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Patterson UTI Energy (PTEN) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Energy· Jul 30, 2026

Source: earnings call transcript

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

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

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

PTEN operating KPIs by quarter

PTEN operating KPIs stated on its earnings calls, by fiscal quarter
KPI Mar 2026 Q1 FY26This call 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.

Deals & partnerships

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.

ADNOC Technical 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

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

Geopolitical uncertainty for 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 volatility past 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 use first 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 disruption Q2 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

Drilling Services rig count exit level

Q3 FY26
Current 92 operating rigs (Q2 average)
Target above 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.

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Q&A highlights

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 read 6 chapters

Detailed narrative

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.

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.

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.

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.

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.

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.

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