Patterson-UTI Energy (NASDAQ:PTEN) executives emphasized free cash flow generation, technology-led differentiation, and disciplined capital spending as they reviewed fourth-quarter 2025 results and outlined early expectations for 2026 on the company’s earnings call.
Fourth-quarter results and cash flow focus
Chief Executive Officer Andy Hendricks said the company “closed 2025 with a strong fourth quarter,” delivering steady results during what is typically a seasonally soft period, supported by operational execution and cost controls. He highlighted $416 million of adjusted free cash flow for full-year 2025 and said the fourth quarter was the company’s highest adjusted free cash flow quarter since its strategic transformation in 2023.
Smith cautioned that quarterly free cash flow can be volatile due to working capital timing, including customer prepayments typically received in the fourth quarter for work performed in the following year. He noted customer prepayments in fourth-quarter 2025 were about $15 million higher than in fourth-quarter 2024.
Shareholder returns and balance sheet
Management increased the quarterly dividend by 25% to $0.10 per share, citing confidence in the company’s free cash flow profile. The dividend is payable March 16 to shareholders of record as of March 2, according to Smith.
During 2025, the company returned $192 million to shareholders through dividends and share repurchases. Smith said that since the start of 2024, Patterson-UTI has returned roughly two-thirds of adjusted free cash flow to shareholders and remains committed to returning at least 50% going forward.
On the balance sheet, Smith said the company ended the fourth quarter with $421 million in cash and nothing drawn on its $500 million revolving credit facility. He also noted the company has no senior note maturities until 2028.
In response to a question about a slower pace of repurchases in the fourth quarter, Smith said the company’s capital allocation philosophy is unchanged and remains centered on maximizing free cash flow per share; he attributed the quarterly pause to the “lumpiness” and timing of working capital items late in the quarter.
2026 outlook: lower CapEx, weather impacts, and commodity uncertainty
Hendricks pointed to macro uncertainty, including questions about the sustainability of U.S. oil production at current activity levels. He said reduced drilling and completion programs in 2025 are beginning to show up in production data, and the industry may ultimately need to choose between declining volumes or higher drilling activity to maintain trends.
For 2026, the company reduced its gross capital spending budget by around 15% to roughly $500 million. Hendricks said that after expected asset sale proceeds, CapEx net of asset sales is still expected to be below $500 million. Smith added that CapEx will be weighted to the first half of 2026 as new technologies are added across drilling and completions.
Smith provided a segment mix for 2026 CapEx guidance:
- About 40% allocated to drilling
- About 45% allocated to completion services
- A little over 10% allocated to drilling products
- The remainder for corporate and other
Within completion services, Smith said roughly $65 million (within that segment’s share of total CapEx) is planned for new Emerald natural gas equipment in 2026.
Management also addressed operational disruption from severe winter weather. Smith said a January 2026 winter storm disrupted operations for several days and is expected to negatively affect first-quarter adjusted gross profit, particularly in completion services. In the Q&A, he estimated the impact at roughly $5 million to $10 million, and said it is included in the company’s guidance.
Hendricks said with oil around $60 per barrel, he expects activity in oil basins to remain relatively steady, while gas markets could present upside later in the year. He added that large customers may wait for clearer natural gas price signals after peak winter demand before altering plans, but the company expects additional demand for its services in the second half of 2026 as LNG and power generation demand grows.
Segment performance: drilling, completions, and drilling products
Drilling services: Smith reported fourth-quarter drilling services revenue of $361 million and adjusted gross profit of $132 million. U.S. contract drilling recorded 8,596 operating days, implying an average operating rig count of 93 rigs. For the first quarter of 2026, the company expects an average rig count in the low-to-mid 90s and drilling services adjusted gross profit down less than 5% from the fourth quarter.
Hendricks said the company is seeing “increasing acceptance” of performance-based commercial agreements and highlighted customer demand for APEX rig technology and broader adoption of the company’s proprietary Cortex automation applications, which he said are now installed on nearly all rigs. He also discussed customer interest in robotics on the rig floor, noting the company has done groundwork for deployment on certain APEX rigs, but citing cost considerations and saying adoption would depend on customer requests.
Completion services: Fourth-quarter completion services revenue was $702 million with adjusted gross profit of $111 million. Smith said activity and pricing were mostly steady versus the third quarter with minimal seasonal downtime, while first-quarter adjusted gross profit is expected to be about $95 million on slightly lower activity due to winter weather. Hendricks and Smith both said the expected first-quarter decline is not primarily driven by pricing; Hendricks said any pricing decline is in the “single digits” and tied to tenders from the second half of 2025.
Hendricks said frac assets were highly utilized entering the first quarter, with almost 2.5 million horsepower deployed or in normal maintenance cycles. He said spare capacity is limited and idle horsepower is older diesel equipment that is not part of the long-term strategy. The company expects a continued shift toward Emerald 100% natural gas equipment, and Hendricks said that by year-end 2026, more than 85% of assets are expected to be capable of using natural gas as a fuel in some capacity.
Hendricks also discussed industry dynamics that complicate comparisons based on fleet count. He said deployed horsepower has remained relatively steady even as public estimates show fewer fleets, and attributed part of this to larger fleets at the well site and more Simul-Frac and “trimul-frac” activity, plus requests for higher rates and pressures. He added that Patterson-UTI’s average frac fleet is now pumping over 22 hours per day, and that continuous pumping toward 24-hour operations can require substantially more equipment on location. In response to questions, he said achieving continuous pumping may require 20% to 30% more capital on site, including redundancy across pumps and other components.
The company also launched its proprietary eos Completions Digital Platform in the fourth quarter. Hendricks said eos connects customers directly with live field data, is hardware agnostic, and integrates automated frac controls (Vertex), while also supporting related services such as wireline and logistics. Management said revenue-generating agreements are already in place and customer interest is increasing.
Drilling products: Drilling products revenue was $84 million with adjusted gross profit of $34 million. Smith said North American revenue per industry rig remained near company record levels, while international revenue declined sequentially on lower-than-expected Middle East results, partly offset by growth in Latin America and Asia Pacific. For the first quarter, the company expects slightly lower U.S. revenue but improved international activity, leading to a slight improvement in adjusted gross profit.
Hendricks said the company opened a new manufacturing facility in Saudi Arabia and produced its first drill bit in-country in December. Management said in-country manufacturing improves its score under local content requirements and could support growth as drilling activity resumes.
International activity: Argentina rigs and early-stage initiatives
Hendricks highlighted a multi-year agreement to lease two high-spec rigs for work in Argentina’s Vaca Muerta, describing it as a capital-efficient way to put idle U.S. assets to work internationally. He said Argentina is attractive because its rig specifications are similar to those in the U.S., limiting the need for major technical changes. Hendricks also suggested that increased drilling in Argentina could reduce available rig supply in the U.S. over time.
On a separate question, Hendricks said the company’s Current Power electrical engineering division builds microgrids and battery storage mainly for drilling rigs, and while there may be potential opportunities in battery storage for data centers, he characterized that as “very early.”
About Patterson-UTI Energy (NASDAQ:PTEN)
Patterson-UTI Energy provides a comprehensive suite of onshore contract drilling and pressure pumping services to exploration and production companies in North America. The company’s core offerings include land-based drilling rigs, directional drilling, hydraulic fracturing services, downhole tool rental and well-servicing equipment. By integrating drilling and completion capabilities, Patterson-UTI Energy offers operators a streamlined solution designed to improve operational efficiency and well performance.
Headquartered in Houston, Texas, Patterson-UTI Energy traces its origins to its founding in 1978 and was later incorporated in Delaware in 1996.
