operations Effective as of the third quarter of 2023, we revised our reportable segments to align with certain changes in how our Chief Operating Decision Maker (“CODM”) manages and allocates resources to our business as a result of the Ulterra acquisition and NexTier merger.
The applicable margin on SOFR rate loans varies from 1.00% to 2.00% and the applicable margin on base rate loans varies from 0.00% to 1.00%, in each case determined based on our credit rating. As of December 31, 2023, the applicable margin on SOFR rate loans was 1.75% and the applicable margin on base rate loans was 0.75%.
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.
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 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.
Under this approach, we used a discounted cash flow model, which utilizes present values of cash flows to estimate fair value. Forecasted cash flows considered known market conditions as of December 31, 2023, 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 third quarter of 2024 and management’s anticipated business outlook for each reporting unit.
Natural gas prices (based on the Henry Hub Spot Market Price) averaged $2.74 per MMBtu in the fourth quarter of 2023 and closed at $1.50 per MMBtu on February 20, 2024. 36 Quarterly average oil prices and our quarterly average number of rigs operating in the United States for 2021, 2022 and 2023 are as follows: 1 st 2 nd 3 rd 4 th Quarter Quarter Quarter Quarter 2021: Average oil price per Bbl (1) $ 57.79 $ 66.09 $ 70.62 $ 77.45 Average rigs operating per day – U.S.
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.
Adjusted EBITDA should not be construed as an alternative to the GAAP measure of net income (loss) from continuing operations. Our computations of Adjusted EBITDA may not be the same as similarly titled measures of other companies.
Adjusted EBITDA should not be construed as an alternative to the GAAP measure of net income (loss). Our computations of Adjusted EBITDA may not be the same as similarly titled measures of other companies. Set forth below is a reconciliation of the non-GAAP financial measure of Adjusted EBITDA to the GAAP financial measure of net income (loss).
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, 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.
We had $92.4 million of outstanding letters of credit at December 31, 2023, which was comprised of $87.7 million outstanding under the Reimbursement Agreement, $2.5 million outstanding under the Credit Agreement, and $2.2 million outstanding with financial institutions providing for short-term borrowing capacity, overdraft protection and bonding requirements.
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.
Even during periods of historically moderate or high prices for oil and natural gas, companies exploring for oil and natural gas may cancel or curtail programs or reduce their levels of capital expenditures for exploration and production for a variety of reasons, which could reduce demand for our services. Impact of Inflation Inflation rates have begun to moderate.
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.
Operating lease liabilities totaled $51.4 million and finance lease liabilities totaled $56.9 million at December 31, 2023. See Note 13 of Notes to consolidated financial statements in Item 8 of this Report for additional information on our operating leases as of December 31, 2023.
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.
However, we continue to actively monitor market trends primarily related to sourcing labor, supplies and equipment.
Impact of Inflation Inflation rates have begun to moderate. However, we continue to actively monitor market trends primarily related to sourcing labor, supplies and equipment.
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.
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.
See Non-GAAP Financial Measures below for a reconciliation of GAAP gross profit to adjusted gross profit by segment.
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.
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.
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 1 of Notes to consolidated financial statements included as a part of Item 8 of this Report. 48 The following table outlines a 10% change in the useful lives on our major categories of property and equipment and the impact on operating income for the year ended December 31, 2023: Useful Lives Change Impact (in thousands) Drilling services equipment 1-15 years 10% $ 47,423 Completion services equipment 1-25 years 10% 13,567 $ 60,990 Impairment of long-lived assets — We review our long-lived assets, including property and equipment, for impairment whenever events or changes in circumstances indicate that the carrying amounts of certain assets may not be recovered over their estimated remaining useful lives (“triggering events”).
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”).
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. 45 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.
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.
Total consideration for the acquisition included the issuance of 34.9 million shares of our common stock and payment of approximately $376 million cash, which based on the closing price of our common stock of $14.94 on August 14, 2023, valued the transaction at closing at approximately $897 million. Ulterra is a global provider of specialized drill bit solutions.
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 adjustment), 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.
The remainder of these shares were acquired to satisfy payroll withholding obligations upon the settlement of performance unit awards and the vesting of restricted stock units. These shares were acquired at fair market value. These acquisitions were made pursuant to the terms of the Patterson-UTI Energy, Inc.
Certain of these shares were acquired to satisfy the exercise price and employees’ tax withholding obligations upon the exercise of stock options. The remainder of these shares were acquired to satisfy payroll withholding obligations upon the settlement of performance unit awards and the vesting of restricted stock units. These shares were acquired at fair market value.
The final determination of our income tax liabilities involves the interpretation of local tax laws and related authorities in each jurisdiction.
The final determination of our income tax liabilities involves the interpretation of local tax laws and related authorities in each jurisdiction. Changes in the operating environments, including changes in tax law, could impact the determination of our income tax liabilities for a tax year.
Amended and Restated 2014 Long-Term Incentive Plan, as amended (the “2014 Plan”) and the Patterson-UTI Energy, Inc. 2021 Long-Term Incentive Plan (the “2021 Plan”), the NexTier Oilfield Solutions Inc. Equity and Incentive Award Plan and the NexTier Oilfield Solutions Inc. (Former C&J Energy) Management Incentive Plan, and not pursuant to the stock buyback program.
These acquisitions were made pursuant to the terms of the Patterson-UTI Energy, Inc. Amended and Restated 2014 Long-Term Incentive Plan, as amended (the “2014 Plan”), the Patterson-UTI Energy, Inc. 2021 Long-Term Incentive Plan (the “2021 Plan”), the NexTier Oilfield Solutions Inc. Equity and Incentive Award Plan and the NexTier Oilfield Solutions Inc.
Based on contracts in place in the United States as of February 14, 2024, we expect an average of 79 rigs operating under term contracts during the first quarter of 2024 and an average of 52 rigs operating under term contracts during 2024.
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.
As of December 31, 2023, our rig fleet included 173 super-spec rigs, of which 131 were Tier-1, super-spec rigs. 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.
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.
Upon the issuance of shares for the Pioneer acquisition in October 2021, we withheld shares with respect to Pioneer employees’ tax withholding obligations. 47 Treasury stock acquisitions during the years ended December 31, 2023, 2022 and 2021 were as follows (dollars in thousands): 2023 2022 2021 Shares Cost Shares Cost Shares Cost Treasury shares at beginning of period 88,758,722 $ 1,453,079 84,128,995 $ 1,372,641 83,402,322 $ 1,366,313 Purchases pursuant to stock buyback program 14,086,229 168,631 3,254,599 57,173 — — Acquisitions pursuant to long-term incentive plan 2,735,060 35,965 1,372,101 23,237 451,196 3,727 Purchases in connection with Pioneer acquisition — — — — 275,477 2,601 Other — — 3,027 28 — — Treasury shares at end of period 105,580,011 $ 1,657,675 88,758,722 $ 1,453,079 84,128,995 $ 1,372,641 As of December 31, 2023, we had unrecognized compensation costs of $51.4 million and $11.1 million related to our unvested restricted stock units and our unvested Performance Units, respectively.
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.
Oil prices averaged $78.53 per barrel in the fourth quarter of 2023 and closed at 78.72 per barrel on February 20, 2024.
Oil prices averaged $70.73 per barrel in the fourth quarter of 2024 and closed at $73.52 per barrel on February 3, 2025.
Year Ended December 31, 2023 2022 2021 (in thousands) Net income (loss) from continuing operations $ 245,952 $ 154,658 $ (657,079 ) Income tax expense (benefit) 61,152 13,204 (62,702 ) Net interest expense 46,748 39,896 41,756 Depreciation, depletion, amortization and impairment 731,416 483,945 849,178 Merger and integration expense 98,077 2,069 12,060 Adjusted EBITDA $ 1,183,345 $ 693,772 $ 183,213 Adjusted Gross Profit We define “Adjusted gross profit” as revenues less direct operating costs (excluding depreciation, depletion, amortization and impairment expense).
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).
Comparison of the years ended December 31, 2023 and 2022 The following tables summarize results of operations by business segment for the years ended December 31, 2023 and 2022: Year Ended December 31, Drilling Services (1) 2023 2022 % Change (Dollars in thousands) Revenues $ 1,919,759 $ 1,544,820 24.3 % Direct operating costs 1,119,200 1,025,904 9.1 % Adjusted gross profit (2) 800,559 518,916 54.3 % Selling, general and administrative 15,014 15,027 (0.1 )% Depreciation, amortization and impairment 364,312 354,116 2.9 % Other operating income, net (769 ) (34 ) 2,161.8 % Operating income $ 422,002 $ 149,807 181.7 % Capital expenditures $ 334,780 $ 272,521 22.8 % Operating days – U.S.
Comparison 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.
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.
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.
Drilling Services Completion Services Drilling Products Other (in thousands) 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 For the year ended December 31, 2021 Revenues $ 784,218 $ 523,756 $ — $ 49,107 Less direct operating costs (577,983 ) (475,953 ) — (28,012 ) Less depreciation, depletion, amortization and impairment (660,402 ) (159,305 ) — (23,612 ) GAAP gross profit (454,167 ) (111,502 ) — (2,517 ) Depreciation, depletion, amortization and impairment 660,402 159,305 — 23,612 Adjusted gross profit $ 206,235 $ 47,803 $ — $ 21,095 52
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
Risk Factors – Our current backlog of contract drilling revenue may decline and may not ultimately be realized, as fixed-term contracts may in certain instances be terminated without an early termination payment.” Our completion services business was impacted by calendar inefficiencies during the second half of 2023 resulting from a decline in customer activity during the third quarter.
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.
See Non-GAAP Financial Measures below for a reconciliation of GAAP gross profit to adjusted gross profit by segment. The results of our drilling products segment reflect the operations of our Ulterra acquisition, from the closing date of August 14, 2023 until December 31, 2023. As such, there were no comparable results for the year ended December 31, 2022.
See Non-GAAP Financial Measures below for a reconciliation of GAAP gross profit to adjusted gross profit by segment. The changes in the results of our drilling products segment for the year ended December 31, 2024 as compared to December 31, 2023 are attributable to the Ulterra acquisition, which closed on August 14, 2023.
This decline in share price was deemed a triggering event that warranted a quantitative assessment for goodwill impairment for all three of our reporting units. We estimated the fair value of the drilling products and the completion services reporting units using the income approach.
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.
Our Board of Directors may, without advance notice, reduce or suspend our dividend in order 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.
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 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. To address evolving customer preferences for emissions-reducing equipment, we have invested in natural gas-powered equipment, including electric pumps, to replace legacy diesel completion services equipment.
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.
Other operating income, net increased primarily due to a $5.2 million favorable legal settlement and a $6.5 million reversal of cumulative compensation costs associated with certain performance-based restricted stock units in 2023. Interest income increased due to interest received from a higher average cash balance in 2023.
The $22.6 million change in other operating income, net was primarily due to a $5.2 million favorable legal settlement and a $6.5 million reversal of cumulative compensation costs associated with certain performance-based restricted stock units in 2023. Additionally, there was a $5.8 million credit loss expense in 2024 due to a deterioration in the financial condition of a customer.
For a full description of the Credit Agreement, the Reimbursement Agreement, the 2028 Notes, the 2029 Notes, the 2033 Notes and the Equipment Loans, see Note 9 of Notes to consolidated financial statements included as a part of Item 8 of this Report.
We were in compliance with all covenants under the associated agreements and indentures at December 31, 2024. 41 Table of Contents For a full description of the Prior Credit Agreement, the Reimbursement Agreement, the 2028 Notes, the 2029 Notes, and the 2033 Notes, see Note 9 of Notes to consolidated financial statements included as a part of Item 8 of this Report.
During 2023, our sources of cash flow included: • $1.0 billion from operating activities, • $26 million in proceeds from the disposal of property and equipment; and • $396 million in net proceeds before offering expenses from the issuance of our 2033 Notes.
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.
The future cash flows were discounted using a market-participant, risk-adjusted weighted average cost of capital of 10% for the drilling products reporting unit and 12% for the completion services reporting unit. We estimated the fair value of the cementing services reporting unit using a market approach.
Future cash flows were then discounted using a market-participant, risk-adjusted weighted average cost of capital of 10.25% for the drilling products reporting unit and 10.75% for the completion services reporting unit. Financial and credit market volatility directly impacts our fair value measurement through the weighted average cost of capital used to determine a discount rate.
(2) 69 73 80 106 2022: Average oil price per Bbl (1) $ 94.45 $ 108.72 $ 93.18 $ 82.79 Average rigs operating per day – U.S. (2) 115 121 128 131 2023: Average oil price per Bbl (1) $ 75.93 $ 73.54 $ 82.25 $ 78.53 Average rigs operating per day – U.S.
(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.
(3) 45,270 45,216 0.1 % Average revenue per operating day – U.S. $ 36.24 $ 27.57 31.5 % Average direct operating costs per operating day – U.S. $ 19.42 $ 17.32 12.1 % Average adjusted gross profit per operating day – U.S.
(3) 40,899 45,270 (9.7 %) Average revenue per operating day – U.S. (3) $ 35.86 $ 36.24 (1.0 %) Average direct operating costs per operating day – U.S. (3) $ 19.80 $ 19.42 2.0 % Average adjusted gross profit per operating day – U.S.
We determined no triggering events occurred in 2023 related to our long-lived assets. See Note 6 of Notes to consolidated financial statements included as a part of Item 8 of this Report.
See Note 6 of Notes to consolidated financial statements included as a part of Item 8 of this Report.
Assets are grouped at the lowest level at which identifiable cash flows are largely independent of other asset groupings for impairment assessment. If there is a triggering event, we estimate future cash flows over the life of the respective assets or asset groupings in our assessment of its recoverability.
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.
These estimates of cash flows are based on historical cyclical trends in the industry as well as our expectations regarding the continuation of these trends in the future.
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.
Year Ended December 31, Drilling Products 2023 2022 % Change (Dollars in thousands) Revenues $ 134,679 $ — N/A Direct operating costs 81,555 — N/A Adjusted gross profit (1) 53,124 — N/A Selling, general and administrative 11,158 — N/A Depreciation, amortization and impairment 48,467 — N/A Operating loss $ (6,501 ) $ — N/A Capital expenditures $ 24,572 $ — N/A (1) Adjusted gross profit is defined as revenues less direct operating costs (excluding depreciation, amortization and impairment expense).
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).
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.
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.
Loans under the Credit Agreement bear interest by reference, at our election, to the SOFR rate (subject to a 0.10% per annum adjustment) or base rate, in each case subject to a 0% floor.
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.
Our average active U.S. rig count for the fourth quarter of 2023 was 118 rigs. This was a decrease from our average active rig count for the third quarter of 2023 of 120 rigs.
In 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.

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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 removed1 unchanged
Biggest changeSimilarly, some of our revenues are denominated in foreign currencies, but have associated U.S. dollar costs, which also give rise to foreign currency exchange rate exposure. The carrying values of cash and cash equivalents, trade receivables and accounts payable approximate fair value due to the short-term maturity of these items.
Biggest changeSimilarly, some of our revenues are denominated in foreign currencies, but have associated U.S. dollar costs, which also give rise to foreign currency exchange rate exposure. The carrying values of cash, cash equivalents and restricted cash, trade receivables and accounts payable approximate fair value due to the short-term maturity of these items. Item 8. Financial Statements and Supplementary Data.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk As of December 31, 2023, we would have had exposure to interest rate market risk associated with any outstanding borrowings and letters of credit that we had under the Credit Agreement and amounts owed under the Reimbursement Agreement.
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.
Loans under the Credit Agreement bear interest by reference, at our election, to the SOFR rate (subject to a 0.10% per annum adjustment) or base rate, in each case subject to a 0% floor.
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.
A letter of credit fee is payable by us equal to the applicable margin for SOFR rate loans times the daily amount available to be drawn under outstanding letters of credit. The commitment fee rate payable to the lenders varies from 0.10% to 0.30% based on our credit rating.
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.
The applicable margin on SOFR rate loans varies from 1.00% to 2.00% and the applicable margin on base rate loans varies from 0.00% to 1.00%, in each case determined based on our credit rating. As of December 31, 2023, the applicable margin on SOFR rate loans was 1.75% and the applicable margin on base rate loans was 0.75%.
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%.
We are obligated to pay Scotiabank interest on all amounts not paid by us on the date of demand or when otherwise due at the LIBOR rate plus 2.25% per annum.
We are obligated to pay Scotiabank interest on all amounts not paid by us on the date of demand or when otherwise due at the Prime rate plus 2.00% per annum.
As of December 31, 2023, we had $2.6 million in letters of credit outstanding and, as a result, had available borrowing capacity of approximately $597 million at that date. Under the terms of the Reimbursement Agreement, we will reimburse Scotiabank on demand for any amounts that Scotiabank has disbursed under any of our letters of credit issued thereunder.
As 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.
Added
Financial Statements are filed as a part of this Report at the end of Part IV hereof beginning at page F-1, Index to Consolidated Financial Statements, and are incorporated herein by this reference. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None.

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