UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
R |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2016
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 |
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75-2504748 |
(State or other jurisdiction of |
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(I.R.S. Employer |
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450 GEARS ROAD, SUITE 500 HOUSTON, TEXAS |
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77067 |
(Address of principal executive offices) |
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(Zip Code) |
(281) 765-7100
(Registrant’s telephone number, including area code)
N/A
(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 R No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes R No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer |
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R |
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Accelerated filer |
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¨ |
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Non-accelerated filer |
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¨ |
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Smaller reporting company |
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¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes £ No R
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
147,732,339 shares of common stock, $0.01 par value, as of July 28, 2016
PATTERSON-UTI ENERGY, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
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Page |
ITEM 1. |
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3 |
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4 |
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Unaudited condensed consolidated statements of comprehensive income |
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5 |
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Unaudited condensed consolidated statement of changes in stockholders’ equity |
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6 |
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7 |
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Notes to unaudited condensed consolidated financial statements |
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8 |
ITEM 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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22 |
ITEM 3. |
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35 |
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ITEM 4. |
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35 |
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ITEM 1. |
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36 |
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ITEM 2. |
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36 |
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ITEM 5 |
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36 |
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ITEM 6. |
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38 |
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39 |
PART I — FINANCIAL INFORMATION
The following unaudited condensed consolidated financial statements include all adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented.
PATTERSON-UTI ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands, except share data)
|
June 30, |
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December 31, |
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2016 |
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2015 |
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ASSETS |
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Current assets: |
|
|
|
|
|
|
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Cash and cash equivalents |
$ |
209,627 |
|
|
$ |
113,346 |
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Accounts receivable, net of allowance for doubtful accounts of $3,191 and $3,545 at June 30, 2016 and December 31, 2015, respectively |
|
128,551 |
|
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219,672 |
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Federal and state income taxes receivable |
|
36,671 |
|
|
|
33,454 |
|
Inventory |
|
11,532 |
|
|
|
14,716 |
|
Deferred tax assets, net |
|
28,487 |
|
|
|
65,121 |
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Other |
|
40,855 |
|
|
|
40,227 |
|
Total current assets |
|
455,723 |
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|
|
486,536 |
|
Property and equipment, net |
|
3,640,894 |
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|
|
3,920,708 |
|
Goodwill and intangible assets |
|
90,788 |
|
|
|
92,609 |
|
Deposits on equipment purchases |
|
17,970 |
|
|
|
22,367 |
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Other |
|
6,096 |
|
|
|
7,264 |
|
Total assets |
$ |
4,211,471 |
|
|
$ |
4,529,484 |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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|
|
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Current liabilities: |
|
|
|
|
|
|
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Accounts payable |
$ |
66,343 |
|
|
$ |
82,771 |
|
Accrued expenses |
|
139,922 |
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|
161,611 |
|
Current portion of long-term debt, net of debt issuance cost of $529 and $483 at June 30, 2016 and December 31, 2015, respectively |
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85,721 |
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63,267 |
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Total current liabilities |
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291,986 |
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|
307,649 |
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Long-term debt, net of debt issuance cost of $2,581 and $3,350 at June 30, 2016 and December 31, 2015, respectively |
|
741,169 |
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|
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787,900 |
|
Deferred tax liabilities, net |
|
768,556 |
|
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|
863,833 |
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Other |
|
7,930 |
|
|
|
8,971 |
|
Total liabilities |
|
1,809,641 |
|
|
|
1,968,353 |
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Commitments and contingencies (see Note 9) |
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Stockholders' equity: |
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Preferred stock, par value $.01; authorized 1,000,000 shares, no shares issued |
|
— |
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— |
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Common stock, par value $.01; authorized 300,000,000 shares with 191,112,033 and 190,374,801 issued and 147,735,741 and 147,167,561 outstanding at June 30, 2016 and December 31, 2015, respectively |
|
1,911 |
|
|
|
1,904 |
|
Additional paid-in capital |
|
1,023,001 |
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|
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1,011,811 |
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Retained earnings |
|
2,284,520 |
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2,458,554 |
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Accumulated other comprehensive income (loss) |
|
3,054 |
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|
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(4,093 |
) |
Treasury stock, at cost, 43,376,292 and 43,207,240 shares at June 30, 2016 and December 31, 2015, respectively |
|
(910,656 |
) |
|
|
(907,045 |
) |
Total stockholders' equity |
|
2,401,830 |
|
|
|
2,561,131 |
|
Total liabilities and stockholders' equity |
$ |
4,211,471 |
|
|
$ |
4,529,484 |
|
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 OPERATIONS
(unaudited, in thousands, except per share data)
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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2016 |
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2015 |
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2016 |
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2015 |
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Operating revenues: |
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|
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|
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Contract drilling |
$ |
115,235 |
|
|
$ |
288,321 |
|
|
$ |
283,894 |
|
|
$ |
689,799 |
|
Pressure pumping |
|
73,950 |
|
|
|
176,624 |
|
|
|
170,263 |
|
|
|
426,345 |
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Oil and natural gas |
|
4,722 |
|
|
|
7,816 |
|
|
|
8,689 |
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|
|
14,316 |
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Total operating revenues |
|
193,907 |
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|
|
472,761 |
|
|
|
462,846 |
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|
|
1,130,460 |
|
Operating costs and expenses: |
|
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|
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|
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Contract drilling |
|
63,803 |
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|
|
153,848 |
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|
|
144,701 |
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366,658 |
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Pressure pumping |
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69,546 |
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142,756 |
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157,359 |
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355,481 |
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Oil and natural gas |
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1,650 |
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|
2,779 |
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|
3,740 |
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|
|
5,577 |
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Depreciation, depletion, amortization and impairment |
|
170,975 |
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181,924 |
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347,745 |
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357,306 |
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Selling, general and administrative |
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17,087 |
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19,216 |
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|
35,059 |
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|
39,753 |
|
Other operating (income) expense, net |
|
(4,822 |
) |
|
|
(2,998 |
) |
|
|
(6,167 |
) |
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6,346 |
|
Total operating costs and expenses |
|
318,239 |
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|
497,525 |
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|
|
682,437 |
|
|
|
1,131,121 |
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Operating loss |
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(124,332 |
) |
|
|
(24,764 |
) |
|
|
(219,591 |
) |
|
|
(661 |
) |
Other income (expense): |
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|
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|
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|
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|
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Interest income |
|
100 |
|
|
|
318 |
|
|
|
210 |
|
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|
601 |
|
Interest expense, net of amount capitalized |
|
(10,678 |
) |
|
|
(9,249 |
) |
|
|
(21,478 |
) |
|
|
(17,790 |
) |
Other |
|
17 |
|
|
|
- |
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33 |
|
|
|
- |
|
Total other expense |
|
(10,561 |
) |
|
|
(8,931 |
) |
|
|
(21,235 |
) |
|
|
(17,189 |
) |
Loss before income taxes |
|
(134,893 |
) |
|
|
(33,695 |
) |
|
|
(240,826 |
) |
|
|
(17,850 |
) |
Income tax expense (benefit): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Current |
|
(2,000 |
) |
|
|
1,705 |
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|
|
(25,814 |
) |
|
|
32,225 |
|
Deferred |
|
(47,027 |
) |
|
|
(16,425 |
) |
|
|
(58,643 |
) |
|
|
(40,225 |
) |
Total income tax benefit |
|
(49,027 |
) |
|
|
(14,720 |
) |
|
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(84,457 |
) |
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|
(8,000 |
) |
Net loss |
$ |
(85,866 |
) |
|
$ |
(18,975 |
) |
|
$ |
(156,369 |
) |
|
$ |
(9,850 |
) |
Net loss per common share: |
|
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Basic |
$ |
(0.58 |
) |
|
$ |
(0.13 |
) |
|
$ |
(1.06 |
) |
|
$ |
(0.07 |
) |
Diluted |
$ |
(0.58 |
) |
|
$ |
(0.13 |
) |
|
$ |
(1.06 |
) |
|
$ |
(0.07 |
) |
Weighted average number of common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Basic |
|
145,944 |
|
|
|
145,300 |
|
|
|
145,857 |
|
|
|
145,142 |
|
Diluted |
|
145,944 |
|
|
|
145,300 |
|
|
|
145,857 |
|
|
|
145,142 |
|
Cash dividends per common share |
$ |
0.02 |
|
|
$ |
0.10 |
|
|
$ |
0.12 |
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$ |
0.20 |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
PATTERSON-UTI ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited, in thousands)
|
Three Months Ended |
|
|
Six Months Ended |
|
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|
June 30, |
|
|
June 30, |
|
||||||||||
|
2016 |
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2015 |
|
|
2016 |
|
|
2015 |
|
||||
Net loss |
$ |
(85,866 |
) |
|
$ |
(18,975 |
) |
|
$ |
(156,369 |
) |
|
$ |
(9,850 |
) |
Other comprehensive income (loss), net of taxes of $0 for all periods: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment |
|
469 |
|
|
|
3,033 |
|
|
|
7,147 |
|
|
|
(5,545 |
) |
Total comprehensive loss |
$ |
(85,397 |
) |
|
$ |
(15,942 |
) |
|
$ |
(149,222 |
) |
|
$ |
(15,395 |
) |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5
PATTERSON-UTI ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
(unaudited, in thousands)
|
|
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|
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Accumulated |
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
|
Additional |
|
|
|
|
|
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Other |
|
|
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|||||||
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Number of |
|
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|
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Paid-in |
|
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Retained |
|
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Comprehensive |
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Treasury |
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|
|
|
|
|||||
|
Shares |
|
|
Amount |
|
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Capital |
|
|
Earnings |
|
|
Income (Loss) |
|
|
Stock |
|
|
Total |
|
|||||||
Balance, December 31, 2015 |
|
190,375 |
|
|
$ |
1,904 |
|
|
$ |
1,011,811 |
|
|
$ |
2,458,554 |
|
|
$ |
(4,093 |
) |
|
$ |
(907,045 |
) |
|
|
2,561,131 |
|
Net loss |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(156,369 |
) |
|
|
— |
|
|
|
— |
|
|
|
(156,369 |
) |
Foreign currency translation adjustment |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
7,147 |
|
|
|
— |
|
|
|
7,147 |
|
Issuance of restricted stock |
|
749 |
|
|
|
7 |
|
|
|
(7 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Vesting of restricted stock units |
|
15 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Forfeitures of restricted stock |
|
(27 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Stock-based compensation |
|
— |
|
|
|
— |
|
|
|
14,192 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
14,192 |
|
Tax expense related to stock- based compensation |
|
— |
|
|
|
— |
|
|
|
(2,995 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(2,995 |
) |
Payment of cash dividends |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(17,665 |
) |
|
|
— |
|
|
|
— |
|
|
|
(17,665 |
) |
Purchase of treasury stock |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(3,611 |
) |
|
|
(3,611 |
) |
Balance, June 30, 2016 |
|
191,112 |
|
|
$ |
1,911 |
|
|
$ |
1,023,001 |
|
|
$ |
2,284,520 |
|
|
$ |
3,054 |
|
|
$ |
(910,656 |
) |
|
$ |
2,401,830 |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6
PATTERSON-UTI ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
|
Six Months Ended |
|
|||||
|
June 30, |
|
|||||
|
2016 |
|
|
2015 |
|
||
Cash flows from operating activities: |
|
|
|
|
|
|
|
Net loss |
$ |
(156,369 |
) |
|
$ |
(9,850 |
) |
Adjustments to reconcile net loss to net cash provided by operating activities: |
|
|
|
|
|
|
|
Depreciation, depletion, amortization and impairment |
|
347,745 |
|
|
|
357,306 |
|
Dry holes and abandonments |
|
— |
|
|
|
114 |
|
Deferred income tax benefit |
|
(58,643 |
) |
|
|
(40,225 |
) |
Stock-based compensation expense |
|
14,192 |
|
|
|
13,831 |
|
Net gain on asset disposals |
|
(7,267 |
) |
|
|
(5,914 |
) |
Tax expense on stock-based compensation |
|
(2,995 |
) |
|
|
— |
|
Amortization of debt issuance costs |
|
723 |
|
|
|
522 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
Accounts receivable |
|
91,559 |
|
|
|
330,176 |
|
Income taxes receivable/payable |
|
(2,329 |
) |
|
|
93,527 |
|
Inventory and other assets |
|
3,795 |
|
|
|
11,555 |
|
Accounts payable |
|
(25,738 |
) |
|
|
(108,424 |
) |
Accrued expenses |
|
(21,658 |
) |
|
|
(1,894 |
) |
Other liabilities |
|
(1,088 |
) |
|
|
(63 |
) |
Net cash provided by operating activities |
|
181,927 |
|
|
|
640,661 |
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
Purchases of property and equipment |
|
(51,834 |
) |
|
|
(463,633 |
) |
Proceeds from disposal of assets |
|
12,350 |
|
|
|
10,728 |
|
Net cash used in investing activities |
|
(39,484 |
) |
|
|
(452,905 |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
|
Purchases of treasury stock |
|
(3,611 |
) |
|
|
(8,010 |
) |
Dividends paid |
|
(17,665 |
) |
|
|
(29,352 |
) |
Tax benefit related to stock-based compensation |
|
— |
|
|
|
1,129 |
|
Debt issuance costs |
|
— |
|
|
|
(1,979 |
) |
Proceeds from long-term debt |
|
— |
|
|
|
200,000 |
|
Repayment of long-term debt |
|
(25,000 |
) |
|
|
(10,000 |
) |
Proceeds from borrowings under revolving credit facility |
|
— |
|
|
|
54,000 |
|
Repayment of borrowings under revolving credit facility |
|
— |
|
|
|
(357,000 |
) |
Net cash used in financing activities |
|
(46,276 |
) |
|
|
(151,212 |
) |
Effect of foreign exchange rate changes on cash |
|
114 |
|
|
|
(3,050 |
) |
Net increase in cash and cash equivalents |
|
96,281 |
|
|
|
33,494 |
|
Cash and cash equivalents at beginning of period |
|
113,346 |
|
|
|
43,012 |
|
Cash and cash equivalents at end of period |
$ |
209,627 |
|
|
$ |
76,506 |
|
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
Net cash (paid) received during the period for: |
|
|
|
|
|
|
|
Interest, net of capitalized interest of $286 in 2016 and $3,343 in 2015 |
$ |
(20,252 |
) |
|
$ |
(16,506 |
) |
Income taxes |
$ |
19,603 |
|
|
$ |
63,740 |
|
Non-cash investing and financing activities: |
|
|
|
|
|
|
|
Net increase (decrease) in payables for purchases of property and equipment |
$ |
9,283 |
|
|
$ |
(50,487 |
) |
Net decrease in deposits on equipment purchases |
$ |
4,397 |
|
|
$ |
64,638 |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
7
PATTERSON-UTI ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Consolidation and Presentation
The unaudited interim condensed consolidated financial statements include the accounts of Patterson-UTI Energy, Inc. (the “Company”) and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. Except for wholly-owned subsidiaries, the Company has no controlling financial interests in any entity which would require consolidation.
The unaudited interim condensed consolidated financial statements have been prepared by management of the Company 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 accounting principles generally accepted in the United States of America have been omitted pursuant to such rules and regulations, although the Company believes the disclosures included either on the face of the financial statements or herein are sufficient to make the information presented not misleading. In the opinion of management, all adjustments which are of a normal recurring nature considered necessary for a fair statement of the information in conformity with accounting principles generally accepted in the United States of America have been included. The Unaudited Condensed Consolidated Balance Sheet as of December 31, 2015, as presented herein, was derived from the audited consolidated balance sheet of the Company, but does not include all disclosures required by accounting principles generally accepted in the United States of America. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015. The results of operations for the six months ended June 30, 2016 are not necessarily indicative of the results to be expected for the full year.
The U.S. dollar is the functional currency for all of the Company’s operations except for its Canadian operations, which uses the Canadian dollar as its functional currency. The effects of exchange rate changes are reflected in accumulated other comprehensive income, which is a separate component of stockholders’ equity.
During the first quarter of 2016, the Company determined that certain income and expense items should be classified as “other operating (income) expense, net” in the condensed consolidated statements of operations. This caption now includes gains and losses on asset disposals and expenses related to certain legal settlements. Gains and losses on asset disposals were previously presented as a separate line in the condensed consolidated statements of operations. Expenses related to legal settlements were previously included in operating costs of the respective operating segment or in selling, general and administrative expense. For comparative purposes, all such prior period amounts were reclassified to conform to the current presentation, including the Company’s previously disclosed $12.3 million legal settlement that was previously included within selling, general and administrative expense for the six months ended June 30, 2015.
The Company provides a dual presentation of its net income (loss) per common share in its unaudited condensed consolidated statements of operations: Basic net income (loss) per common share (“Basic EPS”) and diluted net income (loss) per common share (“Diluted EPS”).
Basic EPS excludes dilution and is computed by first allocating earnings between common stockholders and holders of non-vested shares of restricted stock. Basic EPS is then determined by dividing the earnings attributable to common stockholders by the weighted average number of common shares outstanding during the period, excluding non-vested shares of restricted stock.
Diluted EPS is based on the weighted average number of common shares outstanding plus the dilutive effect of potential common shares, including stock options, non-vested shares of restricted stock and restricted stock units. The dilutive effect of stock options and restricted stock units is determined using the treasury stock method. The dilutive effect of non-vested shares of restricted stock is based on the more dilutive of the treasury stock method or the two-class method, assuming a reallocation of undistributed earnings to common stockholders after considering the dilutive effect of potential common shares other than non-vested shares of restricted stock.
8
The following table presents information necessary to calculate net loss per share for the three and six month periods ended June 30, 2016 and 2015 as well as potentially dilutive securities excluded from the weighted average number of diluted common shares outstanding because their inclusion would have been anti-dilutive (in thousands, except per share amounts):
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
June 30, |
|
|
June 30, |
|
||||||||||
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
||||
BASIC EPS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
$ |
(85,866 |
) |
|
$ |
(18,975 |
) |
|
$ |
(156,369 |
) |
|
$ |
(9,850 |
) |
Adjust for loss attributed to holders of non-vested restricted stock |
|
846 |
|
|
|
198 |
|
|
|
1,526 |
|
|
|
109 |
|
Loss attributed to other common stockholders |
$ |
(85,020 |
) |
|
$ |
(18,777 |
) |
|
$ |
(154,843 |
) |
|
$ |
(9,741 |
) |
Weighted average number of common shares outstanding, excluding non-vested shares of restricted stock |
|
145,944 |
|
|
|
145,300 |
|
|
|
145,857 |
|
|
|
145,142 |
|
Basic net loss per common share |
$ |
(0.58 |
) |
|
$ |
(0.13 |
) |
|
$ |
(1.06 |
) |
|
$ |
(0.07 |
) |
DILUTED EPS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss attributed to other common stockholders |
$ |
(85,020 |
) |
|
$ |
(18,777 |
) |
|
$ |
(154,843 |
) |
|
$ |
(9,741 |
) |
Weighted average number of common shares outstanding, excluding non-vested shares of restricted stock |
|
145,944 |
|
|
|
145,300 |
|
|
|
145,857 |
|
|
|
145,142 |
|
Add dilutive effect of potential common shares |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Weighted average number of diluted common shares outstanding |
|
145,944 |
|
|
|
145,300 |
|
|
|
145,857 |
|
|
|
145,142 |
|
Diluted net loss per common share |
$ |
(0.58 |
) |
|
$ |
(0.13 |
) |
|
$ |
(1.06 |
) |
|
$ |
(0.07 |
) |
Potentially dilutive securities excluded as anti-dilutive |
|
9,370 |
|
|
|
8,208 |
|
|
|
9,370 |
|
|
|
8,208 |
|
2. Stock-based Compensation
The Company uses share-based payments to compensate employees and non-employee directors. The Company recognizes the cost of share-based payments under the fair-value-based method. Share-based awards consist of equity instruments in the form of stock options, restricted stock or restricted stock units and have included service and, in certain cases, performance conditions. The Company’s share-based awards also included share-settled performance unit awards. Share-settled performance unit awards are accounted for as equity awards. The Company issues shares of common stock when vested stock options are exercised, when restricted stock is granted and when restricted stock units and share-settled performance unit awards vest.
Stock Options — The Company estimates the grant date fair values of stock options using the Black-Scholes-Merton valuation model. Volatility assumptions are based on the historic volatility of the Company’s common stock over the most recent period equal to the expected term of the options as of the date the options are granted. The expected term assumptions are based on the Company’s experience with respect to employee stock option activity. Dividend yield assumptions are based on the expected dividends at the time the options are granted. The risk-free interest rate assumptions are determined by reference to United States Treasury yields. Weighted-average assumptions used to estimate the grant date fair values for stock options granted for the three and six month periods ended June 30, 2016 and 2015 follow:
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
June 30, |
|
|
June 30, |
|
||||||||||
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
||||
Volatility |
|
34.87 |
% |
|
|
37.91 |
% |
|
|
35.13 |
% |
|
|
37.95 |
% |
Expected term (in years) |
|
5.00 |
|
|
|
5.00 |
|
|
|
5.00 |
|
|
|
5.00 |
|
Dividend yield |
|
2.16 |
% |
|
|
1.97 |
% |
|
|
2.19 |
% |
|
|
2.00 |
% |
Risk-free interest rate |
|
1.40 |
% |
|
|
1.35 |
% |
|
|
1.42 |
% |
|
|
1.37 |
% |
9
Stock option activity from January 1, 2016 to June 30, 2016 follows:
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
Average |
|
|
|
Underlying |
|
|
Exercise Price |
|
||
|
Shares |
|
|
Per Share |
|
||
Outstanding at January 1, 2016 |
|
6,307,250 |
|
|
$ |
21.68 |
|
Granted |
|
894,900 |
|
|
$ |
18.35 |
|
Exercised |
|
— |
|
|
$ |
- |
|
Cancelled |
|
— |
|
|
$ |
- |
|
Expired |
|
(50,000 |
) |
|
$ |
29.24 |
|
Outstanding at June 30, 2016 |
|
7,152,150 |
|
|
$ |
21.21 |
|
Exercisable at June 30, 2016 |
|
5,666,148 |
|
|
$ |
21.48 |
|
Restricted Stock — For all restricted stock awards to date, shares of common stock were issued when the awards were made. Non-vested shares are subject to forfeiture for failure to fulfill service conditions and, in certain cases, performance conditions. Non-forfeitable dividends are paid on non-vested shares of restricted stock. The Company uses the straight-line method to recognize periodic compensation cost over the vesting period.
Restricted stock activity from January 1, 2016 to June 30, 2016 follows:
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
Average Grant |
|
|
|
|
|
|
|
Date Fair Value |
|
|
|
Shares |
|
|
Per Share |
|
||
Non-vested restricted stock outstanding at January 1, 2016 |
|
1,432,250 |
|
|
$ |
24.56 |
|
Granted |
|
748,825 |
|
|
$ |
20.66 |
|
Vested |
|
(670,987 |
) |
|
$ |
24.53 |
|
Forfeited |
|
(26,626 |
) |
|
$ |
24.76 |
|
Non-vested restricted stock outstanding June 30, 2016 |
|
1,483,462 |
|
|
$ |
22.60 |
|
Restricted Stock Units — For all restricted stock unit awards made to date, shares of common stock are not issued until the units vest. Restricted stock units are subject to forfeiture for failure to fulfill service conditions. Non-forfeitable cash dividend equivalents are paid on certain non-vested restricted stock units. The Company uses the straight-line method to recognize periodic compensation cost over the vesting period.
Restricted stock unit activity from January 1, 2016 to June 30, 2016 follows:
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
Average Grant |
|
|
|
|
|
|
|
Date Fair Value |
|
|
|
Shares |
|
|
Per Share |
|
||
Non-vested restricted stock units outstanding at January 1, 2016 |
|
41,686 |
|
|
$ |
26.22 |
|
Granted |
|
18,350 |
|
|
$ |
21.71 |
|
Vested |
|
(15,033 |
) |
|
$ |
27.30 |
|
Forfeited |
|
(7,668 |
) |
|
$ |
24.83 |
|
Non-vested restricted stock units outstanding June 30, 2016 |
|
37,335 |
|
|
$ |
23.86 |
|
Performance Unit Awards. The Company has granted stock-settled performance unit awards to certain executive officers (the “Performance Units”) on an annual basis since 2010. The Performance Units provide for the recipients to receive a grant of shares of stock upon the achievement during a specified period of certain performance goals established by the Compensation Committee. The performance period for the Performance Units is the three year period commencing on April 1 of the year of grant, except that for the Performance Units granted in 2013 the performance period has been extended pursuant to its terms, as described below.
10
The performance goals for the Performance Units are tied to the Company’s total shareholder return for the performance period as compared to total shareholder return for a peer group determined by the Compensation Committee. These goals are considered to be market conditions under the relevant accounting standards and the market conditions were factored into the determination of the fair value of the respective performance units. Generally, the recipients will receive a target number of shares if the Company’s total shareholder return during the performance period is positive and, when compared to the peer group, is at the 50th percentile. If the Company’s total shareholder return during the performance period is positive and, when compared to the peer group, is at the 75th percentile or higher, then the recipients will receive two times the target number of shares. If the Company’s total shareholder return during the performance period is positive, and, when compared to the peer group, is at the 25th percentile, then the recipients will only receive one-half of the target number of shares. If the Company’s total shareholder return during the performance period is positive and, when compared to the peer group, achievement is between the 25th and 75th percentile, then the shares to be received by the recipients will be determined on a pro-rata basis. For the Performance Units awarded prior to 2016, there is no payout unless the Company’s total shareholder return is positive and, when compared to the peer group, is at or above the 25th percentile.
For the Performance Units granted in April 2016, if the Company’s total shareholder return is negative, and, when compared to the peer group is at or above the 25th percentile, then the recipients will receive one-half of the number of shares they would have received if the Company’s total shareholder return had been positive.
In respect of the 2013 Performance Units, the performance period ended March 31, 2016, the Company’s total shareholder return for the performance period was negative, the Company’s total shareholder return for the performance period when compared to the peer group was above the 75th percentile, and there was no payout; provided, however, that pursuant to the terms of those 2013 awards, if, during the two-year period ending March 31, 2018, the Company’s total shareholder return for any 30 consecutive day period equals or exceeds 18 percent on an annualized basis from April 1, 2013 through the last day of such 30 consecutive day period, and the recipient is actively employed by the Company through the last day of the extended performance period, then the Company will issue to the recipient the number of shares equal to the amount the recipient would have been entitled to receive if the Company’s total shareholder return had been positive during the initial three year performance period.
The total target number of shares with respect to the Performance Units for the awards in 2012-2016 is set forth below:
|
2016 |
|
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
2012 |
|
|||||
|
Performance |
|
|
Performance |
|
|
Performance |
|
|
Performance |
|
|
Performance |
|
|||||
|
Unit Awards |
|
|
Unit Awards |
|
|
Unit Awards |
|
|
Unit Awards |
|
|
Unit Awards |
|
|||||
Target number of shares |
|
185,000 |
|
|
|
190,600 |
|
|
|
154,000 |
|
|
|
236,500 |
|
|
|
192,000 |
|
Because the performance units are stock-settled awards, they are accounted for as equity awards and measured at fair value on the date of grant using a Monte Carlo simulation model. The fair value of the Performance Units is set forth below (in thousands):
|
2016 |
|
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
2012 |
|
|||||
|
Performance |
|
|
Performance |
|
|
Performance |
|
|
Performance |
|
|
Performance |
|
|||||
|
Unit Awards |
|
|
Unit Awards |
|
|
Unit Awards |
|
|
Unit Awards |
|
|
Unit Awards |
|
|||||
Fair value at date of grant |
$ |
3,854 |
|
|
$ |
4,052 |
|
|
$ |
5,388 |
|
|
$ |
5,564 |
|
|
$ |
3,065 |
|
These fair value amounts are charged to expense on a straight-line basis over the performance period. Compensation expense associated with the Performance Units is shown below (in thousands):
|
2016 |
|
|
2015 |
|
|
2014 |
|
|
2013 |
|
|
2012 |
|
|||||
|
Performance |
|
|
Performance |
|
|
Performance |
|
|
Performance |
|
|
Performance |
|
|||||
|
Unit Awards |
|
|
Unit Awards |
|
|
Unit Awards |
|
|
Unit Awards |
|
|
Unit Awards |
|
|||||
Three months ended June 30, 2015 |
NA |
|
|
$ |
338 |
|
|
$ |
449 |
|
|
$ |
464 |
|
|
NA |
|
||
Three months ended June 30, 2016 |
$ |
321 |
|
|
$ |
338 |
|
|
$ |
449 |
|
|
NA |
|
|
NA |
|
||
Six months ended June 30, 2015 |
NA |
|
|
$ |
338 |
|
|
$ |
898 |
|
|
$ |
928 |
|
|
$ |
255 |
|
|
Six months ended June 30, 2016 |
$ |
321 |
|
|
$ |
675 |
|
|
$ |
898 |
|
|
$ |
464 |
|
|
NA |
|
11
Property and equipment consisted of the following at June 30, 2016 and December 31, 2015 (in thousands):
|
June 30, |
|
|
December 31, |
|
||
|
2016 |
|
|
2015 |
|
||
Equipment |
$ |
6,885,227 |
|
|
$ |
6,963,148 |
|
Oil and natural gas properties |
|
199,591 |
|
|
|
200,923 |
|
Buildings |
|
97,054 |
|
|
|
96,470 |
|
Land |
|
22,370 |
|
|
|
22,370 |
|
|
|
7,204,242 |
|
|
|
7,282,911 |
|
Less accumulated depreciation, depletion and impairment |
|
(3,563,348 |
) |
|
|
(3,362,203 |
) |
Property and equipment, net |
$ |
3,640,894 |
|
|
$ |
3,920,708 |
|
The Company evaluates the recoverability of its long-lived assets whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable (a “triggering event”). Based on recent commodity prices, the Company’s results of operations for the three and six month periods ended June 30, 2016 and management’s expectations of results of operations in future periods, the Company concluded that no triggering event occurred during the six months ended June 30, 2016 with respect to its contract drilling segment or its pressure pumping segment. Management’s expectations of results of operations in future periods were based on the assumption that activity levels in both segments will begin to recover by early 2017 in response to improved future oil prices.
The Company reviews its proved oil and natural gas properties for impairment whenever a triggering event occurs, such as downward revisions in reserve estimates or decreases in expected future oil and natural gas prices. Proved properties are grouped by field and undiscounted cash flow estimates are prepared based on the Company’s expectation of future pricing over the lives of the respective fields. These cash flow estimates are reviewed by an independent petroleum engineer. If the net book value of a field exceeds its undiscounted cash flow estimate, impairment expense is measured and recognized as the difference between net book value and fair value. The fair value estimates used in measuring impairment are based on internally developed unobservable inputs including reserve volumes and future production, pricing and operating costs (Level 3 inputs in the fair value hierarchy of fair value accounting). The expected future net cash flows are discounted using an annual rate of 10% to determine fair value. The Company reviews unproved oil and natural gas properties quarterly to assess potential impairment. The Company’s impairment assessment is made on a lease-by-lease basis and considers factors such as the Company’s intent to drill, lease terms and abandonment of an area. If an unproved property is determined to be impaired, the related property costs are expensed. Impairment expense related to proved and unproved oil and natural gas properties totaled approximately $2.2 million in the first quarter of 2016 and is included in depreciation, depletion, amortization and impairment in the condensed consolidated statements of operations. There was no impairment expense in the second quarter of 2016.
12
The Company’s revenues, operating income (losses) and identifiable assets are primarily attributable to three business segments: (i) contract drilling of oil and natural gas wells, (ii) pressure pumping services and (iii) the investment, on a non-operating working interest basis, in oil and natural gas properties. Each of these segments represents a distinct type of business. These segments have separate management teams which report to the Company’s chief operating decision maker. The results of operations in these segments are regularly reviewed by the chief operating decision maker for purposes of determining resource allocation and assessing performance.
The following tables summarize selected financial information relating to the Company’s business segments (in thousands):
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
June 30, |
|
|
June 30, |
|
||||||||||
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract drilling |
$ |
115,235 |
|
|
$ |
288,588 |
|
|
$ |
283,992 |
|
|
$ |
690,829 |
|
Pressure pumping |
|
73,950 |
|
|
|
176,624 |
|
|
|
170,263 |
|
|
|
426,345 |
|
Oil and natural gas |
|
4,722 |
|
|
|
7,816 |
|
|
|
8,689 |
|
|
|
14,316 |
|
Total segment revenues |
|
193,907 |
|
|
|
473,028 |
|
|
|
462,944 |
|
|
|
1,131,490 |
|
Elimination of intercompany revenues (a) |
|
- |
|
|
|
(267 |
) |
|
|
(98 |
) |
|
|
(1,030 |
) |
Total revenues |
$ |
193,907 |
|
|
$ |
472,761 |
|
|
$ |
462,846 |
|
|
$ |
1,130,460 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract drilling |
$ |
(70,449 |
) |
|
$ |
9,426 |
|
|
$ |
(105,545 |
) |
|
$ |
77,824 |
|
Pressure pumping |
|
(46,025 |
) |
|
|
(18,744 |
) |
|
|
(89,984 |
) |
|
|
(33,760 |
) |
Oil and natural gas |
|
1,267 |
|
|
|
(3,631 |
) |
|
|
(1,588 |
) |
|
|
(8,193 |
) |
|
|
(115,207 |
) |
|
|
(12,949 |
) |
|
|
(197,117 |
) |
|
|
35,871 |
|
Corporate and other |
|
(13,947 |
) |
|
|
(14,813 |
) |
|
|
(28,641 |
) |
|
|
(30,186 |
) |
Other operating income (expense), net (b) |
|
4,822 |
|
|
|
2,998 |
|
|
|
6,167 |
|
|
|
(6,346 |
) |
Interest income |
|
100 |
|
|
|
318 |
|
|
|
210 |
|
|
|
601 |
|
Interest expense |
|
(10,678 |
) |
|
|
(9,249 |
) |
|
|
(21,478 |
) |
|
|
(17,790 |
) |
Other |
|
17 |
|
|
|
- |
|
|
|
33 |
|
|
|
- |
|
Loss before income taxes |
$ |
(134,893 |
) |
|
$ |
(33,695 |
) |
|
$ |
(240,826 |
) |
|
$ |
(17,850 |
) |
|
June 30, |
|
|
December 31, |
|
||
|
2016 |
|
|
2015 |
|
||
Identifiable assets: |
|
|
|
|
|
|
|
Contract drilling |
$ |
3,201,494 |
|
|
$ |
3,457,044 |
|
Pressure pumping |
|
703,768 |
|
|
|
813,704 |
|
Oil and natural gas |
|
30,903 |
|
|
|
34,073 |
|
Corporate and other (c) |
|
275,306 |
|
|
|
224,663 |
|
Total assets |
$ |
4,211,471 |
|
|
$ |
4,529,484 |
|
|
(a) |
Consists of contract drilling intercompany revenues for services provided to the oil and natural gas exploration and production segment. |
(b) |
Other operating income (expense) includes net gains or losses associated with the disposal of assets related to corporate strategy decisions of the executive management group. Accordingly, the related gains or losses have been excluded from the results of specific segments. This caption also includes expenses related to certain legal settlements. |
(c) |
Corporate and other assets primarily include cash on hand, income tax receivables and certain deferred tax assets. |
13
5. Goodwill and Intangible Assets
Goodwill — All of the Company’s goodwill at both June 30, 2016 and December 31, 2015 related to the contract drilling operating segment. Goodwill as of June 30, 2016 and changes for the six months then ended are as follows (in thousands):
|
Six Months Ended |
|
|
|
June 30, 2016 |
|
|
Balance at beginning of period |
$ |
86,234 |
|
Changes to goodwill |
— |
|
|
Balance at end of period |
$ |
86,234 |
|
There were no impairment losses related to the goodwill in the contract drilling operating segment as of June 30, 2016 or December 31, 2015.
Goodwill is evaluated at least annually as of December 31, or when circumstances require, to determine if the fair value of recorded goodwill has decreased below its carrying value. For purposes of impairment testing, goodwill is evaluated at the reporting unit level. The Company’s reporting units for impairment testing have been determined to be its operating segments. The Company first determines whether it is more likely than not that the fair value of a reporting unit is less than its carrying value after considering qualitative, market and other factors, and if it is, then goodwill impairment is determined using a two-step quantitative impairment test. From time to time, the Company may perform the first step of the quantitative testing for goodwill impairment in lieu of performing the qualitative assessment. The first step of the quantitative testing is to compare the fair value of an entity’s reporting units to the respective carrying value of those reporting units. If the carrying value of a reporting unit exceeds its fair value, the second step of the quantitative testing is performed whereby the fair value of the reporting unit is allocated to its identifiable tangible and intangible assets and liabilities with any remaining fair value representing the fair value of goodwill. If this resulting fair value of goodwill is less than the carrying value of goodwill, an impairment loss would be recognized in the amount of the shortfall.
Intangible Assets — Intangible assets were recorded in the pressure pumping operating segment in connection with the fourth quarter 2010 acquisition of the assets of a pressure pumping business. As a result of the purchase price allocation, the Company recorded an intangible asset related to the customer relationships acquired. The intangible asset was recorded at fair value on the date of acquisition.
The value of the customer relationships was estimated using a multi-period excess earnings model to determine the present value of the projected cash flows associated with the customers in place at the time of the acquisition and taking into account a contributory asset charge. The resulting intangible asset is being amortized on a straight-line basis over seven years. Amortization expense of approximately $911,000 was recorded in the three months ended June 30, 2016 and 2015, and amortization expense of approximately $1.8 million was recorded in the six months ended June 30, 2016 and 2015.
The following table presents the gross carrying amount and accumulated amortization of the customer relationships as of June 30, 2016 and December 31, 2015 (in thousands):
|
June 30, 2016 |
|
|
December 31, 2015 |
|
||||||||||||||||||
|
Gross |
|
|
|
|
|
|
Net |
|
|
Gross |
|
|
|
|
|
|
Net |
|
||||
|
Carrying |
|
|
Accumulated |
|
|
Carrying |
|
|
Carrying |
|
|
Accumulated |
|
|
Carrying |
|
||||||
|
Amount |
|
|
Amortization |
|
|
Amount |
|
|
Amount |
|
|
Amortization |
|
|
Amount |
|
||||||
Customer relationships |
$ |
25,500 |
|
|
$ |
(20,946 |
) |
|
$ |
4,554 |
|
|
$ |
25,500 |
|
|
$ |
(19,125 |
) |
|
$ |
6,375 |
|
6. Accrued Expenses
Accrued expenses consisted of the following at June 30, 2016 and December 31, 2015 (in thousands):
|
June 30, |
|
|
December 31, |
|
||
|
2016 |
|
|
2015 |
|
||
Salaries, wages, payroll taxes and benefits |
$ |
18,132 |
|
|
$ |
27,055 |
|
Workers' compensation liability |
|
70,155 |
|
|
|
75,358 |
|
Property, sales, use and other taxes |
|
6,416 |
|
|
|
9,061 |
|
Insurance, other than workers' compensation |
|
10,205 |
|
|
|
12,817 |
|
Accrued interest payable |
|
7,403 |
|
|
|
7,668 |
|
Other |
|
27,611 |
|
|
|
29,652 |
|
Total |
$ |
139,922 |
|
|
$ |
161,611 |
|
14
7. Asset Retirement Obligation
The Company records a liability for the estimated costs to be incurred in connection with the abandonment of oil and natural gas properties in the future. This liability is included in the caption “other” in the liabilities section of the condensed consolidated balance sheet. The following table describes the changes to the Company’s asset retirement obligations during the six months ended June 30, 2016 and 2015 (in thousands):
|
Six Months Ended |
|
|||||
|
June 30, |
|
|||||
|
2016 |
|
|
2015 |
|
||
Balance at beginning of year |
$ |
5,692 |
|
|
$ |
5,301 |
|
Liabilities incurred |
|
66 |
|
|
|
271 |
|
Liabilities settled |
|
(71 |
) |
|
|
(65 |
) |
Accretion expense |
|
84 |
|
|
|
86 |
|
Revision in estimated costs of plugging oil and natural gas wells |
|
43 |
|
|
|
— |
|
Asset retirement obligation at end of period |
$ |
5,814 |
|
|
$ |
5,593 |
|
8. Long Term Debt
2012 Credit Agreement — On September 27, 2012, the Company entered into a Credit Agreement (“Base Credit Agreement”) with Wells Fargo Bank, N.A., as administrative agent, letter of credit issuer, swing line lender and lender, and each of the other lenders party thereto. The Base Credit Agreement (as amended, the “Credit Agreement”) is a committed senior unsecured credit facility that includes a revolving credit facility.
On July 8, 2016, the Company entered into Amendment No. 2 to the Credit Agreement (the “Amendment No. 2”), which amended the Base Credit Agreement. Amendment No. 2, among other things:
|
· |
provided that borrowings under the Credit Agreement will be subject to a borrowing base calculated by reference to the Company’s and certain of its subsidiaries’ eligible equipment, inventory, accounts receivable and unencumbered cash as described in Amendment No. 2; |
|
· |
decreased the permitted amount of certain secured indebtedness of the Company and its subsidiaries and decreased the permitted amount of certain unsecured indebtedness of the Company’s subsidiaries; |
|
· |
revised the limitation on the Company’s ability to make investments in foreign subsidiaries or joint ventures such that, if the book value of all such investments since September 27, 2012 is above 20% of the total book value of the assets of the Company and its subsidiaries on a pro forma basis, the Company will not be able to make such investment; |
|
· |
added a restricted payments covenant that restricts the Company’s ability to pay dividends and make equity repurchases, subject to certain exceptions, including an exception allowing such restricted payments if before and immediately after giving effect to such restricted payment, the Pro Forma Debt Service Coverage Ratio (as defined in Amendment No. 2) is at least 1.50 to 1.00; and |
|
· |
requires that, if the consolidated cash balance of the Company and its subsidiaries, subject to certain exclusions, is more than $100 million at the end of the day on which a borrowing is made, the Company can only use the proceeds from such borrowing to fund acquisitions, capital expenditures and the repurchase of indebtedness, and if such proceeds are not used in such manner within three business days, the Company must repay such unused proceeds on the fourth business day following such borrowings. |
As a condition precedent, Amendment No. 2 required that the Company repay the entire outstanding principal amount of its bank term loans. The Company used $160 million of cash and $70 million drawn under the revolving credit facility to repay the bank term loans.
The revolving credit facility permits aggregate borrowings of up to $500 million outstanding at any time, subject to the borrowing base described above. The revolving credit facility contains a letter of credit facility that is limited to $50 million and a swing line facility that is limited to $20 million, in each case outstanding at any time.
15
The term loan facility included in the Base Credit Agreement, which facility was terminated in connection with Amendment No. 2, provided for a loan of $100 million, which was drawn on December 24, 2012 and was payable in quarterly principal installments.
Subject to customary conditions, the Company may request that the lenders’ aggregate commitments with respect to the revolving credit facility be increased by up to $100 million, not to exceed total commitments of $600 million. The maturity date under the Base Credit Agreement was September 27, 2017 for the revolving facility, however, Amendment No. 2 extended the maturity date of $357.9 million in revolving credit commitments of certain lenders to March 27, 2019.
Loans under the Credit Agreement bear interest by reference, at the Company’s election, to the LIBOR rate or base rate, provided, that swing line loans bear interest by reference only to the base rate. Until September 27, 2017, the applicable margin on LIBOR rate loans varies from 2.75% to 3.25% and the applicable margin on base rate loans varies from 1.75% to 2.25%, in each case determined based upon the Company’s debt to capitalization ratio. On or after September 27, 2017, the applicable margin on LIBOR rate loans varies from 3.25% to 3.75% and the applicable margin on base rate loans varies from 2.25% to 2.75%, in each case determined based on the Company’s excess availability under the credit facility. As of June 30, 2016 the applicable margin on LIBOR rate loans was 2.75% and the applicable margin on base rate loans was 1.75%. Based on the Company’s debt to capitalization ratio at March 31, 2016, the applicable margin on LIBOR loans is 2.75% and the applicable margin on base rate loans is 1.75% as of July 1, 2016. Based on the Company’s debt to capitalization ratio at June 30, 2016, the applicable margin on LIBOR loans will be 2.75% and the applicable margin on base rate loans will be 1.75% as of October 1, 2016. A letter of credit fee is payable by the Company equal to the applicable margin for LIBOR rate loans times the daily amount available to be drawn under outstanding letters of credit. The commitment fee rate payable to the lenders for the unused portion of the credit facility is 0.50%.
Each domestic subsidiary of the Company unconditionally guarantees all existing and future indebtedness and liabilities of the other guarantors and the Company arising under the Credit Agreement, other than (a) Ambar Lone Star Fluid Services LLC, (b) domestic subsidiaries that directly or indirectly have no material assets other than equity interests in, or capitalization indebtedness owed by, foreign subsidiaries, and (c) any subsidiary having total assets of less than $1 million. Such guarantees also cover obligations of the Company and any subsidiary of the Company arising under any interest rate swap contract with any person while such person is a lender or an affiliate of a lender under the Credit Agreement.
The Credit Agreement requires compliance with two financial covenants. The Company must not permit its debt to capitalization ratio to exceed 40%. The Credit Agreement generally defines the debt to capitalization ratio as the ratio of (a) total borrowed money indebtedness to (b) the sum of such indebtedness plus consolidated net worth, with consolidated net worth determined as of the last day of the most recently ended fiscal quarter. The Company also must not permit the interest coverage ratio as of the last day of a fiscal quarter to be less than 3.00 to 1.00. The Credit Agreement generally defines the interest coverage ratio as the ratio of earnings before interest, taxes, depreciation and amortization (“EBITDA”) of the four prior fiscal quarters to interest charges for the same period. The Company was in compliance with these covenants at June 30, 2016.
The Credit Agreement also contains customary representations, warranties and affirmative and negative covenants.
Events of default under the Credit Agreement include failure to pay principal or interest when due, failure to comply with the financial and operational covenants, as well as a cross default event, loan document enforceability event, change of control event and bankruptcy and other insolvency events. If an event of default occurs and is continuing, then a majority of the lenders have the right, among others, to (i) terminate the commitments under the Credit Agreement, (ii) accelerate and require the Company to repay all the outstanding amounts owed under any loan document (provided that in limited circumstances with respect to insolvency and bankruptcy of the Company, such acceleration is automatic), and (iii) require the Company to cash collateralize any outstanding letters of credit.
As of June 30, 2016, the Company had $60 million principal amount outstanding under the term loan facility at an interest rate of 5.25% and no amounts outstanding under the revolving credit facility. As a condition precedent to Amendment No. 2, the Company repaid the entire outstanding principal amount under the term loan facility. The borrowing base under the Credit Agreement is currently $500 million. As of August 2, 2016, the Company had $70 million drawn under the revolving credit facility, with available borrowing capacity of $430 million.
2015 Reimbursement Agreement — On March 16, 2015, the Company entered into a Reimbursement Agreement (the “Reimbursement Agreement”) with The Bank of Nova Scotia (“Scotiabank”), pursuant to which the Company may from time to time request that Scotiabank issue an unspecified amount of letters of credit. As of June 30, 2016, the Company had $38.2 million in letters of credit outstanding under the Reimbursement Agreement.
16
Under the terms of the Reimbursement Agreement, the Company will reimburse Scotiabank on demand for any amounts that Scotiabank has disbursed under any letters of credit. Fees, charges and other reasonable expenses for the issuance of letters of credit are payable by the Company at the time of issuance at such rates and amounts as are in accordance with Scotiabank’s prevailing practice. The Company is obligated to pay to Scotiabank interest on all amounts not paid by the Company on the date of demand or when otherwise due at the LIBOR rate plus 2.25% per annum, calculated daily and payable monthly, in arrears, on the basis of a calendar year for the actual number of days elapsed, with interest on overdue interest at the same rate as on the reimbursement amounts.
The Company has also agreed that if obligations under the Credit Agreement are secured by liens on any of its or any of its subsidiaries’ property, then the Company’s reimbursement obligations and (to the extent similar obligations would be secured under the Credit Agreement) other obligations under the Reimbursement Agreement and any letters of credit will be equally and ratably secured by all property subject to such liens securing the Credit Agreement.
Pursuant to a Continuing Guaranty dated as of March 16, 2015, the Company’s payment obligations under the Reimbursement Agreement are jointly and severally guaranteed as to payment and not as to collection by subsidiaries of the Company that from time to time guarantee payment under the Credit Agreement.
2015 Term Loan Agreement — On March 18, 2015, the Company entered into a Term Loan Agreement (the “2015 Term Loan Agreement”) with Wells Fargo Bank, N.A., as administrative agent and lender, each of the other lenders party thereto, Wells Fargo Securities, LLC, as Lead Arranger and Sole Book Runner, and Bank of America, N.A. and The Bank Of Tokyo-Mitsubishi UFJ, LTD., as Co-Syndication Agents.
The 2015 Term Loan Agreement was a senior unsecured single-advance term loan facility pursuant to which the Company made a term loan borrowing of $200 million on March 18, 2015 (the “Term Loan Borrowing”). The Term Loan Borrowing was payable in quarterly principal installments, together with accrued interest. Loans under the 2015 Term Loan Agreement bore interest, at the Company’s election, at the per annum rate of LIBOR rate plus 3.25% or base rate plus 2.25%.
As of June 30, 2016, the Company had $170 million principal amount outstanding under the 2015 Term Loan Agreement at an interest rate of 5.75%. As a condition precedent to Amendment No. 2, the Company repaid the entire outstanding principal amount under the 2015 Term Loan Agreement and terminated the agreement.
Senior Notes — On October 5, 2010, the Company completed the issuance and sale of $300 million in aggregate principal amount of its 4.97% Series A Senior Notes due October 5, 2020 (the “Series A Notes”) in a private placement. The Series A Notes bear interest at a rate of 4.97% per annum. The Company pays interest on the Series A Notes on April 5 and October 5 of each year. The Series A Notes will mature on October 5, 2020.
On June 14, 2012, the Company completed the issuance and sale of $300 million in aggregate principal amount of its 4.27% Series B Senior Notes due June 14, 2022 (the “Series B Notes”) in a private placement. The Series B Notes bear interest at a rate of 4.27% per annum. The Company pays interest on the Series B Notes on April 5 and October 5 of each year. The Series B Notes will mature on June 14, 2022.
The Series A Notes and Series B Notes are senior unsecured obligations of the Company which rank equally in right of payment with all other unsubordinated indebtedness of the Company. The Series A Notes and Series B Notes are guaranteed on a senior unsecured basis by each of the existing domestic subsidiaries of the Company other than subsidiaries that are not required to be guarantors under the Credit Agreement.
The Series A Notes and Series B Notes are prepayable at the Company’s option, in whole or in part, provided that in the case of a partial prepayment, prepayment must be in an amount not less than 5% of the aggregate principal amount of the notes then outstanding, at any time and from time to time at 100% of the principal amount prepaid, plus accrued and unpaid interest to the prepayment date, plus a “make-whole” premium as specified in the note purchase agreements. The Company must offer to prepay the notes upon the occurrence of any change of control. In addition, the Company must offer to prepay the notes upon the occurrence of certain asset dispositions if the proceeds therefrom are not timely reinvested in productive assets. If any offer to prepay is accepted, the purchase price of each prepaid note is 100% of the principal amount thereof, plus accrued and unpaid interest thereon to the prepayment date.
17
The respective note purchase agreements require compliance with two financial covenants. The Company must not permit its debt to capitalization ratio to exceed 50% at any time. The note purchase agreements generally define the debt to capitalization ratio as the ratio of (a) total borrowed money indebtedness to (b) the sum of such indebtedness plus consolidated net worth, with consolidated net worth determined as of the last day of the most recently ended fiscal quarter. The Company also must not permit the interest coverage ratio as of the last day of a fiscal quarter to be less than 2.50 to 1.00. The note purchase agreements generally define the interest coverage ratio as the ratio of EBITDA for the four prior fiscal quarters to interest charges for the same period. The Company was in compliance with these covenants at June 30, 2016.
Events of default under the note purchase agreements include failure to pay principal or interest when due, failure to comply with the financial and operational covenants, a cross default event, a judgment in excess of a threshold event, the guaranty agreement ceasing to be enforceable, the occurrence of certain ERISA events, a change of control event and bankruptcy and other insolvency events. If an event of default under the note purchase agreements occurs and is continuing, then holders of a majority in principal amount of the respective notes have the right to declare all the notes then-outstanding to be immediately due and payable. In addition, if the Company defaults in payments on any note, then until such defaults are cured, the holder thereof may declare all the notes held by it pursuant to the note purchase agreement to be immediately due and payable.
In April and August 2015, the Financial Accounting Standards Board (“FASB”) issued accounting standards updates to provide guidance for the presentation of debt issuance costs. Under this guidance, debt issuance costs, except those related to line-of-credit arrangements, are presented in the balance sheet as a direct deduction from the carrying amount of the related debt. Debt issuance costs related to line-of-credit arrangements can continue to be classified as a deferred charge. Amortization of debt issuance costs continues to be reported as interest expense. This guidance became effective for the Company during the three months ended March 31, 2016. This guidance was applied retrospectively, and debt issuance costs and long-term debt as of December 31, 2015 have been adjusted. There was no impact on results of operations or cash flows as a result of the adoption of this guidance. Interest expense related to the amortization of debt issuance costs was approximately $746,000 and $743,000 for the three months ended June 30, 2016 and 2015, respectively. Interest expense related to the amortization of debt issuance costs was approximately $1.5 million and $1.3 million for the six months ended June 30, 2016 and 2015, respectively.
Presented below is a schedule of the principal repayment requirements of long-term debt as of June 30, 2016 (in thousands):
Year ending December 31, |
|
|
|
2016 |
$ |
38,750 |
|
2017 |
|
191,250 |
|
2018 |
|
— |
|
2019 |
|
— |
|
2020 |
|
300,000 |
|
Thereafter |
|
300,000 |
|
Total |
$ |
830,000 |
|
On July 8 2016, the Company repaid $230 million of long-term debt that had principal repayments due in 2016 and 2017. As of August 2, 2016, the Company has no term debt due prior to 2020.
9. Commitments, Contingencies and Other Matters
As of June 30, 2016, the Company maintained letters of credit in the aggregate amount of $38.2 million for the benefit of various insurance companies as collateral for retrospective premiums and retained losses which could become payable under the terms of the underlying insurance contracts. These letters of credit expire annually at various times during the year and are typically renewed. As of June 30, 2016, no amounts had been drawn under the letters of credit.
As of June 30, 2016, the Company had commitments to purchase approximately $55.1 million of major equipment for its drilling and pressure pumping businesses.
The Company’s pressure pumping business has entered into agreements to purchase minimum quantities of proppants and chemicals from certain vendors. These agreements expire in 2017 and 2018. As of June 30, 2016, the remaining obligation under these agreements was approximately $23.5 million, of which approximately $6.5 million relates to purchases required during the remainder of 2016. In the event the required minimum quantities are not purchased during any contract year, the Company could be required to make a liquidated damages payment to the respective vendor for any shortfall.
In November 2011, the Company’s pressure pumping business entered into an agreement with a proppant vendor to advance up to $12.0 million to such vendor to finance the construction of certain processing facilities. This advance is secured by the underlying processing facilities and bears interest at an annual rate of 5.0%. Repayment of the advance is to be made through discounts applied to purchases from the vendor and repayment of all amounts advanced must be made no later than October 1, 2017. As of June 30,
18
2016, advances of approximately $11.8 million had been made under this agreement and principal repayments of approximately $10.6 million had been received, resulting in a balance outstanding of approximately $1.2 million.
The Company is party to various legal proceedings arising in the normal course of its business. The Company does not believe that the outcome of these proceedings, either individually or in the aggregate, will have a material adverse effect on its financial condition, results of operations or cash flows.
10. Stockholders’ Equity
Cash Dividends — The Company paid cash dividends during the six months ended June 30, 2015 and 2016 as follows:
2015: |
Per Share |
|
|
Total |
|
||
|
|
|
|
|
(in thousands) |
|
|
Paid on March 25, 2015 |
$ |
0.10 |
|
|
$ |
14,640 |
|
Paid on June 24, 2015 |
|
0.10 |
|
|
|
14,712 |
|
Total cash dividends |
$ |
0.20 |
|
|
$ |
29,352 |
|
2016: |
Per Share |
|
|
Total |
|
||
|
|
|
|
|
(in thousands) |
|
|
Paid on March 24, 2016 |
$ |
0.10 |
|
|
$ |
14,712 |
|
Paid on June 23, 2016 |
|
0.02 |
|
|
|
2,953 |
|
Total cash dividends |
$ |
0.12 |
|
|
$ |
17,665 |
|
On July 27, 2016, the Company’s Board of Directors approved a cash dividend on its common stock in the amount of $0.02 per share to be paid on September 22, 2016 to holders of record as of September 8, 2016. The amount and timing of all future dividend payments, if any, are subject to the discretion of the Board of Directors and will depend upon business conditions, results of operations, financial condition, terms of the Company’s debt agreements and other factors.
On September 6, 2013, the Company’s Board of Directors approved a stock buyback program that authorizes purchase of up to $200 million of the Company’s common stock in open market or privately negotiated transactions. As of June 30, 2016, the Company had remaining authorization to purchase approximately $187 million of the Company’s outstanding common stock under the stock buyback program. Shares purchased under a buyback program are accounted for as treasury stock.
Treasury stock acquisitions during the six months ended June 30, 2016 were as follows (dollars in thousands):
|
June 30, 2016 |
|
|||||
|
Shares |
|
|
Cost |
|
||
Treasury shares at beginning of period |
|
43,207,240 |
|
|
$ |
907,045 |
|
Purchases pursuant to stock buyback program |
|
8,488 |
|
|
|
183 |
|
Acquisitions pursuant to long-term incentive plan |
|
160,564 |
|
|
|
3,428 |
|
Treasury shares at end of period |
|
43,376,292 |
|
|
$ |
910,656 |
|
11. Income Taxes
The Company’s effective income tax rate was 35.1% for the six months ended June 30, 2016, compared to 44.8% for the six months ended June 30, 2015. The Domestic Production Activities Deduction (the “Section 199 Deduction”) was enacted as part of the American Jobs Creation Act of 2004 (as revised by the Emergency Economic Stabilization Act of 2008), and allows a deduction of 9% on the lesser of qualified production activities income or taxable income. For tax purposes, the Company had net operating losses for the years ended December 31, 2015 and 2014, which have been carried back to prior years. These carrybacks resulted in the loss of the benefits of previous Section 199 Deductions. The loss of these benefits was recognized during the six months ended June 30, 2016, which reduced the tax benefit recorded for the six months ended June 30, 2016.
At June 30, 2015, the Company expected a loss before income taxes for financial statement purposes for the year ending December 31, 2015; however the Company expected to have taxable income for the year ending December 31, 2015, and the Section 199 Deduction was expected to provide a permanent tax benefit. On June 15, 2015, legislation was enacted which permanently reduced the Texas Margin Tax rate. This resulted in a permanent tax benefit that was recognized during the quarter ended June 30, 2015. The interplay between the expected loss before income taxes for financial statement purposes, the permanent tax
19
benefit expected to be provided by the Section 199 Deduction and the permanent tax benefit from the Texas Margin Tax rate resulted in a higher effective income tax rate for the six months ended June 30, 2015.
12. Fair Values of Financial Instruments
The carrying values of cash and cash equivalents, trade receivables and accounts payable approximate fair value due to the short-term maturity of these items. These fair value estimates are considered Level 1 fair value estimates in the fair value hierarchy of fair value accounting.
The estimated fair value of the Company’s outstanding debt balances (including current portion) as of June 30, 2016 and December 31, 2015 is set forth below (in thousands):
|
June 30, 2016 |
|
|
December 31, 2015 |
|
||||||||||
|
Carrying |
|
|
Fair |
|
|
Carrying |
|
|
Fair |
|
||||
|
Value |
|
|
Value |
|
|
Value |
|
|
Value |
|
||||
Borrowings under Credit Agreement: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Term loan facility |
$ |
60,000 |
|
|
$ |
60,000 |
|
|
$ |
70,000 |
|
|
$ |
70,000 |
|
2015 Term Loan |
|
170,000 |
|
|
|
170,000 |
|
|
|
185,000 |
|
|
|
185,000 |
|
4.97% Series A Senior Notes |
|
300,000 |
|
|
|
279,525 |
|
|
|
300,000 |
|
|
|
279,635 |
|
4.27% Series B Senior Notes |
|
300,000 |
|
|
|
259,824 |
|
|
|
300,000 |
|
|
|
258,806 |
|
Total debt |
$ |
830,000 |
|
|
$ |
769,349 |
|
|
$ |
855,000 |
|
|
$ |
793,441 |
|
The carrying values of the balances outstanding under the Credit Agreement and the 2015 Term Loan Agreement approximate their fair values as these instruments have floating interest rates. The fair values of the Series A Notes and Series B Notes at June 30, 2016 and December 31, 2015 are based on discounted cash flows associated with the respective notes using current market rates of interest at those respective dates. For the Series A Notes, the current market rates used in measuring this fair value were 6.85% at June 30, 2016 and 6.66% at December 31, 2015. For the Series B Notes, the current market rates used in measuring this fair value were 7.07% at June 30, 2016 and 6.95% at December 31, 2015. These fair value estimates are based on observable market inputs and are considered Level 2 fair value estimates in the fair value hierarchy of fair value accounting.
13. Recently Issued Accounting Standards
In May 2014, the FASB issued an accounting standards update to provide guidance on the recognition of revenue from customers. The FASB clarified this guidance in March, April and May 2016. Under this guidance, an entity will recognize revenue when it transfers promised goods or services to customers in an amount that reflects what it expects in exchange for the goods or services. This guidance also requires more detailed disclosures to enable users of the financial statements to understand the nature, amount, timing and uncertainty, if any, of revenue and cash flows arising from contracts with customers. The requirements in this update are effective during interim and annual periods beginning after December 15, 2017. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements.
In November 2015, the FASB issued an accounting standards update to provide guidance for the presentation of deferred tax liabilities and assets. Under this guidance, for a particular tax-paying component of an entity and within a particular tax jurisdiction, all deferred tax liabilities and assets, as well as any related valuation allowance, shall be offset and presented as a single noncurrent amount. The requirements in this update are effective during interim and annual periods beginning after December 15, 2016. The adoption of this update is not expected to have a material impact on the Company’s consolidated financial statements.
In February 2016, the FASB issued an accounting standards update to provide guidance for the accounting for leasing transactions. The requirements in this update are effective during interim and annual periods beginning after December 15, 2018. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements.
In March 2016, the FASB issued an accounting standards update to provide guidance for the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The requirements in this update are effective during interim and annual periods beginning after December 15, 2016. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements.
20
DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (this “Report”) and other public filings and press releases by us contain “forward-looking statements” within the meaning of the Securities Act of 1933, as amended (the “Securities Act”), the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995, as amended. These “forward-looking statements” involve risk and uncertainty. These forward-looking statements include, without limitation, statements relating to: liquidity; revenue and cost expectations and backlog; financing of operations; oil and natural gas prices; source and sufficiency of funds required for building new equipment, upgrading existing equipment and additional acquisitions (if opportunities arise); impact of inflation; demand for our services; competition; equipment availability; government regulation; debt service obligations; and other matters. Our forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts and often use words such as “anticipates,” “believes,” “budgeted,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “project,” “should,” “strategy,” or “will,” or the negative thereof and other words and expressions of similar meaning. 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. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to have been correct. Forward-looking statements may be made orally or in writing, including, but not limited to, Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this Report and other sections of our filings with the United States Securities and Exchange Commission (the “SEC”) under the Exchange Act and the Securities Act.
Forward-looking statements are not guarantees of future performance and a variety of factors could cause actual results to differ materially from the anticipated or expected results expressed in or suggested by these forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, volatility in customer spending and in oil and natural gas prices that could adversely affect demand for our services and their associated effect on rates, utilization, margins and planned capital expenditures, global economic conditions, excess availability of land drilling rigs and pressure pumping equipment, including as a result of reactivation or construction, equipment specialization and new technologies, competition, adverse industry conditions, adverse credit and equity market conditions, failure by our customers to pay us or satisfy their contractual obligations (particularly with respect to fixed term contracts), difficulty in building and deploying new equipment and integrating acquisitions, shortages, delays in delivery and interruptions in supply of equipment, supplies and materials, weather, loss of key customers, liabilities from operations for which we do not have and receive full indemnification or insurance, ability to effectively identify and enter new markets, governmental regulation, ability to realize backlog, ability to retain management and field personnel, legal proceedings and other factors. Refer to “Risk Factors” contained in Part 1 of our Annual Report on Form 10-K for the year ended December 31, 2015 for a more complete discussion of factors that might affect our performance and financial results. You are cautioned not to place undue reliance on any of our forward-looking statements. These forward-looking statements are intended to relay our expectations about the future, and speak only as of the date they are made. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, changes in internal estimates or otherwise, except as required by law.
21
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Recent Developments — Oil prices declined significantly during the second half of 2014. The closing price of oil, which was as high as $105.68 per barrel during the third quarter of 2014, averaged $48.69 during 2015 and reached a twelve-year low of $26.19 in February 2016. Oil prices averaged $45.41 during the second quarter of 2016 and were briefly above $50 during June 2016. As a result of the prolonged decline in oil prices, our industry has experienced a severe decline in both contract drilling and pressure pumping activity levels. While activity levels have recently stabilized, we do not expect activity levels to significantly increase until commodity prices improve.
Low commodity prices are negatively impacting spending by exploration and production companies. The impact of these spending reductions is evidenced by the published rig counts, which have declined by more than 75% in the United States since the recent peak in 2014.
Our rig count has also significantly declined. As of June 30, 2016, we had 55 drilling rigs operating in the United States, which was a decrease of 74% from the peak of 214 rigs in October 2014. On average, we operated 55 rigs in the United States during the second quarter of 2016. Term contracts have provided support for our operating rig count during the second quarter of 2016. Based on contracts currently in place, we expect an average of 45 rigs operating under term contracts during the third quarter of 2016 and an average of 42 rigs operating under term contracts during the second half of 2016.
Our pressure pumping business is continuing to experience the effects of reduced spending by customers and downward pressure on pricing. With the weakness in commodity prices, we have seen a significant decrease in the amount of available work, and the profitability of available work has continued to deteriorate. In response, we now have stacked approximately 53% of our fleet of more than 1.0 million hydraulic fracturing horsepower.
In anticipation of this downturn, we began reducing our cost structure in the fourth quarter of 2014. In 2015 and the first half of 2016, we continued to reduce our cost structure and, to date, we have reduced our drilling headcount at a rate generally proportionate with the reduction in our rig count. In pressure pumping, we have reduced our headcount and obtained lower prices on many products and services that we use. We expect our capital expenditures in the remainder of 2016 to primarily consist of maintenance capital, as well as upgrades to our drilling rig fleet. We plan to continue to adjust our cost structure in line with our level of operating activity.
We expect that our term contract coverage in contract drilling and scalability with respect to labor and other operating costs in contract drilling and pressure pumping should position us to weather this downturn. The U.S. rig count has slightly rebounded as crude oil prices have improved from the cyclical lows reached in the first quarter of 2016. Although the outlook for crude oil prices remains uncertain with numerous economic and geopolitical concerns, our rig count in the U.S. has increased from a low of 52 rigs in April 2016 to 58 rigs as of July 28, 2016. In the event oil prices remain depressed for a sustained period, or decline further, these declines could have a material adverse effect on our business, financial condition and results of operations.
Management Overview — We are a leading provider of services to the North American oil and natural gas industry. Our services primarily involve the drilling, on a contract basis, of land-based oil and natural gas wells and pressure pumping services. In addition to these services, we also invest, on a non-operating working interest basis, in oil and natural gas properties.
We operate land-based drilling rigs in oil and natural gas producing regions of the continental United States and western Canada. There continues to be uncertainty with respect to the global economic environment, and oil and natural gas prices have been depressed. During the second quarter of 2016, our average number of rigs operating in the United States was 55 compared to an average of 122 drilling rigs operating during the same period in 2015. During the second quarter of 2016, our average number of rigs operating in Canada was less than one compared to an average of two drilling rigs operating during the second quarter of 2015.
Prior to the decline in oil prices, we addressed our customers’ needs for drilling horizontal wells in shale and other unconventional resource plays by expanding our areas of operation and improving the capabilities of our drilling fleet during the last several years. As of June 30, 2016, our rig fleet included 161 APEX® rigs.
With regard to our pressure pumping business, primarily between 2010 and 2014, we added equipment to perform service-intensive fracturing jobs in connection with the development of horizontal shale and other unconventional resource plays. As of June 30, 2016, we had approximately 1.1 million hydraulic horsepower in our pressure pumping fleet. We have increased the horsepower of our pressure pumping fleet by more than eight-fold since the beginning of 2009, although we have not ordered or committed to purchase any new horsepower since October 2014 and there is currently no new horsepower on order. In recent years, low commodity prices and the industry-wide addition of new pressure pumping equipment to the marketplace led to an excess supply of pressure pumping equipment in North America.
22
We maintain a backlog of commitments for contract drilling revenues under term contracts, which we define as contracts with a fixed term of six months or more. Our contract drilling backlog as of June 30, 2016 was approximately $500 million. More than 60% of the total June 30, 2016 backlog is reasonably expected to remain at the end of 2016. We generally calculate our backlog by multiplying the dayrate under our term drilling contracts by the number of days remaining under the contract. The calculation does not include any revenues related to other fees such as for mobilization, demobilization and customer reimbursables, nor does it include potential reductions in rates for unscheduled standby or during periods in which the rig is moving or incurring maintenance and repair time in excess of what is permitted under the drilling contract. In addition, generally our term drilling contracts are subject to termination by the customer on short notice and provide for an early termination payment to us in the event that the contract is terminated by the customer. For contracts that we have received an early termination notice, our backlog calculation includes the early termination rate, instead of the dayrate, for the period we expect to receive the lower rate.
For the three and six months ended June 30, 2016 and 2015, our operating revenues consisted of the following (in thousands):
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||||||||||||||||||
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
||||||||||||||||||||
Contract drilling |
$ |
115,235 |
|
|
|
59.4 |
% |
|
$ |
288,321 |
|
|
|
61.0 |
% |
|
$ |
283,894 |
|
|
|
61.3 |
% |
|
$ |
689,799 |
|
|
|
61.0 |
% |
Pressure pumping |
|
73,950 |
|
|
|
38.2 |
% |
|
|
176,624 |
|
|
|
37.4 |
% |
|
|
170,263 |
|
|
|
36.8 |
% |
|
|
426,345 |
|
|
|
37.7 |
% |
Oil and natural gas |
|
4,722 |
|
|
|
2.4 |
% |
|
|
7,816 |
|
|
|
1.6 |
% |
|
|
8,689 |
|
|
|
1.9 |
% |
|
|
14,316 |
|
|
|
1.3 |
% |
|
$ |
193,907 |
|
|
|
100.0 |
% |
|
$ |
472,761 |
|
|
|
100.0 |
% |
|
$ |
462,846 |
|
|
|
100.0 |
% |
|
$ |
1,130,460 |
|
|
|
100.0 |
% |
Generally, the profitability of our business is impacted most by two primary factors in our contract drilling segment: our average number of rigs operating and our average revenue per operating day. During the second quarter of 2016, our average number of rigs operating was 55 in the United States and less than one in Canada compared to 122 in the United States and two in Canada in the second quarter of 2015. Our average revenue per operating day was $23,070 in the second quarter of 2016, including $5.4 million of early termination revenue, compared to $25,720 in the second quarter of 2015, including $15.6 million of early termination revenue. The profitability of our pressure pumping segment is impacted most by our number of fracturing jobs during a quarter and our average revenue per fracturing job. We had 74 fracturing jobs during the second quarter of 2016 compared to 148 fracturing jobs during the second quarter of 2015. Our average revenue per fracturing job was $976,300 in the second quarter of 2016 and $1.148 million in the second quarter of 2015. Consolidated net loss for the second quarter of 2016 was $85.9 million compared to consolidated net loss of $19.0 million for the second quarter of 2015.
Our revenues, profitability and cash flows are highly dependent upon prevailing prices for oil and natural gas. During periods of improved commodity prices, the capital spending budgets of oil and natural gas operators tend to expand, which generally results in increased demand for our services. Conversely, in periods when these commodity prices deteriorate, the demand for our services generally weakens, and we experience downward pressure on pricing for our services. Oil and natural gas prices and our monthly average number of rigs operating have significantly declined from recent highs. In June 2016, our average number of rigs operating was 54 in the United States and one in Canada.
We are also highly impacted by operational risks, competition, the availability of excess equipment, labor issues, weather and various other factors that could materially adversely affect our business, financial condition, cash flows and results of operations. Please see “Risk Factors” included in Part I of our Annual Report on Form 10-K for the fiscal year ended December 31, 2015.
Our liquidity as of June 30, 2016 included approximately $164 million in working capital, including $210 million of cash and cash equivalents, and $500 million available under our revolving credit facility. To further solidify our financial position, on July 8, 2016, we amended our bank credit agreement to, among other things, extend the maturity of $357.9 million of our revolving credit facility by 18 months to March 2019. Additionally, we repaid the entire $230 million of bank term loans outstanding as of June 30, 2016 using cash on hand and $70 million drawn from the revolving credit facility. As a result, we believe our current liquidity, together with cash expected to be generated from operations, should provide us with sufficient ability to fund our current plans to maintain and make improvements to our existing equipment, service our debt, pay cash dividends and finance working capital requirements during a recovery. If under current market conditions we desire to pursue opportunities for growth that require additional capital, we believe such pursuit would likely require additional debt or equity financing. However, there can be no assurance that such capital will be available on reasonable terms, if at all.
Commitments and Contingencies — As of June 30, 2016, we maintained letters of credit in the aggregate amount of $38.2 million for the benefit of various insurance companies as collateral for retrospective premiums and retained losses which could become payable under the terms of the underlying insurance contracts. These letters of credit expire annually at various times during the year and are typically renewed. As of June 30, 2016, no amounts had been drawn under the letters of credit.
As of June 30, 2016, we had commitments to purchase approximately $55.1 million of major equipment for our drilling and pressure pumping businesses.
23
Our pressure pumping business has entered into agreements to purchase minimum quantities of proppants and chemicals from certain vendors. These agreements expire in 2017 and 2018. As of June 30, 2016, the remaining obligation under these agreements was approximately $23.5 million, of which approximately $6.5 million relates to purchases required during the remainder of 2016. In the event the required minimum quantities are not purchased during any contract year, we could be required to make a liquidated damages payment to the respective vendor for any shortfall.
In November 2011, our pressure pumping business entered into an agreement with a proppant vendor to advance up to $12.0 million to such vendor to finance its construction of certain processing facilities. This advance is secured by the underlying processing facilities and bears interest at an annual rate of 5.0%. Repayment of the advance is to be made through discounts applied to purchases from the vendor and repayment of all amounts advanced must be made no later than October 1, 2017. As of June 30, 2016, advances of approximately $11.8 million had been made under this agreement and repayments of approximately $10.6 million had been received resulting in a balance outstanding of approximately $1.2 million.
Trading and Investing — We have not engaged in trading activities that include high-risk securities, such as derivatives and non-exchange traded contracts. We invest cash primarily in highly liquid, short-term investments such as overnight deposits and money market accounts.
Description of Business — We conduct our contract drilling operations primarily in the continental United States and western Canada. We provide pressure pumping services to oil and natural gas operators primarily in Texas and the Appalachian region. Pressure pumping services are primarily well stimulation and cementing for completion of new wells and remedial work on existing wells. We also invest in oil and natural gas assets as a non-operating working interest owner. Our oil and natural gas working interests are located primarily in Texas and New Mexico.
The North American oil and natural gas services industry is cyclical and at times experiences downturns in demand. During these periods, there have been substantially more drilling rigs and pressure pumping equipment available than necessary to meet demand. As a result, drilling and pressure pumping contractors have had difficulty sustaining profit margins and, at times, have incurred losses during the downturn periods. The North American oil and natural gas services industry is currently experiencing a severe downturn.
Construction of new technology drilling rigs increased significantly in the years preceding the current industry downturn. The addition of new technology drilling rigs to the market, combined with a reduction in the drilling of vertical wells, has resulted in excess capacity of older technology drilling rigs. Similarly, the substantial increase in unconventional resource plays led to higher demand for pressure pumping services, and there was a significant increase in the construction of new pressure pumping equipment across the industry. As a result of the decline in oil and natural gas prices and the construction of new equipment, there is an excess of new technology drilling rigs and pressure pumping equipment available. In circumstances of excess capacity, providers of drilling and pressure pumping services have difficulty sustaining profit margins and may sustain losses during downturn periods. We cannot predict either the future level of demand for our contract drilling or pressure pumping services or future conditions in the oil and natural gas contract drilling or pressure pumping businesses.
In addition, unconventional resource plays have substantially increased and some drilling rigs are not capable of drilling these wells efficiently. Accordingly, the utilization of some older technology drilling rigs has been hampered by their lack of capability to efficiently compete for this work. Other ongoing factors which could continue to adversely affect utilization rates and pricing, even in an environment of high oil and natural gas prices and increased drilling activity, include:
|
· |
movement of drilling rigs from region to region, |
|
· |
reactivation of land-based drilling rigs, or |
|
· |
construction of new technology drilling rigs. |
Critical Accounting Policies
In addition to established accounting policies, our condensed consolidated financial statements are impacted by certain estimates and assumptions made by management. No changes in our critical accounting policies have occurred since the filing of our Annual Report on Form 10-K for the fiscal year ended December 31, 2015.
We evaluate the recoverability of our long-lived assets whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable (a “triggering event”). Based on recent commodity prices, our results of operations for the period ended June 30, 2016 and our expectations of results of operations in future periods, we concluded that no triggering event occurred during the second quarter of 2016 with respect to our contract drilling segment or our pressure pumping segment. Our expectations of results of operations in future periods were based on the assumption that activity levels in both segments will begin to recover by early 2017 in response to improved future oil prices.
24
We review our proved oil and natural gas properties for impairment whenever a triggering event occurs, such as downward revisions in reserve estimates or decreases in expected future oil and natural gas prices. Proved properties are grouped by field and undiscounted cash flow estimates are prepared based on our expectation of future pricing over the lives of the respective fields. These cash flow estimates are reviewed by an independent petroleum engineer. If the net book value of a field exceeds its undiscounted cash flow estimate, impairment expense is measured and recognized as the difference between net book value and fair value. The fair value estimates used in measuring impairment are based on internally developed unobservable inputs including reserve volumes and future production, pricing and operating costs (Level 3 inputs in the fair value hierarchy of fair value accounting). The expected future net cash flows are discounted using an annual rate of 10% to determine fair value. We review unproved oil and natural gas properties quarterly to assess potential impairment. Our impairment assessment is made on a lease-by-lease basis and considers factors such as our intent to drill, lease terms and abandonment of an area. If an unproved property is determined to be impaired, the related property costs are expensed. Impairment expense related to proved and unproved oil and natural gas properties totaled approximately $2.2 million in the first quarter of 2016 and is included in depreciation, depletion, amortization and impairment in the condensed consolidated statements of operations. There was no impairment expense in the second quarter of 2016.
Liquidity and Capital Resources
Our liquidity as of June 30, 2016 included approximately $164 million in working capital, including $210 million of cash and cash equivalents, and $500 million available under our revolving credit facility. To further solidify our financial position, on July 8, 2016, we amended our bank credit agreement to, among other things, extend the maturity of $357.9 million of our revolving credit facility by 18 months to March 2019. Additionally, we repaid the entire $230 million of bank term loans outstanding as of June 30, 2016 using cash on hand and $70 million drawn from the revolving credit facility. As a result, we believe our current liquidity, together with cash expected to be generated from operations, should provide us with sufficient ability to fund our current plans to maintain and make improvements to our existing equipment, service our debt, pay cash dividends and finance working capital requirements during a recovery. If under current market conditions we desire to pursue opportunities for growth that require additional capital, we believe such pursuit would likely require additional debt or equity financing. However, there can be no assurance that such capital will be available on reasonable terms, if at all.
During the six months ended June 30, 2016, our sources of cash flow included:
|
· |
$182 million from operating activities, |
|
· |
$12.4 million in proceeds from the disposal of property and equipment. |
During the six months ended June 30, 2016, we used $17.7 million to pay dividends on our common stock, $3.6 million to purchase treasury stock, $25.0 million to repay long-term debt and $51.8 million:
|
· |
to make capital expenditures for the betterment and refurbishment of existing drilling rigs and pressure pumping equipment, |
|
· |
to acquire and procure equipment and facilities to support our drilling and pressure pumping operations, and |
|
· |
to fund investments in oil and natural gas properties on a non-operating working interest basis. |
We paid cash dividends during the six months ended June 30, 2016 as follows:
|
Per Share |
|
|
Total |
|
||
|
|
|
|
|
(in thousands) |
|
|
Paid on March 24, 2016 |
$ |
0.10 |
|
|
$ |
14,712 |
|
Paid on June 23, 2016 |
|
0.02 |
|
|
|
2,953 |
|
Total cash dividends |
$ |
0.12 |
|
|
$ |
17,665 |
|
On July 27, 2016, our Board of Directors approved a cash dividend on our common stock in the amount of $0.02 per share to be paid on September 22, 2016 to holders of record as of September 8, 2016. However, the amount and timing of all future dividend payments, if any, are subject to the discretion of the Board of Directors and will depend upon business conditions, results of operations, financial condition, terms of our debt agreements and other factors.
On September 6, 2013, our Board of Directors approved a stock buyback program that authorizes purchase of up to $200 million of our common stock in open market or privately negotiated transactions. As of June 30, 2016, we had remaining authorization to purchase approximately $187 million of our outstanding common stock under the 2013 stock buyback program. Shares purchased under a buyback program are accounted for as treasury stock.
25
Treasury stock acquisitions during the six months ended June 30, 2016 were as follows (dollars in thousands):
|
June 30, 2016 |
|
|||||
|
Shares |
|
|
Cost |
|
||
Treasury shares at beginning of period |
|
43,207,240 |
|
|
$ |
907,045 |
|
Purchases pursuant to stock buyback program |
|
8,488 |
|
|
|
183 |
|
Acquisitions pursuant to long-term incentive plan |
|
160,564 |
|
|
|
3,428 |
|
Treasury shares at end of period |
|
43,376,292 |
|
|
$ |
910,656 |
|
2012 Credit Agreement — On September 27, 2012, we entered into a Credit Agreement (“Base Credit Agreement”). The Base Credit Agreement (as amended, the “Credit Agreement”) is a committed senior unsecured credit facility that includes a revolving credit facility.
On July 8, 2016, we entered into Amendment No. 2 to the Credit Agreement (the “Amendment No. 2”), which amended the Base Credit Agreement. Amendment No. 2, among other things:
|
· |
provided that borrowings under the Credit Agreement will be subject to a borrowing base calculated by reference to our and certain of our subsidiaries’ eligible equipment, inventory, accounts receivable and unencumbered cash as described in Amendment No. 2; |
|
· |
decreased the permitted amount of certain secured indebtedness by us and our subsidiaries and decreased the permitted amount of certain unsecured indebtedness of our subsidiaries; |
|
· |
revised the limitation on our ability to make investments in foreign subsidiaries or joint ventures such that, if the book value of all such investments since September 27, 2012 is above 20% of our total consolidated book value of the assets on a pro forma basis, we will not be able to make such investment; |
|
· |
added a restricted payments covenant that restricts our ability to pay dividends and make equity repurchases, subject to certain exceptions, including an exception allowing such restricted payments if before and immediately after giving effect to such restricted payment, the Pro Forma Debt Service Coverage Ratio (as defined in Amendment No. 2) is at least 1.50 to 1.00; and |
|
· |
requires that, if our consolidated cash balance, subject to certain exclusions, is more than $100 million at the end of the day on which a borrowing is made, we can only use the proceeds from such borrowing to fund acquisitions, capital expenditures and the repurchase of indebtedness, and if such proceeds are not used in such manner within three business days, we must repay such unused proceeds on the fourth business day following such borrowings. |
As a condition precedent, Amendment No. 2 required us to repay the entire outstanding principal amount of our bank term loans. We used $160 million of cash and $70 million drawn under the revolving credit facility to repay the bank term loans.
The revolving credit facility permits aggregate borrowings of up to $500 million outstanding at any time, subject to the borrowing base described above. The revolving credit facility contains a letter of credit facility that is limited to $50 million and a swing line facility that is limited to $20 million, in each case outstanding at any time.
The term loan facility included in the Base Credit Agreement, which facility was terminated in connection with Amendment No. 2, provided for a loan of $100 million, which was drawn on December 24, 2012 and was payable in quarterly principal installments.
Subject to customary conditions, we may request that the lenders’ aggregate commitments with respect to the revolving credit facility be increased by up to $100 million, not to exceed total commitments of $600 million. The maturity date under the Base Credit Agreement was September 27, 2017 for the revolving facility; however, Amendment No. 2 extended the maturity date of $357.9 million in revolving credit commitments of certain lenders to March 27, 2019.
26
Loans under the Credit Agreement bear interest by reference, at our election, to the LIBOR rate or base rate, provided, that swing line loans bear interest by reference only to the base rate. Until September 27, 2017, the applicable margin on LIBOR rate loans varies from 2.75% to 3.25% and the applicable margin on base rate loans varies from 1.75% to 2.25%, in each case determined based upon our debt to capitalization ratio. On or after September 27, 2017, the applicable margin on LIBOR rate loans varies from 3.25% to 3.75% and the applicable margin on base rate loans varies from 2.25% to 2.75%, in each case determined based on our excess availability under the credit facility. As of June 30, 2016 the applicable margin on LIBOR rate loans was 2.75% and the applicable margin on base rate loans was 1.75%. Based on our debt to capitalization ratio at March 31, 2016, the applicable margin on LIBOR loans is 2.75% and the applicable margin on base rate loans is 1.75% as of July 1, 2016. Based on our debt to capitalization ratio at June 30, 2016, the applicable margin on LIBOR loans will be 2.75% and the applicable margin on base rate loans will be 1.75% as of October 1, 2016. A letter of credit fee is payable by us equal to the applicable margin for LIBOR rate loans times the daily amount available to be drawn under outstanding letters of credit. The commitment fee rate payable to the lenders for the unused portion of the credit facility is 0.50%.
Each of our domestic subsidiaries unconditionally guarantees all existing and future indebtedness and liabilities of the other guarantors and us arising under the Credit Agreement, other than (a) Ambar Lone Star Fluid Services LLC, (b) domestic subsidiaries that directly or indirectly have no material assets other than equity interests in, or capitalization indebtedness owed by, foreign subsidiaries, and (c) any subsidiary having total assets of less than $1 million. Such guarantees also cover our obligations and those of any of our subsidiaries arising under any interest rate swap contract with any person while such person is a lender or an affiliate of a lender under the Credit Agreement.
The Credit Agreement requires compliance with two financial covenants. We must not permit our debt to capitalization ratio to exceed 40%. The Credit Agreement generally defines the debt to capitalization ratio as the ratio of (a) total borrowed money indebtedness to (b) the sum of such indebtedness plus consolidated net worth, with consolidated net worth determined as of the last day of the most recently ended fiscal quarter. We also must not permit the interest coverage ratio as of the last day of a fiscal quarter to be less than 3.00 to 1.00. The Credit Agreement generally defines the interest coverage ratio as the ratio of earnings before interest, taxes, depreciation and amortization (“EBITDA”) of the four prior fiscal quarters to interest charges for the same period. We were in compliance with these covenants at June 30, 2016.
The Credit Agreement also contains customary representations, warranties and affirmative and negative covenants. We do not expect that the restrictions and covenants will impair, in any material respect, our ability to operate or react to opportunities that might arise.
Events of default under the Credit Agreement include failure to pay principal or interest when due, failure to comply with the financial and operational covenants, as well as a cross default event, loan document enforceability event, change of control event and bankruptcy and other insolvency events. If an event of default occurs and is continuing, then a majority of the lenders have the right, among others, to (i) terminate the commitments under the Credit Agreement, (ii) accelerate and require us to repay all the outstanding amounts owed under any loan document (provided that in limited circumstances with respect to insolvency and bankruptcy, such acceleration is automatic), and (iii) require us to cash collateralize any outstanding letters of credit.
As of June 30, 2016, we had $60 million principal amount outstanding under the term loan facility at an interest rate of 5.25% and no amounts outstanding under the revolving credit facility. As a condition precedent to Amendment No. 2, we repaid the entire outstanding principal amount under the term loan facility. The borrowing base under the Credit Agreement is currently $500 million. As of August 2, 2016, we had $70 million drawn under the revolving credit facility, with available borrowing capacity of $430 million.
2015 Reimbursement Agreement — On March 16, 2015, we entered into a Reimbursement Agreement (the “Reimbursement Agreement”) with The Bank of Nova Scotia (“Scotiabank”), pursuant to which we may from time to time request that Scotiabank issue an unspecified amount of letters of credit. As of June 30, 2016, we had $38.2 million in letters of credit outstanding under the Reimbursement Agreement.
Under the terms of the Reimbursement Agreement, we will reimburse Scotiabank on demand for any amounts that Scotiabank has disbursed under any letters of credit. Fees, charges and other reasonable expenses for the issuance of letters of credit are payable by us at the time of issuance at such rates and amounts as are in accordance with Scotiabank’s prevailing practice. We are obligated to pay to Scotiabank interest on all amounts not paid on the date of demand or when otherwise due at the LIBOR rate plus 2.25% per annum, calculated daily and payable monthly, in arrears, on the basis of a calendar year for the actual number of days elapsed, with interest on overdue interest at the same rate as on the reimbursement amounts.
We have also agreed that if obligations under the Credit Agreement are secured by liens on any of our subsidiaries’ property, then our reimbursement obligations and (to the extent similar obligations would be secured under the Credit Agreement) other obligations under the Reimbursement Agreement and any letters of credit will be equally and ratably secured by all property subject to such liens securing the Credit Agreement.
27
Pursuant to a Continuing Guaranty dated as of March 16, 2015 (the “Continuing Guaranty”), our payment obligations under the Reimbursement Agreement are jointly and severally guaranteed as to payment and not as to collection by our subsidiaries that from time to time guarantee payment under the Credit Agreement.
2015 Term Loan Agreement — On March 18, 2015, we entered into a Term Loan Agreement (the “2015 Term Loan Agreement”) with Wells Fargo Bank, N.A., as administrative agent and lender, each of the other lenders party thereto, Wells Fargo Securities, LLC, as Lead Arranger and Sole Book Runner, and Bank of America, N.A. and The Bank Of Tokyo-Mitsubishi UFJ, LTD., as Co-Syndication Agents.
The 2015 Term Loan Agreement was a senior unsecured single-advance term loan facility pursuant to which we made a term loan borrowing of $200 million on March 18, 2015 (the “Term Loan Borrowing”). The Term Loan Borrowing was payable in quarterly principal installments, together with accrued interest. Loans under the 2015 Term Loan Agreement bore interest, at our election, at the per annum rate of LIBOR rate plus 3.25% or base rate plus 2.25%.
As of June 30, 2016, we had $170 million principal amount outstanding under the 2015 Term Loan Agreement at an interest rate of 5.75%. As a condition precedent to Amendment No. 2, we repaid the entire outstanding principal amount under the 2015 Term Loan Agreement and terminated the agreement.
Senior Notes — On October 5, 2010, we completed the issuance and sale of $300 million in aggregate principal amount of our 4.97% Series A Senior Notes due October 5, 2020 (the “Series A Notes”) in a private placement. The Series A Notes bear interest at a rate of 4.97% per annum. We pay interest on the Series A Notes on April 5 and October 5 of each year. The Series A Notes will mature on October 5, 2020.
On June 14, 2012, we completed the issuance and sale of $300 million in aggregate principal amount of our 4.27% Series B Senior Notes due June 14, 2022 (the “Series B Notes”) in a private placement. The Series B Notes bear interest at a rate of 4.27% per annum. We pay interest on the Series B Notes on April 5 and October 5 of each year. The Series B Notes will mature on June 14, 2022.
The Series A Notes and Series B Notes are senior unsecured obligations which rank equally in right of payment with all of our other unsubordinated indebtedness. The Series A Notes and Series B Notes are guaranteed on a senior unsecured basis by each of our domestic subsidiaries other than subsidiaries that are not required to be guarantors under the Credit Agreement.
The Series A Notes and Series B Notes are prepayable at our option, in whole or in part, provided that in the case of a partial prepayment, prepayment must be in an amount not less than 5% of the aggregate principal amount of the notes then outstanding, at any time and from time to time at 100% of the principal amount prepaid, plus accrued and unpaid interest to the prepayment date, plus a “make-whole” premium as specified in the note purchase agreements. We must offer to prepay the notes upon the occurrence of any change of control. In addition, we must offer to prepay the notes upon the occurrence of certain asset dispositions if the proceeds therefrom are not timely reinvested in productive assets. If any offer to prepay is accepted, the purchase price of each prepaid note is 100% of the principal amount thereof, plus accrued and unpaid interest thereon to the prepayment date.
The respective note purchase agreements require compliance with two financial covenants. We must not permit our debt to capitalization ratio to exceed 50% at any time. The note purchase agreements generally define the debt to capitalization ratio as the ratio of (a) total borrowed money indebtedness to (b) the sum of such indebtedness plus consolidated net worth, with consolidated net worth determined as of the last day of the most recently ended fiscal quarter. We also must not permit the interest coverage ratio as of the last day of a fiscal quarter to be less than 2.50 to 1.00. The note purchase agreements generally define the interest coverage ratio as the ratio of EBITDA for the four prior fiscal quarters to interest charges for the same period. We were in compliance with these financial covenants as of June 30, 2016. We do not expect that the restrictions and covenants will impair, in any material respect, our ability to operate or react to opportunities that might arise.
Events of default under the note purchase agreements include failure to pay principal or interest when due, failure to comply with the financial and operational covenants, a cross default event, a judgment in excess of a threshold event, the guaranty agreement ceasing to be enforceable, the occurrence of certain ERISA events, a change of control event and bankruptcy and other insolvency events. If an event of default under the note purchase agreements occurs and is continuing, then holders of a majority in principal amount of the respective notes have the right to declare all the notes then-outstanding to be immediately due and payable. In addition, if we default in payments on any note, then until such defaults are cured, the holder thereof may declare all the notes held by it pursuant to the note purchase agreement to be immediately due and payable.
Our liquidity as of June 30, 2016 included approximately $164 million in working capital, including $210 million of cash and cash equivalents, and $500 million available under our revolving credit facility. To further solidify our financial position, on July 8, 2016, we amended our bank credit agreement to, among other things, extend the maturity of $357.9 million of our revolving credit facility by 18 months to March 2019. Additionally, we repaid the entire $230 million of bank term loans outstanding as of
28
June 30, 2016 using cash on hand and $70 million drawn from the revolving credit facility. As a result, we believe our current liquidity, together with cash expected to be generated from operations, should provide us with sufficient ability to fund our current plans to maintain and make improvements to our existing equipment, service our debt, pay cash dividends and finance working capital requirements during a recovery. If under current market conditions we desire to pursue opportunities for growth that require additional capital, we believe such pursuit would likely require additional debt or equity financing. However, there can be no assurance that such capital will be available on reasonable terms, if at all.
Results of Operations
The following tables summarize operations by business segment for the three months ended June 30, 2016 and 2015:
Contract Drilling |
|
2016 |
|
|
2015 |
|
|
% Change |
|
|||
|
|
(Dollars in thousands) |
|
|
|
|
|
|||||
Revenues |
|
$ |
115,235 |
|
|
$ |
288,321 |
|
|
|
(60.0 |
)% |
Direct operating costs |
|
|
63,803 |
|
|
|
153,848 |
|
|
|
(58.5 |
)% |
Margin (1) |
|
|
51,432 |
|
|
|
134,473 |
|
|
|
(61.8 |
)% |
Selling, general and administrative |
|
|
1,479 |
|
|
|
1,420 |
|
|
|
4.2 |
% |
Depreciation, amortization and impairment |
|
|
120,402 |
|
|
|
123,627 |
|
|
|
(2.6 |
)% |
Operating income (loss) |
|
$ |
(70,449 |
) |
|
$ |
9,426 |
|
|
NA |
|
|
Operating days |
|
|
4,996 |
|
|
|
11,211 |
|
|
|
(55.4 |
)% |
Average revenue per operating day |
|
$ |
23.07 |
|
|
$ |
25.72 |
|
|
|
(10.3 |
)% |
Average direct operating costs per operating day |
|
$ |
12.77 |
|
|
$ |
13.72 |
|
|
|
(6.9 |
)% |
Average margin per operating day (1) |
|
$ |
10.29 |
|
|
$ |
11.99 |
|
|
|
(14.2 |
)% |
Average rigs operating |
|
|
55 |
|
|
|
123 |
|
|
|
(55.4 |
)% |
Capital expenditures |
|
$ |
16,570 |
|
|
$ |
153,940 |
|
|
|
(89.2 |
)% |
(1) |
Margin is defined as revenues less direct operating costs and excludes depreciation, amortization and impairment and selling, general and administrative expenses. Average margin per operating day is defined as margin divided by operating days. |
The decreases in revenues and direct operating costs primarily result from the decrease in the number of rigs operating. Average revenues per operating day is lower due to market conditions. Average direct operating costs per operating day decreased primarily due to a higher percentage of rigs on standby during the 2016 quarter. Rigs on standby have very little associated cost.
29
|
2016 |
|
|
2015 |
|
|
% Change |
|
||||
|
|
(Dollars in thousands) |
|
|
|
|
|
|||||
Revenues |
|
$ |
73,950 |
|
|
$ |
176,624 |
|
|
|
(58.1 |
)% |
Direct operating costs |
|
|
69,546 |
|
|
|
142,756 |
|
|
|
(51.3 |
)% |
Margin (1) |
|
|
4,404 |
|
|
|
33,868 |
|
|
|
(87.0 |
)% |
Selling, general and administrative |
|
|
3,029 |
|
|
|
4,351 |
|
|
|
(30.4 |
)% |
Depreciation, amortization and impairment |
|
|
47,400 |
|
|
|
48,261 |
|
|
|
(1.8 |
)% |
Operating loss |
|
$ |
(46,025 |
) |
|
$ |
(18,744 |
) |
|
|
145.5 |
% |
Fracturing jobs |
|
|
74 |
|
|
|
148 |
|
|
|
(50.0 |
)% |
Other jobs |
|
|
172 |
|
|
|
535 |
|
|
|
(67.9 |
)% |
Total jobs |
|
|
246 |
|
|
|
683 |
|
|
|
(64.0 |
)% |
Average revenue per fracturing job |
|
$ |
976.30 |
|
|
$ |
1,148.39 |
|
|
|
(15.0 |
)% |
Average revenue per other job |
|
$ |
9.91 |
|
|
$ |
12.45 |
|
|
|
(20.4 |
)% |
Average revenue per total job |
|
$ |
300.61 |
|
|
$ |
258.60 |
|
|
|
16.2 |
% |
Average direct operating costs per total job |
|
$ |
282.71 |
|
|
$ |
209.01 |
|
|
|
35.3 |
% |
Average margin per total job (1) |
|
$ |
17.90 |
|
|
$ |
49.59 |
|
|
|
(63.9 |
)% |
Margin as a percentage of revenues (1) |
|
|
6.0 |
% |
|
|
19.2 |
% |
|
|
(68.8 |
)% |
Capital expenditures |
|
$ |
11,780 |
|
|
$ |
64,009 |
|
|
|
(81.6 |
)% |
(1) |
Margin is defined as revenues less direct operating costs and excludes depreciation, amortization and impairment and selling, general and administrative expenses. Average margin per total job is defined as margin divided by total jobs. Margin as a percentage of revenues is defined as margin divided by revenues. |
Revenues and direct operating costs decreased primarily due to a decrease in the number of fracturing jobs. The total number of jobs decreased as a result of the downturn in the oil and natural gas industry. Margin as a percentage of revenues declined due to competitive pricing.
The reduction in selling, general and administrative expense reflects reductions in headcount and other personnel related costs.
Oil and Natural Gas Production and Exploration |
|
2016 |
|
|
2015 |
|
|
% Change |
|
|||
|
|
(Dollars in thousands) |
|
|
|
|
|
|||||
Revenues - Oil |
|
$ |
4,056 |
|
|
$ |
7,091 |
|
|
|
(42.8 |
)% |
Revenues - Natural gas and liquids |
|
|
666 |
|
|
|
725 |
|
|
|
(8.1 |
)% |
Revenues - Total |
|
|
4,722 |
|
|
|
7,816 |
|
|
|
(39.6 |
)% |
Direct operating costs |
|
|
1,650 |
|
|
|
2,779 |
|
|
|
(40.6 |
)% |
Margin (1) |
|
|
3,072 |
|
|
|
5,037 |
|
|
|
(39.0 |
)% |
Depletion and impairment |
|
|
1,805 |
|
|
|
8,668 |
|
|
|
(79.2 |
)% |
Operating income (loss) |
|
$ |
1,267 |
|
|
$ |
(3,631 |
) |
|
NA |
|
|
Capital expenditures |
|
$ |
1,692 |
|
|
$ |
3,612 |
|
|
|
(53.2 |
)% |
(1) |
Margin is defined as revenues less direct operating costs and excludes depletion and impairment. |
Oil revenues decreased as a result of lower oil production and lower commodity prices. Depletion and impairment expense in 2015 includes approximately $4.1 million of oil and natural gas property impairments. There were no impairments in the three months ended June 30, 2016. Depletion expense is lower primarily due to lower oil production and the impact of significant impairments recognized in recent years.
30
|
2016 |
|
|
2015 |
|
|
% Change |
|
||||
|
|
(Dollars in thousands) |
|
|
|
|
|
|||||
Selling, general and administrative |
|
$ |
12,579 |
|
|
$ |
13,445 |
|
|
|
(6.4 |
)% |
Depreciation |
|
$ |
1,368 |
|
|
$ |
1,368 |
|
|
|
— |
|
Other operating income, net: |
|
|
|
|
|
|
|
|
|
|
|
|
Net gain on asset disposals |
|
$ |
(4,822 |
) |
|
$ |
(2,998 |
) |
|
|
60.8 |
% |
Interest income |
|
$ |
100 |
|
|
$ |
318 |
|
|
|
(68.6 |
)% |
Interest expense |
|
$ |
10,678 |
|
|
$ |
9,249 |
|
|
|
15.5 |
% |
Other income |
|
$ |
17 |
|
|
|
— |
|
|
NA |
|
|
Capital expenditures |
|
$ |
491 |
|
|
$ |
606 |
|
|
|
(19.0 |
)% |
Lower selling, general and administrative expense reflects lower personnel costs due to headcount reductions. Other operating income, net includes net gains or losses associated with the disposal of assets related to corporate strategy decisions of the executive management group. Accordingly, the related gains or losses have been excluded from the results of specific segments. Interest expense increased primarily due to lower capitalized interest, as we have reduced our capital expenditure spending in 2016.
The following tables summarize operations by business segment for the six months ended June 30, 2016 and 2015:
Contract Drilling |
|
2016 |
|
|
2015 |
|
|
% Change |
|
|||
|
|
(Dollars in thousands) |
|
|
|
|
|
|||||
Revenues |
|
$ |
283,894 |
|
|
$ |
689,799 |
|
|
|
(58.8 |
)% |
Direct operating costs |
|
|
144,701 |
|
|
|
366,658 |
|
|
|
(60.5 |
)% |
Margin (1) |
|
|
139,193 |
|
|
|
323,141 |
|
|
|
(56.9 |
)% |
Selling, general and administrative |
|
|
3,237 |
|
|
|
2,858 |
|
|
|
13.3 |
% |
Depreciation, amortization and impairment |
|
|
241,501 |
|
|
|
242,459 |
|
|
|
(0.4 |
)% |
Operating income (loss) |
|
$ |
(105,545 |
) |
|
$ |
77,824 |
|
|
NA |
|
|
Operating days |
|
|
11,653 |
|
|
|
26,731 |
|
|
|
(56.4 |
)% |
Average revenue per operating day |
|
$ |
24.36 |
|
|
$ |
25.81 |
|
|
|
(5.6 |
)% |
Average direct operating costs per operating day |
|
$ |
12.42 |
|
|
$ |
13.72 |
|
|
|
(9.5 |
)% |
Average margin per operating day (1) |
|
$ |
11.94 |
|
|
$ |
12.09 |
|
|
|
(1.2 |
)% |
Average rigs operating |
|
|
64 |
|
|
|
148 |
|
|
|
(56.6 |
)% |
Capital expenditures |
|
$ |
28,450 |
|
|
$ |
311,362 |
|
|
|
(90.9 |
)% |
(1) |
Margin is defined as revenues less direct operating costs and excludes depreciation, amortization and impairment and selling, general and administrative expenses. Average margin per operating day is defined as margin divided by operating days. |
The decreases in revenues and direct operating costs primarily result from the decrease in the number of rigs operating. Average direct operating costs per operating day decreased primarily due to lower labor costs and a higher percentage of rigs on standby during the 2016 period. Rigs on standby have very little associated cost.
31
|
2016 |
|
|
2015 |
|
|
% Change |
|
||||
|
|
(Dollars in thousands) |
|
|
|
|
|
|||||
Revenues |
|
$ |
170,263 |
|
|
$ |
426,345 |
|
|
|
(60.1 |
)% |
Direct operating costs |
|
|
157,359 |
|
|
|
355,481 |
|
|
|
(55.7 |
)% |
Margin (1) |
|
|
12,904 |
|
|
|
70,864 |
|
|
|
(81.8 |
)% |
Selling, general and administrative |
|
|
5,918 |
|
|
|
9,444 |
|
|
|
(37.3 |
)% |
Depreciation, amortization and impairment |
|
|
96,970 |
|
|
|
95,180 |
|
|
|
1.9 |
% |
Operating loss |
|
$ |
(89,984 |
) |
|
$ |
(33,760 |
) |
|
|
166.5 |
% |
Fracturing jobs |
|
|
157 |
|
|
|
364 |
|
|
|
(56.9 |
)% |
Other jobs |
|
|
330 |
|
|
|
1,153 |
|
|
|
(71.4 |
)% |
Total jobs |
|
|
487 |
|
|
|
1,517 |
|
|
|
(67.9 |
)% |
Average revenue per fracturing job |
|
$ |
1,058.99 |
|
|
$ |
1,118.41 |
|
|
|
(5.3 |
)% |
Average revenue per other job |
|
$ |
12.13 |
|
|
$ |
16.69 |
|
|
|
(27.3 |
)% |
Average revenue per total job |
|
$ |
349.62 |
|
|
$ |
281.04 |
|
|
|
24.4 |
% |
Average direct operating costs per total job |
|
$ |
323.12 |
|
|
$ |
234.33 |
|
|
|
37.9 |
% |
Average margin per total job (1) |
|
$ |
26.50 |
|
|
$ |
46.71 |
|
|
|
(43.3 |
)% |
Margin as a percentage of revenues (1) |
|
|
7.6 |
% |
|
|
16.6 |
% |
|
|
(54.2 |
)% |
Capital expenditures and acquisitions |
|
$ |
19,332 |
|
|
$ |
139,819 |
|
|
|
(86.2 |
)% |
(1) |
Margin is defined as revenues less direct operating costs and excludes depreciation, amortization and impairment and selling, general and administrative expenses. Average margin per total job is defined as margin divided by total jobs. Margin as a percentage of revenues is defined as margin divided by revenues. |
Revenues and direct operating costs decreased primarily due to a decrease in the number of fracturing jobs. The total number of jobs decreased as a result of the downturn in the oil and natural gas industry.
The reduction in selling, general and administrative expense reflects reductions in headcount and other personnel related costs.
Oil and Natural Gas Production and Exploration |
|
2016 |
|
|
2015 |
|
|
% Change |
|
|||
|
|
(Dollars in thousands) |
|
|
|
|
|
|||||
Revenues - Oil |
|
$ |
7,413 |
|
|
$ |
12,955 |
|
|
|
(42.8 |
)% |
Revenues - Natural gas and liquids |
|
|
1,276 |
|
|
|
1,361 |
|
|
|
(6.2 |
)% |
Revenues - Total |
|
|
8,689 |
|
|
|
14,316 |
|
|
|
(39.3 |
)% |
Direct operating costs |
|
|
3,740 |
|
|
|
5,577 |
|
|
|
(32.9 |
)% |
Margin (1) |
|
|
4,949 |
|
|
|
8,739 |
|
|
|
(43.4 |
)% |
Depletion and impairment |
|
|
6,537 |
|
|
|
16,932 |
|
|
|
(61.4 |
)% |
Operating loss |
|
$ |
(1,588 |
) |
|
$ |
(8,193 |
) |
|
|
(80.6 |
)% |
Capital expenditures |
|
$ |
3,220 |
|
|
$ |
11,204 |
|
|
|
(71.3 |
)% |
(1) |
Margin is defined as revenues less direct operating costs and excludes depletion and impairment. |
Oil revenues decreased as a result of lower oil production and lower commodity prices. Depletion and impairment expense in 2016 includes approximately $2.2 million of oil and natural gas property impairments compared to approximately $7.4 million of oil and natural gas property impairments in 2015. Depletion expense is lower primarily due to lower oil production and the impact of significant impairments recorded in recent years.
32
|
2016 |
|
|
2015 |
|
|
% Change |
|
||||
|
|
(Dollars in thousands) |
|
|
|
|
|
|||||
Selling, general and administrative |
|
$ |
25,904 |
|
|
$ |
27,451 |
|
|
|
(5.6 |
)% |
Depreciation |
|
$ |
2,737 |
|
|
$ |
2,735 |
|
|
|
0.1 |
% |
Other operating (income) expense, net: |
|
|
|
|
|
|
|
|
|
|
|
|
Net gain on asset disposals |
|
$ |
(7,267 |
) |
|
$ |
(5,914 |
) |
|
|
22.9 |
% |
Legal settlements |
|
|
1,100 |
|
|
|
12,260 |
|
|
|
(91.0 |
)% |
Other operating (income) expense, net |
|
$ |
(6,167 |
) |
|
$ |
6,346 |
|
|
NA |
|
|
Interest income |
|
$ |
210 |
|
|
$ |
601 |
|
|
|
(65.1 |
)% |
Interest expense |
|
$ |
21,478 |
|
|
$ |
17,790 |
|
|
|
20.7 |
% |
Other income |
|
$ |
33 |
|
|
$ |
— |
|
|
NA |
|
|
Capital expenditures |
|
$ |
832 |
|
|
$ |
1,248 |
|
|
|
(33.3 |
)% |
Lower selling, general and administrative expense reflects lower personnel costs due to headcount reductions. Other operating (income) expense, net includes net gains or losses associated with the disposal of assets related to corporate strategy decisions of the executive management group. Accordingly, the related gains or losses have been excluded from the results of specific segments. Interest expense increased primarily due to lower capitalized interest, as we have reduced our capital expenditure spending in 2016.
Adjusted EBITDA
Adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) is not defined by accounting principles generally accepted in the United States of America (“U.S. GAAP”). We define Adjusted EBITDA as net income (loss) plus net interest expense, income tax expense (benefit) and depreciation, depletion, amortization and impairment expense. We present Adjusted EBITDA (a non-U.S. GAAP measure) because we believe it provides to both management and investors additional information with respect to both the performance of our fundamental business activities and our ability to meet our capital expenditures and working capital requirements. Adjusted EBITDA should not be construed as an alternative to the U.S. GAAP measure of net income (loss).
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
||||
|
|
(Dollars in thousands) |
|
|||||||||||||
Net loss |
|
$ |
(85,866 |
) |
|
$ |
(18,975 |
) |
|
$ |
(156,369 |
) |
|
$ |
(9,850 |
) |
Income tax benefit |
|
|
(49,027 |
) |
|
|
(14,720 |
) |
|
|
(84,457 |
) |
|
|
(8,000 |
) |
Net interest expense |
|
|
10,578 |
|
|
|
8,931 |
|
|
|
21,268 |
|
|
|
17,189 |
|
Depreciation, depletion, amortization and impairment |
|
|
170,975 |
|
|
|
181,924 |
|
|
|
347,745 |
|
|
|
357,306 |
|
Adjusted EBITDA |
|
$ |
46,660 |
|
|
$ |
157,160 |
|
|
$ |
128,187 |
|
|
$ |
356,645 |
|
Income Taxes
Our effective income tax rate was 35.1% for the six months ended June 30, 2016, compared to 44.8% for the six months ended June 30, 2015. The Domestic Production Activities Deduction (the “Section 199 Deduction”) was enacted as part of the American Jobs Creation Act of 2004 (as revised by the Emergency Economic Stabilization Act of 2008), and allows a deduction of 9% on the lesser of qualified production activities income or taxable income. For tax purposes, we had net operating losses for the years ended December 31, 2015 and 2014, which have been carried back to prior years. These carrybacks resulted in the loss of the benefits of previous Section 199 Deductions. The loss of these benefits was recognized during the six months ended June 30, 2016, which reduced the tax benefit recorded for the six months ended June 30, 2016.
At June 30, 2015, we expected a loss before income taxes for financial statement purposes for the year ending December 31, 2015; however we expected to have taxable income for the year ending December 31, 2015, and the Section 199 Deduction was expected to provide a permanent tax benefit. On June 15, 2015, legislation was enacted which permanently reduced the Texas Margin Tax rate. This resulted in a permanent tax benefit that was recognized during the quarter ended June 30, 2015. The interplay between the expected loss before income taxes for financial statement purposes, the permanent tax benefit expected to be provided by the Section 199 Deduction and the permanent tax benefit from the Texas Margin Tax rate resulted in a higher effective income tax rate for the six months ended June 30, 2015.
33
Recently Issued Accounting Standards
In May 2014, the FASB issued an accounting standards update to provide guidance on the recognition of revenue from customers. The FASB clarified this guidance in March, April and May 2016. Under this guidance, an entity will recognize revenue when it transfers promised goods or services to customers in an amount that reflects what it expects in exchange for the goods or services. This guidance also requires more detailed disclosures to enable users of the financial statements to understand the nature, amount, timing and uncertainty, if any, of revenue and cash flows arising from contracts with customers. The requirements in this update are effective during interim and annual periods beginning after December 15, 2017. We are currently evaluating the impact this guidance will have on our consolidated financial statements.
In November 2015, the FASB issued an accounting standards update to provide guidance for the presentation of deferred tax liabilities and assets. Under this guidance, for a particular tax-paying component of an entity and within a particular tax jurisdiction, all deferred tax liabilities and assets, as well as any related valuation allowance, shall be offset and presented as a single noncurrent amount. The requirements in this update are effective during interim and annual periods beginning after December 15, 2016. The adoption of this update is not expected to have a material impact on our consolidated financial statements.
In February 2016, the FASB issued an accounting standards update to provide guidance for the accounting for leasing transactions. The requirements in this update are effective during interim and annual periods beginning after December 15, 2018. We are currently evaluating the impact this guidance will have on our consolidated financial statements.
In March 2016, the FASB issued an accounting standards update to provide guidance for the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The requirements in this update are effective during interim and annual periods beginning after December 15, 2016. We are currently evaluating the impact this guidance will have on our consolidated financial statements.
Volatility of Oil and Natural Gas Prices and its Impact on Operations and Financial Condition
Our revenue, profitability and cash flows are highly dependent upon prevailing prices for oil and natural gas and expectations about future prices. For many years, oil and natural gas prices and markets have been extremely volatile. Prices are affected by many factors beyond our control. Oil prices declined significantly during the second half of 2014. The closing price of oil, which was as high as $105.68 per barrel during the third quarter of 2014, averaged $48.69 during 2015 and reached a twelve-year low of $26.19 in February 2016. Oil prices averaged $45.41 during the second quarter of 2016 and were briefly above $50 during June 2016. As a result of the prolonged decline in oil prices, our industry has experienced a severe decline in both contract drilling and pressure pumping activity levels. While activity levels have recently stabilized, we do not expect activity levels to significantly increase until commodity prices improve.
We expect oil and natural gas prices to continue to be volatile and to affect our financial condition, operations and ability to access sources of capital. Higher oil and natural gas prices do not necessarily result in increased activity because demand for our services is generally driven by our customers’ expectations of future oil and natural gas prices. A continued decline in demand for oil and natural gas or prolonged low oil and natural gas prices would likely result in further reduced capital expenditures by our customers and decreased demand for our drilling rigs and pressure pumping services, which could have a material adverse effect on our operating results, financial condition and cash flows.
34
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
As of June 30, 2016, we had exposure to interest rate market risk associated with any borrowings that we had under the Base Credit Agreement, the 2015 Term Loan Agreement and the Reimbursement Agreement.
Loans under the Credit Agreement bear interest by reference, at our election, to the LIBOR rate or base rate, provided, that swing line loans bear interest by reference only to the base rate. Until September 27, 2017, the applicable margin on LIBOR rate loans varies from 2.75% to 3.25% and the applicable margin on base rate loans varies from 1.75% to 2.25%, in each case determined based upon our debt to capitalization ratio. On or after September 27, 2017, the applicable margin on LIBOR rate loans varies from 3.25% to 3.75% and the applicable margin on base rate loans varies from 2.25% to 2.75%, in each case determined based on our excess availability under the credit facility. As of June 30, 2016 the applicable margin on LIBOR rate loans was 2.75% and the applicable margin on base rate loans was 1.75%. Based on our debt to capitalization ratio at March 31, 2016, the applicable margin on LIBOR loans is 2.75% and the applicable margin on base rate loans is 1.75% as of July 1, 2016. Based on our debt to capitalization ratio at June 30, 2016, the applicable margin on LIBOR loans will be 2.75% and the applicable margin on base rate loans will be 1.75% as of October 1, 2016.
Loans under the 2015 Term Loan Agreement bore interest, at our election, at the per annum rate of LIBOR plus 3.25% or base rate plus 2.25%.
As of June 30, 2016, under our Base Credit Agreement we had no amounts outstanding under our revolving credit facility and $60.0 million outstanding under our term loan facility at an interest rate of 5.25%. As of June 30, 2016, we had $170 million principal amount outstanding under the 2015 Term Loan Agreement at an interest rate of 5.75%. As a condition precedent to Amendment No. 2, we repaid amounts outstanding under both term loan facilities and terminated both facilities. As of August 2, 2016, we had $70 million drawn under the revolving credit facility. The interest rate on the borrowings outstanding under our revolving credit facility is variable and adjusts at each interest payment date based on our election of LIBOR or the base rate.
Under the Reimbursement Agreement, we will reimburse Scotiabank on demand for any amounts that Scotiabank has disbursed under any letters of credit. We are obligated to pay to Scotiabank interest on all amounts not paid by us on the date of demand or when otherwise due at the LIBOR rate plus 2.25% per annum. As of June 30, 2016, no amounts had been disbursed under any letters of credit.
We conduct a portion of our business in Canadian dollars through our Canadian land-based drilling operations. The exchange rate between Canadian dollars and U.S. dollars has fluctuated during the last several years. If the value of the Canadian dollar against the U.S. dollar weakens, revenues and earnings of our Canadian operations will be reduced and the value of our Canadian net assets will decline when they are translated to U.S. dollars. This currency risk is not material to our results of operations or financial condition.
The carrying values of cash and cash equivalents, trade receivables and accounts payable approximate fair value due to the short-term maturity of these items.
ITEM 4. Controls and Procedures
Disclosure Controls and Procedures — We maintain disclosure controls and procedures (as such terms are defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act), designed to ensure that the information required to be disclosed in the reports that we file with the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including our CEO and CFO, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10‑Q. Based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of June 30, 2016.
Changes in Internal Control Over Financial Reporting —There were no changes in our internal control over financial reporting during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting, as defined in Rule 13a-15(f) under the Exchange Act.
35
We are party to various legal proceedings arising in the normal course of our business; we do not believe that the outcome of these proceedings, either individually or in the aggregate, will have a material adverse effect on our financial condition, results of operations or cash flows. See Note 9 to our unaudited condensed consolidated financial statements in Item 1 of Part I – Financial Information.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
The table below sets forth the information with respect to purchases of our common stock made by us during the quarter ended June 30, 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Approximate Dollar |
|
|
|
|
|
|
|
|
|
|
|
|
Total Number of |
|
|
Value of Shares |
|
||
|
|
|
|
|
|
|
|
|
|
Shares (or Units) |
|
|
That May Yet Be |
|
||
|
|
|
|
|
|
|
|
|
|
Purchased as Part |
|
|
Purchased Under the |
|
||
|
|
Total |
|
|
Average Price |
|
|
of Publicly |
|
|
Plans or |
|
||||
|
|
Number of Shares |
|
|
Paid per |
|
|
Announced Plans |
|
|
Programs (in |
|
||||
Period Covered |
|
Purchased |
|
|
Share |
|
|
or Programs |
|
|
thousands)(1) |
|
||||
April 2016 (2) |
|
|
12,124 |
|
|
$ |
18.74 |
|
|
— |
|
|
|
186,836 |
|
|
May 2016 |
|
— |
|
|
— |
|
|
— |
|
|
|
186,836 |
|
|||
June 2016 (2) |
|
|
156,928 |
|
|
$ |
21.56 |
|
|
|
8,488 |
|
|
|
186,653 |
|
Total |
|
|
169,052 |
|
|
$ |
21.36 |
|
|
|
8,488 |
|
|
|
186,653 |
|
|
(1) |
On September 9, 2013, we announced that our Board of Directors approved a stock buyback program authorizing purchases of up to $200 million of our common stock in open market or privately negotiated transactions. |
(2) |
We withheld 12,124 shares in April 2016 and 148,440 shares in June 2016 with respect to employees’ tax withholding obligations upon vesting of restricted shares. These shares were purchased at fair market value pursuant to the terms of the 2014 Plan and not pursuant to the stock buyback program. |
On August 1, 2016, we entered into an Employment Agreement with William Andrew Hendricks, Jr., our President and Chief Executive Officer, pursuant to which Mr. Hendricks will be entitled to receive a base salary of $600,000 per year and will be eligible to participate in the Company’s annual bonus arrangement for senior executives. Pursuant to the Patterson-UTI Energy, Inc. 2014 Long Term Incentive Plan, the Compensation Committee granted Mr. Hendricks 36,661 restricted shares of common stock of the Company, which vest over a three-year period. In addition to a base salary, Mr. Hendricks will be entitled to participate in all benefit plans generally available to other senior executive employees and in our incentive plans.
The Employment Agreement has an initial three-year term, subject to automatic annual renewal, and supersedes his previous change in control agreement. Mr. Hendricks may terminate his employment under the Employment Agreement by providing written notice of such termination at least 30 days before the effective date of such termination. Under specified circumstances, we may terminate Mr. Hendricks’ employment under the Employment Agreement for “Cause” (as defined in the Employment Agreement) by either (i) providing written notice 10 days before the effective date of such termination and by granting at least 10 days to cure the cause for such termination or (ii) by providing written notice of such termination at least 30 days before the effective date of such termination and by granting at least 20 days to cure the cause for such termination, provided that if the matter is reasonably determined by the Company to not be capable of being cured, Mr. Hendricks may be terminated for cause on the date the written notice is delivered.
The Employment Agreement also provides for, among other things, severance payments and the continuation of certain benefits following termination by the Company of Mr. Hendricks other than for Cause, or termination by Mr. Hendricks for “Good Reason” (as defined in the Employment Agreement). Under these provisions, if Mr. Hendricks’ employment is terminated by the Company without Cause, or Mr. Hendricks terminates his employment for Good Reason, (i) Mr. Hendricks will have the right to receive a lump-sum payment consisting of three times the sum of his base salary plus the average annual cash bonus received by him for the three years prior to the date of termination, payable on the 60th day following his termination, (ii) Mr. Hendricks will have the right to receive a pro-rated lump-sum payment equal to his annual cash bonus based on actual results for the year, payable at the same time as annual cash bonuses are paid to active employees, (iii) the Company will accelerate vesting of all options and restricted stock awards on the 60th day following Mr. Hendricks’ termination, (iv) Mr. Hendricks will be entitled to receive a number of shares in an amount
36
equal to the amount of any performance units previously granted to him that would have vested at the end of the applicable performance period based on actual results, payable at the same time as if Mr. Hendricks had remained employed through the end of the applicable performance period, and (v) the Company will pay Mr. Hendricks certain accrued obligations and certain obligations pursuant to the terms of employee benefit plans. If a termination by the Company other than for Cause or by Mr. Hendricks for Good Reason, occurs following a “Change in Control of the Company” (as defined in the Employment Agreement), Mr. Hendricks will generally be entitled to the same severance payments and benefits described above except that the pro-rated lump-sum payment for annual cash bonuses will be based on his highest annual cash bonus for the last three years and his performance units will vest at target, both payable within 60 days following his termination.
All of the foregoing severance benefits (other than the accrued obligations and benefit obligations) are conditioned on Mr. Hendricks’ execution of a release within 50 days of his termination that is not revoked during any applicable revocation period provided in such release.
The Employment Agreement also contains a non-disparagement covenant and certain confidentiality covenants prohibiting Mr. Hendricks from, among other things, disclosing confidential information. The Employment Agreement also contains non-competition and non-solicitation restrictions, pursuant to which Mr. Hendricks will not be permitted to compete with the Company in certain circumstances for a period of one year following termination of employment. The foregoing summary is qualified in its entirety by reference to the Employment Agreement, a copy of which is filed as Exhibit 10.2 and is incorporated herein by reference.
37
The following exhibits are filed herewith or incorporated by reference, as indicated:
3.1 |
|
Restated Certificate of Incorporation, as amended (filed August 9, 2004 as Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2004 and incorporated herein by reference). |
|
|
|
3.2 |
|
Amendment to Restated Certificate of Incorporation, as amended (filed August 9, 2004 as Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2004 and incorporated herein by reference). |
|
|
|
3.3 |
|
Second Amended and Restated Bylaws (filed August 6, 2007 as Exhibit 3.3 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2007 and incorporated herein by reference). |
|
|
|
10.1 |
|
Amendment No. 2 to Credit Agreement, dated as of July 8, 2016, by and among the Company, certain subsidiaries of the Company party thereto, Wells Fargo Bank, N.A., as administrative agent, issuer of letters of credit and swing line lender and the other lenders party thereto. (filed July 12, 2016 as Exhibit 10.1 to the Company’s Current Report on Form 8-K and incorporated herein by reference).
|
10.2* |
|
Employment Agreement dated as of August 1, 2016 between Patterson-UTI Energy, Inc. and William Andrew Hendricks, Jr.
|
31.1* |
|
Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended. |
|
|
|
31.2* |
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended. |
|
|
|
32.1* |
|
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 USC Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
|
101* |
|
The following materials from Patterson-UTI Energy, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2016, formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Comprehensive Income, (iv) the Condensed Consolidated Statement of Changes in Stockholders’ Equity, (v) the Condensed Consolidated Statements of Cash Flows, and (vi) Notes to Condensed Consolidated Financial Statements. |
* |
filed herewith |
38
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
PATTERSON-UTI ENERGY, INC. |
||
|
|
|
By: |
|
/s/ John E. Vollmer III |
|
|
John E. Vollmer III |
|
|
Senior Vice President – Corporate Development, |
|
|
Chief Financial Officer and Treasurer |
|
|
(Principal Financial and Accounting Officer and Duly Authorized Officer) |
Date: August 2, 2016
39
Exhibit 10.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this “Agreement”) is entered into as of August 1, 2016, between Patterson-UTI Energy, Inc., a Delaware corporation (the “Company”), and William Andrew Hendricks, Jr. (“Executive”).
W I T N E S S E T H:
WHEREAS, Executive is employed by Patterson-UTI Management Services, LLC, a wholly-owned subsidiary of the Company (the “Employer”), and serves as President and Chief Executive Officer of the Company;
WHEREAS, the Company and Executive desire that Executive continue his employment with the Employer and service with the Company as President and Chief Executive Officer, on the terms and conditions set forth below.
WHEREAS, the Company and Executive have agreed to enter into an employment agreement on the terms and conditions, and for the consideration, hereinafter set forth.
NOW THEREFORE, for and in consideration of the mutual promises, covenants and obligations contained herein, the Company and Executive agree as follows:
1.Employment.
(a)The Company agrees to employ Executive, and Executive agrees to be employed by the Company, pursuant to the terms of this Agreement beginning as of August 1, 2016 (the “Effective Date”) and continuing for the period of time set forth in Section 3 of this Agreement, subject to the terms and conditions of this Agreement.
(b)From and after the Effective Date, Executive shall serve in the position of President and Chief Executive Officer of the Company and shall report to the Board of Directors of the Company (the “Board”), with a principal place of employment at the Company’s office in the Houston, Texas metropolitan area.
2.Duties and Responsibilities.
(a)Executive agrees to serve in the position referred to in Section 1(b) hereof and to perform diligently and to the best of Executive’s abilities the usual and customary duties and services appertaining to such position, as well as such additional duties and services appropriate to such position which the Company and Executive mutually may agree upon from time to time. Executive’s employment shall also be subject to the policies maintained and established by the Company that are of general applicability to the Company’s executives, as such policies may be amended from time to time. Executive agrees, during the period of Executive’s employment by the Company, to devote substantially all of Executive’s business time, energy and best efforts to the business and affairs of the Company and its affiliates.
(b)Executive will comply with all applicable laws and corporate documents and policies governing the conduct of the business and affairs of the Company and its subsidiaries and affiliates.
3.Term. Subject to the provision for earlier termination set forth in Section 5 hereof, this Agreement shall be for an initial term that begins on the Effective Date and continues in effect through
1
the third anniversary of the Effective Date and, unless terminated sooner as herein provided, shall automatically be extended for one additional year on each anniversary of the Effective Date (the “Term”).
4.Compensation.
(a)Salary. During the Term, Executive shall receive an annualized base salary of $600,000.00, subject to adjustment up (but not down) by the Board (the “Base Salary”) payable in accordance with the Company’s normal payroll practices.
(b)Bonus. During the Term, Executive shall be eligible to participate in the Company’s annual bonus arrangement for senior executives as in effect from time to time. The amount of such bonus shall be based on the performance of the Company and/or Executive, with specific performance targets and amounts to be determined annually by the Board or the Compensation Committee of the Board.
(c)Employee Benefits. During the Term, Executive shall be entitled to participate in all benefit plans generally available to the Company’s other senior executive employees when and as such plans, if any, become available and Executive becomes eligible for them.
(d)Incentive Plans. During the Term, Executive shall be entitled to participate in the Company’s incentive plans, as in effect from time to time.
(e)Restricted Stock Award. The Board has granted to Executive on the Effective Date pursuant to the Patterson-UTI Energy, Inc. 2014 Long Term Incentive Plan 36,661 restricted shares of common stock of the Company as evidenced by the award agreement dated August 1, 2016.
(f)Reimbursement of Expenses. The Company agrees to promptly reimburse Executive for all appropriately documented, reasonable travel and other business expenses incurred by Executive in the course of providing services requested by the Company or otherwise incurred in his capacity as Executive.
5.Termination of Employment.
(a)By the Company. Notwithstanding the provisions of Section 3, the Company may terminate Executive’s employment under this Agreement at any time for Cause (as defined below), or for any other reason whatsoever or for no reason at all, in the sole discretion of the Company. The Company may terminate Executive’s employment under this Agreement at any time for Cause, by delivering to Executive written notice describing the cause of termination (x) in the case of clause (i), 30 days before the effective date of such termination and by granting Executive at least 20 days to cure the cause; (y) in the case of clauses (ii), (iii) or (iv), 10 days before the effective date of such termination and by granting Executive at least 10 days to cure the cause; or (z) in the case of clause (v) on the date of such termination; provided however, that if the matter is reasonably determined by the Company to not be capable of being cured, Executive may be terminated for cause on the date the written notice is delivered.
“Cause” shall be limited to the occurrence of the following events:
|
(i) |
Executive’s failure to perform the duties described in Section 2 in an honest and faithful manner; |
|
(ii) |
Executive’s omission to perform his duties in a manner that materially and adversely affects the Company; |
2
|
(iv) |
any other action taken by Executive in bad faith or that could be reasonably expected to damage or negatively impact the business, operations, reputation or financial condition of the Company in a material manner; or |
|
(v) |
Executive’s conviction of (or plead of no contest to) a crime involving fraud, dishonesty or moral turpitude or any felony. |
(b)By Executive. Notwithstanding the provisions of Section 3, Executive may terminate Executive’s employment under this Agreement for Good Reason or for any reason whatsoever or no reason at all, in the sole discretion of Executive. In such case, Executive must deliver to the Company written notice of such termination at least 30 days before the effective date of such termination, unless otherwise provided in this Agreement.
“Good Reason” means:
(1)if, prior to a Change in Control of the Company, the occurrence of any of the following events:
|
(i) |
a material diminution in Executive’s Base Salary; |
|
(ii) |
a material diminution in Executive’s authority, duties or responsibilities; or |
|
(iii) |
a material breach by the Company of a material provision of this Agreement. |
Notwithstanding the foregoing provisions of this clause (1) or any other provision in this Agreement to the contrary, any assertion by Executive of a termination of employment for “Good Reason” pursuant to this clause (1) shall not be effective unless all of the following conditions are satisfied: (A) the condition described in clauses (i), (ii) or (iii) giving rise to Executive’s termination of employment must have arisen without Executive’s consent; (B) Executive must provide written notice to the Company of such condition in accordance with Section 11 within 45 days of Executive gaining knowledge of the initial existence of the condition, (C) the condition specified in such notice must remain uncorrected for 30 days after receipt of such notice by the Company and (D) the date of Executive’s termination of employment must occur within 30 days after the expiration of the cure period set forth in (C) above. The date of actual termination of employment in accordance with this clause (1) shall be the “date of termination.”
(2)if, on or after a Change in Control of the Company, the Company, without the consent of Executive:
|
(i) |
causes Executive to cease to be the chief executive officer of the Company or the ultimate parent of the Company; |
3
|
the first Change in Control of the Company or otherwise makes any change in any such position, authority, duties or responsibilities; |
|
(iii) |
removes Executive from, or fails to re-elect or appoint Executive to, any duties or position with the Company or any of its affiliates that were assigned or held by Executive immediately before the occurrence of the first Change in Control of the Company, except that a nominal change in Executive’s title that is merely descriptive and does not affect rank or status shall not constitute such an event; |
|
(iv) |
takes any other action that results in a material diminution in such position, authority, duties or responsibilities or otherwise take any action that materially interferes therewith; |
|
(v) |
reduces Executive’s Base Salary as in effect immediately before the occurrence of the first Change in Control of the Company or as Executive’s Base Salary may be increased from time to time after that occurrence; |
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(vi) |
reduces Executive’s annual bonus to an amount less than the average of the two annual bonuses earned by Executive with respect to the two fiscal years of the Company immediately preceding the fiscal year of the Company in which the first Change in Control of the Company occurred; |
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(vii) |
relocates Executive’s principal place of employment to a location outside of a 50-mile radius from Executive’s principal place of employment immediately prior to the first Change in Control of the Company; |
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(viii) |
fails to (x) continue in effect any bonus, incentive, profit sharing, performance, savings, retirement or pension policy, plan, program or arrangement (such policies, plans, programs and arrangements collectively being referred to herein as “Basic Benefit Plans”), including, but not limited to, any deferred compensation, supplemental executive retirement or other retirement income, stock option, stock purchase, stock appreciation, or similar policy, plan, program or arrangement of the Company, in which Executive was a participant immediately before the occurrence of the first Change in Control of the Company, or any substitute plan adopted by the Board and in which Executive was a participant immediately before the occurrence of the last Change in Control of the Company, unless an equitable and reasonably comparable arrangement (embodied in a substitute or alternative benefit or plan) shall have been made with respect to such Basic Benefit Plan promptly following the occurrence of the last Change in Control of the Company, or (y) continue Executive’s participation in any Basic Benefit Plan (or any substitute or alternative plan) on substantially the same basis, both in terms of the amount of benefits provided to Executive (which are in any event always subject to the terms of any applicable Basic Benefit Plan) and the level of Executive’s participation relative to other participants, as existed immediately before the occurrence of the first Change in Control of the Company; |
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was a participant immediately before the occurrence of the first Change in Control of the Company; |
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(x) |
fails to provide Executive with the number of paid vacation days to which Executive was entitled in accordance with the Company’s vacation policy in effect immediately before the occurrence of the first Change in Control of the Company; |
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(xi) |
fails to continue to provide Executive with office space, related facilities and support personnel (including, but not limited to, administrative and secretarial assistance) (y) that are both commensurate with Executive’s responsibilities to and position with the Company immediately before the occurrence of the first Change in Control of the Company and not materially dissimilar to the office space, related facilities and support personnel provided to other employees of the Company having comparable responsibility to Executive, or (z) that are physically located at the Company’s principal executive offices; or |
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(xii) |
purports to terminate Executive’s employment by the Company unless notice of that termination shall have been given to Executive pursuant to, and that notice shall meet the requirements of, this Section 5. |
If Executive’s employment by the Company is terminated by Executive as a result of the occurrence of Good Reason, Executive shall provide the Company a notice that shall specifically describe the action or inaction of the Company that Executive believes constitutes Good Reason. The notice given pursuant to this clause (2) shall state a date, which shall be not fewer than 30 days nor more than 60 days after the date such notice is given, on which the termination of Executive’s employment by the Company is effective. The date so stated in accordance with this clause (2) shall be the “date of termination.”
(c)Death or Disability. Executive’s employment under this Agreement shall terminate automatically upon Executive’s death or Disability. For purposes of this Agreement, Executive shall be deemed to be terminated due to “Disability” if Executive shall be considered to be permanently and totally disabled in accordance with the Company’s disability plan, if any, for a period of 90 days or more. The Company may terminate Executive’s employment due to Disability by delivering to Executive written notice providing an effective date of termination no earlier than the date of the notice of termination. If there should be a dispute between the Company and Executive as to Executive’s Disability for purposes of this Agreement, the question shall be settled by the opinion of an impartial reputable physician agreed upon by the parties or their representatives within 30 days after the date of the notice of termination due to Disability. The parties agree to be bound by the final decision of such physician.
6.Effect of Termination of Employment on Compensation.
(a)Benefit Obligation and Accrued Obligation Defined. For purposes of this Agreement, payment of the “Benefit Obligation” shall mean payment by the Company to Executive (or his designated beneficiary or legal representative, as applicable), in accordance with the terms of the applicable plan document, of all vested benefits to which Executive is entitled under the terms of the employee benefit plans and compensation arrangements in which Executive is a participant as of the date of termination. “Accrued Obligation” means the sum of (1) Executive’s Base Salary through the date of termination, (2) any accrued vacation pay earned by Executive, (3) any earned but unpaid annual bonus for any completed calendar year and (4) any incurred but unreimbursed expenses for which Executive is entitled to reimbursement, in each case, to the extent not theretofore paid.
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(b)By the Company Without Cause or by Executive for Good Reason. If during the Term, but prior to the occurrence of a Change in Control of the Company (as defined in Section 7) Executive’s employment is terminated by the Company other than for Cause and not as a result of Executive’s death or Disability, or Executive’s employment is terminated by Executive for Good Reason, then Executive shall receive the following benefits and compensation from the Company:
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(i) |
the Company shall pay Executive the Accrued Obligation within 30 days following the date of Executive’s date of termination or such earlier date as may be required by law; |
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(ii) |
the Company shall pay Executive a lump-sum payment consisting of three times the sum of Executive’s Base Salary plus the average annual cash bonus received by Executive for the three years prior to the date of termination, payable on the 60th day following Executive’s date of termination payable on the 60th day following Executive’s date of termination; |
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(iii) |
the Company shall pay Executive a lump-sum payment equal to Executive’s annual cash bonus based on actual results for the year in which Executive’s date of termination occurs multiplied by a fraction, the numerator of which is the number of days Executive was employed by the Company during the year of the termination and the denominator of which is 365, payable at the same time as annual cash bonuses are paid to active employees; |
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(iv) |
the Company will cause all unvested options and restricted stock awards, previously granted by the Company to Executive, to vest on the 60th day following Executive’s date of termination; |
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(v) |
Executive shall be entitled to receive a number of shares in an amount equal to the amount of any performance units, previously granted to Executive, that would have vested at the end of the applicable performance period based on actual results, payable at the same time as if Executive had remained employed through the end of the applicable performance period; and |
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(vi) |
the Company shall pay Executive the Benefit Obligation at the times specified in and in accordance with the terms of the applicable employee benefit plans and compensation arrangements. |
Notwithstanding the foregoing, neither Executive, nor his estate, shall be permitted to specify the taxable year in which a payment described in this Section 6.1(b) shall be paid.
(c)By the Company for Cause. If during the Term Executive’s employment is terminated by the Company for Cause, the Company shall pay to Executive the Accrued Obligation within 30 days following the date of termination or such earlier date as may be required by law. The Company shall pay Executive (or his designated beneficiary or legal representative, if applicable) the Benefit Obligation at the times specified in and in accordance with the terms of the applicable employee benefit plans and compensation arrangements. Following such payments, the Company shall have no further obligations to Executive other than as may be required by law. For the avoidance of doubt, all unvested stock options, restricted stock awards, performance units or other equity awards, previously granted to Executive, shall be forfeited for no consideration, as of the date of termination. The Company shall pay Executive the Benefit Obligation at the times specified in and in accordance with the terms of the applicable employee benefit plans and compensation arrangements.
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(d)By Executive without Good Reason. If during the Term and prior to a Change in Control of the Company (as defined below), Executive terminates his employment without Good Reason, the Company shall pay to Executive the Accrued Obligation within 30 days following the date of termination or such earlier date as may be required by law. The Company shall pay Executive (or his designated beneficiary or legal representative, if applicable) the Benefit Obligation at the times specified in and in accordance with the terms of the applicable employee benefit plans and compensation arrangements. Following such payments, the Company shall have no further obligations to Executive other than as may be required by law. For the avoidance of doubt, all unvested stock options, restricted stock awards, performance units or other equity awards, previously granted to Executive, shall be forfeited for no consideration, as of the date of termination. Any vested stock options shall be exercisable in accordance with the terms and conditions set forth in the applicable award agreement or plan document. The Company shall pay Executive the Benefit Obligation at the times specified in and in accordance with the terms of the applicable employee benefit plans and compensation arrangements. Executive shall not have breached this Agreement if he terminates his employment without Good Reason.
(e)Disability; Death. If during the Term, Executive’s employment is terminated by the Company due to the death or Disability of Executive, then the Company shall pay Executive (or his designated beneficiary or legal representative, if applicable) the Accrued Obligation within 30 days following the date of Executive’s date of termination or such earlier date as may be required by law. The Company shall pay Executive (or his designated beneficiary or legal representative, if applicable) the Benefit Obligation at the times specified in and in accordance with the terms of the applicable employee benefit plans and compensation arrangements. All stock options, restricted stock awards, performance units or other equity awards, previously granted to Executive, shall be administered in accordance with the terms of the applicable award agreement and plan document. Notwithstanding the foregoing, neither Executive, nor his estate, shall be permitted to specify the taxable year in which a payment described in this Section 6(e) shall be paid.
(f)General Release of Claims. Payments to and benefits for Executive under this Section 6 or Section 7 (other than Accrued Obligation and Benefit Obligation) are contingent upon Executive’s execution of a release, substantially in the form attached hereto as Exhibit A, within 50 days of Executive’s date of termination that is not revoked by Executive during any applicable revocation period provided in such release (which shall release and discharge the Company and its affiliates, and their officers, directors, managers, employees and agents from any and all claims or causes of action of any kind or character, including but not limited to all claims or causes of action arising out of Executive’s employment with the Company or its affiliates or the termination of such employment).
7.Change in Control of the Company.
(a)If during the Term a Change in Control of the Company occurs and Executive’s employment is terminated by the Company other than for Cause and not as a result of Executive’s death or Disability, or is terminated by Executive for Good Reason then, Executive shall receive the following benefits and compensation from the Company:
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(i) |
the Company shall pay Executive the Accrued Obligation within 30 days following the date of Executive’s date of termination; |
|
(ii) |
the Company shall pay Executive a lump-sum payment consisting of three times the sum of Executive’s Base Salary plus the average annual cash bonus received by Executive in the three years prior to the date of termination, payable on the 60th day following Executive’s date of termination; |
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|
(iv) |
during the three year period following Executive’s date of termination, the Company shall allow Executive and his eligible dependents to continue to be covered by all medical, vision and dental benefit plans maintained by the Company under which Executive was covered immediately prior to Executive’s date of termination at the same active employee premium cost as a similarly situated active employee, provided that such reimbursements shall not be made in the event the Company would be subject to any excise tax under Section 4980D of the Internal Revenue Code of 1986, as amended (the “Code”) or other penalty or liability pursuant to the provisions of the Patient Protection and Affordable Care Act of 2010 (as amended from time to time), and in lieu of providing the subsidized premiums described above, the Company shall instead pay to Executive a fully taxable monthly cash payment in an amount such that, after payment by Executive of all taxes on such payment, Executive retains an amount equal to the applicable premiums for such month, with such monthly payment being made on the last day of each month for the remainder of such three-year period; provided, further, that such benefits provided during the three-year period shall run concurrent with the health continuation coverage period mandated by Section 4980B of the Code; |
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(v) |
the Company will cause all unvested options and restricted stock awards, previously granted by the Company to Executive, to vest on the 60th day following Executive’s date of termination; |
|
(vi) |
Executive shall be entitled to receive a number of shares in an amount equal to the target amount of any performance units, previously granted to Executive, on the 60th day following Executive’s date of termination; and |
|
(vii) |
the Company shall pay Executive the Benefit Obligation at the times specified in and in accordance with the terms of the applicable employee benefit plans and compensation arrangements. |
Notwithstanding the foregoing, neither Executive, nor his estate, shall be permitted to specify the taxable year in which a payment described in this Section 7(a) shall be paid.
(b)For purposes of this Agreement, a “Change in Control of the Company” shall mean the occurrence of any of the following after the Effective Date:
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entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that for purposes of this subsection (i) of this Section 7(b), the following acquisitions shall not constitute a Change in Control of the Company: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any entity controlled by the Company, or (iv) any acquisition by any corporation pursuant to a transaction which complies with clauses (A), (B) and (C) of subsection (iii) of this Section 7(b); or |
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(ii) |
Individuals who, as of the Effective Date, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Effective Date whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Covered Person other than the Board; or |
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(iii) |
Consummation of (xx) a reorganization, merger or consolidation or sale of the Company or any subsidiary of the Company, or (yy) a disposition of all or substantially all of the assets of the Company (a “Business Combination”), in each case, unless, following such Business Combination, (A) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, direct or indirectly, more than 65% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (B) no Covered Person (excluding any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 35% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation, except to the extent that such ownership existed prior to the Business Combination, and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or, if earlier, of the action of the Board, providing for such Business Combination. |
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(a)Confidential Treatment. Executive acknowledges and agrees that he has acquired, and will in the future acquire as a result of his employment by the Company or otherwise, Proprietary Information (as defined below) of the Company which is of a confidential or trade secret nature, and all of which has a great value to the Company and is a substantial basis and foundation upon which the Company’s business is predicated. Accordingly, other than in the legitimate performance of his job duties, Executive agrees:
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(i) |
to regard and preserve as confidential at all times all Proprietary Information, |
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(ii) |
to refrain from publishing or disclosing any part of the Proprietary Information and from using, copying or duplicating it in any way by any means whatsoever, and |
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(iii) |
not to use on his own behalf or on behalf of any third party or to disclose the Proprietary Information to any person or entity without the prior written consent of the Company. |
“Proprietary Information” includes all confidential or proprietary scientific or technical information, data, formulas and related concepts, business plans (both current and under development), client lists, promotion and marketing programs, trade secrets, or any other confidential or proprietary business information relating to drilling, pressure pumping, or extraction processes, development programs, costs, revenues, marketing, investments, sales activities, promotions, credit and financial data, financing methods, plans or the business of the Company or its affiliates, whether in written or electronic form of writings, correspondence, notes, drafts, records, maps, invoices, technical and business logs, maps, policies, computer programs, disks or otherwise. Proprietary Information does not include information that is or becomes publicly known through lawful means.
(b)Property of the Company. Upon the termination of Executive’s employment with the Company, Executive shall surrender to the Company any and all work papers, reports, manuals, documents and the like (including all originals and copies thereof) in his possession which contain Proprietary Information relating to the business, prospects or plans of the Company or its affiliates. Further, Executives agrees to delete all Proprietary Information from his computer, smartphone, tablet, or any other personal electronic storage devices that may contain Proprietary Information. Executive acknowledges that all Proprietary Information and other property of the Company or any affiliate thereof which Executive accumulates during his engagement are the property of the Company and shall be returned to the Company immediately upon termination of this Agreement.
(c)Cooperation. Executive agrees that following any termination of his employment with the Company, he will not disclose or cause to be disclosed any Proprietary Information, or any negative or adverse information of a substantial nature about the Company or its affiliates, the management of the Company or its affiliates, any product or service provided by the Company or its affiliates or the future prospects of the Company or its affiliates unless required by court order. Nothing in this Section 8 prohibits Executive from reporting possible violations of law or regulation to any governmental agency or entity (or of making any other protected disclosures). Pursuant to the Defend Trade Secrets Act of 2016, Executive shall not be held criminally or civilly liable under any Federal or state trade secret law for the disclosure of any Proprietary Information that (i) is made (A) in confidence to a Federal, state or local government official, either directly or indirectly, or to an attorney and (B) solely for the purpose of reporting or investigating a suspected violation of law or (ii) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. The Company may seek the
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assistance, cooperation or testimony of Executive following any such termination in connection with any investigation, litigation or proceeding arising out of matters within the knowledge of Executive and related to his engagement by the Company, and in any instance, Executive shall provide such assistance, cooperation or testimony and the Company shall pay Executive’s reasonable costs and expenses in connection therewith.
9.Restrictive Covenants.
(a)Definitions. As used in this Section 9, the following terms shall have the following meanings:
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(i) |
“Business” means any business in which the Company, including its affiliates, is engaged in during the Prohibited Period. |
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(ii) |
“Competing Business” means any business, individual, partnership, firm, corporation or other entity which wholly or in any significant part engages in any business competing with the Business in the Restricted Area. In no event will the Company or any of its affiliates be deemed a Competing Business. |
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(iii) |
“Governmental Authority” means any governmental, quasi-governmental, state, county, city or other political subdivision of the United States or any other country, or any agency, court or instrumentality, foreign or domestic, or statutory or regulatory body thereof. |
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(iv) |
“Legal Requirement” means any law, statute, code, ordinance, order, rule, regulation, judgment, decree, injunction, franchise, permit, certificate, license, authorization, or other directional requirement of any Governmental Authority. |
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(v) |
“Prohibited Period” means the period during which Executive is employed by the Company hereunder and a period of one year following Executive’s date of termination. |
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(vi) |
“Restricted Area” (A) means any country or subdivision thereof in which the Company or its affiliates (i) is then currently engaged in the Business, (ii) has engaged in the Business in the two years prior to Executive’s date of termination or (iii) is actively pursuing business opportunities for the Business and (B) includes the parishes in Louisiana listed on Exhibit B. |
(b)Non-Competition; Non-Solicitation.
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(i) |
Executive and the Company agree to the non-competition and non-solicitation provisions of this Section 9(b); (i) in consideration for the Proprietary Information provided by the Company to Executive pursuant to Section 8 of this Agreement; (ii) as part of the consideration for the compensation and benefits to be paid to Executive hereunder; (iii) to protect the Proprietary Information of the Company or its affiliates disclosed or entrusted to Executive by the Company or its affiliates or created or developed by Executive for the Company or its affiliates, the business goodwill of the Company or its affiliates developed through the efforts of Executive and/or the business opportunities disclosed or entrusted to Executive by the Company or its affiliates; and (iv) as an additional incentive for the Company to enter into this Agreement. |
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(iii) |
Notwithstanding the restrictions contained in Section 9(b)(ii), Executive or any of Executive’s affiliates may own an aggregate of not more than 1% of the outstanding stock of any class of any corporation engaged in a Competing Business, if such stock is listed on a national securities exchange or regularly traded in the over-the-counter market by a member of a national securities exchange, without violating the provisions of Section 9(b)(ii), provided that neither Executive nor any of Executive’s affiliates has the power, directly or indirectly, to control or direct the management or affairs of any such corporation and is not involved in the management of such corporation. |
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(iv) |
Executive further expressly covenants and agrees that during the Prohibited Period, Executive will not, and Executive will cause Executive’s affiliates not to (i) engage or employ, or solicit or contact with a view to the engagement or employment of, any person who is an officer or employee of the Company or any of its affiliates or (ii) canvass, solicit, approach or entice away or cause to be canvassed, solicited, approached or enticed away from the Company or any of its affiliates any person who or which is a customer of any of such entities during the period during which Executive is employed by the Company. |
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(v) |
Executive expressly recognizes that Executive is a high-level, executive employee who will be provided with access to Proprietary Information and trade secrets as part of Executive’s employment and that the restrictive covenants set forth in this Section 9 are reasonable and necessary in light of Executive’s executive position and access to the Proprietary Information. |
(c)Non-Disparagement. Executive agrees that following any termination of his employment with the Company, he will not disparage, orally or in writing, the Company or its affiliates, the management of the Company or its affiliates, any product or service provided by the Company or its affiliates or the future prospects of the Company or its affiliates.
(d)Relief. Executive and the Company agree and acknowledge that the limitations as to time, geographical area and scope of activity to be restrained as set forth in this Section 9 are reasonable and do not impose any greater restraint than is necessary to protect the legitimate business interests of the Company. Executive and the Company also acknowledge that money damages would not be sufficient remedy for any breach of Section 8 or this Section 9 by Executive, and the Company or its affiliates shall be entitled to enforce the provisions of Section 8 or this Section 9 by terminating payments then owing to Executive under this Agreement or otherwise and to specific performance and injunctive relief as remedies for such breach or any threatened breach. Such remedies shall not be deemed the exclusive remedies for a breach of Section 8 or this Section 9 but shall be in addition to all remedies available at law or in equity, including the recovery of damages from Executive and Executive’s agents. However, if it is determined that Executive has not committed a breach of Section 8 or this Section 9, then the
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Company shall resume the payments and benefits due under this Agreement and pay to Executive all payments and benefits that had been suspended pending such determination.
(e)Reasonableness; Enforcement. Executive acknowledges that the geographic scope and duration of the covenants contained in this Section 9 are the result of arm’s-length bargaining and are fair and reasonable in light of (a) the nature and wide geographic scope of the operations of the Business, (b) Executive’s level of control over and contact with the Business in all jurisdictions in which it is conducted, (c) the fact that the Business is conducted throughout the Restricted Area and (d) the amount of compensation and Proprietary Information that Executive is receiving in connection with the performance of Executive’s duties hereunder. It is the desire and intent of the parties that the provisions of this Section 9 be enforced to the fullest extent permitted under applicable Legal Requirements, whether now or hereafter in effect and therefore, to the extent permitted by applicable Legal Requirements, Executive and the Company hereby waive any provision of applicable Legal Requirements that would render any provision of this Section 9 invalid or unenforceable.
(f)Reformation. The Company and Executive agree that the foregoing restrictions are reasonable under the circumstances and that any breach of the covenants contained in this Section 9 would cause irreparable injury to the Company. Executive expressly represents that enforcement of the restrictive covenants set forth in this Section 9 will not impose an undue hardship upon Executive or any person or entity affiliated with Executive. Executive understands that the foregoing restrictions may limit Executive’s ability to engage in certain businesses anywhere in the Restricted Area during the Prohibited Period, but acknowledges that Executive will receive sufficiently high remuneration and other benefits from the Company to justify such restriction. Further, Executive acknowledges that Executive’s skills are such that Executive can be gainfully employed in non-competitive employment, and that the restrictive covenants will not prevent Executive from earning a living. Nevertheless, if any of the aforesaid restrictions are found by a court of competent jurisdiction to be unreasonable, or overly broad as to geographic area or time, or otherwise unenforceable, the parties intend for the restrictions herein set forth to be modified by the court making such determination so as to be reasonable and enforceable and, as so modified, to be fully enforced.
10.Excise Taxes. Notwithstanding anything to the contrary in this Agreement, if Executive is a “disqualified individual” (as defined in Section 280G(c) of the Code), and the payments and benefits provided for under this Agreement, together with any other payments and benefits which Executive has the right to receive from the Company or any of its affiliates, would constitute a “parachute payment” (as defined in Section 280G(b)(2) of the Code), then the payments and benefits provided for under this Agreement shall be either (a) reduced (but not below zero) so that the present value of such total amounts and benefits received by Executive from the Company and its affiliates will be one dollar ($1.00) less than three times Executive’s “base amount”(as defined in Section 280G(b)(3) of the Code) and so that no portion of such amounts and benefits received by Executive shall be subject to the excise tax imposed by Section 4999 of the Code or (b) paid in full, whichever produces the better net after-tax position to Executive (taking into account any applicable excise tax under Section 4999 of the Code and any other applicable taxes). The reduction of payments and benefits hereunder, if applicable, shall be made by reducing, first, payments or benefits to be paid in cash hereunder in the order in which such payment or benefit would be paid or provided (beginning with such payment or benefit that would be made last in time and continuing, to the extent necessary, through to such payment or benefit that would be made first in time) and, then, reducing any benefit to be provided in kind hereunder in a similar order. The determination as to whether any such reduction in the amount of the payments and benefits provided hereunder is necessary shall be made by a nationally recognized public accounting firm selected by the Company in good faith and approved by Executive, which approval shall not be unreasonably withheld. If a reduced payment or benefit is made or provided and through error or otherwise that payment or benefit, when aggregated with other payments and benefits from the Company (or its affiliates) used in
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determining if a parachute payment exists, exceeds one dollar ($1.00) less than three times Executive’s base amount, then Executive shall immediately repay such excess to the Company upon notification that an overpayment has been made.
11.Notice. All notices, requests, consents, directions and other instruments and communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given if (a) delivered personally, (b) mailed first-class, postage prepaid, registered or certified mail, or (c) sent by overnight courier, facsimile, telecommunication or other similar form of communication (with receipt confirmed), as follows:
To the Company:Patterson-UTI Energy, Inc.
Attention: General Counsel
450 Gears Road, Suite 500
Houston, Texas 77067
Facsimile: (281) 765-7175
To Executive:William Andrew Hendricks, Jr. at the most recent address for Executive
listed in the payroll records of the Company.
or to such other address and to the attention of such other person(s) or officer(s) as any party may designate by written notice. Any notice mailed shall be deemed to have been given and received on the third business day following the day of mailing. Any notice sent by overnight courier, facsimile, telecommunication or other similar form of communication (with receipt confirmed) shall be deemed to have been given and received on the next business day following the day such communication is sent.
12.References to the Company. References in this Agreement to the Company in the context of providing services to the Company shall include the Company and all of its subsidiaries as the context reasonably requires, including without limitation Sections 8 and 9. References in this Agreement to employment with the Company shall also refer to employment with the Employer as the context reasonably requires.
13.Nonassignment. This Agreement is personal to Executive and to the Company and shall not be assigned by either party without the other’s written consent, except that the Company may assign its rights and delegate its obligations under this Agreement to any entity that acquires all or substantially all of its business.
14.Further Assurances. Each party hereto agrees to perform such further actions, and to execute and deliver such additional documents, as may be reasonably necessary to carry out the provisions of this Agreement.
15.Severability. In the event that any of the provisions, or portions thereof, of this Agreement are held to be unenforceable or invalid by any court of competent jurisdiction, the validity and enforceability or the remaining provisions, or portions thereof, shall not be affected thereby.
16.Governing Law; Venue. This Agreement shall be governed and construed under and interpreted in accordance with the laws of the State of Texas without giving effect to the doctrine of conflict of laws. With respect to any claim or dispute related to or arising under this Agreement, the parties hereto hereby consent to the exclusive jurisdiction, forum and venue of the state and federal courts located in or sitting for Houston, Texas.
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17.Entire Agreement; Interpretation. This Agreement constitutes the entire agreement of the parties, and supersedes all prior agreements, oral or written, between the Company and Executive relating to his employment by the Company, including the Change in Control Agreement between the Company and Executive dated April 2, 2012, which as of the Effective Date shall be null and void. For the avoidance of doubt, any equity incentive award agreements or indemnity agreements between the Company and Executive remain in effect in accordance with their terms and are not superseded pursuant to this Section 17, except to the extent that this Agreement provides more favorable vesting provisions applicable to certain terminations of employment as described in Sections 6 and 7. No change or modification of this Agreement shall be enforceable unless contained in a writing signed by the party against whom enforcement is sought. No presumption shall be construed against the party drafting this Agreement.
18.Withholding of Taxes and Other Employee Deductions. The Company may withhold from any benefits and payments made pursuant to this Agreement all federal, state, city and other applicable taxes and withholdings as may be required pursuant to any law or governmental regulation or ruling and all other customary deductions made with respect to the Company’s employees generally.
19.Executive’s Representations. Executive represents and warrants that:
(a)he is free to enter into this Agreement and to perform each of the terms and covenants contained herein;
(b)he has been advised by legal counsel as to the terms and provisions hereof and the effort thereof and fully understands the consequences thereof;
20.Waiver. The failure of any party to insist, in any one or more instances, upon strict performance of any one or more of the provisions, terms and conditions of this Agreement, or to exercise any right or rights hereunder shall not be construed as a waiver thereof, and any and all such provisions, terms, conditions and rights shall continue and remain in full force and effect.
21.Compliance with Section 409A.
(a)This Agreement is intended to comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”) and shall be construed and interpreted in accordance with such intent. To the extent any payment or benefit provided under this Agreement is subject to Section 409A, such benefit shall be provided in a manner that complies with Section 409A, including any IRS guidance promulgated with respect to Section 409A; provided, however, in no event shall any action to comply with Section 409A reduce the aggregate amount payable to Executive hereunder unless expressly agreed in writing by Executive.
(b)All reimbursements or provision of in-kind benefits pursuant to this Agreement shall be made in accordance with Treasury Regulation § 1.409A-3(i)(1)(iv) such that the reimbursement or provision will be deemed payable at a specified time or on a fixed schedule relative to a permissible payment event. Specifically, the amount reimbursed or in-kind benefits provided under this Agreement during Executive’s taxable year may not affect the amounts reimbursed or provided in any other taxable year (except that total reimbursements may be limited by a lifetime maximum under a group health plan), the reimbursement of an eligible expense shall be made on or before the last day of Executive’s taxable year following the taxable year in which the expense was incurred, and the right to reimbursement or provision of in-kind benefit is not subject to liquidation or exchange for another benefit.
15
(c)To the extent required to comply with Section 409A (as determined by the Company), if Executive is a “specified employee,” as determined by the Company, as of his date of termination, then all amounts due under this Agreement that constitute a “deferral of compensation” within the meaning of Section 409A, that are provided as a result of a “separation from service” within the meaning of Section 409A, and that would otherwise be paid or provided during the first six months following Executive’s date of termination, shall be accumulated through and paid or provided on the first business day that is more than six months after Executive’s date of termination (or, if Executive dies during such six month period, within 90 days after Executive’s death). Each payment under this Agreement, including each payment in a series of installment payments, is intended to be a separate payment for purposes of Treas. Reg. § 1.409A-2(b).
22.Clawback Policy. Notwithstanding any other provisions in this Agreement, any payments made pursuant to this Agreement shall be subject to recovery or clawback by the Company under any applicable clawback policy adopted by the Company in accordance with SEC regulations or other applicable law, including the clawback policy of the Company adopted on March 9, 2010, as amended or superseded from time to time, and Executive agrees to execute appropriate acknowledgements or other documentation as may be required pursuant to such policies from time to time.
23.Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement.
[SIGNATURES ON FOLLOWING PAGE]
16
IN WITNESS WHEREOF, the parties have caused this Agreement to be entered into as of the date first written above.
PATTERSON-UTI ENERGY, INC
By: /s/ Mark S. Siegel
Mark S. Siegel
Chairman of the Board of Directors
EXECUTIVE
/s/ William Andrew Hendricks, Jr.
William Andrew Hendricks, Jr.
17
FORM OF WAIVER AND RELEASE
[The language in this Release may change based on legal developments and evolving best practices; this form is provided as an example of what will be included in the final Release document.]
In consideration of, and as a condition precedent to, the severance payment (the “Severance”) described in that certain Employment Agreement (the “Agreement”) effective as of August 1, 2016 between Patterson-UTI Energy, Inc., a Delaware corporation (the “Company”), and William Andrew Hendricks, Jr. (“Executive”), which were offered to Executive in exchange for a general waiver and release of claims (this “Waiver and Release”). Executive having acknowledged the above-stated consideration as full compensation for and on account of any and all injuries and damages which Executive has sustained or claimed, or may be entitled to claim, Executive, for himself, and his heirs, executors, administrators, successors and assigns, does hereby release, forever discharge and promise not to sue the Company, its parents, subsidiaries, affiliates, successors and assigns, and their past and present officers, directors, partners, employees, members, managers, shareholders, agents, attorneys, accountants, insurers, heirs, administrators, executors (collectively the “Released Parties”) from any and all claims, liabilities, costs, expenses, judgments, attorney fees, actions, known and unknown, of every kind and nature whatsoever in law or equity, which Executive had, now has, or may have against the Released Parties relating in any way to Executive’s employment with the Company or termination thereof prior to and including the date of execution of this Waiver and Release, including but not limited to, all claims for contract damages, tort damages, special, general, direct, punitive and consequential damages, compensatory damages, loss of profits, attorney fees and any and all other damages of any kind or nature; all contracts, oral or written, between Executive and any of the Released Parties; any business enterprise or proposed enterprise contemplated by any of the Released Parties, as well as anything done or not done prior to and including the date of execution of this Waiver and Release. Notwithstanding anything to the contrary contained in this Waiver and Release, nothing in this Waiver and Release shall be construed to release the Company from any obligations set forth in the Agreement.
Executive understands and agrees that this release and covenant not to sue shall apply to any and all claims or liabilities arising out of or relating to Executive’s employment with the Company and the termination of such employment, including, but not limited to: claims of discrimination based on age, race, color, sex (including sexual harassment), religion, national origin, marital status, parental status, veteran status, union activities, disability or any other grounds under applicable federal, state or local law prior to and including the date of execution of this Waiver and Release, including, but not limited to, claims arising under the Age Discrimination in Employment Act of 1967, the Americans with Disabilities Act, the Family and Medical Leave Act, Title VII of the Civil Rights Act, the Civil Rights Act of 1991, 42 U.S.C. § 1981, the Genetic Information Non-Discrimination Act of 2008, the Employee Retirement Income Security Act of 1974, the Consolidated Omnibus Budget Reconciliation Act of 1985, the Rehabilitation Act of 1973, the Equal Pay Act of 1963 (EPA), all as amended, as well as any claims prior to and including the date of execution of this Waiver and Release, regarding wages; benefits; vacation; sick leave; business expense reimbursements; wrongful termination; breach of the covenant of good faith and fair dealing; intentional or negligent infliction of emotional distress; retaliation; outrage; defamation; invasion of privacy; breach of contract; fraud or negligent misrepresentation; harassment; breach of duty; negligence; discrimination; claims under any employment, contract or tort laws; claims arising under any other federal law, state law, municipal law, local law, or common law; any claims arising out of any employment contract, policy or procedure; and any other claims related to or arising out of his employment or the separation of his employment with the Company prior to and including the date of execution of this Waiver and Release.
In addition, Executive agrees not to cause or encourage any legal proceeding to be maintained or instituted against any of the Released Parties, save and except proceedings to enforce the terms of the Agreement or claims of Executive not released by and in this Waiver and Release.
This release does not apply to any claims for unemployment compensation or any other claims or rights which, by law, cannot be waived, including the right to file an administrative charge or participate in an administrative investigation or proceeding; provided, however that Executive disclaims and waives any right to share or participate in any monetary award resulting from the prosecution of such charge or investigation or proceeding.
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Executive expressly acknowledges that he is voluntarily, irrevocably and unconditionally releasing and forever discharging the Company and its respective present and former parents, subsidiaries, divisions, affiliates, branches, insurers, agencies, and other offices from all rights or claims he has or may have against the Company including, but not limited to, without limitation, all charges, claims of money, demands, rights, and causes of action arising under the Age Discrimination in Employment Act of 1967, as amended (“ADEA”), up to and including the date Executive signs this Waiver and Release including, but not limited to, all claims of age discrimination in employment and all claims of retaliation in violation of ADEA. Executive further acknowledges that the consideration given for this waiver of claims under the ADEA is in addition to anything of value to which he was already entitled in the absence of this waiver. Executive further acknowledges: (a) that he has been informed by this writing that he should consult with an attorney prior to executing this Waiver and Release; (b) that he has carefully read and fully understands all of the provisions of this Waiver and Release; (c) he is, through this Waiver and Release, releasing the Company from any and all claims he may have against it; (d) he understands and agrees that this waiver and release does not apply to any claims that may arise under the ADEA after the date he executes this Waiver and Release; (e) he has at least twenty-one (21) days within which to consider this Waiver and Release; and (f) he has seven (7) days following his execution of this Waiver and Release to revoke the Waiver and Release; and (g) this Waiver and Release shall not be effective until the revocation period has expired and Executive has signed and has not revoked the Waiver and Release.
Executive acknowledges and agrees that: (a) he has had reasonable and sufficient time to read and review this Waiver and Release and that he has, in fact, read and reviewed this Waiver and Release; (b) that he has the right to consult with legal counsel regarding this Waiver and Release and is encouraged to consult with legal counsel with regard to this Waiver and Release; (c) that he has had (or has had the opportunity to take) twenty-one (21) calendar days to discuss the Waiver and Release with a lawyer of his choice before signing it and, if he signs before the end of that period, he does so of his own free will and with the full knowledge that he could have taken the full period; (d) that he is entering into this Waiver and Release freely and voluntarily and not as a result of any coercion, duress or undue influence; (e) that he is not relying upon any oral representations made to him regarding the subject matter of this Waiver and Release; (f) that by this Waiver and Release he is receiving consideration in addition to that which he was already entitled; and (g) that he has received all information he requires from the Company in order to make a knowing and voluntary release and waiver of all claims against the Company.
Executive acknowledges and agrees that he has seven (7) days after the date he signs this Waiver and Release in which to rescind or revoke this Waiver and Release by providing notice in writing to the Company. Executive further understands that the Waiver and Release will have no force and effect until the end of that seventh day (the “Waiver Effective Date”). If Executive revokes the Waiver and Release, the Company will not be obligated to pay or provide Executive with the benefits described in this Waiver and Release, and this Waiver and Release shall be deemed null and void.
AGREED TO AND ACCEPTED this
______ day of _________________, 20__.
William Andrew Hendricks, Jr.
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Allen
Beauregard
Bienville
Bossier
Caddo
Calcasieu
Cameron
DeSoto
Jackson
Jefferson Davis
Lafayette
Lincoln
Natchitoches
Rapides
Red River
Sabine
St. Landry
St. Mary
Vermilion
Webster
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EXHIBIT 31.1
CERTIFICATIONS
I, William Andrew Hendricks, Jr., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Patterson-UTI Energy, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
/s/ William Andrew Hendricks, Jr. |
William Andrew Hendricks, Jr. |
President and Chief Executive Officer |
Date: August 2, 2016
EXHIBIT 31.2
CERTIFICATIONS
I, John E. Vollmer III, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Patterson-UTI Energy, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
/s/ John E. Vollmer III |
John E. Vollmer III |
Senior Vice President — Corporate |
Development, Chief Financial Officer and Treasurer |
Date: August 2, 2016
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
NOT FILED PURSUANT TO THE SECURITIES EXCHANGE ACT OF 1934
In connection with the quarterly report of Patterson-UTI Energy, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2016, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), William Andrew Hendricks, Jr., Chief Executive Officer, and John E. Vollmer III, Chief Financial Officer, of the Company, each certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission upon request. The foregoing is being furnished solely pursuant to said Section 906 and Rule 13a-14(b) promulgated under the Securities Exchange Act of 1934, as amended, and is not being filed as part of the Report or as a separate disclosure document.
/s/ William Andrew Hendricks, Jr. |
William Andrew Hendricks, Jr. |
Chief Executive Officer |
August 2, 2016 |
/s/ John E. Vollmer III |
John E. Vollmer III |
Chief Financial Officer |
August 2, 2016 |
Document and Entity Information - shares |
6 Months Ended | |
---|---|---|
Jun. 30, 2016 |
Jul. 28, 2016 |
|
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Jun. 30, 2016 | |
Document Fiscal Year Focus | 2016 | |
Document Fiscal Period Focus | Q2 | |
Trading Symbol | PTEN | |
Entity Registrant Name | PATTERSON UTI ENERGY INC | |
Entity Central Index Key | 0000889900 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 147,732,339 |
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (Unaudited) - USD ($) $ in Thousands |
Jun. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Statement Of Financial Position [Abstract] | ||
Accounts receivable, allowance for doubtful accounts | $ 3,191 | $ 3,545 |
Current portion of long-term debt, net of debt issuance cost | 529 | 483 |
Long-term debt, net of debt issuance cost | $ 2,581 | $ 3,350 |
Preferred stock, par value | $ 0.01 | $ 0.01 |
Preferred stock, authorized | 1,000,000 | 1,000,000 |
Preferred stock, shares issued | 0 | 0 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, authorized | 300,000,000 | 300,000,000 |
Common stock, issued | 191,112,033 | 190,374,801 |
Common stock, outstanding | 147,735,741 | 147,167,561 |
Treasury stock, shares | 43,376,292 | 43,207,240 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | ||||
---|---|---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
|||
Operating revenues: | ||||||
Oil and natural gas | $ 4,722 | $ 7,816 | $ 8,689 | $ 14,316 | ||
Total operating revenues | 193,907 | 472,761 | 462,846 | 1,130,460 | ||
Operating costs and expenses: | ||||||
Contract drilling | 63,803 | 153,848 | 144,701 | 366,658 | ||
Pressure pumping | 69,546 | 142,756 | 157,359 | 355,481 | ||
Oil and natural gas | 1,650 | 2,779 | 3,740 | 5,577 | ||
Depreciation, depletion, amortization and impairment | 170,975 | 181,924 | 347,745 | 357,306 | ||
Selling, general and administrative | 17,087 | 19,216 | 35,059 | 39,753 | ||
Other operating (income) expense, net | [1] | (4,822) | (2,998) | (6,167) | 6,346 | |
Total operating costs and expenses | 318,239 | 497,525 | 682,437 | 1,131,121 | ||
Operating loss | (124,332) | (24,764) | (219,591) | (661) | ||
Other income (expense): | ||||||
Interest income | 100 | 318 | 210 | 601 | ||
Interest expense, net of amount capitalized | (10,678) | (9,249) | (21,478) | (17,790) | ||
Other | 17 | 33 | ||||
Total other expense | (10,561) | (8,931) | (21,235) | (17,189) | ||
Loss before income taxes | (134,893) | (33,695) | (240,826) | (17,850) | ||
Income tax expense (benefit): | ||||||
Current | (2,000) | 1,705 | (25,814) | 32,225 | ||
Deferred | (47,027) | (16,425) | (58,643) | (40,225) | ||
Total income tax benefit | (49,027) | (14,720) | (84,457) | (8,000) | ||
Net loss | $ (85,866) | $ (18,975) | $ (156,369) | $ (9,850) | ||
Net loss per common share: | ||||||
Basic | $ (0.58) | $ (0.13) | $ (1.06) | $ (0.07) | ||
Diluted | $ (0.58) | $ (0.13) | $ (1.06) | $ (0.07) | ||
Weighted average number of common shares outstanding: | ||||||
Basic | 145,944 | 145,300 | 145,857 | 145,142 | ||
Diluted | 145,944 | 145,300 | 145,857 | 145,142 | ||
Cash dividends per common share | $ 0.02 | $ 0.10 | $ 0.12 | $ 0.20 | ||
Contract Drilling | ||||||
Operating revenues: | ||||||
Oil and gas services | $ 115,235 | $ 288,321 | $ 283,894 | $ 689,799 | ||
Pressure Pumping | ||||||
Operating revenues: | ||||||
Oil and gas services | $ 73,950 | $ 176,624 | $ 170,263 | $ 426,345 | ||
|
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Statement Of Income And Comprehensive Income [Abstract] | ||||
Net loss | $ (85,866) | $ (18,975) | $ (156,369) | $ (9,850) |
Other comprehensive income (loss), net of taxes of $0 for all periods: | ||||
Foreign currency translation adjustment | 469 | 3,033 | 7,147 | (5,545) |
Total comprehensive loss | $ (85,397) | $ (15,942) | $ (149,222) | $ (15,395) |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Parenthetical) (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Statement Of Income And Comprehensive Income [Abstract] | ||||
Other comprehensive income (loss), taxes | $ 0 | $ 0 | $ 0 | $ 0 |
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited) - 6 months ended Jun. 30, 2016 - USD ($) $ in Thousands |
Total |
Common Stock |
Additional Paid-in Capital |
Retained Earnings |
Accumulated Other Comprehensive Income (Loss) |
Treasury Stock |
---|---|---|---|---|---|---|
Beginning Balance at Dec. 31, 2015 | $ 2,561,131 | $ 1,904 | $ 1,011,811 | $ 2,458,554 | $ (4,093) | $ (907,045) |
Beginning Balance (in shares) at Dec. 31, 2015 | 190,374,801 | 190,375,000 | ||||
Net loss | $ (156,369) | (156,369) | ||||
Foreign currency translation adjustment | 7,147 | 7,147 | ||||
Issuance of restricted stock (in shares) | 749,000 | |||||
Issuance of restricted stock | $ 7 | (7) | ||||
Vesting of restricted stock units (in shares) | 15,000 | |||||
Forfeitures of restricted stock (in shares) | (27,000) | |||||
Stock-based compensation | 14,192 | 14,192 | ||||
Tax expense related to stock- based compensation | (2,995) | (2,995) | ||||
Payment of cash dividends | (17,665) | (17,665) | ||||
Purchase of treasury stock | (3,611) | (3,611) | ||||
Ending Balance at Jun. 30, 2016 | $ 2,401,830 | $ 1,911 | $ 1,023,001 | $ 2,284,520 | $ 3,054 | $ (910,656) |
Ending Balance (in shares) at Jun. 30, 2016 | 191,112,033 | 191,112,000 |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) (Unaudited) - USD ($) $ in Thousands |
6 Months Ended | |
---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Statement Of Cash Flows [Abstract] | ||
Interest expense, capitalized interest | $ 286 | $ 3,343 |
Basis of Consolidation and Presentation |
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Organization Consolidation And Presentation Of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Consolidation and Presentation | 1. Basis of Consolidation and Presentation The unaudited interim condensed consolidated financial statements include the accounts of Patterson-UTI Energy, Inc. (the “Company”) and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. Except for wholly-owned subsidiaries, the Company has no controlling financial interests in any entity which would require consolidation. The unaudited interim condensed consolidated financial statements have been prepared by management of the Company 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 accounting principles generally accepted in the United States of America have been omitted pursuant to such rules and regulations, although the Company believes the disclosures included either on the face of the financial statements or herein are sufficient to make the information presented not misleading. In the opinion of management, all adjustments which are of a normal recurring nature considered necessary for a fair statement of the information in conformity with accounting principles generally accepted in the United States of America have been included. The Unaudited Condensed Consolidated Balance Sheet as of December 31, 2015, as presented herein, was derived from the audited consolidated balance sheet of the Company, but does not include all disclosures required by accounting principles generally accepted in the United States of America. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015. The results of operations for the six months ended June 30, 2016 are not necessarily indicative of the results to be expected for the full year. The U.S. dollar is the functional currency for all of the Company’s operations except for its Canadian operations, which uses the Canadian dollar as its functional currency. The effects of exchange rate changes are reflected in accumulated other comprehensive income, which is a separate component of stockholders’ equity. During the first quarter of 2016, the Company determined that certain income and expense items should be classified as “other operating (income) expense, net” in the condensed consolidated statements of operations. This caption now includes gains and losses on asset disposals and expenses related to certain legal settlements. Gains and losses on asset disposals were previously presented as a separate line in the condensed consolidated statements of operations. Expenses related to legal settlements were previously included in operating costs of the respective operating segment or in selling, general and administrative expense. For comparative purposes, all such prior period amounts were reclassified to conform to the current presentation, including the Company’s previously disclosed $12.3 million legal settlement that was previously included within selling, general and administrative expense for the six months ended June 30, 2015. The Company provides a dual presentation of its net income (loss) per common share in its unaudited condensed consolidated statements of operations: Basic net income (loss) per common share (“Basic EPS”) and diluted net income (loss) per common share (“Diluted EPS”). Basic EPS excludes dilution and is computed by first allocating earnings between common stockholders and holders of non-vested shares of restricted stock. Basic EPS is then determined by dividing the earnings attributable to common stockholders by the weighted average number of common shares outstanding during the period, excluding non-vested shares of restricted stock. Diluted EPS is based on the weighted average number of common shares outstanding plus the dilutive effect of potential common shares, including stock options, non-vested shares of restricted stock and restricted stock units. The dilutive effect of stock options and restricted stock units is determined using the treasury stock method. The dilutive effect of non-vested shares of restricted stock is based on the more dilutive of the treasury stock method or the two-class method, assuming a reallocation of undistributed earnings to common stockholders after considering the dilutive effect of potential common shares other than non-vested shares of restricted stock. The following table presents information necessary to calculate net loss per share for the three and six month periods ended June 30, 2016 and 2015 as well as potentially dilutive securities excluded from the weighted average number of diluted common shares outstanding because their inclusion would have been anti-dilutive (in thousands, except per share amounts):
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Stock-based Compensation |
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Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based Compensation | 2. Stock-based Compensation
The Company uses share-based payments to compensate employees and non-employee directors. The Company recognizes the cost of share-based payments under the fair-value-based method. Share-based awards consist of equity instruments in the form of stock options, restricted stock or restricted stock units and have included service and, in certain cases, performance conditions. The Company’s share-based awards also included share-settled performance unit awards. Share-settled performance unit awards are accounted for as equity awards. The Company issues shares of common stock when vested stock options are exercised, when restricted stock is granted and when restricted stock units and share-settled performance unit awards vest. Stock Options — The Company estimates the grant date fair values of stock options using the Black-Scholes-Merton valuation model. Volatility assumptions are based on the historic volatility of the Company’s common stock over the most recent period equal to the expected term of the options as of the date the options are granted. The expected term assumptions are based on the Company’s experience with respect to employee stock option activity. Dividend yield assumptions are based on the expected dividends at the time the options are granted. The risk-free interest rate assumptions are determined by reference to United States Treasury yields. Weighted-average assumptions used to estimate the grant date fair values for stock options granted for the three and six month periods ended June 30, 2016 and 2015 follow:
Stock option activity from January 1, 2016 to June 30, 2016 follows:
Restricted Stock — For all restricted stock awards to date, shares of common stock were issued when the awards were made. Non-vested shares are subject to forfeiture for failure to fulfill service conditions and, in certain cases, performance conditions. Non-forfeitable dividends are paid on non-vested shares of restricted stock. The Company uses the straight-line method to recognize periodic compensation cost over the vesting period. Restricted stock activity from January 1, 2016 to June 30, 2016 follows:
Restricted Stock Units — For all restricted stock unit awards made to date, shares of common stock are not issued until the units vest. Restricted stock units are subject to forfeiture for failure to fulfill service conditions. Non-forfeitable cash dividend equivalents are paid on certain non-vested restricted stock units. The Company uses the straight-line method to recognize periodic compensation cost over the vesting period. Restricted stock unit activity from January 1, 2016 to June 30, 2016 follows:
Performance Unit Awards. The Company has granted stock-settled performance unit awards to certain executive officers (the “Performance Units”) on an annual basis since 2010. The Performance Units provide for the recipients to receive a grant of shares of stock upon the achievement during a specified period of certain performance goals established by the Compensation Committee. The performance period for the Performance Units is the three year period commencing on April 1 of the year of grant, except that for the Performance Units granted in 2013 the performance period has been extended pursuant to its terms, as described below.
The performance goals for the Performance Units are tied to the Company’s total shareholder return for the performance period as compared to total shareholder return for a peer group determined by the Compensation Committee. These goals are considered to be market conditions under the relevant accounting standards and the market conditions were factored into the determination of the fair value of the respective performance units. Generally, the recipients will receive a target number of shares if the Company’s total shareholder return during the performance period is positive and, when compared to the peer group, is at the 50th percentile. If the Company’s total shareholder return during the performance period is positive and, when compared to the peer group, is at the 75th percentile or higher, then the recipients will receive two times the target number of shares. If the Company’s total shareholder return during the performance period is positive, and, when compared to the peer group, is at the 25th percentile, then the recipients will only receive one-half of the target number of shares. If the Company’s total shareholder return during the performance period is positive and, when compared to the peer group, achievement is between the 25th and 75th percentile, then the shares to be received by the recipients will be determined on a pro-rata basis. For the Performance Units awarded prior to 2016, there is no payout unless the Company’s total shareholder return is positive and, when compared to the peer group, is at or above the 25th percentile.
For the Performance Units granted in April 2016, if the Company’s total shareholder return is negative, and, when compared to the peer group is at or above the 25th percentile, then the recipients will receive one-half of the number of shares they would have received if the Company’s total shareholder return had been positive.
In respect of the 2013 Performance Units, the performance period ended March 31, 2016, the Company’s total shareholder return for the performance period was negative, the Company’s total shareholder return for the performance period when compared to the peer group was above the 75th percentile, and there was no payout; provided, however, that pursuant to the terms of those 2013 awards, if, during the two-year period ending March 31, 2018, the Company’s total shareholder return for any 30 consecutive day period equals or exceeds 18 percent on an annualized basis from April 1, 2013 through the last day of such 30 consecutive day period, and the recipient is actively employed by the Company through the last day of the extended performance period, then the Company will issue to the recipient the number of shares equal to the amount the recipient would have been entitled to receive if the Company’s total shareholder return had been positive during the initial three year performance period. The total target number of shares with respect to the Performance Units for the awards in 2012-2016 is set forth below:
Because the performance units are stock-settled awards, they are accounted for as equity awards and measured at fair value on the date of grant using a Monte Carlo simulation model. The fair value of the Performance Units is set forth below (in thousands):
These fair value amounts are charged to expense on a straight-line basis over the performance period. Compensation expense associated with the Performance Units is shown below (in thousands):
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Property and Equipment |
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Property Plant And Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property and Equipment | 3. Property and Equipment Property and equipment consisted of the following at June 30, 2016 and December 31, 2015 (in thousands):
The Company evaluates the recoverability of its long-lived assets whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable (a “triggering event”). Based on recent commodity prices, the Company’s results of operations for the three and six month periods ended June 30, 2016 and management’s expectations of results of operations in future periods, the Company concluded that no triggering event occurred during the six months ended June 30, 2016 with respect to its contract drilling segment or its pressure pumping segment. Management’s expectations of results of operations in future periods were based on the assumption that activity levels in both segments will begin to recover by early 2017 in response to improved future oil prices. The Company reviews its proved oil and natural gas properties for impairment whenever a triggering event occurs, such as downward revisions in reserve estimates or decreases in expected future oil and natural gas prices. Proved properties are grouped by field and undiscounted cash flow estimates are prepared based on the Company’s expectation of future pricing over the lives of the respective fields. These cash flow estimates are reviewed by an independent petroleum engineer. If the net book value of a field exceeds its undiscounted cash flow estimate, impairment expense is measured and recognized as the difference between net book value and fair value. The fair value estimates used in measuring impairment are based on internally developed unobservable inputs including reserve volumes and future production, pricing and operating costs (Level 3 inputs in the fair value hierarchy of fair value accounting). The expected future net cash flows are discounted using an annual rate of 10% to determine fair value. The Company reviews unproved oil and natural gas properties quarterly to assess potential impairment. The Company’s impairment assessment is made on a lease-by-lease basis and considers factors such as the Company’s intent to drill, lease terms and abandonment of an area. If an unproved property is determined to be impaired, the related property costs are expensed. Impairment expense related to proved and unproved oil and natural gas properties totaled approximately $2.2 million in the first quarter of 2016 and is included in depreciation, depletion, amortization and impairment in the condensed consolidated statements of operations. There was no impairment expense in the second quarter of 2016. |
Business Segments |
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Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Segments | 4. Business Segments The Company’s revenues, operating income (losses) and identifiable assets are primarily attributable to three business segments: (i) contract drilling of oil and natural gas wells, (ii) pressure pumping services and (iii) the investment, on a non-operating working interest basis, in oil and natural gas properties. Each of these segments represents a distinct type of business. These segments have separate management teams which report to the Company’s chief operating decision maker. The results of operations in these segments are regularly reviewed by the chief operating decision maker for purposes of determining resource allocation and assessing performance. The following tables summarize selected financial information relating to the Company’s business segments (in thousands):
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Goodwill and Intangible Assets |
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Goodwill And Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets | 5. Goodwill and Intangible Assets Goodwill — All of the Company’s goodwill at both June 30, 2016 and December 31, 2015 related to the contract drilling operating segment. Goodwill as of June 30, 2016 and changes for the six months then ended are as follows (in thousands):
There were no impairment losses related to the goodwill in the contract drilling operating segment as of June 30, 2016 or December 31, 2015. Goodwill is evaluated at least annually as of December 31, or when circumstances require, to determine if the fair value of recorded goodwill has decreased below its carrying value. For purposes of impairment testing, goodwill is evaluated at the reporting unit level. The Company’s reporting units for impairment testing have been determined to be its operating segments. The Company first determines whether it is more likely than not that the fair value of a reporting unit is less than its carrying value after considering qualitative, market and other factors, and if it is, then goodwill impairment is determined using a two-step quantitative impairment test. From time to time, the Company may perform the first step of the quantitative testing for goodwill impairment in lieu of performing the qualitative assessment. The first step of the quantitative testing is to compare the fair value of an entity’s reporting units to the respective carrying value of those reporting units. If the carrying value of a reporting unit exceeds its fair value, the second step of the quantitative testing is performed whereby the fair value of the reporting unit is allocated to its identifiable tangible and intangible assets and liabilities with any remaining fair value representing the fair value of goodwill. If this resulting fair value of goodwill is less than the carrying value of goodwill, an impairment loss would be recognized in the amount of the shortfall. Intangible Assets — Intangible assets were recorded in the pressure pumping operating segment in connection with the fourth quarter 2010 acquisition of the assets of a pressure pumping business. As a result of the purchase price allocation, the Company recorded an intangible asset related to the customer relationships acquired. The intangible asset was recorded at fair value on the date of acquisition. The value of the customer relationships was estimated using a multi-period excess earnings model to determine the present value of the projected cash flows associated with the customers in place at the time of the acquisition and taking into account a contributory asset charge. The resulting intangible asset is being amortized on a straight-line basis over seven years. Amortization expense of approximately $911,000 was recorded in the three months ended June 30, 2016 and 2015, and amortization expense of approximately $1.8 million was recorded in the six months ended June 30, 2016 and 2015. The following table presents the gross carrying amount and accumulated amortization of the customer relationships as of June 30, 2016 and December 31, 2015 (in thousands):
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Accrued Expenses |
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Payables And Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued Expenses | 6. Accrued Expenses Accrued expenses consisted of the following at June 30, 2016 and December 31, 2015 (in thousands):
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Asset Retirement Obligation |
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Asset Retirement Obligation Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Asset Retirement Obligation | 7. Asset Retirement Obligation The Company records a liability for the estimated costs to be incurred in connection with the abandonment of oil and natural gas properties in the future. This liability is included in the caption “other” in the liabilities section of the condensed consolidated balance sheet. The following table describes the changes to the Company’s asset retirement obligations during the six months ended June 30, 2016 and 2015 (in thousands):
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Long Term Debt |
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||
Long Term Debt | 8. Long Term Debt 2012 Credit Agreement — On September 27, 2012, the Company entered into a Credit Agreement (“Base Credit Agreement”) with Wells Fargo Bank, N.A., as administrative agent, letter of credit issuer, swing line lender and lender, and each of the other lenders party thereto. The Base Credit Agreement (as amended, the “Credit Agreement”) is a committed senior unsecured credit facility that includes a revolving credit facility. On July 8, 2016, the Company entered into Amendment No. 2 to the Credit Agreement (the “Amendment No. 2”), which amended the Base Credit Agreement. Amendment No. 2, among other things:
As a condition precedent, Amendment No. 2 required that the Company repay the entire outstanding principal amount of its bank term loans. The Company used $160 million of cash and $70 million drawn under the revolving credit facility to repay the bank term loans. The revolving credit facility permits aggregate borrowings of up to $500 million outstanding at any time, subject to the borrowing base described above. The revolving credit facility contains a letter of credit facility that is limited to $50 million and a swing line facility that is limited to $20 million, in each case outstanding at any time. The term loan facility included in the Base Credit Agreement, which facility was terminated in connection with Amendment No. 2, provided for a loan of $100 million, which was drawn on December 24, 2012 and was payable in quarterly principal installments. Subject to customary conditions, the Company may request that the lenders’ aggregate commitments with respect to the revolving credit facility be increased by up to $100 million, not to exceed total commitments of $600 million. The maturity date under the Base Credit Agreement was September 27, 2017 for the revolving facility, however, Amendment No. 2 extended the maturity date of $357.9 million in revolving credit commitments of certain lenders to March 27, 2019.
Loans under the Credit Agreement bear interest by reference, at the Company’s election, to the LIBOR rate or base rate, provided, that swing line loans bear interest by reference only to the base rate. Until September 27, 2017, the applicable margin on LIBOR rate loans varies from 2.75% to 3.25% and the applicable margin on base rate loans varies from 1.75% to 2.25%, in each case determined based upon the Company’s debt to capitalization ratio. On or after September 27, 2017, the applicable margin on LIBOR rate loans varies from 3.25% to 3.75% and the applicable margin on base rate loans varies from 2.25% to 2.75%, in each case determined based on the Company’s excess availability under the credit facility. As of June 30, 2016 the applicable margin on LIBOR rate loans was 2.75% and the applicable margin on base rate loans was 1.75%. Based on the Company’s debt to capitalization ratio at March 31, 2016, the applicable margin on LIBOR loans is 2.75% and the applicable margin on base rate loans is 1.75% as of July 1, 2016. Based on the Company’s debt to capitalization ratio at June 30, 2016, the applicable margin on LIBOR loans will be 2.75% and the applicable margin on base rate loans will be 1.75% as of October 1, 2016. A letter of credit fee is payable by the Company equal to the applicable margin for LIBOR rate loans times the daily amount available to be drawn under outstanding letters of credit. The commitment fee rate payable to the lenders for the unused portion of the credit facility is 0.50%. Each domestic subsidiary of the Company unconditionally guarantees all existing and future indebtedness and liabilities of the other guarantors and the Company arising under the Credit Agreement, other than (a) Ambar Lone Star Fluid Services LLC, (b) domestic subsidiaries that directly or indirectly have no material assets other than equity interests in, or capitalization indebtedness owed by, foreign subsidiaries, and (c) any subsidiary having total assets of less than $1 million. Such guarantees also cover obligations of the Company and any subsidiary of the Company arising under any interest rate swap contract with any person while such person is a lender or an affiliate of a lender under the Credit Agreement. The Credit Agreement requires compliance with two financial covenants. The Company must not permit its debt to capitalization ratio to exceed 40%. The Credit Agreement generally defines the debt to capitalization ratio as the ratio of (a) total borrowed money indebtedness to (b) the sum of such indebtedness plus consolidated net worth, with consolidated net worth determined as of the last day of the most recently ended fiscal quarter. The Company also must not permit the interest coverage ratio as of the last day of a fiscal quarter to be less than 3.00 to 1.00. The Credit Agreement generally defines the interest coverage ratio as the ratio of earnings before interest, taxes, depreciation and amortization (“EBITDA”) of the four prior fiscal quarters to interest charges for the same period. The Company was in compliance with these covenants at June 30, 2016. The Credit Agreement also contains customary representations, warranties and affirmative and negative covenants. Events of default under the Credit Agreement include failure to pay principal or interest when due, failure to comply with the financial and operational covenants, as well as a cross default event, loan document enforceability event, change of control event and bankruptcy and other insolvency events. If an event of default occurs and is continuing, then a majority of the lenders have the right, among others, to (i) terminate the commitments under the Credit Agreement, (ii) accelerate and require the Company to repay all the outstanding amounts owed under any loan document (provided that in limited circumstances with respect to insolvency and bankruptcy of the Company, such acceleration is automatic), and (iii) require the Company to cash collateralize any outstanding letters of credit. As of June 30, 2016, the Company had $60 million principal amount outstanding under the term loan facility at an interest rate of 5.25% and no amounts outstanding under the revolving credit facility. As a condition precedent to Amendment No. 2, the Company repaid the entire outstanding principal amount under the term loan facility. The borrowing base under the Credit Agreement is currently $500 million. As of August 2, 2016, the Company had $70 million drawn under the revolving credit facility, with available borrowing capacity of $430 million. 2015 Reimbursement Agreement — On March 16, 2015, the Company entered into a Reimbursement Agreement (the “Reimbursement Agreement”) with The Bank of Nova Scotia (“Scotiabank”), pursuant to which the Company may from time to time request that Scotiabank issue an unspecified amount of letters of credit. As of June 30, 2016, the Company had $38.2 million in letters of credit outstanding under the Reimbursement Agreement. Under the terms of the Reimbursement Agreement, the Company will reimburse Scotiabank on demand for any amounts that Scotiabank has disbursed under any letters of credit. Fees, charges and other reasonable expenses for the issuance of letters of credit are payable by the Company at the time of issuance at such rates and amounts as are in accordance with Scotiabank’s prevailing practice. The Company is obligated to pay to Scotiabank interest on all amounts not paid by the Company on the date of demand or when otherwise due at the LIBOR rate plus 2.25% per annum, calculated daily and payable monthly, in arrears, on the basis of a calendar year for the actual number of days elapsed, with interest on overdue interest at the same rate as on the reimbursement amounts. The Company has also agreed that if obligations under the Credit Agreement are secured by liens on any of its or any of its subsidiaries’ property, then the Company’s reimbursement obligations and (to the extent similar obligations would be secured under the Credit Agreement) other obligations under the Reimbursement Agreement and any letters of credit will be equally and ratably secured by all property subject to such liens securing the Credit Agreement. Pursuant to a Continuing Guaranty dated as of March 16, 2015, the Company’s payment obligations under the Reimbursement Agreement are jointly and severally guaranteed as to payment and not as to collection by subsidiaries of the Company that from time to time guarantee payment under the Credit Agreement. 2015 Term Loan Agreement — On March 18, 2015, the Company entered into a Term Loan Agreement (the “2015 Term Loan Agreement”) with Wells Fargo Bank, N.A., as administrative agent and lender, each of the other lenders party thereto, Wells Fargo Securities, LLC, as Lead Arranger and Sole Book Runner, and Bank of America, N.A. and The Bank Of Tokyo-Mitsubishi UFJ, LTD., as Co-Syndication Agents. The 2015 Term Loan Agreement was a senior unsecured single-advance term loan facility pursuant to which the Company made a term loan borrowing of $200 million on March 18, 2015 (the “Term Loan Borrowing”). The Term Loan Borrowing was payable in quarterly principal installments, together with accrued interest. Loans under the 2015 Term Loan Agreement bore interest, at the Company’s election, at the per annum rate of LIBOR rate plus 3.25% or base rate plus 2.25%. As of June 30, 2016, the Company had $170 million principal amount outstanding under the 2015 Term Loan Agreement at an interest rate of 5.75%. As a condition precedent to Amendment No. 2, the Company repaid the entire outstanding principal amount under the 2015 Term Loan Agreement and terminated the agreement. Senior Notes — On October 5, 2010, the Company completed the issuance and sale of $300 million in aggregate principal amount of its 4.97% Series A Senior Notes due October 5, 2020 (the “Series A Notes”) in a private placement. The Series A Notes bear interest at a rate of 4.97% per annum. The Company pays interest on the Series A Notes on April 5 and October 5 of each year. The Series A Notes will mature on October 5, 2020. On June 14, 2012, the Company completed the issuance and sale of $300 million in aggregate principal amount of its 4.27% Series B Senior Notes due June 14, 2022 (the “Series B Notes”) in a private placement. The Series B Notes bear interest at a rate of 4.27% per annum. The Company pays interest on the Series B Notes on April 5 and October 5 of each year. The Series B Notes will mature on June 14, 2022. The Series A Notes and Series B Notes are senior unsecured obligations of the Company which rank equally in right of payment with all other unsubordinated indebtedness of the Company. The Series A Notes and Series B Notes are guaranteed on a senior unsecured basis by each of the existing domestic subsidiaries of the Company other than subsidiaries that are not required to be guarantors under the Credit Agreement. The Series A Notes and Series B Notes are prepayable at the Company’s option, in whole or in part, provided that in the case of a partial prepayment, prepayment must be in an amount not less than 5% of the aggregate principal amount of the notes then outstanding, at any time and from time to time at 100% of the principal amount prepaid, plus accrued and unpaid interest to the prepayment date, plus a “make-whole” premium as specified in the note purchase agreements. The Company must offer to prepay the notes upon the occurrence of any change of control. In addition, the Company must offer to prepay the notes upon the occurrence of certain asset dispositions if the proceeds therefrom are not timely reinvested in productive assets. If any offer to prepay is accepted, the purchase price of each prepaid note is 100% of the principal amount thereof, plus accrued and unpaid interest thereon to the prepayment date. The respective note purchase agreements require compliance with two financial covenants. The Company must not permit its debt to capitalization ratio to exceed 50% at any time. The note purchase agreements generally define the debt to capitalization ratio as the ratio of (a) total borrowed money indebtedness to (b) the sum of such indebtedness plus consolidated net worth, with consolidated net worth determined as of the last day of the most recently ended fiscal quarter. The Company also must not permit the interest coverage ratio as of the last day of a fiscal quarter to be less than 2.50 to 1.00. The note purchase agreements generally define the interest coverage ratio as the ratio of EBITDA for the four prior fiscal quarters to interest charges for the same period. The Company was in compliance with these covenants at June 30, 2016. Events of default under the note purchase agreements include failure to pay principal or interest when due, failure to comply with the financial and operational covenants, a cross default event, a judgment in excess of a threshold event, the guaranty agreement ceasing to be enforceable, the occurrence of certain ERISA events, a change of control event and bankruptcy and other insolvency events. If an event of default under the note purchase agreements occurs and is continuing, then holders of a majority in principal amount of the respective notes have the right to declare all the notes then-outstanding to be immediately due and payable. In addition, if the Company defaults in payments on any note, then until such defaults are cured, the holder thereof may declare all the notes held by it pursuant to the note purchase agreement to be immediately due and payable. In April and August 2015, the Financial Accounting Standards Board (“FASB”) issued accounting standards updates to provide guidance for the presentation of debt issuance costs. Under this guidance, debt issuance costs, except those related to line-of-credit arrangements, are presented in the balance sheet as a direct deduction from the carrying amount of the related debt. Debt issuance costs related to line-of-credit arrangements can continue to be classified as a deferred charge. Amortization of debt issuance costs continues to be reported as interest expense. This guidance became effective for the Company during the three months ended March 31, 2016. This guidance was applied retrospectively, and debt issuance costs and long-term debt as of December 31, 2015 have been adjusted. There was no impact on results of operations or cash flows as a result of the adoption of this guidance. Interest expense related to the amortization of debt issuance costs was approximately $746,000 and $743,000 for the three months ended June 30, 2016 and 2015, respectively. Interest expense related to the amortization of debt issuance costs was approximately $1.5 million and $1.3 million for the six months ended June 30, 2016 and 2015, respectively. Presented below is a schedule of the principal repayment requirements of long-term debt as of June 30, 2016 (in thousands):
On July 8 2016, the Company repaid $230 million of long-term debt that had principal repayments due in 2016 and 2017. As of August 2, 2016, the Company has no term debt due prior to 2020. |
Commitments, Contingencies and Other Matters |
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Jun. 30, 2016 | |
Commitments And Contingencies Disclosure [Abstract] | |
Commitments, Contingencies and Other Matters | 9. Commitments, Contingencies and Other Matters As of June 30, 2016, the Company maintained letters of credit in the aggregate amount of $38.2 million for the benefit of various insurance companies as collateral for retrospective premiums and retained losses which could become payable under the terms of the underlying insurance contracts. These letters of credit expire annually at various times during the year and are typically renewed. As of June 30, 2016, no amounts had been drawn under the letters of credit. As of June 30, 2016, the Company had commitments to purchase approximately $55.1 million of major equipment for its drilling and pressure pumping businesses. The Company’s pressure pumping business has entered into agreements to purchase minimum quantities of proppants and chemicals from certain vendors. These agreements expire in 2017 and 2018. As of June 30, 2016, the remaining obligation under these agreements was approximately $23.5 million, of which approximately $6.5 million relates to purchases required during the remainder of 2016. In the event the required minimum quantities are not purchased during any contract year, the Company could be required to make a liquidated damages payment to the respective vendor for any shortfall. In November 2011, the Company’s pressure pumping business entered into an agreement with a proppant vendor to advance up to $12.0 million to such vendor to finance the construction of certain processing facilities. This advance is secured by the underlying processing facilities and bears interest at an annual rate of 5.0%. Repayment of the advance is to be made through discounts applied to purchases from the vendor and repayment of all amounts advanced must be made no later than October 1, 2017. As of June 30, 2016, advances of approximately $11.8 million had been made under this agreement and principal repayments of approximately $10.6 million had been received, resulting in a balance outstanding of approximately $1.2 million. The Company is party to various legal proceedings arising in the normal course of its business. The Company does not believe that the outcome of these proceedings, either individually or in the aggregate, will have a material adverse effect on its financial condition, results of operations or cash flows.
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Stockholders' Equity |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity | 10. Stockholders’ Equity Cash Dividends — The Company paid cash dividends during the six months ended June 30, 2015 and 2016 as follows:
On July 27, 2016, the Company’s Board of Directors approved a cash dividend on its common stock in the amount of $0.02 per share to be paid on September 22, 2016 to holders of record as of September 8, 2016. The amount and timing of all future dividend payments, if any, are subject to the discretion of the Board of Directors and will depend upon business conditions, results of operations, financial condition, terms of the Company’s debt agreements and other factors. On September 6, 2013, the Company’s Board of Directors approved a stock buyback program that authorizes purchase of up to $200 million of the Company’s common stock in open market or privately negotiated transactions. As of June 30, 2016, the Company had remaining authorization to purchase approximately $187 million of the Company’s outstanding common stock under the stock buyback program. Shares purchased under a buyback program are accounted for as treasury stock. Treasury stock acquisitions during the six months ended June 30, 2016 were as follows (dollars in thousands):
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Income Taxes |
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Jun. 30, 2016 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | 11. Income Taxes
The Company’s effective income tax rate was 35.1% for the six months ended June 30, 2016, compared to 44.8% for the six months ended June 30, 2015. The Domestic Production Activities Deduction (the “Section 199 Deduction”) was enacted as part of the American Jobs Creation Act of 2004 (as revised by the Emergency Economic Stabilization Act of 2008), and allows a deduction of 9% on the lesser of qualified production activities income or taxable income. For tax purposes, the Company had net operating losses for the years ended December 31, 2015 and 2014, which have been carried back to prior years. These carrybacks resulted in the loss of the benefits of previous Section 199 Deductions. The loss of these benefits was recognized during the six months ended June 30, 2016, which reduced the tax benefit recorded for the six months ended June 30, 2016.
At June 30, 2015, the Company expected a loss before income taxes for financial statement purposes for the year ending December 31, 2015; however the Company expected to have taxable income for the year ending December 31, 2015, and the Section 199 Deduction was expected to provide a permanent tax benefit. On June 15, 2015, legislation was enacted which permanently reduced the Texas Margin Tax rate. This resulted in a permanent tax benefit that was recognized during the quarter ended June 30, 2015. The interplay between the expected loss before income taxes for financial statement purposes, the permanent tax benefit expected to be provided by the Section 199 Deduction and the permanent tax benefit from the Texas Margin Tax rate resulted in a higher effective income tax rate for the six months ended June 30, 2015.
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Fair Values of Financial Instruments |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Values of Financial Instruments | 12. Fair Values of Financial Instruments The carrying values of cash and cash equivalents, trade receivables and accounts payable approximate fair value due to the short-term maturity of these items. These fair value estimates are considered Level 1 fair value estimates in the fair value hierarchy of fair value accounting. The estimated fair value of the Company’s outstanding debt balances (including current portion) as of June 30, 2016 and December 31, 2015 is set forth below (in thousands):
The carrying values of the balances outstanding under the Credit Agreement and the 2015 Term Loan Agreement approximate their fair values as these instruments have floating interest rates. The fair values of the Series A Notes and Series B Notes at June 30, 2016 and December 31, 2015 are based on discounted cash flows associated with the respective notes using current market rates of interest at those respective dates. For the Series A Notes, the current market rates used in measuring this fair value were 6.85% at June 30, 2016 and 6.66% at December 31, 2015. For the Series B Notes, the current market rates used in measuring this fair value were 7.07% at June 30, 2016 and 6.95% at December 31, 2015. These fair value estimates are based on observable market inputs and are considered Level 2 fair value estimates in the fair value hierarchy of fair value accounting.
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Recently Issued Accounting Standards |
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Jun. 30, 2016 | |
Accounting Changes And Error Corrections [Abstract] | |
Recently Issued Accounting Standards | 13. Recently Issued Accounting Standards In May 2014, the FASB issued an accounting standards update to provide guidance on the recognition of revenue from customers. The FASB clarified this guidance in March, April and May 2016. Under this guidance, an entity will recognize revenue when it transfers promised goods or services to customers in an amount that reflects what it expects in exchange for the goods or services. This guidance also requires more detailed disclosures to enable users of the financial statements to understand the nature, amount, timing and uncertainty, if any, of revenue and cash flows arising from contracts with customers. The requirements in this update are effective during interim and annual periods beginning after December 15, 2017. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements.
In November 2015, the FASB issued an accounting standards update to provide guidance for the presentation of deferred tax liabilities and assets. Under this guidance, for a particular tax-paying component of an entity and within a particular tax jurisdiction, all deferred tax liabilities and assets, as well as any related valuation allowance, shall be offset and presented as a single noncurrent amount. The requirements in this update are effective during interim and annual periods beginning after December 15, 2016. The adoption of this update is not expected to have a material impact on the Company’s consolidated financial statements.
In February 2016, the FASB issued an accounting standards update to provide guidance for the accounting for leasing transactions. The requirements in this update are effective during interim and annual periods beginning after December 15, 2018. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements.
In March 2016, the FASB issued an accounting standards update to provide guidance for the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The requirements in this update are effective during interim and annual periods beginning after December 15, 2016. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements.
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Basis of Consolidation and Presentation (Tables) |
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Organization Consolidation And Presentation Of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Calculation of Basic and Diluted Net Loss per Share | The following table presents information necessary to calculate net loss per share for the three and six month periods ended June 30, 2016 and 2015 as well as potentially dilutive securities excluded from the weighted average number of diluted common shares outstanding because their inclusion would have been anti-dilutive (in thousands, except per share amounts):
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Stock-based Compensation (Tables) |
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Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Weighted-Average Assumptions Used to Estimate Grant Date Fair Values for Stock Options Granted | Weighted-average assumptions used to estimate the grant date fair values for stock options granted for the three and six month periods ended June 30, 2016 and 2015 follow:
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Stock Option Activity | Stock option activity from January 1, 2016 to June 30, 2016 follows:
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Restricted Stock Activity | Restricted stock activity from January 1, 2016 to June 30, 2016 follows:
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Restricted Stock Unit Activity | Restricted stock unit activity from January 1, 2016 to June 30, 2016 follows:
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Performance Units | The total target number of shares with respect to the Performance Units for the awards in 2012-2016 is set forth below:
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Fair Value of Performance Units | The fair value of the Performance Units is set forth below (in thousands):
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Compensation Expense Associated with Performance Units | These fair value amounts are charged to expense on a straight-line basis over the performance period. Compensation expense associated with the Performance Units is shown below (in thousands):
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Property and Equipment (Tables) |
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Property Plant And Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property and Equipment | Property and equipment consisted of the following at June 30, 2016 and December 31, 2015 (in thousands):
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Business Segments (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Segments - Financial Information | The following tables summarize selected financial information relating to the Company’s business segments (in thousands):
|
Goodwill and Intangible Assets (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill And Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill by Operating Segment | Goodwill — All of the Company’s goodwill at both June 30, 2016 and December 31, 2015 related to the contract drilling operating segment. Goodwill as of June 30, 2016 and changes for the six months then ended are as follows (in thousands):
|
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Gross Carrying Amount and Accumulated Amortization of Customer Relationships | The following table presents the gross carrying amount and accumulated amortization of the customer relationships as of June 30, 2016 and December 31, 2015 (in thousands):
|
Accrued Expenses (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Payables And Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Accrued Expenses | Accrued expenses consisted of the following at June 30, 2016 and December 31, 2015 (in thousands):
|
Asset Retirement Obligation (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Asset Retirement Obligation Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes to Company's Asset Retirement Obligations | The following table describes the changes to the Company’s asset retirement obligations during the six months ended June 30, 2016 and 2015 (in thousands):
|
Long Term Debt (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2016 | |||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||
Schedule of Principal Repayment Requirements of Long Term Debt | Presented below is a schedule of the principal repayment requirements of long-term debt as of June 30, 2016 (in thousands):
|
Stockholders' Equity (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash Dividends | The Company paid cash dividends during the six months ended June 30, 2015 and 2016 as follows:
|
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Treasury Stock Acquisition | Treasury stock acquisitions during the six months ended June 30, 2016 were as follows (dollars in thousands):
|
Fair Values of Financial Instruments (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Estimated Fair Value of Outstanding Debt Balances | The estimated fair value of the Company’s outstanding debt balances (including current portion) as of June 30, 2016 and December 31, 2015 is set forth below (in thousands):
|
Basis of Consolidation and Presentation - Additional Information (Detail) $ in Millions |
6 Months Ended |
---|---|
Jun. 30, 2015
USD ($)
| |
Organization Consolidation And Presentation Of Financial Statements [Abstract] | |
Settlement of fund for eligible participants | $ (12.3) |
Weighted-Average Assumptions Used to Estimate Grant Date Fair Values for Stock Options Granted (Detail) - Employee Stock Option |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||||
Volatility | 34.87% | 37.91% | 35.13% | 37.95% |
Expected term (in years) | 5 years | 5 years | 5 years | 5 years |
Dividend yield | 2.16% | 1.97% | 2.19% | 2.00% |
Risk-free interest rate | 1.40% | 1.35% | 1.42% | 1.37% |
Stock Option Activity (Detail) |
6 Months Ended |
---|---|
Jun. 30, 2016
$ / shares
shares
| |
Underlying Shares | |
Outstanding at beginning of period | shares | 6,307,250 |
Granted | shares | 894,900 |
Expired | shares | (50,000) |
Outstanding at end of period | shares | 7,152,150 |
Exercisable at end of year | shares | 5,666,148 |
Weighted Average Exercise Price Per Share | |
Outstanding at beginning of period | $ / shares | $ 21.68 |
Granted | $ / shares | 18.35 |
Expired | $ / shares | 29.24 |
Outstanding at end of period | $ / shares | 21.21 |
Exercisable at end of year | $ / shares | $ 21.48 |
Restricted Stock Activity (Detail) - Restricted Stock Awards |
6 Months Ended |
---|---|
Jun. 30, 2016
$ / shares
shares
| |
Shares | |
Outstanding at beginning of period | shares | 1,432,250 |
Granted | shares | 748,825 |
Vested | shares | (670,987) |
Forfeited | shares | (26,626) |
Outstanding at end of period | shares | 1,483,462 |
Weighted Average Grant Date Fair Value Per Share | |
Outstanding at beginning of period | $ / shares | $ 24.56 |
Granted | $ / shares | 20.66 |
Vested | $ / shares | 24.53 |
Forfeited | $ / shares | 24.76 |
Outstanding at end of period | $ / shares | $ 22.60 |
Restricted Stock Unit Activity (Detail) - Restricted Stock Units (RSUs) |
6 Months Ended |
---|---|
Jun. 30, 2016
$ / shares
shares
| |
Shares | |
Outstanding at beginning of period | shares | 41,686 |
Granted | shares | 18,350 |
Vested | shares | (15,033) |
Forfeited | shares | (7,668) |
Outstanding at end of period | shares | 37,335 |
Weighted Average Grant Date Fair Value Per Share | |
Outstanding at beginning of period | $ / shares | $ 26.22 |
Granted | $ / shares | 21.71 |
Vested | $ / shares | 27.30 |
Forfeited | $ / shares | 24.83 |
Outstanding at end of period | $ / shares | $ 23.86 |
Stock-based Compensation - Additional Information (Detail) - Performance Units Awards |
6 Months Ended |
---|---|
Jun. 30, 2016 | |
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |
Performance period | 3 years |
Basis of annual percentage exceeds | 18.00% |
Condition One [Member] | |
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |
Award description | Generally, the recipients will receive a target number of shares if the Company’s total shareholder return during the performance period is positive and, when compared to the peer group, is at the 50th percentile. If the Company’s total shareholder return during the performance period is positive and, when compared to the peer group, is at the 75th percentile or higher, then the recipients will receive two times the target number of shares. |
Condition Two [Member] | |
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |
Award description | if, during the two-year period ending March 31, 2018, the Company’s total shareholder return for any 30 consecutive day period equals or exceeds 18 percent on an annualized basis from April 1, 2013 through the last day of such 30 consecutive day period, and the recipient is actively employed by the Company through the last day of the extended performance period, then the Company will issue to the recipient the number of shares equal to the amount the recipient would have been entitled to receive if the Company’s total shareholder return had been positive during the initial three year performance period. |
Fair Value of Performance Units (Detail) - Performance Units Awards $ in Thousands |
6 Months Ended |
---|---|
Jun. 30, 2016
USD ($)
| |
2016 | |
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |
Fair value at date of grant | $ 3,854 |
2015 | |
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |
Fair value at date of grant | 4,052 |
2014 | |
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |
Fair value at date of grant | 5,388 |
2013 | |
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |
Fair value at date of grant | 5,564 |
2012 | |
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |
Fair value at date of grant | $ 3,065 |
Property and Equipment (Detail) - USD ($) $ in Thousands |
Jun. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Property Plant And Equipment [Line Items] | ||
Total property and equipment | $ 7,204,242 | $ 7,282,911 |
Less accumulated depreciation, depletion and impairment | (3,563,348) | (3,362,203) |
Property and equipment, net | 3,640,894 | 3,920,708 |
Equipment | ||
Property Plant And Equipment [Line Items] | ||
Total property and equipment | 6,885,227 | 6,963,148 |
Oil and natural gas properties | ||
Property Plant And Equipment [Line Items] | ||
Total property and equipment | 199,591 | 200,923 |
Buildings | ||
Property Plant And Equipment [Line Items] | ||
Total property and equipment | 97,054 | 96,470 |
Land | ||
Property Plant And Equipment [Line Items] | ||
Total property and equipment | $ 22,370 | $ 22,370 |
Property and Equipment - Additional Information (Detail) - USD ($) |
3 Months Ended | 6 Months Ended | |
---|---|---|---|
Jun. 30, 2016 |
Mar. 31, 2016 |
Jun. 30, 2016 |
|
Property Plant And Equipment [Abstract] | |||
Future net cash flow discount rate | 10.00% | ||
Impairment expense related to oil and natural gas properties | $ 0 | $ 2,200,000 |
Business Segments - Additional Information (Detail) |
6 Months Ended |
---|---|
Jun. 30, 2016
Segment
| |
Segment Reporting [Abstract] | |
Number of reportable business segments | 3 |
Business Segments - Operating Income (Loss) from Continuing Operations Before Income Taxes (Detail) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||||
---|---|---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
|||
Segment Reporting Reconciling Item For Operating Profit Loss From Segment To Consolidated [Line Items] | ||||||
Operating income (loss) | $ (124,332) | $ (24,764) | $ (219,591) | $ (661) | ||
Other operating income (expense), net | [1] | 4,822 | 2,998 | 6,167 | (6,346) | |
Interest income | 100 | 318 | 210 | 601 | ||
Interest expense | (10,678) | (9,249) | (21,478) | (17,790) | ||
Other | 17 | 33 | ||||
Loss before income taxes | (134,893) | (33,695) | (240,826) | (17,850) | ||
Operating Segments | ||||||
Segment Reporting Reconciling Item For Operating Profit Loss From Segment To Consolidated [Line Items] | ||||||
Operating income (loss) | (115,207) | (12,949) | (197,117) | 35,871 | ||
Operating Segments | Contract Drilling | ||||||
Segment Reporting Reconciling Item For Operating Profit Loss From Segment To Consolidated [Line Items] | ||||||
Operating income (loss) | (70,449) | 9,426 | (105,545) | 77,824 | ||
Operating Segments | Pressure Pumping | ||||||
Segment Reporting Reconciling Item For Operating Profit Loss From Segment To Consolidated [Line Items] | ||||||
Operating income (loss) | (46,025) | (18,744) | (89,984) | (33,760) | ||
Operating Segments | Oil and Natural Gas | ||||||
Segment Reporting Reconciling Item For Operating Profit Loss From Segment To Consolidated [Line Items] | ||||||
Operating income (loss) | 1,267 | (3,631) | (1,588) | (8,193) | ||
Corporate and other | ||||||
Segment Reporting Reconciling Item For Operating Profit Loss From Segment To Consolidated [Line Items] | ||||||
Operating income (loss) | $ (13,947) | $ (14,813) | $ (28,641) | $ (30,186) | ||
|
Business Segments - Assets (Detail) - USD ($) $ in Thousands |
Jun. 30, 2016 |
Dec. 31, 2015 |
||
---|---|---|---|---|
Segment Reporting Asset Reconciling Item [Line Items] | ||||
Total assets | $ 4,211,471 | $ 4,529,484 | ||
Operating Segments | Contract Drilling | ||||
Segment Reporting Asset Reconciling Item [Line Items] | ||||
Total assets | 3,201,494 | 3,457,044 | ||
Operating Segments | Pressure Pumping | ||||
Segment Reporting Asset Reconciling Item [Line Items] | ||||
Total assets | 703,768 | 813,704 | ||
Operating Segments | Oil and Natural Gas | ||||
Segment Reporting Asset Reconciling Item [Line Items] | ||||
Total assets | 30,903 | 34,073 | ||
Corporate and other | ||||
Segment Reporting Asset Reconciling Item [Line Items] | ||||
Total assets | [1] | $ 275,306 | $ 224,663 | |
|
Goodwill by Operating Segment (Detail) - Contract Drilling $ in Thousands |
6 Months Ended |
---|---|
Jun. 30, 2016
USD ($)
| |
Goodwill [Line Items] | |
Balance at beginning of period | $ 86,234 |
Changes to goodwill | 0 |
Balance at end of period | $ 86,234 |
Goodwill and Intangible Assets - Additional Information (Detail) - USD ($) |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
Dec. 31, 2015 |
|
Contract Drilling | |||||
Goodwill And Intangible Assets Disclosure [Line Items] | |||||
Accumulated impairment losses | $ 0 | $ 0 | $ 0 | ||
Pressure Pumping | Customer Relationships | |||||
Goodwill And Intangible Assets Disclosure [Line Items] | |||||
Amortization period (in years) | 7 years | ||||
Amortization expense | $ 911,000 | $ 911,000 | $ 1,800,000 | $ 1,800,000 |
Gross Carrying Amount and Accumulated Amortization of Intangible Assets (Detail) - Customer Relationships - Pressure Pumping - USD ($) $ in Thousands |
Jun. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Acquired Finite Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | $ 25,500 | $ 25,500 |
Accumulated Amortization | (20,946) | (19,125) |
Net Carrying Amount | $ 4,554 | $ 6,375 |
Summary of Accrued Expenses (Detail) - USD ($) $ in Thousands |
Jun. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Payables And Accruals [Abstract] | ||
Salaries, wages, payroll taxes and benefits | $ 18,132 | $ 27,055 |
Workers' compensation liability | 70,155 | 75,358 |
Property, sales, use and other taxes | 6,416 | 9,061 |
Insurance, other than workers' compensation | 10,205 | 12,817 |
Accrued interest payable | 7,403 | 7,668 |
Other | 27,611 | 29,652 |
Accrued expenses | $ 139,922 | $ 161,611 |
Changes to Company's Asset Retirement Obligations (Detail) - USD ($) $ in Thousands |
6 Months Ended | |
---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Asset Retirement Obligation Disclosure [Abstract] | ||
Balance at beginning of year | $ 5,692 | $ 5,301 |
Liabilities incurred | 66 | 271 |
Liabilities settled | (71) | (65) |
Accretion expense | 84 | 86 |
Revision in estimated costs of plugging oil and natural gas wells | 43 | |
Asset retirement obligation at end of period | $ 5,814 | $ 5,593 |
Long Term Debt - Credit Facilities - Additional Information (Detail) |
6 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
Jul. 08, 2016
USD ($)
|
Mar. 16, 2015 |
Sep. 27, 2012
USD ($)
Covenant
|
Jun. 30, 2016
USD ($)
|
Jun. 30, 2015
USD ($)
|
Oct. 01, 2016 |
Aug. 02, 2016
USD ($)
|
Jul. 01, 2016 |
Dec. 31, 2015
USD ($)
|
Mar. 18, 2015
USD ($)
|
|
Debt Instrument [Line Items] | ||||||||||
Repayment of long-term debt | $ 25,000,000 | $ 10,000,000 | ||||||||
Proceeds from long-term debt | $ 200,000,000 | |||||||||
Aggregate amount by which the revolving credit facility can be increased | $ 100,000,000 | |||||||||
Credit facility, maximum borrowing capacity | $ 600,000,000 | |||||||||
Debt maturity date | Sep. 27, 2017 | |||||||||
Total assets | 4,211,471,000 | $ 4,529,484,000 | ||||||||
Letters of credit outstanding | 38,200,000 | |||||||||
Letter of Credit | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Line of credit, amount outstanding | $ 0 | |||||||||
Maximum | Subsidiaries | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Total assets | $ 1,000,000 | |||||||||
Subsequent Event | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Repayment of long-term debt | $ 160,000,000 | |||||||||
Repayment of borrowings under credit facility | $ 70,000,000 | |||||||||
Credit Agreement | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Credit agreement date | Sep. 27, 2012 | |||||||||
Commitment fee payable to the lenders for the unused portion of the credit facility | 0.50% | |||||||||
Credit agreement, financial covenant description | The Company must not permit its debt to capitalization ratio to exceed 40%. The Credit Agreement generally defines the debt to capitalization ratio as the ratio of (a) total borrowed money indebtedness to (b) the sum of such indebtedness plus consolidated net worth, with consolidated net worth determined as of the last day of the most recently ended fiscal quarter. The Company also must not permit the interest coverage ratio as of the last day of a fiscal quarter to be less than 3.00 to 1.00. The Credit Agreement generally defines the interest coverage ratio as the ratio of earnings before interest, taxes, depreciation and amortization (“EBITDA”) of the four prior fiscal quarters to interest charges for the same period. The Company was in compliance with these covenants at June 30, 2016 | |||||||||
Credit agreement, financial covenant compliance | The Company was in compliance with these covenants | |||||||||
Number of compliance covenants | Covenant | 2 | |||||||||
Credit Agreement | London Interbank Offered Rate (LIBOR) | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Debt instrument, basis spread on variable rate | 2.75% | |||||||||
Credit Agreement | London Interbank Offered Rate (LIBOR) | Scenario Forecast | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Applicable margin | 2.75% | |||||||||
Credit Agreement | Base Rate | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Debt instrument, basis spread on variable rate | 1.75% | |||||||||
Credit Agreement | Base Rate | Scenario Forecast | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Applicable margin | 1.75% | |||||||||
Credit Agreement | Revolving Credit Facility | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Current aggregate borrowing capacity | $ 500,000,000 | |||||||||
Line of credit, amount outstanding | $ 0 | |||||||||
Credit Agreement | Revolving Credit Facility | Letter of Credit | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Current aggregate borrowing capacity | 50,000,000 | |||||||||
Credit Agreement | Revolving Credit Facility | Swing Line Facility | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Current aggregate borrowing capacity | 20,000,000 | |||||||||
Credit Agreement | Term Loan Facility | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Proceeds from long-term debt | $ 100,000,000 | |||||||||
Line of credit facility, frequency of payments | Quarterly | |||||||||
Line of credit, amount outstanding | $ 60,000,000 | |||||||||
Line of credit facility, interest rate | 5.25% | |||||||||
Credit Agreement | Minimum | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Interest coverage ratio that the Company must exceed on the last day of the fiscal quarter | 300.00% | |||||||||
Credit Agreement | Minimum | London Interbank Offered Rate (LIBOR) | Until September 27, 2017 | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Debt instrument, basis spread on variable rate | 2.75% | |||||||||
Credit Agreement | Minimum | London Interbank Offered Rate (LIBOR) | On or after September 27, 2017 | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Debt instrument, basis spread on variable rate | 3.25% | |||||||||
Credit Agreement | Minimum | Base Rate | Until September 27, 2017 | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Debt instrument, basis spread on variable rate | 1.75% | |||||||||
Credit Agreement | Minimum | Base Rate | On or after September 27, 2017 | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Debt instrument, basis spread on variable rate | 2.25% | |||||||||
Credit Agreement | Maximum | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Debt to capitalization ratio, percentage the Company must not exceed at any time | 40.00% | |||||||||
Credit Agreement | Maximum | London Interbank Offered Rate (LIBOR) | Until September 27, 2017 | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Debt instrument, basis spread on variable rate | 3.25% | |||||||||
Credit Agreement | Maximum | London Interbank Offered Rate (LIBOR) | On or after September 27, 2017 | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Debt instrument, basis spread on variable rate | 3.75% | |||||||||
Credit Agreement | Maximum | Base Rate | Until September 27, 2017 | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Debt instrument, basis spread on variable rate | 2.25% | |||||||||
Credit Agreement | Maximum | Base Rate | On or after September 27, 2017 | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Debt instrument, basis spread on variable rate | 2.75% | |||||||||
Credit Agreement | Subsequent Event | London Interbank Offered Rate (LIBOR) | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Applicable margin | 2.75% | |||||||||
Credit Agreement | Subsequent Event | Base Rate | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Applicable margin | 1.75% | |||||||||
Amended Credit Agreement | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Debt maturity date | Mar. 27, 2019 | |||||||||
Line of credit, amount outstanding | $ 357,900,000 | |||||||||
Amended Credit Agreement | Scenario Forecast | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Line of credit, amount outstanding | $ 70,000,000 | |||||||||
Amended Credit Agreement | Revolving Credit Facility | Scenario Forecast | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Line of credit, available borrowing capacity | $ 430,000,000 | |||||||||
Amended Credit Agreement | Subsequent Event | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Credit agreement amendment date | Jul. 08, 2016 | |||||||||
Maximum percentage allowed to invest in foreign subsidiaries or joint ventures on book value basis | 20.00% | |||||||||
Maximum cash balance allowed | $ 100,000,000 | |||||||||
Amended Credit Agreement | Subsequent Event | Minimum | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Debt service coverage ratio | 150.00% | |||||||||
Reimbursement Agreement | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Letters of credit outstanding | $ 38,200,000 | |||||||||
Reimbursement Agreement | London Interbank Offered Rate (LIBOR) | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Debt instrument, basis spread on variable rate | 2.25% | |||||||||
2015 Term Loan Agreement | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Line of credit facility, frequency of payments | Quarterly | |||||||||
Line of credit, amount outstanding | $ 170,000,000 | $ 200,000,000 | ||||||||
Line of credit facility, interest rate | 5.75% | |||||||||
Line of credit facility, frequency of payment and payment terms | The Term Loan Borrowing was payable in quarterly principal installments, together with accrued interest. Loans under the 2015 Term Loan Agreement bore interest, at the Company’s election, at the per annum rate of LIBOR rate plus 3.25% or base rate plus 2.25%. | |||||||||
2015 Term Loan Agreement | London Interbank Offered Rate (LIBOR) | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Debt instrument, basis spread on variable rate | 3.25% | |||||||||
2015 Term Loan Agreement | Base Rate | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Debt instrument, basis spread on variable rate | 2.25% |
Long Term Debt - Senior Notes - Additional Information (Detail) |
3 Months Ended | 6 Months Ended | |||||||
---|---|---|---|---|---|---|---|---|---|
Jul. 08, 2016
USD ($)
|
Sep. 27, 2012 |
Jun. 14, 2012
USD ($)
Covenant
|
Oct. 05, 2010
USD ($)
Covenant
|
Jun. 30, 2016
USD ($)
|
Jun. 30, 2015
USD ($)
|
Jun. 30, 2016
USD ($)
|
Jun. 30, 2015
USD ($)
|
Aug. 02, 2016
USD ($)
|
|
Debt Instrument [Line Items] | |||||||||
Debt maturity date | Sep. 27, 2017 | ||||||||
Interest expense related to amortization of debt issuance costs | $ 746,000 | $ 743,000 | $ 1,500,000 | $ 1,300,000 | |||||
Repayment of long-term debt | $ 25,000,000 | $ 10,000,000 | |||||||
Subsequent Event | |||||||||
Debt Instrument [Line Items] | |||||||||
Repayment of long-term debt | $ 160,000,000 | ||||||||
Term Loan Facility | Subsequent Event | |||||||||
Debt Instrument [Line Items] | |||||||||
Term debt due before 2020 | $ 0 | ||||||||
4.97% Series A Senior Notes, Due October 5th 2020 | |||||||||
Debt Instrument [Line Items] | |||||||||
Debt maturity date | Oct. 05, 2020 | ||||||||
Long-term debt, aggregate principal amount | $ 300,000,000 | ||||||||
Debt interest rate | 4.97% | ||||||||
Semi-annual interest payment, first payment date | April 5 | ||||||||
Semi-annual interest payment, second payment date | October 5 | ||||||||
Notes issuance date | Oct. 05, 2010 | ||||||||
Description of the prepayment terms | Notes are prepayable at the Company’s option, in whole or in part, provided that in the case of a partial prepayment, prepayment must be in an amount not less than 5% of the aggregate principal amount of the notes then outstanding, at any time and from time to time at 100% of the principal amount prepaid, plus accrued and unpaid interest to the prepayment date, plus a “make-whole” premium as specified in the note purchase agreements. The Company must offer to prepay the notes upon the occurrence of any change of control. In addition, the Company must offer to prepay the notes upon the occurrence of certain asset dispositions if the proceeds therefrom are not timely reinvested in productive assets. If any offer to prepay is accepted, the purchase price of each prepaid note is 100% of the principal amount thereof, plus accrued and unpaid interest thereon to the prepayment date. | ||||||||
Prepayment terms, percent of principal before accrued and unpaid interest and "make-whole" premium | 100.00% | ||||||||
Description of the acceptance terms | If any offer to prepay is accepted, the purchase price of each prepaid note is 100% of the principal amount thereof, plus accrued and unpaid interest thereon to the prepayment date. | ||||||||
Acceptance terms, percent of principal before accrued and unpaid interest | 100.00% | ||||||||
Note purchase agreement, financial covenant description | The Company must not permit its debt to capitalization ratio to exceed 50% at any time. The note purchase agreements generally define the debt to capitalization ratio as the ratio of (a) total borrowed money indebtedness to (b) the sum of such indebtedness plus consolidated net worth, with consolidated net worth determined as of the last day of the most recently ended fiscal quarter. The Company also must not permit the interest coverage ratio as of the last day of a fiscal quarter to be less than 2.50 to 1.00. The note purchase agreements generally define the interest coverage ratio as the ratio of EBITDA for the four prior fiscal quarters to interest charges for the same period. The Company was in compliance with these covenants at June 30, 2016. | ||||||||
Number of compliance covenants | Covenant | 2 | ||||||||
4.97% Series A Senior Notes, Due October 5th 2020 | Minimum | |||||||||
Debt Instrument [Line Items] | |||||||||
Debt instrument, prepayment percentage of aggregate principal amount | 5.00% | ||||||||
Interest coverage ratio that the Company must exceed on the last day of the fiscal quarter | 2.50% | ||||||||
4.97% Series A Senior Notes, Due October 5th 2020 | Maximum | |||||||||
Debt Instrument [Line Items] | |||||||||
Debt to capitalization ratio, percentage the Company must not exceed at any time | 50.00% | ||||||||
4.27% Series B Senior Notes, Due June 14th 2022 | |||||||||
Debt Instrument [Line Items] | |||||||||
Debt maturity date | Jun. 14, 2022 | ||||||||
Long-term debt, aggregate principal amount | $ 300,000,000 | ||||||||
Debt interest rate | 4.27% | ||||||||
Semi-annual interest payment, first payment date | April 5 | ||||||||
Semi-annual interest payment, second payment date | October 5 | ||||||||
Notes issuance date | Jun. 14, 2012 | ||||||||
Description of the prepayment terms | Notes are prepayable at the Company’s option, in whole or in part, provided that in the case of a partial prepayment, prepayment must be in an amount not less than 5% of the aggregate principal amount of the notes then outstanding, at any time and from time to time at 100% of the principal amount prepaid, plus accrued and unpaid interest to the prepayment date, plus a “make-whole” premium as specified in the note purchase agreements. The Company must offer to prepay the notes upon the occurrence of any change of control. In addition, the Company must offer to prepay the notes upon the occurrence of certain asset dispositions if the proceeds therefrom are not timely reinvested in productive assets. If any offer to prepay is accepted, the purchase price of each prepaid note is 100% of the principal amount thereof, plus accrued and unpaid interest thereon to the prepayment date. | ||||||||
Prepayment terms, percent of principal before accrued and unpaid interest and "make-whole" premium | 100.00% | ||||||||
Description of the acceptance terms | If any offer to prepay is accepted, the purchase price of each prepaid note is 100% of the principal amount thereof, plus accrued and unpaid interest thereon to the prepayment date. | ||||||||
Acceptance terms, percent of principal before accrued and unpaid interest | 100.00% | ||||||||
Note purchase agreement, financial covenant description | The Company must not permit its debt to capitalization ratio to exceed 50% at any time. The note purchase agreements generally define the debt to capitalization ratio as the ratio of (a) total borrowed money indebtedness to (b) the sum of such indebtedness plus consolidated net worth, with consolidated net worth determined as of the last day of the most recently ended fiscal quarter. The Company also must not permit the interest coverage ratio as of the last day of a fiscal quarter to be less than 2.50 to 1.00. The note purchase agreements generally define the interest coverage ratio as the ratio of EBITDA for the four prior fiscal quarters to interest charges for the same period. The Company was in compliance with these covenants at June 30, 2016. | ||||||||
Number of compliance covenants | Covenant | 2 | ||||||||
4.27% Series B Senior Notes, Due June 14th 2022 | Minimum | |||||||||
Debt Instrument [Line Items] | |||||||||
Debt instrument, prepayment percentage of aggregate principal amount | 5.00% | ||||||||
Interest coverage ratio that the Company must exceed on the last day of the fiscal quarter | 2.50% | ||||||||
4.27% Series B Senior Notes, Due June 14th 2022 | Maximum | |||||||||
Debt Instrument [Line Items] | |||||||||
Debt to capitalization ratio, percentage the Company must not exceed at any time | 50.00% | ||||||||
Principal Repayments Due In Twenty Sixteen And Twenty Seventeen | Subsequent Event | |||||||||
Debt Instrument [Line Items] | |||||||||
Repayment of long-term debt | $ 230,000,000 |
Schedule of Principal Repayment Requirements of Long Term Debt (Detail) - USD ($) $ in Thousands |
Jun. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Debt Disclosure [Abstract] | ||
2016 | $ 38,750 | |
2017 | 191,250 | |
2020 | 300,000 | |
Thereafter | 300,000 | |
Total | $ 830,000 | $ 855,000 |
Commitments Contingencies and Other Matters - Additional Information (Detail) |
6 Months Ended |
---|---|
Jun. 30, 2016
USD ($)
| |
Commitments and Contingencies Disclosure [Line Items] | |
Letters of credit, collateral for retrospective premiums and retained losses | $ 38,200,000 |
Commitments to purchase major equipment | 55,100,000 |
Current obligation | 23,500,000 |
Purchase obligations for remainder of 2016 | 6,500,000 |
Advances to Vendor | |
Commitments and Contingencies Disclosure [Line Items] | |
Advance to non-affiliates | $ 11,800,000 |
Notes receivable interest rate | 5.00% |
Repayment of notes receivable | $ 10,600,000 |
Notes receivable outstanding | 1,200,000 |
Advances to Vendor | Maximum | |
Commitments and Contingencies Disclosure [Line Items] | |
Advance to non-affiliates | 12,000,000 |
Letter of Credit | |
Commitments and Contingencies Disclosure [Line Items] | |
Amount drawn under letters of credit | $ 0 |
Cash Dividends (Detail) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Dividends Payable [Line Items] | ||||
Cash dividends paid, per share | $ 0.02 | $ 0.10 | $ 0.12 | $ 0.20 |
Cash dividends paid | $ 17,665 | $ 29,352 | ||
Installment 1, FY 2015 | ||||
Dividends Payable [Line Items] | ||||
Cash dividends paid, date | Mar. 25, 2015 | |||
Cash dividends paid, per share | $ 0.10 | |||
Cash dividends paid | $ 14,640 | |||
Installment 2, FY 2015 | ||||
Dividends Payable [Line Items] | ||||
Cash dividends paid, date | Jun. 24, 2015 | |||
Cash dividends paid, per share | $ 0.10 | |||
Cash dividends paid | $ 14,712 | |||
Installment 1, FY 2016 | ||||
Dividends Payable [Line Items] | ||||
Cash dividends paid, date | Mar. 24, 2016 | |||
Cash dividends paid, per share | $ 0.10 | |||
Cash dividends paid | $ 14,712 | |||
Installment 2, FY 2016 | ||||
Dividends Payable [Line Items] | ||||
Cash dividends paid, date | Jun. 23, 2016 | |||
Cash dividends paid, per share | $ 0.02 | |||
Cash dividends paid | $ 2,953 |
Stockholders' Equity - Additional Information (Detail) - USD ($) |
Jul. 27, 2016 |
Jun. 30, 2016 |
Sep. 06, 2013 |
---|---|---|---|
2013 program | |||
Class Of Stock [Line Items] | |||
Remaining Amount approved for repurchases under stock buyback program | $ 187,000,000 | ||
2013 program | Maximum | |||
Class Of Stock [Line Items] | |||
Amount approved for repurchases under stock buyback program | $ 200,000,000 | ||
Subsequent Event | Dividend Declared | |||
Class Of Stock [Line Items] | |||
Dividend declaration date | Jul. 27, 2016 | ||
Dividend per share, declared | $ 0.02 | ||
Dividend payment date | Sep. 22, 2016 | ||
Dividend record date | Sep. 08, 2016 |
Treasury Stock Acquisition (Detail) $ in Thousands |
6 Months Ended |
---|---|
Jun. 30, 2016
USD ($)
shares
| |
Schedule of Treasury Stock [Line Items] | |
Treasury shares at beginning of period | shares | 43,207,240 |
Treasury shares at end of period | shares | 43,376,292 |
Treasury shares at beginning of period | $ 907,045 |
Treasury stock acquired, cost | 3,611 |
Treasury shares at end of period | $ 910,656 |
Stock Buyback Program | |
Schedule of Treasury Stock [Line Items] | |
Treasury stock acquired, shares | shares | 8,488 |
Treasury stock acquired, cost | $ 183 |
Long Term Incentive Plan | |
Schedule of Treasury Stock [Line Items] | |
Treasury stock acquired, shares | shares | 160,564 |
Treasury stock acquired, cost | $ 3,428 |
Income Taxes - Additional Information (Detail) |
6 Months Ended | |
---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Income Tax Disclosure [Abstract] | ||
Effective income tax rate | 35.10% | 44.80% |
Domestic Production Activities Deduction | 9.00% |
Estimated Fair Value of Outstanding Debt Balances (Detail) - USD ($) $ in Thousands |
Jun. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items] | ||
Carrying value of Debt | $ 830,000 | $ 855,000 |
Fair value of Debt | 769,349 | 793,441 |
Term Loan Facility | ||
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items] | ||
Carrying value of Debt | 60,000 | 70,000 |
Fair value of Debt | 60,000 | 70,000 |
2015 Term Loan | ||
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items] | ||
Carrying value of Debt | 170,000 | 185,000 |
Fair value of Debt | 170,000 | 185,000 |
4.97% Series A Senior Notes, Due October 5th 2020 | ||
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items] | ||
Carrying value of Debt | 300,000 | 300,000 |
Fair value of Debt | 279,525 | 279,635 |
4.27% Series B Senior Notes, Due June 14th 2022 | ||
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items] | ||
Carrying value of Debt | 300,000 | 300,000 |
Fair value of Debt | $ 259,824 | $ 258,806 |
Fair Values of Financial Instruments - Additional Information (Detail) |
6 Months Ended | 12 Months Ended |
---|---|---|
Jun. 30, 2016 |
Dec. 31, 2015 |
|
4.97% Series A Senior Notes, Due October 5th 2020 | ||
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items] | ||
Current market rates used in measuring fair value | 6.85% | 6.66% |
4.27% Series B Senior Notes, Due June 14th 2022 | ||
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items] | ||
Current market rates used in measuring fair value | 7.07% | 6.95% |
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