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Patterson UTI Energy (PTEN) Q1 FY26 earnings call: guidance and Q&A

Earnings call· Mar 2026 (Q1 FY26)· Energy· Apr 23, 2026

Source: earnings call transcript

Executive summary

Patterson-UTI Q1 FY26 — U.S. Shale Activity Inflection and Frac Market Tightness

Patterson-UTI reported Q1 FY26 results reflecting strong field execution amidst a shifting commodity outlook. The company anticipates an inflection in U.S. shale activity, particularly in the second half of the year, driven by higher oil prices. Management emphasized capital discipline, strategic investments in natural gas-powered frac fleets and rig upgrades, and a focus on improving returns in a tightening market before adding significant capacity.

Highlights

5

  • Drilling Services rig count expected to exit Q2 FY26 at 92-95 rigs, positioning well for the second half.

  • Completion Services adjusted gross profit is projected to increase to approximately $105 million in Q2 FY26, reflecting near full utilization.

  • The majority of frac white space for Q2 FY26 has been filled, with Q3 FY26 calendars now fully loaded.

  • Leading-edge drilling rig pricing is starting to move up from the low $30,000s per day.

  • By year-end FY26, over 15% of active horsepower is expected to be 100% natural gas-powered, with approximately 90% at least partially powered by natural gas.

Concerns

4

  • The company reported a net loss attributable to common shareholders of $25 million, or $0.06 per share, in Q1 FY26.

  • Completion Services experienced a $9 million EBITDA impact in Q1 FY26 due to 5 days of disruption from a January winter storm.

  • Drilling Products adjusted gross profit is expected to decline slightly in Q2 FY26, driven by lower profitability in the Middle East and Canadian spring breakup.

  • The Middle East conflict has led to increased logistics and personnel costs, and tungsten prices are significantly higher than a year ago.

Guidance & targets

CategoryTargetConfidence
Drilling Services average rig count
~90 rigs
medium materiality
High
Drilling Services exit rig count
92 to 95 rigs
medium materiality
High
Drilling Services adjusted gross profit
~$130 million
medium materiality
High
Completion Services adjusted gross profit
~$105 million
medium materiality
High
Drilling Products adjusted gross profit
decline slightly
low materiality
Medium
Other adjusted gross profit
~$5 million
low materiality
High
General and administrative expenses
~$67 million
low materiality
High
Depreciation, depletion, amortization and impairment expense
~$220 million
low materiality
High
Nameplate horsepower
decline
medium materiality
High
Active horsepower 100% natural gas-powered
>15%
medium materiality
High
Active horsepower at least partially natural gas-powered
~90%
medium materiality
High
Full year free cash flow
solid year
high materiality
High
APEX-XC rig day rates
exceeding $40,000 a day
medium materiality
Medium
Frac pricing
move up steadily
high materiality
High

Segment performance

SegmentRevenueYoYQoQMargin
Drilling Services
Revenue and adjusted gross profit included $3 million of early contract termination payments. Pricing remained relatively steady versus Q4 FY25, with benefits from cost reduction actions.
Operating days: 8,301Average operating rig count: 92 rigs
$352 million——$134 million (adjusted gross profit)
Completion Services
Results reflected the impact of roughly 5 days of winter storm disruption in January. Excluding this, frac operations ran near capacity with natural gas-powered assets near fully utilized.
$680 million——$98 million (adjusted gross profit)
Drilling Products
Results reflected disruption in the Middle East related to ongoing conflict and some cost inflation. Middle East contributes 10-15% of segment revenue.
$80 million——$33 million (adjusted gross profit)
Other
$6 million——$3 million (adjusted gross profit)

PTEN operating KPIs by quarter

PTEN operating KPIs stated on its earnings calls, by fiscal quarter
KPIThis call Mar 2026 Q1 FY26 Jun 2026 Q2 FY26Change vs prior quarter
Operating days US contract drilling
8,301 In US contract drilling, we totaled 8,301 operating days in the quarter, with an average operating rig count of 92 rigs. Source: earnings call transcript
8,361 In US contract drilling, we recorded 8,361 operating days during the quarter and averaged 92 operating rigs. Source: earnings call transcript
+0.7%
Average operating rig count US contract drilling
92 In US contract drilling, we totaled 8,301 operating days in the quarter, with an average operating rig count of 92 rigs. Source: earnings call transcript
92 In US contract drilling, we recorded 8,361 operating days during the quarter and averaged 92 operating rigs. Source: earnings call transcript
0%
Capital expenditures Drilling Services
$54M During the first quarter, total CapEx was $117 million, including $54 million in drilling services, $45 million in completion services, $16 million in drilling products and $1 million in other in corporate. Source: earnings call transcript
$60M That amount included $60 million in drilling services, $75 million in completion services, $19 million in Drilling Products and $2 million in other and corporate. Source: earnings call transcript
+11.1%
Capital expenditures Completion Services
$45M During the first quarter, total CapEx was $117 million, including $54 million in drilling services, $45 million in completion services, $16 million in drilling products and $1 million in other in corporate. Source: earnings call transcript
$75M That amount included $60 million in drilling services, $75 million in completion services, $19 million in Drilling Products and $2 million in other and corporate. Source: earnings call transcript
+66.7%
Capital expenditures Drilling Products
$16M During the first quarter, total CapEx was $117 million, including $54 million in drilling services, $45 million in completion services, $16 million in drilling products and $1 million in other in corporate. Source: earnings call transcript
$19M That amount included $60 million in drilling services, $75 million in completion services, $19 million in Drilling Products and $2 million in other and corporate. Source: earnings call transcript
+18.8%
Capital expenditures Other and corporate
$1M During the first quarter, total CapEx was $117 million, including $54 million in drilling services, $45 million in completion services, $16 million in drilling products and $1 million in other in corporate. Source: earnings call transcript
$2M That amount included $60 million in drilling services, $75 million in completion services, $19 million in Drilling Products and $2 million in other and corporate. Source: earnings call transcript
+100%

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Capital programs

Emerald fleet expansion underway
Start: Ongoing

Benefit:>15% active horsepower 100% natural gas-powered; ~90% active horsepower at least partially natural gas-powered

The company is directing capital towards expanding its Emerald fleet of 100% natural gas-powered assets. By year-end, they expect more than 15% of active horsepower to be entirely natural gas-powered and approximately 90% at least partially natural gas-powered.

Drilling rig structural upgrades underway
Start: Ongoing

Benefit:Supports deeper wells and longer laterals; day rates expected to exceed $40,000/day for upgraded rigs

In drilling, the company is executing a disciplined cadence of structural upgrades to support deeper wells and longer laterals, consistent with customer demand trends. These upgrades are expected to drive higher returns and day rates.

Risks & headwinds

Middle East geopolitical conflict Ongoing

Increased logistics and personnel costs; impacted activity in certain regions; 10-15% of Drilling Products segment revenue from the region.

Mitigation:Actively pursuing additional actions to mitigate risks; onshore activity largely tracked expectations; potential for product sales to move up once inventory is worked through.

Winter storm disruption Q1 FY26

$9 million EBITDA impact; 5 days of paused completions business.

Mitigation:Frac operations ran near capacity excluding the disruption; calendars now essentially full.

Cost inflation Ongoing

Tungsten prices significantly higher than a year ago; diesel price moving up.

Mitigation:Can mitigate tungsten costs by producing more steel body bits; market conditions allow for passing through cost increases to customers.

Customer budget caution Near term

Many customers remain cautious in the near term despite higher oil prices.

Mitigation:Market tone is changing with more discussions around rig reactivations and stronger completion demand; private customers are moving faster than public E&Ps.

What to watch in Q2 FY26

Drilling Services rig count exit rate

Q2 FY26
Current 92 rigs (Q1 average)
Target 92-95 rigs (Q2 exit)

Why it matters

This indicates the pace of increasing U.S. shale activity and the company's ability to capture market share.

we expect our rig count will exit the second quarter above the quarterly average and near the high point so far for the year, around 92 to 95 rigs depending on the timing, positioning us well as we move into the second half.

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Q&A highlights

How are public E&Ps thinking about adding activity, and what is the available capacity on the rig and frac side?

Management is excited about putting drilling rigs back to work, expecting 2-5 additional rigs by quarter-end. The top-tier frac equipment is sold out, and the company will focus on improving pricing and returns before adding more capacity, noting that competitors are also near sold out.

“But before we start adding more capacity, we're going to be very focused on returns and trying to improve pricing where we can and we'll be continuing the discussions that we're already having with a number of our customers on what that pricing should look like given the tightness in the market and given the demand.”

asked by Saurabh Pant · answered by William Hendricks

3 min read 6 chapters

Detailed narrative

Market Inflection and Outlook

The commodity outlook has shifted materially since the start of the year, with oil prices now significantly above mid-December levels, which were assumed in many customers' 2026 budgets. This change is expected to drive an increase in U.S. shale activity starting later in Q2 FY26 and continuing into the second half of the year. While public E&Ps are slower to adjust, private customers are moving faster, and the industry anticipates higher activity into 2027, especially with WTI strip exiting 2027 at approximately $70. Natural gas activity is also expected to improve in 2027 due to newly commissioned LNG facilities.

Drilling Services Performance and Strategy

The Drilling Services segment performed well in Q1 FY26, with steady pricing and benefits from cost control programs. The average operating rig count was 92 rigs, totaling 8,301 operating days. The company expects its rig count to average around 90 rigs in Q2 FY26 and exit the quarter at 92-95 rigs. Management is focused on capital-efficient upgrades for high-capability rigs to support deeper and longer laterals, with leading-edge day rates for upgraded rigs expected to exceed $40,000 per day by year-end FY26 or early FY27.

Completion Services Fleet High-Grading

Completion Services delivered solid results despite a $9 million EBITDA impact from a winter storm. The company's frac operations ran near capacity, with natural gas-powered assets near fully utilized. Demand is improving, particularly in H2 FY26, and discussions are underway for higher pricing. Patterson-UTI is prioritizing investment in newer natural gas-powered technologies, such as the Emerald fleet, and expects nameplate horsepower to decline this year as older diesel equipment is not reactivated due to high costs (over $10 million per fleet) and uncertain long-term returns.

Drilling Products Challenges and Mitigation

The Drilling Products segment faced headwinds from the Middle East conflict, which contributes 10-15% of segment revenue, primarily from Saudi Arabia. This led to increased logistics and personnel costs, and tungsten prices are significantly higher. Despite these challenges, adjusted gross profit only modestly declined versus Q4 FY25. The company is actively pursuing mitigation strategies, including potentially shifting to steel body bits to reduce tungsten exposure and passing through cost increases in the current market.

Capital Allocation and Shareholder Returns

Patterson-UTI maintains a disciplined approach to capital allocation, prioritizing investments with the highest return potential. The company ended Q1 FY26 with $337 million cash on hand and no draws on its $500 million revolving credit facility. The Board approved a quarterly dividend of $0.10 per share. Management expects to deliver another solid year of free cash flow in 2026, with working capital becoming a tailwind in the second half, reinforcing its commitment to consistent returns of capital to shareholders.

International Expansion and Opportunities

The company shipped two drilling rigs to Argentina, anticipating continued rig count growth in the region over the next 1-2 years. While discussions are ongoing, the rig specifications for Argentina are similar to those used in the U.S. In Venezuela, there is interest in increasing production, particularly in the Orinoco belt for heavy oil, which could utilize 1,500-horsepower rigs from the U.S. However, management expects this process to be slow.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.