PTEN Oilfield Services · Oilfield services · Drilling · Completions · Thesis updated July 1, 2026

Completions strength meets a thinner drilling backlog

Completion Services is the largest business, with 60.8% of Q1 2026 revenue.
Management guided for higher Q2 adjusted gross profit in Completion Services.
The U.S. contract drilling backlog fell to $260 million from $291 million.
Drilling Services and Drilling Products both face slightly weaker Q2 profit guidance.
Finn is cautious because the business is cyclical and the valuation case is not easy.

01 Running thesis

A split signal in 2026

Patterson-UTI has one clear strength right now: completion work. This is the part of the business that helps finish wells, often with hydraulic fracturing equipment. Management said Q2 2026 adjusted gross profit should be higher than Q1 in Completion Services, which supports the bull case for high-spec fleets.

The problem is drilling visibility. The U.S. contract drilling backlog was about $260 million at March 31, 2026, down from $291 million at year-end 2025. Backlog is work already under contract, so a falling number can mean less locked-in revenue and weaker pricing power.

The near-term setup is balanced. Management expects the U.S. active rig count to average around 90 rigs in Q2 and exit the quarter at 92 to 95 rigs. That helps. But the same guidance also calls for slightly lower adjusted gross profit in Drilling Services and Drilling Products.

The key question is whether completions can carry the company while drilling rebuilds. A rebound in backlog, stronger completion margins, and a steady U.S. rig count would improve the story. If backlog keeps slipping, the bear case gets louder.

Apr 2026→The Q1 2026 10-Q gave mixed signals. Completion Services guidance improved, but U.S. contract drilling backlog fell to $260 million.

Apr 2026▲Q1 results showed $1.12 billion of revenue and $205 million of adjusted EBITDA. Management said high-spec completion fleet calendars were essentially filled through Q3 2026.

Feb 2026→The 2025 10-K confirmed the year-end U.S. drilling backlog of $291 million. It also showed customer concentration, with the top ten customers at 57% of 2025 revenue.

Feb 2026▲Q4 2025 improved the story because backlog rose to $291 million and the dividend was increased to $0.10 per quarter. The update eased, but did not remove, the backlog concern.

Oct 2025▼The Q3 2025 10-Q showed U.S. contract drilling backlog falling to $256 million. Guidance also pointed to sequential profit pressure in the two largest segments.

Jul 2025▼The Q2 2025 10-Q showed backlog falling to $312 million and included a $27.8 million Latin American drilling equipment impairment. The Drilling Products goodwill cushion was disclosed at about 8%.

Jul 2025→Q2 commentary showed the core tension. Backlog kept falling, but management pointed to possible 2026 gas-related demand and strong use of premium frac fleets.

Apr 2025▼The Q1 2025 10-Q showed U.S. contract drilling backlog down to $407 million. Management also warned about weaker macro conditions, trade policy uncertainty, and OPEC+ supply changes.

02 Business model

Paid when customers drill

Patterson-UTI sells services and equipment to oil and gas producers. Customers hire its rigs to drill wells, its crews and fleets to complete wells, and its Ulterra business to supply drill bits. That makes the company tied to customer budgets.

Those budgets depend on oil and gas prices. When prices are high, producers tend to drill and complete more wells. When prices fall, they can delay work, push for lower prices, or cancel programs.

The company is trying to sell more complete well-site solutions instead of only separate jobs. Its P10 Advantage project combines drilling, completion, and digital tools. Starting in Q2 2025, management said it would stop reporting daily rig revenue and cost metrics, which fits this shift toward total well delivery contracts.

This model can improve efficiency for customers and give Patterson-UTI a larger share of spending. It also raises execution risk. If customers pull back, a bigger bundled offering can still be hit by the same cycle.

03 Product portfolio

Rigs, frac fleets, and bits

Cash cow

U.S. and Colombia land rigs

Drilling Services runs land-based rigs, with a focus on modern super-spec rigs. This business can earn strong margins, but the falling U.S. backlog is the main concern.

Steady

Directional drilling and automation

These tools help guide wells and improve rig performance. They support the drilling fleet and fit the company's push toward more integrated work.

Growth engine

Hydraulic fracturing fleets

Completion Services is the biggest segment and the current bright spot. Management said natural gas-powered completion equipment was near full capacity and calendars for high-spec fleets were essentially filled through Q3 2026.

Steady

Wireline, pumping, and cementing

These services help prepare and finish wells after drilling. They make Patterson-UTI more useful to customers that want fewer vendors at a well site.

Option

Power and proppant logistics

These offerings support completion jobs by moving materials and supplying power. They can help lower customer friction when activity is strong.

Steady

Ulterra drill bits

Drilling Products makes specialized drill bits for energy and mining customers in more than 30 countries. Q2 guidance points to pressure from Canadian seasonality and higher Middle East costs.

04 Business segments

Completions now dominate sales

Completion Services61%modest

Drilling Services32%declining

Drilling Products7%declining

Segment shares use Q1 2026 revenue: Completion Services 60.8%, Drilling Services 31.5%, and Drilling Products 7.1%. For 2025, the ten largest customers were 57% of revenue, and one customer was 12%.

05 Risk factors

What could break the thesis

Backlog keeps falling

High impact · Medium odds

The U.S. contract drilling backlog fell to about $260 million at March 31, 2026 from $291 million at year-end 2025. That makes future drilling revenue less visible. If new term contracts do not come in, Patterson-UTI may depend more on spot work, where pricing can change fast.

We watchU.S. contract drilling backlog in the next 10-Q, plus any comment on new term contracts for Q2 and Q3.

Completions cannot offset weak drilling

High impact · Medium odds

The bull case depends on Completion Services improving profit. Management guided for higher Q2 adjusted gross profit there, but also guided for slightly lower adjusted gross profit in Drilling Services and Drilling Products. If completions only meet demand at weak pricing, the company may not offset pressure elsewhere.

We watchQ2 adjusted gross profit by segment, especially Completion Services margin versus Drilling Services and Drilling Products declines.

Oil and gas customers cut budgets

High impact · Medium odds

Patterson-UTI depends on producers spending money to drill and complete wells. Commodity price drops, trade policy shocks, or OPEC+ supply changes can make customers slow activity. Customer consolidation can also make buyers more disciplined and harder on pricing.

We watchCustomer capital spending plans, U.S. rig count trends, and management comments on cancelled or delayed programs.

Drilling Products writedown risk

Medium impact · Medium odds

The Drilling Products reporting unit had only an 8% cushion between fair value and carrying value during the Q2 2025 impairment test. That is not a large buffer. Higher Middle East costs or weaker international demand could make a future goodwill impairment more likely.

We watchGoodwill impairment testing updates and commentary on Middle East costs in the Ulterra business.

Older assets lose value

Medium impact · Medium odds

Customers prefer modern, efficient rigs and high-spec equipment. Patterson-UTI has already taken charges on older or less strategic assets, including a $27.8 million Latin American drilling equipment impairment in Q2 2025. More fleet cleanup could hurt reported earnings.

We watchAsset impairment charges, rig retirement updates, and the number of older rigs no longer marketed.

06 Quick answers

In one breath

What does Patterson-UTI Energy do?

Patterson-UTI provides drilling rigs, well completion services, and drill bits. Its customers are oil and gas companies that need help drilling and finishing wells.

Why does the drilling backlog matter for PTEN?

Backlog is work already under contract. A lower backlog means less revenue is locked in, so the company has more exposure to short-term market pricing.

What is the main bull case for PTEN?

The bull case is that high-spec completion fleets stay busy and earn better profit. Management guided for higher Q2 adjusted gross profit in Completion Services.

What is the main bear case for PTEN?

The bear case is that drilling weakens again. The U.S. contract drilling backlog fell by $31 million in Q1 2026, and management guided for slightly weaker Q2 profit in Drilling Services.