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Description of Business and Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2025

Basis of presentation — The consolidated financial statements include the accounts of Patterson-UTI Energy, Inc., its wholly-owned subsidiaries and the consolidating interest of a joint venture. All intercompany accounts and transactions have been eliminated. Except for wholly-owned subsidiaries and our interest in a joint venture, we have no controlling financial interests in any other entity which would require consolidation. Patterson-UTI Energy, Inc. conducts its business operations through its wholly-owned subsidiaries and has no employees or independent operations.

The U.S. dollar is the reporting currency and functional currency for most of our operations except certain of our foreign subsidiaries, which use their local currencies as their functional currency. Assets and liabilities of these foreign subsidiaries are translated into U.S. dollars using the exchange rates in effect as of the balance sheet date. The effects of these translation adjustments are reflected in accumulated other comprehensive income, which is a separate component of stockholders’ equity.

The consolidated financial statements for the year ended December 31, 2023 include the results of Ulterra from August 14, 2023, and the results of NexTier from September 1, 2023.

Management estimates

Management estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from such estimates.

Cash and cash equivalents

Cash and cash equivalents — Cash equivalents are highly liquid, short-term investments with original maturities of three months or less from their date of purchase.

Restricted cash

Restricted cash — Restricted cash includes amounts restricted as cash collateral for the issuance of standby letters of credit.

Accounts receivable

Accounts receivable — Trade accounts receivable are recorded at the invoiced amount. The allowance for credit losses represents our estimate of the amount of probable credit losses existing in our accounts receivable. Significant individual accounts receivable balances and balances which have been outstanding greater than 90 days are reviewed individually for collectability. Account balances, when determined to be uncollectible, are charged against the allowance.

Inventories

Inventories — Inventories consist primarily of sand and other products to be used in conjunction with our completion services activities, materials used in our equipment servicing business, spare parts for drilling services and raw materials for drilling products. Such inventories are stated at the lower of cost or net realizable value. Our inventory is recorded using weighted average cost.

We periodically review the nature and quantities of inventory on hand and evaluate the net realizable value of items based on historical usage patterns, known changes to equipment or processes and customer demand for specific products. Provision for excess or obsolete inventories is determined based on historical usage of inventory on-hand, volume on-hand versus anticipated usage, technological advances and consideration of current market conditions. Inventories that have not turned over for more than a year are subject to slow-moving reserve provisions. In addition, inventories that have become obsolete due to technological advances or are no longer configured to operate with our equipment are written off.

Other current assets

Other current assets — Other current assets include reimbursement from our workers compensation insurance carrier for claims in excess of our deductible in the amount of $30.5 million and $33.2 million at December 31, 2025 and 2024, respectively. We also maintain prepayments for items such as insurance, rent and inventory.

Long-lived assets with definite lives

Long-lived assets with definite lives — Property and equipment and definite-lived intangible assets are carried at cost less accumulated depreciation, amortization, depletion and impairment. Depreciation and amortization is recorded on the straight-line method over the estimated useful lives.

The estimated useful lives are shown below:


			Useful Lives
Equipment			1-25 years
Rental equipment			4-8 runs
Buildings and leasehold improvements			1-30 years
Other			3-20 years

Amortization of definite-lived intangible assets is calculated on the straight-lined method over the estimated useful lives of the assets, which range from 3 to 15 years.

Long-lived assets with definite lives, including property and equipment and certain intangible assets, are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amounts of certain assets may not be recovered over their estimated remaining useful lives (“triggering events”). Assets are grouped at the lowest level at which identifiable cash flows are largely independent of other asset groupings for impairment assessment. If there is a triggering event, we estimate undiscounted future cash flows over the life of the respective assets or asset groupings in our assessment of its recoverability. These estimates of cash flows are based on historical cyclical trends in the industry as well as our expectations regarding the continuation of these trends in the future. If estimated undiscounted cash flows expected to result from the use and eventual disposition of an asset or asset group is less than its respective carrying amount, an impairment loss is recognized in the amount by which the carrying amount exceeds its estimated fair value.

Maintenance and repairs

Maintenance and repairs — Maintenance and repairs are charged to expense when incurred. Renewals and betterments which extend the life or improve existing property and equipment are capitalized.

Disposals

Disposals — Upon disposition of property and equipment, the cost and related accumulated depreciation are removed and any resulting gain or loss is reflected in our consolidated statements of operations.

Goodwill

Goodwill — As a result of both the Ulterra acquisition and the NexTier merger, we have recognized goodwill. Goodwill from acquisitions is recorded as the excess of the consideration transferred plus the fair value of any non-controlling interest in the acquiree at the acquisition date over the fair values of the identifiable net assets acquired. Goodwill is considered to have an indefinite useful economic life and is not amortized. We assess impairment of goodwill at least annually, as of July 31, or on an interim basis when events or circumstances indicate that the fair value of goodwill may have decreased below its carrying value. If the carrying value of a reporting unit exceeds its fair value, we recognize an impairment in an amount equal to the excess, limited to the total amount of

goodwill allocated to the reporting unit. During the third quarter of 2024, we recorded an $885 million impairment charge to goodwill related to our completion services reporting unit. See Note 7 for details.

Goodwill — During the twelve months ended December 31, 2025, there were no additions or impairments to goodwill. As of December 31, 2025 and December 31, 2024, our goodwill balances by operating segment were as follows (in thousands):


	Completion Services		Drilling Products		Total
Balance, December 31, 2024 and 2025	$	36,885	$	450,503	$	487,388

Goodwill is evaluated at least annually on July 31, or more frequently when events or circumstances occur indicating recorded goodwill may be impaired. Goodwill is tested at the reporting unit level, which is at or one level below our operating segments. We determine 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. Any necessary goodwill impairment is determined using a quantitative impairment test. If the resulting fair value of goodwill is less than the carrying value of goodwill, an impairment loss would be recognized for the amount of the shortfall. The fair value of a reporting unit is determined using significant unobservable inputs, or level 3 in the fair value hierarchy. These inputs are based on forecasts and significant judgment.

We determined our drilling products operating segment consists of a single reporting unit to which the goodwill from our 2023 acquisition of Ulterra was allocated. We determined our completion services operating segment consisted of two reporting units: completion services, which was primarily comprised of our hydraulic fracturing operations and other integrated service offerings, and cementing services.

Goodwill Annual Impairment Assessment (Fourth and Third Quarter of 2025) — During the fourth and third quarters of 2025, we evaluated whether events or changes in circumstances indicated that the fair value of our goodwill may be less than its carrying amount. As part of this qualitative assessment, we considered the results of our most recent quantitative analysis performed in the second quarter of 2025, along with other factors such as macroeconomic conditions, market trends and indicators of potential changes in the fair value of our reporting units. Based on this assessment, we concluded that it was more likely than not that the fair value of our goodwill exceeded its carrying amount. Therefore, no impairment was indicated, and a Step 1 quantitative goodwill impairment test was not required.

Goodwill Impairment Assessment (Second Quarter of 2025) — During the second quarter of 2025, we viewed the reduction in activity forecasts combined with the decline in the market price of our common stock as a triggering event that warranted a quantitative assessment for goodwill impairment.

We estimated the fair value of the drilling products and cementing services reporting units using the income approach. Under this approach, we used a discounted cash flow model, which utilized present values of cash flows to estimate fair value. Forecasted cash flows reflected known market conditions in the second quarter of 2025 and the expected market outlook. Future cash flows were projected based on estimates of revenue growth rates, gross profit, selling, general and administrative expense, changes in working capital, and capital expenditures. The terminal period used within the discounted cash flow model included a growth rate. Future cash flows were then discounted using a market-participant, risk-adjusted weighted average cost of capital. Financial and credit market volatility directly impacts our fair value measurement through the weighted average cost of capital used to determine a discount rate. During times of volatility, significant judgment must be applied to determine whether credit market changes are a short-term or long-term trend.

The forecast for the cementing services reporting unit assumed lower activity in 2026 compared to estimated average activity for full year 2025 and moderate growth estimates thereafter. Those estimates were based on future drilling rig count forecasts during the second quarter of 2025 and estimated market share. Based on the results of the goodwill impairment test, the fair value of the cementing services reporting unit exceeded its carrying value with a substantial cushion. Accordingly, no impairment was recorded in the second quarter of 2025.

The forecast for the drilling products reporting unit assumed lower activity during 2025 relative to 2024, with growth estimates thereafter. The increases in estimated activity assumed growth in both domestic and international markets. Those growth estimates were based on drilling rig count forecasts and estimated market share. Geopolitical instability in regions in which we expect to maintain and grow market share, an unfavorable legal proceeding outcome, a global decrease in the demand of drilling products or other unforeseen macroeconomic considerations could negatively impact the key assumptions used in our goodwill assessment for our drilling products reporting unit. Based on the results of the goodwill impairment test, the fair value of the drilling products reporting unit exceeded its carrying value by approximately 8%. Accordingly, no impairment was recorded in the second quarter of 2025.

Goodwill Impairment Assessment (Third Quarter of 2024) — During the third quarter of 2024, the forecast for the completion services reporting unit assumed lower activity in 2025 compared to average activity for full year 2024 and increases in estimated activity of 2% to 8% beginning in 2026 through 2029. Those estimates were based on future drilling rig and pressure pumping fleet count forecasts during the third quarter of 2024 and estimated market share. Additionally, the forecast reflected the expectation that industry-wide pricing pressure would persist within the completions market and continue to compress adjusted gross profit. These factors negatively impacted the estimated value of the reporting unit. The terminal period used within the discounted cash flow model for completion services consisted of a 1% growth rate. Future cash flows were then discounted using a market-participant, risk-adjusted weighted average cost of capital of 10.75%.

Based on the results of the quantitative assessment, the fair value of the completion services reporting unit was less than its carrying value. Accordingly, we recorded an $885 million impairment charge to goodwill for the completion services reporting unit during the third quarter of 2024.

Leases

Leases — We lease various offices, equipment and vehicles to support our operations and corporate activities. We determine if a contract contains a lease at inception or as a result of an acquisition. Right-of-use (“ROU”) assets and corresponding lease liabilities are recognized on our consolidated balance sheet at lease commencement based on the present value of the remaining lease payments over the lease term. The lease term may include options to extend or terminate the lease when it is reasonably certain that we will exercise such options.

By our policy election, ROU assets and lease liabilities with an initial term of one year or less are not recognized for leasing arrangements, and non-lease and lease components are treated as a single lease component instead of bifurcating those components. If available, we use the rate implicit in the lease at the commencement date to discount lease payments. If the implicit rate is not readily determinable, we use our incremental borrowing rate based on information available at the commencement date to determine the present value of future lease payments.

Lease expense for operating leases is recognized on a straight-line basis over the lease term. For finance leases, the ROU asset is amortized on a straight-line basis over the earlier of the useful life of the underlying asset or the lease term and recorded in depreciation and amortization expense in the consolidated statements of operations. Lease liabilities are adjusted for lease payments made and interest incurred using the effective interest method, with interest expense recorded in “Interest expense” in the consolidated statements of operations.

In the third quarter of 2023, as part of the Ulterra acquisition and the NexTier merger, we acquired certain operating and finance leases. We inherited NexTier’s and Ulterra’s lease classifications as of the time of each respective acquisition. We elected as an accounting policy election by class of underlying assets to not recognize assets or liabilities at the acquisition date for leases that had a remaining lease term of twelve months or less. See Notes 2 and 13 for details.

Revenue recognition

Revenue recognition — Revenues from our drilling services, completion services, drilling products, and other activities are recognized upon the transfer of control of the related services and products to the customer. See Note 3 for details.

ASC Topic 606 Revenue from Contracts with Customers

Drilling Services and Completion Services — revenue is recognized based on our customers’ ability to benefit from our services in an amount that reflects the consideration we expect to receive in exchange for those services. This typically happens when the service is performed. The services we provide represent a series of distinct services, generally provided daily, that are substantially the same, with the same pattern of transfer to the customer. Because our customers benefit equally throughout the service period, generally measured in days, and our efforts in providing services are incurred relatively evenly over the period of performance, revenue is recognized as we provide services to the customer.

Drilling Services revenue primarily consists of daywork drilling contracts for which related revenues and expenses are recognized as services are performed. For certain contracts, we receive payments for the mobilization of rigs and other drilling equipment. We defer revenue and related direct operating expense related to mobilizations and recognize those revenues and expenses on a straight-line basis as drilling services are provided. Costs incurred to relocate rigs and other drilling equipment to areas in which a contract has not been secured are expensed as incurred and are recorded in Drilling Services operating expense in the Consolidated Statements of Operations and Comprehensive Income (Loss). For certain contracts, we are also entitled to early termination payments if our customers choose to terminate a contract prior to the expiration of the contractual term. We recognize revenue associated with early termination payments when all contractual requirements related to early termination payments have been met.

Certain of our drilling contracts are performance-based. Performance-based contracts are contracts pursuant to which we are compensated partly based upon our performance against a mutually agreed upon set of predetermined targets. These types of contracts typically have a lower base dayrate, but give us the opportunity to receive additional compensation by meeting or exceeding certain performance targets agreed to by our customers.

Completion Services revenue consists of services and products related to our suite of completion businesses including hydraulic fracturing, completion support services, wireline and pumpdown services, and cementing. These services are provided pursuant to contractual arrangements, including pricing agreements. Revenue from these services is earned as services are rendered, which is generally on a per stage or fixed monthly rate except for our cementing services. All revenue is recognized when a contract with a customer exists, the performance obligations under the contract have been satisfied over time, the amount to which we have the right to invoice has been determined and collectability of amounts subject to invoice is probable. Contract fulfillment costs, such as mobilization costs and shipping and handling costs, are expensed as incurred and are recorded in Completion Services operating expense in the Consolidated Statements of Operations and Comprehensive Income (Loss). To the extent fulfillment costs are considered separate performance obligations that are billable to the customer, the amounts billed are recorded as revenue in the Consolidated Statements of Operations and Comprehensive Income (Loss).

Once a stage has been completed or products and services have been provided, a field ticket is created that includes charges for the service performed and the chemicals, proppant, and compressed natural gas consumed during the course of the service. The field ticket may also include charges for the mobilization of the equipment and inventory to the location, any additional equipment used on the

job, and other miscellaneous items. The field ticket represents the amounts to which we have the right to invoice and to recognize as revenue.

A portion of our contracts contain variable consideration; however, this variable consideration is typically unknown at the time of contract inception, and is not known until the job is complete, at which time the variability is resolved. Examples of variable consideration include the number of hours that will be incurred and the amount of consumables (such as chemicals and proppants) that will be used to complete a job.

Revenue is presented net of any sales tax charged to the customer that we are required to remit to local or state governmental taxing authorities. Reimbursements for the purchase of supplies, equipment, personnel services, shipping and other services that are provided at the request of our customers are recorded as revenue when incurred. The related costs are recorded as operating expenses when incurred.

ASC Topic 842 Revenue from Equipment Rentals and Other

Drilling Products Revenue — revenues are primarily generated from the rental of drilling equipment, comprised of drill bits and downhole tools. These arrangements provide the customer with the right to control the use of the identified asset. Generally, the lease terms in such arrangements are for periods of two to three days and do not provide customers with options to purchase the underlying asset.

Other — we are a non-operating working interest owner of oil and natural gas assets primarily located in Texas and New Mexico. The ownership terms are outlined in joint operating agreements for each well between the operator of the well and the various interest owners, including us, who are considered non-operators of the well. We receive revenue each period for our working interest in the well during the period.

Our revenue is disaggregated by service category, which aligns with our reportable segments. See Note 17 for details. Management believes this disaggregation depicts the nature, amount, timing and uncertainty of revenue and cash flows, as each service category is subject to different demand drivers and contract characteristics.

Income taxes

Income taxes — The asset and liability method is used in accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for operating loss and tax credit carryforwards and for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. If applicable, a valuation allowance is recorded to reduce the carrying amounts of deferred tax assets unless it is more likely than not that such assets will be realized. Our policy is to account for interest and penalties with respect to income taxes as operating expenses. See Note 14 for details.

Stock-based compensation

Stock-based compensation — We recognize the cost of share-based payments under the fair-value-based method. Under this method, compensation cost related to share-based payments is measured based on the estimated fair value of the awards at the date of grant, net of estimated forfeitures. This expense is recognized over the expected life of the awards, as described in Note 12.

Concentration of Credit Risk

Concentration of Credit Risk — Our assets that are potentially subject to concentrations of credit risk are cash, cash equivalents and restricted cash and trade accounts receivable. Cash balances are maintained in financial institutions, which at times exceed federally insured limits. We monitor the financial condition of the financial institutions in which accounts are maintained and we have not experienced any losses in such accounts. We maintain an allowance for credit losses based upon several factors, including historical collection experience, current aging status of the customer accounts and financial condition of our customers. There were no material changes in the allowance for credit losses in 2025 and 2024.

Recently Adopted Accounting Standards and Recently Issued Accounting Standards

Recently Adopted Accounting Standards — In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07 to improve reportable segment disclosure requirements and enhance disclosures about significant segment expenses. We adopted this new accounting pronouncement effective January 1, 2024 and expanded our consolidated financial statement disclosures in order to comply with the update. See Note 17 for details.

In December 2023, the FASB issued ASU 2023-09 to improve income tax disclosure. We adopted this accounting pronouncement effective January 1, 2025, on a prospective basis. The adoption did not have a material impact on our consolidated financial position, results of operations, or cash flows, but resulted in expanded disclosures within the Income Taxes footnote. See Note 14 for details.

Recently Issued Accounting Standards — In November 2024, the FASB issued ASU 2024-03 to expand disclosure requirements related to certain income statement expenses, which requires public entities to disclose additional information about specific expense

categories in the notes to the financial statements on an interim and annual basis. This guidance is effective for annual reporting periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted. We are currently evaluating the impact this pronouncement will have on our consolidated financial statements.

In July 2025, the FASB issued ASU 2025-05 to provide entities the option to use a practical expedient to assume balance sheet conditions remain unchanged when developing forecasts for estimating expected credit losses. This guidance is effective for fiscal years beginning after December 15, 2025, with early adoption permitted. We are currently evaluating the impact this pronouncement will have on our consolidated financial statements.

In September 2025, the FASB issued ASU 2025-06 to improve the accounting for internal-use software cost by increasing the operability of the recognition guidance by removing all references to software development project stages so that the guidance is neutral to different software development methods. This guidance is effective for annual reporting periods beginning after December 15, 2027, with early adoption permitted. We are currently evaluating the impact this pronouncement will have on our consolidated financial statements.

In December 2025, the FASB issued ASU 2025-11 to clarify the applicability of the interim reporting guidance, the types of interim reporting, and the form and content of interim financial statements in accordance with U.S. generally accepted accounting principles. Per the FASB, the amendment does not intend to change the fundamental nature of interim reporting or expand or reduce current interim disclosure requirements but rather provide clarity and improve navigability of the existing interim reporting requirements. The update will be effective for interim reporting periods within annual reporting periods beginning after December 15, 2027. We are currently evaluating the impact this pronouncement will have on our consolidated financial statements.

ASC Topic 842 Revenue from Equipment Rentals

ASC Topic 842 Revenue from Equipment Rentals and Other