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    PTEN
    Earnings call· Jun 2026(Q2 FY26)

    PATTERSON UTI ENERGY Q2 FY26 earnings call PTEN

    Jul 30, 2026 Source

    Executive summary

    Patterson-UTI Q2 FY26 — Strong Activity Inflection and Pricing Recovery

    Patterson-UTI experienced a significant inflection in activity and pricing across its segments in Q2 FY26, exceeding expectations. The company is strategically investing in high-spec rig upgrades and natural gas-powered frac fleets to capitalize on increasing demand and secure long-term contracts, aiming for substantial free cash flow growth in 2027. Management emphasized technology leadership and fleet quality as key differentiators in a tightening market, particularly as public E&Ps begin to increase activity.

    Highlights

    5

    • Total reported revenue increased 10% sequentially to $1.228 billion.

    • Drilling Services rig count averaged 92 operating rigs, with new contract pricing increasing 10% to 15% versus Q1 levels.

    • Completion Services adjusted gross profit reached $123 million, driven by largely full frac calendars and improved pricing.

    • Drilling Products achieved its highest revenue since 2023 at $91 million, with record international revenue and a 14% sequential increase.

    • Adjusted free cash flow is expected to more than cover 2026 dividend payments, with meaningful improvement anticipated in 2027.

    Concerns

    5

    • Reported a net loss attributable to common shareholders of $20 million or $0.05 per share, including noncash charges.

    • Working capital was a use of cash during the first half of the year, exacerbated by the pace of activity increase.

    • Exited contract drilling operations in Colombia, incurring $21 million in noncash charges.

    • Conflict in the Middle East created disruption across logistics, supply chain, and activity levels for Drilling Products.

    • Tungsten prices have increased, impacting drill bit manufacturing costs.

    Guidance & targets

    11
    CategoryTargetConfidence
    Drilling Services rig count
    approximately 100 rigs
    high materiality
    High
    Drilling Services adjusted gross profit
    $145 million
    medium materiality
    High
    Completion Services adjusted gross profit
    $140 million
    medium materiality
    High
    Drilling Products adjusted gross profit
    $40 million
    medium materiality
    High
    Other adjusted gross profit
    $5 million
    low materiality
    High
    General and administrative expenses
    $70 million
    low materiality
    High
    Depreciation, depletion, amortization and impairment expense
    $225 million
    low materiality
    High
    Capital expenditures net of asset sales
    approximately $600 million
    high materiality
    High
    Interest expense
    approximately $20 million
    low materiality
    High
    Adjusted free cash flow
    more than cover 2026 dividend payments
    high materiality
    High
    Adjusted free cash flow
    meaningfully higher
    high materiality
    High

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Drilling Services
    Operating costs included $20 million of noncash charges related to the Colombia exit. Excluding these, adjusted gross profit would have been $134 million. The directional drilling business posted meaningful sequential improvement.
    Operating days: 8,361Average operating rigs: 92Revenue per day: improved from Q1
    		$374 million——$114 million adjusted gross profit
    Completion Services
    Results reflect a largely full frac calendar and improved pricing. The company is phasing out older diesel equipment and adding natural gas-powered Emerald frac assets.
    Frac calendar: largely fullUtilization: very high across pressure pumping marketNatural gas-powered capacity: nearly fully utilized
    		$754 million——$123 million adjusted gross profit
    Drilling Products
    Achieved highest revenue since Ulterra acquisition in 2023, despite Middle East disruptions and Canadian spring breakup. Gained share across several markets and achieved meaningful pricing improvement. Downhole tools and geothermal are growing sources of demand.
    International revenue: recordU.S. business revenue mix: roughly 70%Revenue per industry rig: neared company recordDownhole tools revenue: approximately 5% of segment revenueGeothermal bit runs: doubled compared with end of 2025
    		$91 million—14% increase$37 million adjusted gross profit
    Other
    Profitability improved sequentially, driven by higher oil prices from non-operated oil-weighted E&P interests.
    		$9 million——$7 million adjusted gross profit

    Operational metrics

    12
    Adjusted EBITDA
    $232 million
    Q2 FY26

    Total adjusted EBITDA for the quarter.

    Net loss attributable to common shareholders
    $20 million
    Q2 FY26

    Reported net loss for the quarter.

    Diluted EPS
    $0.05
    Q2 FY26

    Diluted EPS for the quarter, reflecting the net loss.

    Weighted average share count
    380 million
    Q2 FY26

    Weighted average share count used for EPS calculation.

    Cash on hand
    $203 million
    Q2 FY26 end

    Cash balance at the end of the second quarter.

    Revolving credit facility outstanding
    no borrowings
    Q2 FY26 end

    No outstanding borrowings under the $500 million revolving credit facility.

    Quarterly dividend
    $0.10
    Q3 FY26

    Dividend approved by the Board, payable in Q3 FY26.

    Shareholder return commitment
    at least 50%
    FY26

    Commitment to return at least 50% of adjusted free cash flow to shareholders.

    Free cash flow conversion
    40%
    through cycle

    Typical target for free cash flow conversion through the cycle.

    Rig upgrade cost (structural)
    low single-digit millions
    per rig

    Cost for capital-efficient structural upgrades to increase load capacity, with quick payback.

    Completion pricing decline
    30%
    last 3 years

    Estimated average pricing decline in completions over the past three years.

    Natural gas-powered active horsepower mix
    90%
    year-end

    Expected proportion of active horsepower to be powered by natural gas by year-end.

    Industry KPIs

    1
    MetricValueDetails
    FCF CAPEX leverage40%%

    Deals & partnerships

    3
    Archer (DLS division)Leasing of drilling rigs for operations in Argentina

    Patterson-UTI leased a couple of rigs to Archer for their operations in Argentina, allowing the company to take capacity out of the U.S. market. There may be more opportunities to work with them.

    ADNOCTechnical expertise and advisory for turn well drilling and completion activity

    Patterson-UTI continues to participate in the turn well drilling and completion activity with ADNOC through advising, coaching, and mentoring to improve efficiencies. Work continues on Phase 1 to evaluate for Phase 2.

    Colombia (contract drilling business)Exit of contract drilling operations in Colombia

    The company is exiting its contract drilling operations in Colombia due to aging assets, reduced commercial attractiveness from political changes, and the need for significant incremental capital investment. 75% of the written-off value came with the Pioneer acquisition.

    Capital programs

    2
    Rig upgrades (larger structures, enhanced circulating systems, digital/automation)underway
    Period spend: $60 million

    Benefit: 10-15 rigs upgraded to 1 million pound load capacity; higher day rates; longer laterals; deeper wells

    Investments in additional rig upgrades to meet increasing customer demand for higher-spec equipment. Some upgrades will deliver early 2027.

    Emerald frac fleets (100% natural gas-powered)underway
    Period spend: $75 million

    Benefit: additional 100% natural gas-powered Emerald frac fleets; maintain H2 frac activity broadly in line with H1; higher margins

    Capital supports additional Emerald frac fleets, allowing the company to maintain frac activity levels while retiring older diesel assets. This shifts the fleet towards higher-margin, in-demand equipment.

    Risks & headwinds

    6
    Geopolitical uncertaintyfor some time

    Elevated

    Mitigation: U.S. oil and natural gas production plays an important role in supporting energy security; strong domestic energy industry protects against global supply disruptions.

    Commodity price volatilitypast couple of months

    Prices pulled back from recent highs

    Mitigation: Current strip around $70/barrel through 2027 still supports higher activity than current levels; public E&Ps maintain discipline.

    Working capital usefirst half of the year

    Use of cash during H1

    Mitigation: Expected to become a source of cash during the second half of the year; compounded by activity acceleration and ERP system cutover.

    Colombia political environment

    Reduced commercial attractiveness of additional investment

    Mitigation: Exit of contract drilling operations in Colombia, reallocating capital to higher-return opportunities elsewhere.

    Middle East conflict disruptionQ2 FY26

    Disruption across logistics, supply chain, and activity levels

    Mitigation: Drilling Products team managed effectively through challenges; record international revenue achieved despite headwinds; Saudi team qualified for drill bit rebuilds.

    Tungsten price increases

    Gone up for everybody across the board

    Mitigation: Customers are increasingly willing to use steel body drill bits, partially mitigating the higher cost of tungsten.

    What to watch in Q3 FY26

    5

    Drilling Services rig count exit level

    Q3 FY26
    Current92 operating rigs (Q2 average)
    Targetabove 100 rigs

    Why it matters

    Indicates continued recovery and demand for drilling services, impacting future revenue and profitability.

    For the third quarter, we expect our drilling services rig count to average approximately 100 rigs, and we expect to exit the quarter above that level.

    Q&A highlights

    6

    What is the duration of contracts for reactivated rigs, and how do public vs. private E&Ps' plans influence this visibility?

    Reactivated rigs are always for longer-term programs, typically 6 months or more, with upgrades securing even longer contracts into 2027. Private E&Ps are moving quicker, but discussions with public E&Ps for later this year and early next year are gaining momentum, focusing on high-spec equipment.

    “Every rig that's getting reactivated is going to a program somewhere. And rigs that are getting upgrades are signing long-term contracts, 6 months in general, but some even longer.”

    asked by Saurabh Pant · answered by William Hendricks

    3 min read6 chapters

    Detailed Narrative

    01

    Market Inflection and Strategic Positioning

    The global energy landscape is rapidly changing, underscoring the strategic importance of U.S. oil and natural gas production. Patterson-UTI is capitalizing on this by investing in oilfield technology, performance, and execution, leading to a clear differentiation in the service sector. Operators are prioritizing efficiency and reliability, creating opportunities for companies with scale, technology, and capability. This dynamic is playing out across drilling and completions, with the company's investments supporting profitability growth into 2027 and beyond.

    02

    Drilling Services Outperformance and Rig Upgrades

    Drilling Services activity recovered faster than expected, with new contract pricing increasing by 10% to 15% versus Q1 levels. Upgraded rigs are commanding day rates several thousand dollars above standard super-spec rigs. The market is increasingly demanding rigs with larger structures, higher hook load capacity, and advanced digital/automation features to handle deeper wells and longer laterals. Patterson-UTI is making capital-efficient upgrades to its fleet, with paybacks often within a year for lower-cost upgrades and within the initial term for larger structural enhancements, supported by firm take-or-pay contracts.

    03

    Completion Services Pricing Recovery and Fleet Transition

    Completion Services saw meaningful sequential improvement, with favorable pricing discussions and largely full frac calendars. The market for capable frac equipment is tight, especially for natural gas-powered capacity, which is nearly fully utilized. The company is systematically retiring older diesel equipment and replacing it with more capable gas-powered assets, aiming for about 90% of active horsepower to be gas-powered by year-end. This strategic shift enhances fleet profitability and allows the company to capture better pricing and margins.

    04

    Drilling Products International Growth and Innovation

    The Drilling Products segment delivered its highest revenue since the Ulterra acquisition in 2023, despite disruptions from the Middle East conflict and seasonal impacts in Canada. The business achieved record international revenue with sequential growth across key geographies, reinforcing long-term growth opportunities. The U.S. business remains a steady foundation, consistently increasing value captured per active rig. The downhole tools business is also growing significantly, representing approximately 5% of segment revenue, and geothermal demand for drill bits has doubled.

    05

    Capital Allocation and Free Cash Flow Outlook

    Patterson-UTI's capital allocation strategy prioritizes investments that drive the highest long-term free cash flow per share. While working capital was a use of cash in H1 due to increased activity and ERP system cutover, it is expected to be a source of cash in H2. The company expects 2026 adjusted free cash flow to more than cover dividend payments and anticipates a meaningfully higher free cash flow year in 2027, driven by high-return investments in rig upgrades and Emerald frac fleets.

    06

    Colombia Exit and Latin America Opportunities

    The company is exiting its contract drilling operations in Colombia due to aging assets, changes in the political environment reducing commercial attractiveness, and the need for significant incremental capital investment. This decision allows capital to be reallocated to higher-return opportunities. Separately, the company sees potential opportunities in Argentina, having leased rigs through a partnership, recognizing increased activity there, especially with new export pipelines and infrastructure.

    AI-generated summary of the company’s earnings call. Not investment advice.