Patterson-UTI Energy Reports Financial Results for the Three and Six Months Ended June 30, 2020

PATTERSON-UTI ENERGY, INC.

Condensed Consolidated Statements of Operations

(unaudited, in thousands, except per share data)

Three Months Ended

Six Months Ended

June 30,

June 30,

2020

2019

2020

2019

REVENUES

$

250,380

$

675,765

$

696,307

$

1,379,936

COSTS AND EXPENSES:

Direct operating costs

164,746

467,643

491,374

956,968

Depreciation, depletion, amortization and impairment

173,085

208,688

359,882

423,098

Impairment of goodwill

—

—

395,060

—

Selling, general and administrative

23,991

34,894

54,337

67,449

Credit loss expense

4,551

3,594

5,606

3,594

Restructuring expenses

38,338

—

38,338

—

Other operating expenses (income), net

4,753

9,071

5,204

335

Total costs and expenses

409,464

723,890

1,349,801

1,451,444

OPERATING LOSS

(159,084)

(48,125)

(653,494)

(71,508)

OTHER INCOME (EXPENSE):

Interest income

334

1,756

991

2,788

Interest expense, net of amount capitalized

(10,984)

(13,298)

(22,208)

(26,282)

Other

85

92

170

209

Total other expense

(10,565)

(11,450)

(21,047)

(23,285)

LOSS BEFORE INCOME TAXES

(169,649)

(59,575)

(674,541)

(94,793)

INCOME TAX BENEFIT

(19,317)

(10,128)

(89,487)

(16,732)

NET LOSS

$

(150,332)

$

(49,447)

$

(585,054)

$

(78,061)

NET LOSS PER COMMON SHARE:

Basic

$

(0.81)

$

(0.24)

$

(3.10)

$

(0.37)

Diluted

$

(0.81)

$

(0.24)

$

(3.10)

$

(0.37)

WEIGHTED AVERAGE NUMBER OF COMMON

   SHARES OUTSTANDING:

Basic

186,633

207,499

188,654

209,671

Diluted

186,633

207,499

188,654

209,671

CASH DIVIDENDS PER COMMON SHARE

$

0.02

$

0.04

$

0.06

$

0.08

PATTERSON-UTI ENERGY, INC.

Additional Financial and Operating Data

(unaudited, dollars in thousands)

Three Months Ended

Six Months Ended

June 30,

June 30,

2020

2019

2020

2019

Contract Drilling:

Revenues

$

171,134

$

348,138

$

438,498

$

720,530

Direct operating costs

$

87,127

$

201,792

$

250,547

$

420,994

Margin ⁽¹⁾

$

84,007

$

146,346

$

187,951

$

299,536

Restructuring expenses

$

2,430

$

—

$

2,430

$

—

Other operating expenses (income), net

$

(4,155)

$

—

$

(4,155)

$

—

Selling, general and administrative

$

1,344

$

1,450

$

2,808

$

3,106

Depreciation, amortization and impairment

$

115,130

$

128,402

$

226,568

$

258,719

Impairment of goodwill

$

—

$

—

$

395,060

$

—

Operating income (loss)

$

(30,742)

$

16,494

$

(434,760)

$

37,711

Operating days – United States

7,450

14,323

18,638

29,982

Operating days – Canada

—

62

47

190

Operating days – Total

7,450

14,385

18,685

30,172

Average revenue per operating day – United States

$

22.96

$

24.23

$

23.47

$

23.92

Average direct operating costs per operating day –
United States

$

11.65

$

14.00

$

13.36

$

13.92

Average margin per operating day – United States ⁽¹⁾

$

11.32

$

10.23

$

10.11

$

9.99

Average rigs operating – United States

82

157

102

166

Average revenue per operating day – Canada

$

—

$

17.74

$

21.11

$

18.23

Average direct operating costs per operating day –
Canada

$

—

$

20.55

$

33.04

$

18.59

Average margin per operating day – Canada ⁽¹⁾

$

—

$

(2.81)

$

(11.94)

$

(0.37)

Average rigs operating – Canada

—

1

—

1

Average revenue per operating day – Total

$

22.97

$

24.20

$

23.47

$

23.88

Average direct operating costs per operating day – Total

$

11.69

$

14.03

$

13.41

$

13.95

Average margin per operating day – Total ⁽¹⁾

$

11.28

$

10.17

$

10.06

$

9.93

Average rigs operating – Total

82

158

103

167

Capital expenditures

$

42,501

$

47,664

$

91,946

$

123,389

Pressure Pumping:

Revenues

$

59,533

$

251,008

$

184,640

$

498,609

Direct operating costs

$

56,268

$

206,137

$

171,123

$

408,885

Margin ⁽²⁾

$

3,265

$

44,871

$

13,517

$

89,724

Restructuring expenses

$

31,331

$

—

$

31,331

$

—

Selling, general and administrative

$

1,677

$

3,094

$

4,744

$

6,580

Depreciation, amortization and impairment

$

38,811

$

56,185

$

81,482

$

116,320

Operating loss

$

(68,554)

$

(14,408)

$

(104,040)

$

(33,176)

Fracturing jobs

35

122

124

286

Other jobs

152

193

361

456

Total jobs

187

315

485

742

Average revenue per fracturing job

$

1,549.71

$

2,028.33

$

1,413.11

$

1,711.92

Average revenue per other job

$

34.82

$

18.40

$

26.08

$

19.73

Average revenue per total job

$

318.36

$

796.85

$

380.70

$

671.98

Average costs per total job

$

300.90

$

654.40

$

352.83

$

551.06

Average margin per total job ⁽²⁾

$

17.46

$

142.45

$

27.87

$

120.92

Margin as a percentage of revenues ⁽²⁾

5.5

%

17.9

%

7.3

%

18.0

%

Capital expenditures

$

1,947

$

38,802

$

16,227

$

70,202

PATTERSON-UTI ENERGY, INC.

Additional Financial and Operating Data

(unaudited, dollars in thousands)

Three Months Ended

Six Months Ended

June 30,

June 30,

2020

2019

2020

2019

Directional Drilling:

Revenues

$

11,742

$

50,218

$

46,227

$

103,177

Direct operating costs

$

12,265

$

42,102

$

44,594

$

87,704

Margin ⁽³⁾

$

(523)

$

8,116

$

1,633

$

15,473

Restructuring expenses

$

3,175

$

—

$

3,175

$

—

Selling, general and administrative

$

1,010

$

2,536

$

3,340

$

5,193

Depreciation, amortization and impairment

$

9,677

$

10,870

$

20,098

$

21,237

Operating loss

$

(14,385)

$

(5,290)

$

(24,980)

$

(10,957)

Margin as a percentage of revenues ⁽³⁾

(4.5)

%

16.2

%

3.5

%

15.0

%

Capital expenditures

$

2,044

$

3,450

$

4,052

$

5,562

Other Operations:

Revenues

$

7,971

$

26,401

$

26,942

$

57,620

Direct operating costs

$

9,086

$

17,612

$

25,110

$

39,385

Margin ⁽⁴⁾

$

(1,115)

$

8,789

$

1,832

$

18,235

Restructuring expenses

$

501

$

—

$

501

$

—

Selling, general and administrative

$

763

$

4,649

$

2,222

$

7,511

Depreciation, depletion, amortization and impairment

$

7,976

$

11,457

$

28,235

$

23,245

Operating loss

$

(10,355)

$

(7,317)

$

(29,126)

$

(12,521)

Capital expenditures

$

2,808

$

6,230

$

8,072

$

14,003

Corporate:

Selling, general and administrative

$

19,197

$

23,165

$

41,223

$

45,059

Restructuring expenses

$

901

$

—

$

901

$

—

Depreciation

$

1,491

$

1,774

$

3,499

$

3,577

Credit loss expense

$

4,551

$

3,594

$

5,606

$

3,594

Other operating expenses (income), net

$

8,908

$

9,071

$

9,359

$

335

Capital expenditures

$

373

$

773

$

1,304

$

2,104

Total capital expenditures

$

49,673

$

96,919

$

121,601

$

215,260

⁽¹⁾

For Contract Drilling, margin is defined as revenues less direct operating costs and excludes restructuring expenses, depreciation, amortization and impairment, impairment of goodwill, other operating expenses (income), net and selling, general and administrative expenses. Average margin per operating day is defined as margin divided by operating days.

⁽²⁾

For Pressure Pumping, margin is defined as revenues less direct operating costs and excludes restructuring expenses, depreciation, amortization and impairment and selling, general and administrative expenses. Average margin per total job is defined as margin divided by total jobs. Margin as a percentage of revenues is defined as margin divided by revenues.

⁽³⁾

For Directional Drilling, margin is defined as revenues less direct operating costs and excludes restructuring expenses, depreciation, amortization and impairment and selling, general and administrative expenses. Margin as a percentage of revenues is defined as margin divided by revenues.

⁽⁴⁾

For Other Operations, margin is defined as revenues less direct operating costs and excludes restructuring expenses, depreciation, depletion, amortization and impairment, and selling, general and administrative expenses.

June 30,

December 31,

2020

2019

Cash and cash equivalents

$

246,781

$

174,185

Current assets

$

517,535

$

631,815

Current liabilities

$

272,139

$

400,602

Working capital

$

245,396

$

231,213

Long-term debt

$

967,140

$

966,540

PATTERSON-UTI ENERGY, INC.

Non-U.S. GAAP Financial Measures

(unaudited, dollars in thousands)

Three Months Ended

Six Months Ended

June 30,

June 30,

2020

2019

2020

2019

Adjusted Earnings Before Interest, Taxes, Depreciation

   and Amortization (Adjusted EBITDA) ⁽¹⁾:

Net loss

$

(150,332)

$

(49,447)

$

(585,054)

$

(78,061)

Income tax benefit

(19,317)

(10,128)

(89,487)

(16,732)

Net interest expense

10,650

11,542

21,217

23,494

Depreciation, depletion, amortization and impairment

173,085

208,688

359,882

423,098

Impairment of goodwill

—

—

395,060

—

Adjusted EBITDA

$

14,086

$

160,655

$

101,618

$

351,799

Total revenues

$

250,380

$

675,765

$

696,307

$

1,379,936

Adjusted EBITDA margin

5.6

%

23.8

%

14.6

%

25.5

%

Adjusted EBITDA by operating segment:

Contract drilling

$

84,388

$

144,896

$

186,868

$

296,430

Pressure pumping

(29,743)

41,777

(22,558)

83,144

Directional drilling

(4,708)

5,580

(4,882)

10,280

Other operations

(2,379)

4,140

(891)

10,724

Corporate

(33,472)

(35,738)

(56,919)

(48,779)

Consolidated Adjusted EBITDA

$

14,086

$

160,655

$

101,618

$

351,799

⁽¹⁾

Adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") is not defined by accounting principles generally accepted in the United States of America ("U.S. GAAP"). We define Adjusted EBITDA as net income (loss) plus net interest expense, income tax benefit and depreciation, depletion, amortization and impairment expense (including impairment of goodwill). We present Adjusted EBITDA because we believe it provides to both management and investors additional information with respect to the performance of our fundamental business activities and a comparison of the results of our operations from period to period and against our peers without regard to our financing methods or capital structure. We exclude the items listed above from net income (loss) in arriving at Adjusted EBITDA because these amounts can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Adjusted EBITDA should not be construed as an alternative to the U.S. GAAP measure of net income (loss). Our computations of Adjusted EBITDA may not be the same as similarly titled measures of other companies.

Three Months Ended

Six Months Ended

June 30,

June 30,

2020

2020

Adjusted EBITDA

$

14,086

$

101,618

Reverse certain items:

Impairment of capacity reservation contract

9,207

9,207

Restructuring expenses

38,338

38,338

Adjusted EBITDA, excluding certain charges ⁽²⁾

$

61,631

$

149,163

⁽²⁾

We present Adjusted EBITDA, excluding certain charges, in order to convey to investors our performance on a basis that, by excluding certain items, is more comparable to our Adjusted EBITDA performance information reported in previous periods. Adjusted EBITDA, excluding certain charges, should not be construed as an alternative to the U.S. GAAP measure of net income (loss).

PATTERSON-UTI ENERGY, INC.

Pro Forma Net Loss Per Share

(unaudited, dollars in thousands)

Three Months Ended June 30, 2020

As Reported

Pro Forma

Total

Per Share

Total

Per Share ⁽¹⁾

Net loss as reported

$

(150,332)

$

(0.81)

$

(150,332)

$

(0.81)

Reverse certain items:

Restructuring expenses

38,338

Income tax benefit

(4,371)

After tax amount

33,967

$

0.18

Impairment of property and equipment related to Canadian
drilling operations ⁽²⁾

8,255

Income tax benefit

(941)

After tax amount

7,314

$

0.04

Net gain from the realization of insurance proceeds ⁽³⁾

(4,172)

Income tax expense

476

After tax amount

(3,696)

$

(0.02)

Impairment of capacity reservation contract ⁽⁴⁾

9,207

Income tax benefit

(1,050)

After tax amount

8,157

$

0.04

Total, after tax

45,742

$

0.25

Net loss attributed to common shareholders

$

(150,332)

$

(0.81)

$

(104,590)

$

(0.56)

Weighted average number of common shares

outstanding, excluding non-vested shares

of restricted stock

186,633

186,633

Add dilutive effect of potential common shares

—

—

Weighted average number of diluted common

shares outstanding

186,633