0000950134-01-507767.txt : 20011101 0000950134-01-507767.hdr.sgml : 20011101 ACCESSION NUMBER: 0000950134-01-507767 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20010930 FILED AS OF DATE: 20011031 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PATTERSON UTI ENERGY INC CENTRAL INDEX KEY: 0000889900 STANDARD INDUSTRIAL CLASSIFICATION: DRILLING OIL & GAS WELLS [1381] IRS NUMBER: 752504748 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-22664 FILM NUMBER: 1771064 BUSINESS ADDRESS: STREET 1: 4510 LAMESA HWY STREET 2: P O DRAWER 1416 CITY: SNYDER STATE: TX ZIP: 79549 BUSINESS PHONE: 9155731104 MAIL ADDRESS: STREET 1: P O DRAWER 1416 CITY: SNYDER STATE: TX ZIP: 79550 FORMER COMPANY: FORMER CONFORMED NAME: PATTERSON ENERGY INC DATE OF NAME CHANGE: 19940228 10-Q 1 d91681e10-q.txt FORM 10-Q FOR QUARTER ENDED SEPTEMBER 30, 2001 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ____________ Commission file number 0-22664 PATTERSON-UTI ENERGY, INC. (Exact name of registrant as specified in its charter) DELAWARE (State or other jurisdiction of 75-2504748 incorporation or organization) (I.R.S. Employer Identification No.) P. O. BOX 1416, 4510 LAMESA HIGHWAY, SNYDER, TEXAS, 79550 (Address of principal executive offices) (Zip Code) (915) 573-1104 (Registrant's telephone number, including area code) Patterson Energy, Inc. (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ] As of October 29, 2001 the issuer had 76,359,329 outstanding shares of common stock, $0.01 par value, its only class of voting stock. ================================================================================ PATTERSON-UTI ENERGY, INC. AND SUBSIDIARIES INDEX
PAGE Part I - Financial Information Item 1. Financial Statements Unaudited condensed consolidated balance sheets............................ 3 Unaudited condensed consolidated statements of income...................... 4 Unaudited condensed consolidated statement of stockholders' equity......... 5 Unaudited condensed consolidated statements of cash flows.................. 6 Notes to unaudited condensed consolidated financial statements............. 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations...................................................... 13 Item 3. Quantitative and Qualitative Disclosures About Market Risk..................... 16 Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995................................................... 17 Part II - Other Information Item 5. Other Information.............................................................. 18 Item 6. Exhibits and Reports on Form 8-K............................................... 19 Signatures....................................................................................... 23
2 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS THE FOLLOWING UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS INCLUDE ALL ADJUSTMENTS WHICH IN THE OPINION OF MANAGEMENT ARE NECESSARY IN ORDER TO MAKE SUCH FINANCIAL STATEMENTS NOT MISLEADING. PATTERSON-UTI ENERGY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
SEPTEMBER 30, DECEMBER 31, 2001 2000 -------------- -------------- ASSETS (IN THOUSANDS, EXCEPT SHARE DATA) Current assets: Cash and cash equivalents ........................................................ $ 30,519 $ 66,916 Accounts receivable, net of allowance for doubtful accounts of $4,121 at September 30, 2001 and $3,462 at December 31, 2000 ........................... 220,074 136,894 Federal and state income taxes receivable ........................................ -- 1,116 Inventory ........................................................................ 14,617 12,953 Deferred income taxes ............................................................ 9,851 11,090 Other ............................................................................ 4,722 7,442 -------------- -------------- Total current assets ......................................................... 279,783 236,411 Property and equipment, at cost, net ................................................. 569,814 442,559 Intangible assets, net ............................................................... 52,921 56,374 Other ................................................................................ 3,762 3,223 -------------- -------------- Total assets ................................................................. $ 906,280 $ 738,567 ============== ============== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities of notes payable .............................................. $ -- $ 4,477 Accounts payable: Trade ......................................................................... 53,332 69,829 Other ......................................................................... 4,684 10,119 Federal and state income taxes payable ........................................... 50,759 -- Accrued expenses ................................................................. 47,685 24,687 -------------- -------------- Total current liabilities .................................................... 156,460 109,112 Deferred income taxes ................................................................ 94,577 71,899 Other ................................................................................ 474 1,318 Notes payable, net of current maturities ............................................. -- 74,939 -------------- -------------- Total liabilities ............................................................ 251,511 257,268 -------------- -------------- Commitments and contingencies ........................................................ -- -- Stockholders' equity: Preferred stock par value $.01; authorized 1,000,000 shares, no shares issued .... -- -- Common stock, par value $.01; authorized 200,000,000 shares with 77,808,544 and 76,249,642 issued and 76,301,996 and 74,743,094 outstanding at September 30, 2001 and December 31, 2000, respectively ...................... 778 763 Additional paid-in capital ....................................................... 427,467 397,489 Retained earnings ................................................................ 240,131 94,672 Accumulated other comprehensive income ........................................... (1,952) 30 Treasury stock, at cost, 1,506,548 shares ........................................ (11,655) (11,655) -------------- -------------- Total stockholders' equity ................................................... 654,769 481,299 -------------- -------------- Total liabilities and stockholders' equity ................................... $ 906,280 $ 738,567 ============== ==============
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 3 PATTERSON-UTI ENERGY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------------------ ------------------------------ 2001 2000 2001 2000 ------------- ------------- ------------- ------------- (IN THOUSANDS, EXCEPT PER SHARE DATA) Operating revenues: Drilling ..................................... $ 248,942 $ 133,824 $ 702,174 $ 345,761 Drilling and completion fluids ............... 24,369 4,912 71,555 14,386 Pressure pumping ............................. 12,144 6,160 28,231 13,902 Other ........................................ 3,649 4,252 13,294 11,029 ------------- ------------- ------------- ------------- 289,104 149,148 815,254 385,078 ------------- ------------- ------------- ------------- Operating costs and expenses: Drilling ..................................... 131,573 100,202 399,494 268,817 Drilling and completion fluids ............... 20,903 3,846 60,478 11,380 Pressure pumping ............................. 6,231 3,717 15,381 9,004 Depreciation, depletion and amortization ..... 23,211 14,744 61,912 44,193 General and administrative ................... 7,623 5,713 24,442 15,653 Merger costs ................................. -- -- 5,943 -- Restructuring and other charges .............. -- -- 7,202 -- Other ........................................ 691 930 3,121 2,351 ------------- ------------- ------------- ------------- 190,232 129,152 577,973 351,398 ------------- ------------- ------------- ------------- Operating income ................................. 98,872 19,996 237,281 33,680 ------------- ------------- ------------- ------------- Other income (expense): Interest income .............................. 267 291 1,783 807 Interest expense ............................. (365) (2,959) (3,087) (8,349) Other ........................................ 27 (459) 158 (362) ------------- ------------- ------------- ------------- (71) (3,127) (1,146) (7,904) ------------- ------------- ------------- ------------- Income before income taxes ....................... 98,801 16,869 236,135 25,776 ------------- ------------- ------------- ------------- Income tax expense: Current ...................................... 36,760 6,375 73,189 7,811 Deferred ..................................... 1,659 201 17,487 1,954 ------------- ------------- ------------- ------------- 38,419 6,576 90,676 9,765 ------------- ------------- ------------- ------------- Net income ....................................... $ 60,382 $ 10,293 $ 145,459 $ 16,011 ============= ============= ============= ============= Net income per common share: Basic ........................................ $ 0.79 $ 0.14 $ 1.91 $ 0.23 ============= ============= ============= ============= Diluted ...................................... $ 0.77 $ 0.14 $ 1.84 $ 0.22 ============= ============= ============= ============= Weighted average number of common shares outstanding: Basic ........................................ 76,567 71,642 76,272 70,183 ============= ============= ============= ============= Diluted ...................................... 78,332 75,240 79,123 73,876 ============= ============= ============= =============
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 4 PATTERSON-UTI ENERGY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (Unaudited) (in thousands)
Common Stock Accumulated --------------------- Additional other Number of paid-in Retained comprehensive Treasury shares Amount capital earnings income stock Total --------- --------- --------- --------- ------------- --------- --------- Balance, December 31, 2000 ....... 76,250 $ 763 $ 397,489 $ 94,672 $ 30 $ (11,655) $ 481,299 Issuance of common stock ......... 810 8 21,712 -- -- -- 21,720 Exercise of stock options......... 628 6 3,252 -- -- -- 3,258 Exercise of warrants ............. 121 1 1,819 -- -- -- 1,820 Tax benefit related to exercise of stock options ................ -- -- 3,195 -- -- -- 3,195 Foreign currency translation ..... -- -- -- -- (1,982) -- (1,982) Net income ....................... -- -- -- 145,459 -- -- 145,459 --------- --------- --------- --------- --------- --------- --------- Balance, September 30, 2001 ...... 77,809 $ 778 $ 427,467 $ 240,131 $ (1,952) $ (11,655) $ 654,769 ========= ========= ========= ========= ========= ========= =========
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 5 PATTERSON-UTI ENERGY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
NINE MONTHS ENDED SEPTEMBER 30, ------------------------------ 2001 2000 ------------- ------------- Cash flows from operating activities: Net income ........................................................................ $ 145,459 $ 16,011 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization ......................................... 61,912 44,193 Amortization of debt discount..................................................... -- 594 Net gain on sale of assets ....................................................... (801) (568) Abandonments ..................................................................... 478 -- Deferred income tax expense (benefit) ............................................ 18,534 (2,430) Change in operating assets and liabilities: Increase in trade accounts receivable and other current assets ...... (74,003) (30,808) Increase in inventory ............................................... (1,665) (271) Decrease in accrued federal income taxes receivable ................. 2,443 -- Increase (decrease) in trade accounts payable and other current liabilities ..................................................... (4,944) 18,108 Increase in federal income taxes payable ............................ 49,432 6,183 ------------- ------------- Net cash provided by operating activities ....................... 196,845 51,012 ------------- ------------- Cash flows from investing activities: Acquisitions ..................................................................... (27,045) (24,370) Purchases of property and equipment .............................................. (131,687) (80,264) Proceeds from sales of property and equipment .................................... 668 1,326 Change in other assets ........................................................... (736) (214) ------------- ------------- Net cash used in investing activities ........................... (158,800) (103,522) ------------- ------------- Cash flows from financing activities: Proceeds from issuance of common stock ........................................... -- 99,000 Purchase of treasury stock ....................................................... -- (1,650) Proceeds from notes payable ...................................................... 9,760 70,469 Payments of notes payable ........................................................ (89,176) (69,056) Proceeds from exercise of stock options and warrants ............................. 5,078 3,909 ------------- ------------- Net cash provided by (used in) financing activities ............. (74,338) 102,672 ------------- ------------- Net increase (decrease) in cash and cash equivalents ............ (36,293) 50,162 Foreign currency translation adjustment ......................... (104) (230) Cash and cash equivalents at beginning of period ...................................... 66,916 16,339 ------------- ------------- Cash and cash equivalents at end of period ............................................ $ 30,519 $ 66,271 ============= ============= Supplemental disclosure of cash flow information: Net cash paid during the period for: Interest ....................................................................... $ 3,612 $ 8,078 Income taxes ................................................................... $ 18,150 $ 69
On January 5, 2001, the Company issued 810,070 shares of its common stock valued at $26.8125 per share and paid approximately $11.3 million cash as consideration for Jones Drilling Corporation and certain assets of three other entities affiliated with Jones Drilling Corporation. The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 6 PATTERSON-UTI ENERGY, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF CONSOLIDATION AND PRESENTATION On May 8, 2001, the merger between Patterson Energy, Inc. and UTI Energy Corp. ("UTI") was consummated by vote of the stockholders of each of the companies. The merger was treated as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, and was accounted for as a pooling of interests for financial accounting purposes. Accordingly, historical financial statements as presented herein, have been restated to provide for the retroactive effect of the merger. As a part of the merger, the name of Patterson Energy, Inc. was changed to "Patterson-UTI Energy, Inc." (see Note 2). The consolidated financial statements include the accounts of Patterson-UTI Energy, Inc. ("Patterson-UTI") and its wholly-owned subsidiaries, (collectively referred to herein as "Patterson-UTI" or the "Company"). All significant intercompany accounts and transactions have been eliminated. The interim condensed consolidated financial statements have been prepared by management of the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such rules and regulations, although the Company believes the disclosures included herein are adequate to make the information presented not misleading. In the opinion of management, all adjustments (consisting of only normal recurring accruals) considered necessary for presentation of the information have been included. The unaudited condensed consolidated balance sheet as of December 31, 2000, as presented herein, was derived from the audited balance sheets of the Company and UTI, but does not include all disclosures required by generally accepted accounting principles. The U.S. dollar is the functional currency for all of the Company's operations except for its Canadian operations, which use the Canadian dollar as functional currency. The effects of exchange rate changes are reflected in accumulated other comprehensive income, which is a separate component of stockholders' equity. The Company provides a dual presentation of its earnings per share: Basic Earnings per Share ("Basic EPS") and Diluted Earnings per Share ("Diluted EPS"). Basic EPS is based on the weighted average number of shares outstanding during the periods presented. Diluted EPS includes common stock equivalents, which are dilutive to earnings per share. For the three and nine-month periods ended September 30, 2001, the dilutive securities were approximately 1.8 million and 2.9 million, respectively, compared to dilutive securities of approximately 3.6 million and 3.7 million for the three and nine-month periods ended September 30, 2000. The results of operations for the three and nine months ended September 30, 2001, are not necessarily indicative of the results to be expected for the full year. Certain reclassifications have been made to the 2000 consolidated financial statements in order for them to conform with the 2001 presentation. 7 PATTERSON-UTI ENERGY, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED 2. RECENT ACQUISITIONS AND UTI MERGER Acquisitions On January 5, 2001, the Company consummated the transactions contemplated by certain agreements among the Company and Jones Drilling Corporation, Henderson Welding, Inc., L.E.J. Truck and Crane, Inc., and L.E. Jones Drilling Company (collectively the "Jones Entities"). The acquired assets consisted of 21 drilling rigs (of which 14 were marketable when acquired) and related equipment and approximately $2.3 million of net working capital. The net purchase price of $33.2 million consisted of 810,070 shares of the Company's common stock valued at $26.8125 per share and $11.3 million cash plus approximately $240,000 in transaction costs. The pro forma results of combining the consolidated results of operations as if the Jones Entities had been acquired on January 1, 2000, are considered immaterial and have no effect on earnings per share. In January 2001, the Company acquired six drilling rigs, through three separate transactions, for approximately $15.7 million in cash. The above acquisitions were accounted for as purchases and the related results of operations and cash flows have been included in the condensed consolidated financial statements since the respective dates of acquisition. No goodwill was recorded in connection with these acquisitions. UTI Merger On February 4, 2001, Patterson Energy, Inc. entered into an Agreement and Plan of Merger with UTI providing for the merger of the two entities. On May 8, 2001, the stockholders of each company approved the merger. Each outstanding share of UTI common stock was converted into one share of Patterson-UTI common stock and each option or warrant then outstanding representing the right to receive UTI common stock was converted into the right to purchase Patterson-UTI common stock on an equivalent basis. A total of 37,782,135 shares of Patterson-UTI common stock was issued pursuant to the merger and an additional 3,621,079 shares were reserved for issuance under the then outstanding UTI stock options. Additionally, the stockholders of Patterson-UTI approved an increase in the Company's authorized shares of common stock from 50 million to 200 million and a name change to "Patterson-UTI Energy, Inc." following consummation of the merger. The Company incurred $13.1 million in expenses related to the merger. Such expenses consisted of $5.9 million in merger costs which were primarily related to professional fees paid to investment banking firms, attorneys, accountants and commercial printers for their professional services rendered and $7.2 million in restructuring costs and other related charges incurred as a result of the following: o severance costs and related expenses of $2.8 million, o closing of duplicate operational facilities of $1.6 million, o costs of $1.0 million incurred for repaying the Company's credit facility (see Note 6), o fees and expenses related to the transfer of licenses and leaseholds, and in some instances the impairment of such leaseholds, the combination or cancellation of various service contracts and the renegotiation of certain insurance policies of $1.8 million. The merger was treated as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, and was accounted for as a pooling of interests for financial accounting purposes. The consolidated financial statements give retroactive effect to the merger, which includes combining the companies' previous historical consolidated financial statements as of December 31, 2000 and for the three and nine-month periods ended September 30, 2000. Certain immaterial adjustments were made in those periods to conform the previous accounting policies of UTI with those of Patterson-UTI. 8 PATTERSON-UTI ENERGY, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED 3. STOCKHOLDERS' EQUITY As a part of the merger with UTI, the Company's stockholders approved the merger and an amendment to the Company's Charter increasing the number of authorized shares of the Company's common stock to 200 million (see Note 2). On May 7, 2001, warrants to purchase 121,250 shares of UTI's common stock were exercised. The exercise price ranged from $13.25 to $17.50. The $1.8 million in proceeds resulting from the exercise was used as partial payment of notes payable owed to the same parties (see Note 6). In January 2001, the Company issued 810,070 shares of its common stock as partial consideration for the acquisition of Jones Drilling Corporation and its related entities (see Note 2). The common stock was valued at $26.8125 per share, its fair market value on the date of the announcement of the transaction. 4. COMPREHENSIVE INCOME The following table illustrates the Company's comprehensive income including the effects of foreign currency translation adjustments for the three and nine months ended September 30, 2001 and 2000 (in thousands):
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ---------------------------- ---------------------------- 2001 2000 2001 2000 ------------ ------------ ------------ ------------ Net income .................................. $ 60,382 $ 10,293 $ 145,459 $ 16,011 Other comprehensive income (loss): Foreign currency translation adjustment ..... (1,628) (373) (1,982) (124) ------------ ------------ ------------ ------------ Comprehensive income ........................ $ 58,754 $ 9,920 $ 143,477 $ 15,887 ============ ============ ============ ============
5. PRO FORMA FINANCIAL INFORMATION The following includes selected unaudited pro forma combined financial information (in thousands) for the three and nine-month periods ended September 30, 2000, to give effect to the merger of Patterson-UTI and UTI January 1, 2000 using the pooling of interests method of accounting.
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, 2000 SEPTEMBER 30, 2000 ------------------ ------------------ Patterson revenues .................... $ 78,628 $ 204,333 UTI revenues .......................... 72,331 182,189 Adjustments ........................... (1,811) (1,444) ------------------ ------------------ Patterson-UTI revenues ................ $ 149,148 $ 385,078 ================== ================== Patterson net income .................. $ 6,749 $ 11,468 UTI net income ........................ 3,898 4,947 Adjustments ........................... (354) (404) ------------------ ------------------ Patterson-UTI net income .............. $ 10,293 $ 16,011 ================== ==================
The adjustments above were made to conform the accounting methods of Patterson-UTI and UTI to adjust for certain differences between the two companies' relative methods of accounting for the recognition of revenue under turnkey drilling contract arrangements. Patterson-UTI applies the completed contract method to turnkey drilling contracts which requires revenue and costs associated with drilling the well to be deferred until drilling is complete. UTI accounted for its turnkey arrangements using the percentage-of-completion method in which revenue was recognized as costs were incurred relative to the expected total cost of drilling the well. 9 PATTERSON-UTI ENERGY, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED 6. NOTES PAYABLE On July 30, 2001, the Company paid $12.0 million on its outstanding debt with CIT Group/Business Credit, Inc., Foothill Capital Corp., Fleet Capital Corp., and The CIT Group/Equipment Financing, Inc. ("CIT"), and on August 17, 2001, the Company paid the remaining $8.0 million then outstanding, incurring an additional $355,000 in fees associated with the early repayment. During the first six months of 2001, the Company repaid, prior to their scheduled maturities, $69.2 million under its existing credit facilities and other term obligations. The Company incurred expenses of $448,000 as a result of prepayment penalties and $587,000 related to deferred financing costs which were unamortized at the time the debt was extinguished. On June 29, 2001, the Company increased its existing revolving line of credit with CIT to $100.0 million and extended the term of the facility to June 2005. The revolving line of credit carries a floating interest rate of LIBOR plus 1.75% to 2.75% based on Patterson-UTI's twelve-month trailing Earnings Before Income Taxes, Depreciation, Depletion and Amortization ("EBITDA"). The facility has no significantly restrictive financial or operational covenants until amounts drawn under the facility exceed $80.0 million. 7. CONTINGENCIES The Company is involved in several claims arising in the ordinary course of business. Management believes all such claims are covered by insurance or that such matters will not have a material adverse effect on the Company's financial statements. The Company is self-insured for employee health insurance claims up to a maximum of $100,000 per employee under medical claims, at which point the Company is fully insured. The Company is self-insured for workers compensation up to a maximum of $500,000 per event for workers compensation claims, at which point the Company is fully insured. Although the Company believes that adequate reserves have been provided for expected liabilities arising from its self-insured obligations, management's estimates of these liabilities may change in the future as circumstances develop. The Company's operations are subject to the many hazards inherent in the onshore drilling industry, such as blowouts, explosions, sour gas, well fires and spills. These hazards can result in personal injury and loss of life, severe damage to or destruction of property and equipment, pollution or environmental damage and suspension of operations. Although the Company maintains insurance protection as management deems appropriate, such insurance coverage may not provide sufficient funds to protect the Company from all liabilities that could result from its operations. Also, claims will be subject to various retentions and deductibles. While the Company has generally been able to obtain some degree of contractual indemnification from its customers in most of its dayrate drilling contracts, no such indemnification is typically available for footage or turnkey contracts. The indemnity agreements require the customers to hold the Company harmless in the event of loss of production or reservoir damage. This contractual indemnification may not be supported by adequate insurance maintained by the customer. The Company's operations routinely involve the handling of various materials, including hazardous materials. The Company may be exposed to liability under numerous state and federal environmental laws, rules and regulations including dealing with hazardous materials. In addition, environmental laws and regulations including The Comprehensive Environmental Response, Compensation and Liability Act (also know as the "Superfund Law"), may impose strict liability whereby the Company could be liable for clean-up costs, even if the situation resulted from previous conduct of the Company that was lawful at the time conducted or from improper conduct of or conditions caused by previous property owners or other persons not associated with the Company. 10 PATTERSON-UTI ENERGY, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED 7. CONTINGENCIES - (CONTINUED) The Company maintains insurance coverage against some environmental liabilities, including pollution caused by sudden and accidental oil spills. Management believes it has adequately reserved for these contingencies. Management believes that the outcome of known and potential claims will not have a material adverse effect on the Company's operations. 8. BUSINESS SEGMENTS The Company primarily conducts its business through three distinct operating activities: contract drilling of oil and natural gas wells and provision of pressure pumping services and drilling and completion fluid services to operators in the oil and natural gas industry. Separate financial data for each of the Company's three business segments is provided below.
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------------------ ------------------------------ (IN THOUSANDS) 2001 2000 2001 2000 ------------- ------------- ------------- ------------- Revenues: Drilling .......................................... $ 248,942 $ 133,824 $ 702,174 $ 345,761 Drilling and completion fluids .................... 24,369 4,912 71,555 14,386 Pressure pumping .................................. 12,144 6,160 28,231 13,902 Other ............................................. 3,649 4,252 13,294 11,029 ------------- ------------- ------------- ------------- Total operating revenues .............................. $ 289,104 $ 149,148 $ 815,254 $ 385,078 ============= ============= ============= ============= Income from operations: Drilling .......................................... $ 98,459 $ 17,836 $ 242,699 $ 32,102 Drilling and completion fluids .................... 687 (166) 2,793 (484) Pressure pumping .................................. 4,399 1,265 8,682 1,351 Other ............................................. (4,673) 1,061 (3,748) 711 Merger costs and other restructuring charges ...... -- -- (13,145) -- ------------- ------------- ------------- ------------- 98,872 19,996 237,281 33,680 Interest income ....................................... 267 291 1,783 807 Interest expense ...................................... (365) (2,959) (3,087) (8,349) Other ................................................. 27 (459) 158 (362) ------------- ------------- ------------- ------------- Income before income taxes ............................ $ 98,801 $ 16,869 $ 236,135 $ 25,776 ============= ============= ============= =============
9. RECENTLY ISSUED ACCOUNTING STANDARDS The Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 141, "Business Combinations," ("SFAS No. 141") in June 2001. SFAS No. 141 addresses financial accounting and reporting for business combinations and supersedes APB Opinion No. 16, "Business Combinations," and FASB Statement No. 38, "Accounting for Preacquisition Contingencies of Purchased Enterprises." SFAS No. 141 is effective for all business combinations initiated after June 30, 2001 and provides that such combinations are to be accounted for using the purchase method. The Company has adopted SFAS No. 141 as of June 30, 2001. 11 PATTERSON-UTI ENERGY, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED 9. RECENTLY ISSUED ACCOUNTING STANDARDS - (CONTINUED) The FASB issued Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets," ("SFAS No. 142") in June 2001. SFAS No. 142 addresses financial accounting and reporting for acquired goodwill and other intangible assets and supersedes APB Opinion No. 17, "Intangible Assets." SFAS No. 142 applies to all fiscal years beginning after December 15, 2001. The provisions of SFAS No. 142, which the Company will adopt on January 1, 2002, are not expected to have a material impact on the Company's consolidated financial statements. The FASB issued Statement of Financial Accounting Standards No. 143, "Accounting for Asset Retirement Obligations," ("SFAS No. 143") in July 2001. SFAS No. 143 addresses financial accounting requirements for retirement obligations associated with tangible long-lived assets. SFAS No. 143 is effective beginning June 15, 2002. The provisions of SFAS No. 143 are not expected to have a material impact on the Company's consolidated financial statements. The FASB issued Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," (SFAS No. 144) in August 2001. SFAS No. 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets and supersedes SFAS No. 121 and APB Opinion No. 30. SFAS No. 144 is effective beginning January 1, 2002, and is not expected to have a material impact on the Company's consolidated financial statements. 12 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THE FOLLOWING SUMMARY OF LIQUIDITY AND CAPITAL RESOURCES AND RESULTS OF OPERATIONS IS BASED ON CONSOLIDATED FINANCIAL INFORMATION THAT HAS BEEN RESTATED TO REFLECT THE MERGER OF UTI INTO PATTERSON-UTI ON MAY 8, 2001, UNDER THE POOLING OF INTERESTS METHOD OF ACCOUNTING. LIQUIDITY AND CAPITAL RESOURCES As of September 30, 2001, we had working capital of approximately $123.3 million including cash and cash equivalents of $30.5 million as compared to working capital of $127.3 million including cash and cash equivalents of $66.9 million at December 31, 2000. For the nine months ended September 30, 2001, our various sources and uses of cash flow were: Sources: o $196.8 million derived from operations primarily attributable to the following factors: o Net income of $145.5 million which was largely attributable to an: o Increase in average dayrates from $9,121 per day in the fourth quarter of 2000 to $12,033 per day in the third quarter of 2001 and a resulting increase in average daily cash margins from $2,793 per day in the fourth quarter of 2000 to $5,673 per day in the third quarter of 2001, o Improvement in utilization rates as indicated in "Results of Operations" on page 14, and o Increase in average operating rigs from 199 in the fourth quarter of 2000 to 225 in the third quarter of 2001, primarily due to the addition of 27 drilling rigs in January of 2001 with the purchase of Jones Drilling Corporation and three other affiliated entities and three other transactions. o $5.1 million from the exercise of stock options and warrants, o $668 thousand from the sale of certain property and equipment and o $9.8 million in loan proceeds from the Company's revolving line of credit. Uses: o $11.3 million as partial consideration in the acquisition of Jones Drilling Corporation and its related entities and $15.7 million for six drilling rigs from three other non-affiliated entities, o $89.2 million in payments on debt and o $131.6 million for capital expenditures for the betterment and refurbishment of both the marketable and non-marketable drilling rigs, as well as the acquisition and procurement of drilling equipment, to fund leasehold acquisition, exploration and development of oil and natural gas properties and to fund capital expenditures for our drilling and completion fluids and pressure pumping segments. On January 5, 2001, the Company consummated the transactions contemplated by certain agreements among the Company and Jones Drilling Corporation, Henderson Welding, Inc., L.E.J. Truck and Crane, Inc., and L.E. Jones Drilling Company. The acquired assets consisted of 21 drilling rigs (of which 14 were marketable when acquired) and related equipment and approximately $2.3 million of net working capital. During the nine months ended September 30, 2001, the Company paid approximately $18.2 million in cash to the Internal Revenue Service and other state taxing authorities for its federal and state income tax obligations. On October 1, 2001, the Company paid, with its cash on hand, an additional $26.7 million to the Internal Revenue Service for its estimated federal income taxes payable through that date. To date, the Company's line of credit remains fully available. We believe that the current level of cash and cash equivalents, together with cash generated from operations should be sufficient to meet our immediate capital needs. From time to time, acquisition opportunities are reviewed relating to our business. The timing, size or success of any acquisition and the associated capital commitments are unpredictable. Should further opportunities for growth requiring capital arise, we believe we would be able to satisfy these needs through a combination of working capital, cash generated from operations, and either debt or equity financing. However, there can be no assurance that such capital would be available. 13 RESULTS OF OPERATIONS The following tables summarize operations of the Company for the three months ended September 30, 2001 and 2000:
THREE MONTHS ENDED SEPTEMBER 30, ------------------------------------------------- CONTRACT DRILLING 2001 2000 % CHANGE -------------------------------------------------- ------------- ------------- ------------- (DOLLARS IN 000'S) Revenues ......................................... $ 248,942 $ 133,824 86.0 % Drilling cost .................................... 131,573 100,202 31.3 % General and administrative expense ............... 749 1,721 (56.5)% Corporate overhead and other ..................... (431) (28) (1,439.3)% Depreciation and amortization .................... 18,592 14,093 31.9 % Operating income ................................. 98,459 17,836 452.0 % Rig utilization rate ............................. 74% 67% 10.4 % Average # of rigs owned .......................... 302 272 11.0 % Operating days ................................... 20,688 16,789 23.2 % Average revenue per operating day ................ $ 12.03 $ 7.97 50.9 % Average drilling cost per operating day .......... 6.36 5.97 6.5 %
The significant increases shown were reflective of increased productivity in the contract drilling industry as evidenced by: o increases in average rig utilization and in the number of operating days and o the addition of an average 30 drilling rigs from the third quarter of 2000 to that of 2001. Deteriorating economic environment conditions which began in the quarter and have continued through October 2001 have had an adverse impact on the market prices for crude oil and natural gas. Accordingly, the demand for the Company's contract drilling services have been negatively impacted as evidenced by an estimated 50% average rig utilization through October 2001. Demand for the Company's contract drilling services is not expected to increase until such economic conditions improve.
THREE MONTHS ENDED SEPTEMBER 30, ------------------------------------------------ DRILLING AND COMPLETION FLUIDS 2001 2000 % CHANGE -------------------------------------------------- ------------- ------------- ------------- (DOLLARS IN 000'S) Revenues ......................................... $ 24,369 $ 4,912 396.1 % Drilling and completion fluids cost .............. 20,903 3,846 443.5 % General and administrative expense ............... 2,181 871 150.4 % Corporate overhead and other ..................... (96) -- (100.0)% Depreciation and amortization .................... 694 361 92.2 % Operating income (loss) .......................... 687 (166) 513.9 % Total jobs ....................................... 495 209 136.8 % Average revenue per job .......................... $ 49.23 $ 23.50 109.5 %
The increases noted were primarily attributable to the addition of the fluids division of Ambar, Inc., during October 2000.
THREE MONTHS ENDED SEPTEMBER 30, ---------------------------------------------- PRESSURE PUMPING 2001 2000 % CHANGE -------------------------------------------------- ------------- ------------- ------------- (DOLLARS IN 000'S) Revenues ......................................... $ 12,144 $ 6,160 97.1% Pressure pumping cost ............................ 6,231 3,717 67.6% General and administrative expense ............... 983 789 24.6% Corporate overhead and other ..................... 26 (1) 2,700.0% Depreciation ..................................... 505 390 29.5% Operating income ................................. 4,399 1,265 2,477.5% Total jobs ....................................... 1,341 966 38.8% Average revenue per job .......................... $ 9.06 $ 6.38 42.0%
The improvement in the pressure pumping segment's operating results were primarily attributable to improved market conditions as evidenced by the increase in number of jobs and revenue per job. 14 RESULTS OF OPERATIONS - (CONTINUED) The following tables summarize operations of the Company for the nine months ended September 30, 2001 and 2000:
NINE MONTHS ENDED SEPTEMBER 30, ----------------------------------------------- CONTRACT DRILLING 2001 2000 % CHANGE -------------------------------------------------- ------------- ------------- ------------- (DOLLARS IN 000'S) Revenues ......................................... $ 702,174 $ 345,761 103.1% Drilling cost .................................... 399,494 268,817 48.6% General and administrative expense ............... 5,411 4,756 13.8% Corporate overhead and other ..................... 1,557 787 97.8% Depreciation and amortization .................... 53,013 39,299 34.9% Operating income ................................. 242,699 32,102 656.0% Rig utilization rate ............................. 78% 64% 21.9% Average # of rigs owned .......................... 301 258 16.7% Operating days ................................... 64,001 44,967 42.3% Average revenue per operating day ................ $ 10.97 $ 7.69 42.7% Average drilling cost per operating day .......... 6.24 5.98 4.3%
The significant increases shown were reflective of increased productivity in the contract drilling industry as evidenced by: o increases in average rig utilization and in the number of operating days and o the addition of an average 43 drilling rigs from the first nine months of 2000 to that of 2001. Deteriorating economic environment conditions which began in the quarter and have continued through October 2001 have had an adverse impact on the market prices for crude oil and natural gas. Accordingly, the demand for the Company's contract drilling services have been negatively impacted as evidenced by an estimated 50% average rig utilization through October 2001. Demand for the Company's contract drilling services is not expected to increase until such economic conditions improve.
NINE MONTHS ENDED SEPTEMBER 30, ---------------------------------------------- DRILLING AND COMPLETION FLUIDS 2001 2000 % CHANGE -------------------------------------------------- ------------- ------------- ------------- (DOLLARS IN 000'S) Revenues ......................................... $ 71,555 $ 14,386 397.4% Drilling and completion fluids cost .............. 60,478 11,380 431.4% General and administrative expense ............... 6,020 2,462 144.5% Corporate overhead and other ..................... 349 70 398.6% Depreciation and amortization .................... 1,915 958 99.9% Operating income (loss) .......................... 2,793 (484) 677.1% Total jobs ....................................... 1,466 601 143.9% Average revenue per job .......................... $ 48.81 $ 23.94 103.9%
The increases noted were primarily attributable to the addition of the fluids division of Ambar, Inc., during October 2000.
NINE MONTHS ENDED SEPTEMBER 30, ---------------------------------------------- PRESSURE PUMPING 2001 2000 % CHANGE -------------------------------------------------- ------------- ------------- ------------- (DOLLARS IN 000'S) Revenues ......................................... $ 28,231 $ 13,902 103.1% Pressure pumping cost ............................ 15,381 9,004 70.8% General and administrative expense ............... 2,777 2,355 17.9% Corporate overhead and other ..................... 26 (1) 2,700.0% Depreciation ..................................... 1,365 1,193 14.4% Operating income ................................. 8,682 1,351 542.6% Total jobs ....................................... 3,361 2,231 50.7% Average revenue per job .......................... $ 8.40 $ 6.23 34.8%
The improvement in the pressure pumping segment's operating results were primarily attributable to improved market conditions as evidenced by the increase in number of jobs and revenue per job. 15 VOLATILITY OF OIL AND NATURAL GAS PRICES AND ITS IMPACT ON OPERATIONS Our revenue, profitability and future rate of growth are substantially dependent upon prevailing prices for oil and natural gas, with respect to our contract drilling, pressure pumping and drilling and completion fluids segments. Historically, oil and natural gas prices and markets have been volatile. Prices are affected by market supply and demand factors as well as actions of state and local agencies, the United States and foreign governments and international cartels. All of these are beyond our control. Any significant or extended decline in oil and/or natural gas prices would have a material adverse effect on our financial condition and results of operations. Due to a decline in oil and natural gas prices beginning in the second quarter of this year, demand for drilling rigs declined beginning in August and is continuing. This decline in demand has resulted in a commensurate steep decline in drilling rig utilization rates, which in turn has adversely impacted our operations. IMPACT OF INFLATION We believe that inflation will not have a significant impact on our financial position or operations. RECENTLY ISSUED ACCOUNTING STANDARDS The FASB issued Statement of Financial Accounting Standards No. 141, "Business Combinations," ("SFAS No. 141") in June 2001. SFAS No. 141 addresses financial accounting and reporting for business combinations and supersedes APB Opinion No. 16, "Business Combinations," and FASB Statement No. 38, "Accounting for Preacquisition Contingencies of Purchased Enterprises." SFAS No. 141 is effective for all business combinations initiated after June 30, 2001 and provides that such combinations are to be accounted for using the purchase method. The Company has adopted SFAS No. 141 as of June 30, 2001. The FASB issued Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets," ("SFAS No. 142") in June 2001. SFAS No. 142 addresses financial accounting and reporting for acquired goodwill and other intangible assets and supersedes APB Opinion No. 17, "Intangible Assets." SFAS No. 142 applies to all fiscal years beginning after December 15, 2001. The provisions of SFAS No. 142, which the Company will adopt on January 1, 2002, are not expected to have a material impact on the Company's consolidated financial statements. The FASB issued Statement of Financial Accounting Standards No. 143, "Accounting for Asset Retirement Obligations," ("SFAS No. 143") in July 2001. SFAS No. 143 addresses financial accounting requirements for retirement obligations associated with tangible long-lived assets. SFAS No. 143 is effective beginning June 15, 2002. The provisions of SFAS No. 143 are not expected to have a material impact on the Company's consolidated financial statements. The FASB issued Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," (SFAS No. 144) in August 2001. SFAS No. 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets and supersedes SFAS No. 121 and APB Opinion No. 30. SFAS No. 144 is effective beginning January 1, 2002, and is not expected to have a material impact on the Company's consolidated financial statements. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We currently have no exposure to market risk as we have no outstanding balance under our credit facility with CIT. Should we incur a balance in the future, we would have some exposure associated with the floating rate portion of the interest charged on that balance. The credit facility, which matures on June 29, 2005, bears interest at LIBOR plus 1.75 % to 2.75% based on the Company's twelve-month trailing EBITDA. Our exposure to interest rate risk due to changes in LIBOR is not expected to be material. 16 --------------- CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in Item 2 of this Report contains forward-looking statements which are made pursuant to the "safe harbor" provisions of The Private Securities Litigation Reform Act of 1995. These statements include, without limitation, statements relating to: liquidity; financing of operations; continued volatility of oil and natural gas prices; source and sufficiency of funds required for immediate capital needs and additional rig acquisitions (if further opportunities arise); and such other matters. The words "believes," "plans," "intends," "expected," "estimates" or "budgeted" and similar expressions identify forward-looking statements. The forward-looking statements are based on certain assumptions and analyses we make in light of our experience and our perception of historical trends, current conditions, expected future developments and other factors we believe are appropriate in the circumstances. We do not undertake to update, revise or correct any of the forward-looking information. Factors that could cause actual results to differ materially from our expectations expressed in the forward-looking statements include, but are not limited to, the following: projected revenues following the merger being lower than expected; intense competition in the contract drilling industry; low oil prices and/or natural gas prices; adverse market conditions for contract drilling services; drill-pipe shortages; labor shortages, primarily qualified drilling rig personnel; insurance coverage limitations and requirements; inability to acquire additional drilling rigs on terms favorable to us and the loss of key personnel, particularly Cloyce A. Talbott and A. Glenn Patterson, our Chief Executive Officer and our President and Chief Operating Officer, respectively. For a more complete explanation of these various factors and others, see "Cautionary Statement for Purposes of the 'Safe Harbor' Provisions of the Private Securities Litigation Reform Act of 1995" included in our Annual Report on Form 10-K for the year ended December 31, 2000, beginning on page 20, and "Risk Factors" included in our joint proxy statement/prospectus dated March 14, 2001, beginning on page 19 included as a part of our registration statement on Form S-4 filed with the SEC on March 7, 2001, in connection with the UTI merger. --------------- 17 PART II - OTHER INFORMATION ITEM 5. OTHER INFORMATION. The Board of Directors of Patterson-UTI Energy, Inc., at a meeting thereof duly held on October 23, 2001, amended the Rights Agreement between Patterson-UTI Energy, Inc. and Continental Stock Transfer & Trust Company, dated as of January 2, 1997 (the "Rights Plan"), as follows: (a) The fraction of a share of Series A Participating Preferred Stock of Patterson-UTI into which each Right is exercisable pursuant to the terms of the Rights Plan was changed from one one-hundredth of a share of Series A Participating Preferred Stock to one one-thousandth of a share of Series A Participating Preferred Stock; (b) The exercise price of each Right was increased from $41.50 per Right (gives effect to two 2-for-1 stock splits effected since the date of adoption of the Rights Plan on January 2, 1997); and (c) The final expiration date of the Rights Plan was changed from January 2, 2007 to October 23, 2011, thereby establishing a new 10-year term for the Rights Plan. An earlier amendment to the Rights Plan adopted by the Board of Directors at a meeting thereof duly held on July 1, 1999, eliminated the so-called "dead hand" provision from the Rights Plan through deletion of the last sentence of Section 27 of the Rights Plan. 18 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS. The following exhibits are filed herewith or incorporated by reference: 2.1 Plan and Agreement of Merger dated October 14, 1993, between Patterson Energy, Inc., a Texas corporation, and Patterson Energy, Inc., a Delaware corporation, together with related Certificates of Merger. (1) 2.2 Agreement and Plan of Merger, dated April 22, 1996 among Patterson Energy, Inc., Patterson Drilling Company and Tucker Drilling Company, Inc. (2) 2.2.1 Amendment to Agreement and Plan of Merger, dated May 16, 1996 among Patterson Energy, Inc., Patterson Drilling Company and Tucker Drilling Company, Inc. (3) 2.3 Asset Purchase Agreement dated as of September 30, 2000 between Ambar Drilling Fluids LP, LLLP and Ambar, Inc. (4) 2.4 Agreement and Plan of Merger dated as of January 5, 2001 among Patterson Energy, Inc., Patterson Drilling Company LP, LLLP and Jones Drilling Corporation.(5) 2.5 Asset Purchase Agreement, dated as of January 5, 2001 among Patterson Energy, Inc., Patterson Drilling Company LP, LLLP and L.E. Jones Drilling Company.(5) 2.6 Agreement and Plan of Merger, dated February 4, 2001, by and between UTI Energy Corp. and Patterson Energy, Inc. (6) 3.1 Restated Certificate of Incorporation. (7) 3.2 Bylaws. (1) 3.3 Rights Agreement dated January 2, 1997, between Patterson Energy, Inc. and Continental Stock Transfer & Trust Company. (8) 3.4 Amendment to Rights Agreement dated as of October 23, 2001. 4.1 Excerpt from Restated Certificate of Incorporation of Patterson-UTI Energy, Inc. regarding authorized Common Stock and Preferred Stock.(15) 10.1 Loan and Security Agreement, dated November 22, 1999. (15) 10.1.1 First Amendment to Loan and Security Agreement, dated May 2, 2000. (15) 10.1.2 Second Amendment to Loan and Security Agreement, dated May 18, 2000. (15) 10.1.3 Third Amendment to Loan and Security Agreement, dated October 18, 2000. (15) 10.1.4 Fourth Amendment to Loan and Security Agreement, dated May 8, 2001. (15) 10.1.5 Fifth Amendment to Loan and Security Agreement, dated June 29, 2001. (15) 10.1.6 Revolving Loan Promissory Note, dated June 29, 2001. (15) 10.1.7 Guaranty Agreement, dated June 29, 2001. (15) 19 10.1.8 Pledge Agreement, dated June 29, 2001. (15) 10.2 Aircraft Lease, dated December 20, 2000, (effective January 1, 2001) between Talbott Aviation, Inc. and Patterson Energy, Inc. (9) 10.3 Patterson-UTI Energy, Inc. 1993 Stock Incentive Plan, as amended. (10) 10.4 Patterson-UTI Energy, Inc. Non-Employee Directors' Stock Option Plan, as amended. (11) 10.5 Patterson-UTI Energy, Inc. Amended and Restated 1997 Long-Term Incentive Plan. (12) 10.6 Amended and Restated Non-Employee Director Stock Option Plan of Patterson-UTI Energy, Inc. (13) 10.7 Amended and Restated Patterson-UTI Energy, Inc. 1996 Employee Stock Option Plan. (13) 10.8 1997 Stock Option Plan of DSI Industries, Inc. (12) 10.9 Model Form Operating Agreement. (14) 10.10 Form of Drilling Bid Proposal and Footage Drilling Contract. (14) 10.11 Form of Turnkey Drilling Agreement. (14) ---------- 20 (1) Incorporated herein by reference to Item 27, "Exhibits" to Amendment No. 2 to Registration Statement on Form SB-2 (File No. 33-68058-FW) filed on October 28, 1993. (2) Incorporated by reference to Item 7, "Financial Statements and Exhibits" to Form 8-K dated April 22, 1996 and filed on April 30, 1996. (3) Incorporated by reference to Item 7, "Financial Statements and Exhibits" to Form 8-K dated May 16, 1996 and filed on May 22, 1996. (4) Incorporated by reference to Item 7, "Financial Statements and Exhibits" to Form 8-K dated October 3, 2000 and filed on November 6, 2000. (5) Incorporated by reference to Item 16, "Exhibits" to Registration Statement on Form S-3 filed on January 8, 2001. (6) Incorporated herein by reference to Joint Proxy Statement/Prospectus filed on March 14, 2001. (7) Incorporated herein by reference to Item 7, "Financial Statements and Exhibits" to Form 8-K dated and filed on May 8, 2001. (8) Incorporated by reference to Item 2, "Exhibits" to Registration Statement on For 8-A filed on January 14, 1997. (9) Incorporated herein by reference to Item 14, "Exhibits, Financial Statement Schedules and Reports on Form 8-K" to Form 10-K dated December 31, 2000. (10) Incorporated herein by reference to Item 8, "Exhibits" to Registration Statement on Form S-8 (File No. 333-47917) filed on March 13, 1998. (11) Incorporated herein by reference to Item 8, "Exhibits" to Registration Statement on Form S-8 (File No. 33-39471) filed on November 4, 1997. (12) Incorporated herein by reference to Item 8, "Exhibits" to Post-Effective Amendment No. 1 to Registration Statement on Form S-8 (file No. 333-60470) filed on July 25, 2001. (13) Incorporated herein by reference to Item 8, "Exhibits" to Post-Effective Amendment No.1 to Registration Statement on Form S-8 (file No. 333-60466) filed on July 25, 2001. (14) Incorporated by reference to Item 27, "Exhibits" to Registration Statement on Form SB-2 (File No. 33-68058-FW) filed on August 30, 1993. (15) Incorporated herein by reference to Item 6, "Exhibits and Reports on Form 8-K" to Form 10-Q for the quarterly period ended June 30, 2001, filed on August 1, 2001. 21 (b) REPORTS ON FORM 8-K. The following reports on Form 8-K were filed: (1) Report dated May 8, 2001 announcing selected unaudited proforma combined financial statements as of and for the three month period ended March 31, 2001, to give effect to the merger of Patterson Energy, Inc. and UTI Energy Corp., filed July 23, 2001. 22 SIGNATURES In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. PATTERSON-UTI ENERGY, INC. By: /s/ Cloyce A. Talbott ---------------------------------------- Cloyce A. Talbott Chief Executive Officer By: /s/ Jonathan D. Nelson --------------------------------------- Jonathan D. Nelson Vice President-Finance Chief Financial Officer DATED: October 31, 2001 23 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION ------ ----------- 3.4 Amendment to Rights Agreement dated as of October 23, 2001.
24 EX-3.4 3 d91681ex3-4.txt AMENDMENT TO RIGHTS AGREEMENT DATED 10/23/01 EXHIBIT 3.4 AMENDMENT TO RIGHTS AGREEMENT Amendment to Rights Agreement, dated as of October 23, 2001 ("Amendment to Rights Agreement"), between Patterson-UTI Energy, Inc., a Delaware corporation (the "Company"), and Continental Stock Transfer & Trust Company, a New York corporation (the "Rights Agent"). WITNESSED: WHEREAS, the Company and the Rights Agent entered into a Rights Agreement dated as of January 2, 1997 (the "Rights Agreement"); and WHEREAS, the parties to the Rights Agreement desire to enter into this Amendment to Rights Agreement to amend the Rights Agreement in certain respects. NOW, THEREFORE, in consideration of the premises and agreements contained herein and in the Rights Agreement, the parties agree as follows: 1. The words "one one-hundredth of a Preferred Share" wherever they appear in the Rights Agreement or in any of the exhibits to the Rights Agreement shall be deleted and in each such instance the words "one one-thousandth of a Preferred Share" shall be substituted therefor. 2. The dollar figure $166 appearing in the second line of Subsection (b) of Section 7 of the Rights Agreement shall be deleted, and the dollar figure $75 shall be substituted therefor and shall also be substituted wherever the dollar figure $166 appears in the Rights Agreement or in any of the exhibits to the Rights Agreement. 3. The date January 2, 2007 appearing in the third to the last line of Subsection (a) of Section 7 of the Rights Agreement shall be deleted, and the date October 23, 2011 shall be substituted therefor, and such date shall also be substituted for the date January 2, 2007 wherever that date appears in the Rights Agreement or in any of the exhibits to the Rights Agreement. 4. This Amendment to Rights Agreement may be executed in counterparts, both of which shall be considered one and the same agreement. 5. The Rights Agreement, as amended by this Amendment to Rights Agreement, shall remain in full force and effect. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to Rights Agreement to be duly executed and attested, all as of the day and year first above written. Attest: PATTERSON-UTI ENERGY, INC. By: /s/ Michelle R. Martini By: /s/ Jonathan D. Nelson ------------------------------- ----------------------------------- Jonathan D. Nelson, Chief Financial Officer Attest: CONTINENTAL STOCK TRANSFER & TRUST COMPANY, as Rights Agent By: /s/ Thomas Jennings By: /s/ William F. Seegraber ------------------------------- ----------------------------------- Thomas Jennings William F. Seegraber Asst. Secretary Vice President 2