<SEC-DOCUMENT>0001193125-15-366001.txt : 20160916
<SEC-HEADER>0001193125-15-366001.hdr.sgml : 20160916
<ACCEPTANCE-DATETIME>20151104153535
<PRIVATE-TO-PUBLIC>
ACCESSION NUMBER:		0001193125-15-366001
CONFORMED SUBMISSION TYPE:	CORRESP
PUBLIC DOCUMENT COUNT:		1
FILED AS OF DATE:		20151104

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			PATTERSON UTI ENERGY INC
		CENTRAL INDEX KEY:			0000889900
		STANDARD INDUSTRIAL CLASSIFICATION:	DRILLING OIL & GAS WELLS [1381]
		IRS NUMBER:				752504748
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		CORRESP

	BUSINESS ADDRESS:	
		STREET 1:		4510 LAMESA HWY
		STREET 2:		P O DRAWER 1416
		CITY:			SNYDER
		STATE:			TX
		ZIP:			79549
		BUSINESS PHONE:		9155731104

	MAIL ADDRESS:	
		STREET 1:		P O DRAWER 1416
		CITY:			SNYDER
		STATE:			TX
		ZIP:			79550

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	PATTERSON ENERGY INC
		DATE OF NAME CHANGE:	19940228
</SEC-HEADER>
<DOCUMENT>
<TYPE>CORRESP
<SEQUENCE>1
<FILENAME>filename1.htm
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<TITLE>Correspondence</TITLE>
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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">November&nbsp;4, 2015 </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>VIA EDGAR </U></B></P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Securities and Exchange Commission </P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Division of Corporation Finance </P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">100 F Street, N.E. </P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Washington, D.C. 20549 </P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Attention: Ethan Horowitz </P>
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<TD VALIGN="top">Re:</TD>
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<TD VALIGN="top">Patterson-UTI Energy, Inc.</TD></TR>
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<TD VALIGN="top">Form 10-K for Fiscal Year Ended December&nbsp;31, 2014</TD></TR>
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<TD VALIGN="top">Filed February 12, 2015</TD></TR>
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<TD VALIGN="top">Form 10-Q for Fiscal Quarter Ended June 30, 2015</TD></TR>
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<TD VALIGN="top">Filed July 27, 2015</TD></TR>
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<TD VALIGN="top">File No. 000-22664</TD></TR>
</TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Dear Mesdames and Sirs: </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">By letter dated October&nbsp;21, 2015, Patterson-UTI Energy, Inc. (the &#147;Company&#148;) received the Staff&#146;s comments relating to the
Company&#146;s response to the Staff&#146;s comment letter submitted August&nbsp;31, 2015, with respect to the Company&#146;s Annual Report on Form&nbsp;10-K for the year ended December&nbsp;31, 2014, and the Company&#146;s Quarterly Report on Form
10-Q for the quarter ended June&nbsp;30, 2015. The following numbered paragraphs repeat the comments for your convenience, followed by our responses to those comments. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>Form 10-K for Fiscal Year Ended December&nbsp;31, 2014 </U></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations, page 21 </U></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>Critical Accounting Policies, page 23 </U></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>Property and Equipment, page 23 </U></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman"><B>1. The draft disclosure provided in response to prior comment 1 describes the methods and key assumptions used in testing your long-lived
assets for impairment. However, it does not appear that you have discussed the degree of uncertainty associated with your key assumptions or addressed potential events that could reasonably be expected to affect these key assumptions. Please revise
your disclosure accordingly. </B></P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">In our quarterly report on Form 10-Q for the fiscal quarter ended September&nbsp;30, 2015, we provided
expanded disclosure regarding our testing of long-lived assets for impairment. Following is an example of the disclosure as it would have appeared in the Form 10-K for the fiscal year ended December&nbsp;31, 2014: </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">In light of the significant decline in oil and natural gas commodity prices beginning in the fourth quarter of 2014 and continuing into 2015,
we deemed it necessary to assess the recoverability of long-lived asset groups for both contract drilling and pressure pumping. We performed a Step 1 analysis as required by ASC 360-10-35 to assess the recoverability of long-lived assets within our
contract drilling and pressure pumping segments. With respect to these assets, future cash flows were estimated over the expected </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">1 </P>


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remaining life of the assets, and we determined that, on an undiscounted basis, expected cash flows exceeded the carrying value of the long-lived assets, and no impairment was indicated. The
expected cash flows for the contract drilling segment include the backlog of commitments for contract drilling revenues under term contracts, which was approximately $1.5 billion at December&nbsp;31, 2014. Rigs not under term contracts are subject
to market pricing. Utilization and market rates for rigs and for the pressure pumping segment were estimated based upon our historical experience in prior downturns. Also, the expected cash flows for our contract drilling and pressure pumping
segments were based on the assumption that activity levels in both segments will begin to recover in late 2015 and continue to recover in 2016 in response to improved oil prices. This oil price assumption is consistent with forecast information
published by the United States Energy Information Administration in January 2015. While we believe our assumptions with respect to future pricing for oil and natural gas were reasonable, actual future prices may vary significantly from the ones that
we assumed. The timeframe over which oil and natural gas prices will recover is highly uncertain. Potential events that could affect our assumptions regarding future prices and the timeframe for a recovery are affected by factors such as: </P>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">market supply and demand, </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
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<TD ALIGN="left" VALIGN="top">domestic and international military, political, economic and weather conditions, </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the desire and ability of the Organization of Petroleum Exporting Countries, commonly known as OPEC, to set and maintain production and price targets, </TD></TR></TABLE>
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<TD ALIGN="left" VALIGN="top">legal and other limitations or restrictions on exportation and/or importation of oil and natural gas, </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">technical advances affecting energy consumption and production, </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">the price and availability of alternative fuels, </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">the cost of exploring for, developing, producing and delivering oil and natural gas, and </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">regulations regarding the exploration, development, production and delivery of oil and natural gas. </TD></TR></TABLE>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">All of these factors are beyond our control. If the current lower oil and natural gas commodity price environment were to last into 2016 and
beyond, our actual cash flows would likely be less than the expected cash flows used in this assessment and could result in impairment charges in the future and such impairment could be material. See &#147;Item 1A. Risk Factors - We Are Dependent on
the Oil and Natural Gas Industry and Market Prices for Oil and Natural Gas. Declines in Customers&#146; Operating and Capital Expenditures and in Oil and Natural Gas Prices May Adversely Affect Our Operating Results.&#148; </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Impairment considerations related to our oil and natural gas segment are discussed below. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman"><B>2. From your response to prior comment 2, we note that overall rig utilization fell from approximately 89% as of December&nbsp;31, 2014 to
approximately 44% as of June&nbsp;30, 2015 and utilization for mechanical rigs and other electric rigs was approximately 20% as of June&nbsp;30, 2015. Your response states that you do not expect any meaningful increase in demand for North American
land drilling rigs until oil or natural gas prices improve. In addition, disclosure in your Form 10-Q for the period ended June&nbsp;30, 2015 states that your industry is experiencing a severe downturn. Please tell us about your impairment analysis
as of June&nbsp;30, 2015 for rigs not currently under contract and address the impact of changes in expected demand for your drilling services. As part of your response, specifically tell us about your assessment of stacked rigs. Refer to FASB ASC
360-10-35. </B></P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">During the first quarter of 2015, oil prices averaged $48.54 per barrel and reached a low of $43.39 per barrel on
March&nbsp;17, 2015. Oil prices improved during the second quarter of 2015 and averaged $57.85 per barrel. Although a price improvement occurred earlier than we projected, this improvement was generally consistent with our assumption at
December&nbsp;31, 2014, that oil prices would improve late in 2015 and continue to improve in 2016, which would result in improved activity levels for the contract drilling business. During the second quarter of 2015 as oil prices increased, we
received requests from customers to reactivate drilling rigs to resume operations in the third quarter of 2015. We believed this was an indication that future activity levels would be improving for the contract drilling business, which was
consistent with our expectations at December&nbsp;31, 2014 and through the first two quarters of 2015. ASC </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">2 </P>


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360-10-35 requires long-lived assets to be tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. Market conditions at
June&nbsp;30, 2015 were generally consistent with our assumptions at December&nbsp;31, 2014, and there was no event or change in circumstances that indicated that the carrying amount of the long-lived assets of the contract drilling business was not
recoverable. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">During the third quarter of 2015, however, oil prices declined and averaged $46.42 per barrel and reached a new low for 2015
of $38.22 per barrel on August&nbsp;24, 2015. In response to lower oil prices in the third quarter of 2015, we lowered our expectations with respect to future activity levels in the contract drilling business. In light of our revised expectations of
the duration of the lower oil and natural gas commodity price environment and the related deterioration of the market for contract drilling services during the third quarter of 2015, we deemed it necessary to assess the recoverability of long-lived
assets for contract drilling. We performed a Step 1 analysis as required by ASC 360-10-35 to assess the recoverability of long-lived assets within our contract drilling segment. With respect to these assets, future cash flows were estimated over the
expected remaining life of the assets, and we determined that, on an undiscounted basis, expected cash flows exceeded the carrying value of the long-lived assets, and no impairment was indicated. The expected cash flows for the contract drilling
segment were based on our historical experience of utilization and rates in prior downturns. Also, the expected cash flows for the contract drilling segment were based on the assumption that activity levels would begin to recover in the first
quarter of 2017 in response to improved oil prices. While we believe these assumptions with respect to future pricing for oil and natural gas were reasonable, actual future prices may vary significantly from the ones that we assumed. The timeframe
over which oil and natural gas prices will recover is highly uncertain. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">On a periodic basis, at least annually, we evaluate our fleet of
drilling rigs for marketability based on the condition of inactive (&#147;stacked&#148;) rigs, expenditures that would be necessary to bring them to working condition and the expected demand for drilling services by rig type (such as drilling
conventional, vertical wells versus drilling longer, horizontal wells using higher specification rigs). The components comprising rigs that will no longer be marketed are evaluated, and those components with continuing utility to our other marketed
rigs are transferred to other rigs or to our yards to be used as spare equipment. The remaining components of these rigs will be retired. In the quarter ended September&nbsp;30, 2015, we identified 24 mechanical rigs and 9 non-APEX<SUP
STYLE="font-size:85%; vertical-align:top">&reg;</SUP> electric rigs that will no longer be marketed. Also, we had 15 additional mechanical rigs that were not operating. Although these 15 rigs remain marketable, we have lower expectations with
respect to utilization of these rigs due to the industry shift to higher specification drilling rigs. We recorded a charge of $131 million related to the retirement of the 33 rigs, the 15 mechanical rigs that remain marketable but were not
operating, and the write-down of excess spare rig components to their realizable values. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>Goodwill, page 24 </U></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman"><B>3. As noted in your response to prior comment 3, your market capitalization was less than total stockholders&#146; equity as of
December&nbsp;31, 2014. However, a control premium was deemed to be reasonable in assessing your enterprise value. Please tell us about the qualitative and quantitative factors considered in determining the control premium applied as part of this
assessment and explain the characteristics of the control premium used in your analysis. </B></P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">Control premiums are common in acquisitions
in the oil field service industry. We reviewed the implied premiums in acquisitions that we believed to be relevant and were in the oil field service or related industries. The control premiums in those transactions ranged from 32% to 50% of the
pre-announcement share values. The transactions that were considered are listed in Exhibit 1 to this letter. While the observed range of control premiums was 32% to 50%, our analysis required the use of a control premium of only 20% to result in an
implied enterprise value in excess of total stockholders&#146; equity. </P>
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 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman"><B>4. Please explain how you concluded that your contract drilling segment represents a reporting
unit pursuant to FASB ASC 350-20-35-34. As part of your response, tell us how you considered other approaches to determining your reporting units (e.g., based on rig classification &#150; APEX rigs, other electric rigs, and mechanical rigs).
</B></P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">FASB ASC 350-20-35-34 states: &#147;A component of an operating segment is a reporting unit if the component constitutes a business
or a nonprofit activity for which discrete financial information is available and segment management, as that term is defined in paragraph 280-10-50-7, regularly reviews the operating results of that component.&#148; </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">FASB ASC 280-10-50-7 states: &#147;Generally, an operating segment has a segment manager who is directly accountable to and maintains regular
contact with the chief operating decision maker to discuss operating activities, financial results, forecasts, or plans for the segment. The term segment manager identifies a function, not necessarily a manager with a specific title.&#148; </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">Drilling rigs are equipped with engines, a drawworks, a mast, pumps to circulate drilling fluid, blowout preventers, drill pipe and related
equipment. Their power source is either electric or mechanical. The majority of rig components are interchangeable between mechanical rigs and electric rigs. Drilling rigs with the same capacity components, regardless of their power source, are
capable of drilling the same wells, including both vertical and horizontal wells. Additionally, all of our drilling rigs are mobile both within and across geographic areas within North America. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">Individual rigs are managed by Rig Managers that report to Superintendents who manage a group of rigs. Rigs are typically assigned to
Superintendents based upon the rig location and without regard to the rig&#146;s classification as APEX<SUP STYLE="font-size:85%; vertical-align:top">&reg;</SUP>, other electric or mechanical, or other specifications of the rig. If a rig is
relocated to a geographic area outside of the assigned Superintendent&#146;s region, the rig is reassigned to a Superintendent in the rig&#146;s new region. The geographic relocation of drilling rigs occurs in response to changes in customer demand.
</P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">We believe our contract drilling segment is a reporting unit and that the President of this segment is the segment manager. This person
is directly accountable to and maintains regular contact with our chief operating decision maker to discuss operating activities, financial results, forecasts, or plans for the segment. Also, within the contract drilling segment, all Superintendents
ultimately report to the segment President. Management of the contract drilling segment, including the segment President, regularly reviews drilling segment operating results, with a focus on individual rig and customer contract performance. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">Given the factors described above, we do not believe that separating reporting units by rig classification would be appropriate. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman"><B>5. We note that you concluded that it was more likely than not that the fair values of your reporting units were greater than their
carrying amounts as of December&nbsp;31, 2014 based on the factors identified in your response to prior comment 3. Please tell us whether recent changes in the environment in which you operate were deemed to be a circumstance requiring the
evaluation of goodwill as of June&nbsp;30, 2015. </B></P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">As noted in our response to comment 2 above, during the first quarter of 2015, oil
prices averaged $48.54 per barrel and reached a low of $43.39 per barrel on March&nbsp;17, 2015. Oil prices improved during the second quarter of 2015 and averaged $57.85 per barrel. Although a price improvement occurred earlier than we projected,
this improvement was generally consistent with our assumption at December&nbsp;31, 2014, that oil prices would improve in late 2015 and continue to improve in 2016, which would result in improved activity levels for both the contract drilling and
pressure pumping businesses. During the second quarter of 2015 as oil prices increased, we received requests from customers to reactivate drilling rigs to resume operations in the third quarter of 2015. We believed this was an indication that future
activity levels would be improving for both the contract drilling and pressure pumping businesses, which was consistent with our expectations at December&nbsp;31, 2014 and through the first two quarters of 2015. Thus, we determined there was no
&#147;triggering event&#148; requiring an evaluation of goodwill as of June&nbsp;30, 2015. During the third quarter of 2015, however, oil prices declined and averaged $46.42 per barrel and reached a </P>

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new low for 2015 of $38.22 per barrel on August&nbsp;24, 2015. In response to lower oil prices in the third quarter of 2015, we lowered our expectations with respect to future activity levels in
both the contract drilling and pressure pumping businesses. In light of our revised expectations of the duration of the lower oil and natural gas commodity price environment and the related deterioration of the markets for contract drilling and
pressure pumping services during the third quarter of 2015, we performed a goodwill impairment test as of September&nbsp;30, 2015. In completing the first step of the analysis, the fair value of each reporting unit was estimated using both the
income and market valuation methods. The estimate of the fair value of each reporting unit required the use of significant unobservable inputs, representative of a Level 3 fair value measurement. The inputs included assumptions related to the future
performance of our contract drilling and pressure pumping reporting units, such as future oil and natural gas prices and projected demand for our services, and assumptions related to discount rates, long-term growth rates and control premiums. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">Based on the results of the first step of the goodwill impairment test as of September&nbsp;30, 2015, we concluded that no impairment was
indicated in our contract drilling reporting unit; however, impairment was indicated in our pressure pumping reporting unit. In the three months ended September&nbsp;30, 2015, we recognized an impairment charge of $125 million associated with the
impairment of the goodwill of the pressure pumping reporting unit. The implied fair value of goodwill was estimated using a variety of valuation methods, including the income and market approaches. The estimate of fair value required the use of
significant unobservable inputs, representative of a Level 3 fair value measurement. The inputs included assumptions related to the future performance of our pressure pumping reporting unit, such as future oil and natural gas prices and projected
demand for our services, and assumptions related to discount rates, long-term growth rates and control premiums. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>Form 10-Q for Fiscal Quarter Ended
June&nbsp;30, 2015 </U></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations, page 21 </U></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman"><B>6. Your response to prior comment 4 indicates that you do not consider horsepower to be a key performance indicator for your pressure
pumping business. However, disclosure in your periodic Exchange Act filings frequently includes information about the horsepower for your pressure pumping equipment. Also, as noted in our prior comment, you refer to horsepower in discussing your
pressure pumping business as part of earnings conference calls. Please explain how horsepower is used as a measure to manage the operations of your pressure pumping business and tell us whether you believe it is a material metric for investors.
Refer to section I.B. of SEC Release No.&nbsp;33-8350. </B></P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">We believe that the key performance indicators for pressure pumping activity
are the number of fracturing jobs and the average revenue per fracturing job that are presented in the tables on pages 28 and 30 of our Form 10-Q for the fiscal quarter ended June&nbsp;30, 2015 and pages 30 and 32 of our Form 10-Q for the fiscal
quarter ended September&nbsp;30, 2015. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">We have 454 frac pumps which represent approximately one million horsepower of fracturing
capacity. These pumps are deployed to jobs in groups of pumps based upon the customer&#146;s horsepower requirements for each job. With fewer jobs in this market environment, we have elected to concentrate wear and tear in a smaller number of pieces
of equipment by parking (or &#147;stacking&#148;) a portion of the equipment. Alternatively, we could rotate the equipment from job to job and spread the wear and tear evenly over each piece of equipment. Under such a scenario, every piece of
equipment could potentially work every week. This parked equipment can be readily deployed to customer locations at current activity levels or as activity levels improve. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">The amount of hydraulic horsepower is simply a measure of the operating capacity of the business. While the operating capacity may be a factor
in trying to understand actual and potential utilization, since the amount of stacked horsepower can vary as a result of operating decisions without regard to the underlying activity, we do not consider stacked horsepower by itself to be a material
metric for investors. In light of the Staff&#146;s comment, we recognize that this information could be helpful when considered with the </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">5 </P>


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other performance information we provide investors. As such, on page 23 of our Form 10-Q for the fiscal quarter ended September&nbsp;30, 2015, we have disclosed the approximate amount of our
stacked fracturing horsepower. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman"><B>7. Please tell us more about the process through which you evaluate your fleet of marketable pressure
pumping equipment for impairment pursuant to FASB ASC 360-10-35. With your response, also tell us about your impairment analysis as of June&nbsp;30, 2015. In this connection, we note that your response to prior comment 4 states that you will not
experience any meaningful increase in demand for pressure pumping equipment until oil or natural gas prices improve. We also note the disclosure in your Form 10-Q stating that your pressure pumping business is continuing to experience the effects of
reduced spending by customers and downward pressure on pricing and that you expect to experience further declines in pressure pumping activity and pricing. </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">As noted in our responses to comments 2 and 5 above, during the first quarter of 2015, oil prices averaged $48.54 per barrel and reached a low
of $43.39 per barrel on March&nbsp;17, 2015. Oil prices improved during the second quarter of 2015 and averaged $57.85 per barrel. Although a price improvement occurred earlier than we projected, this improvement was generally consistent with our
assumption at December&nbsp;31, 2014, that oil prices would improve late in 2015 and continue to improve in 2016, which would result in improved activity levels for the pressure pumping business. During the second quarter of 2015 as oil prices
increased, we received requests from customers to reactivate drilling rigs to resume operations in the third quarter of 2015. We believed this was an indication that future activity levels would be improving for both the contract drilling and
pressure pumping businesses, which was consistent with our expectations at December&nbsp;31, 2014 and through the first two quarters of 2015. ASC 360-10-35 requires long-lived assets to be tested for recoverability whenever events or changes in
circumstances indicate that its carrying amount may not be recoverable. Market conditions at June&nbsp;30, 2015 were generally consistent with our assumptions at December&nbsp;31, 2014, and there was no event or change in circumstances that
indicated that the carrying amount of the long-lived assets of the pressure pumping business was not recoverable. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">During the third
quarter of 2015, however, oil prices declined and averaged $46.42 per barrel and reached a new low for 2015 of $38.22 per barrel on August&nbsp;24, 2015. In response to lower oil prices in the third quarter of 2015, we lowered our expectations with
respect to future activity levels in the pressure pumping business. In light of our revised expectations of the duration of the lower oil and natural gas commodity price environment and the related deterioration of the market for pressure pumping
services during the third quarter of 2015, we deemed it necessary to assess the recoverability of long-lived assets for pressure pumping. We performed a Step 1 analysis as required by ASC 360-10-35 to assess the recoverability of long-lived assets
within our pressure pumping segment. With respect to these assets, future cash flows were estimated over the expected remaining life of the assets, and we determined that, on an undiscounted basis, expected cash flows exceeded the carrying value of
the long-lived assets, and no impairment was indicated. The expected cash flows for the pressure pumping segment were based on our historical experience of utilization and rates in prior downturns. Also, the expected cash flows for the pressure
pumping segment were based on the assumption that activity levels would begin to recover in the first quarter of 2017 in response to improved oil prices. While we believe these assumptions with respect to future pricing for oil and natural gas were
reasonable, actual future prices may vary significantly from the ones that we assumed. The timeframe over which oil and natural gas prices will recover is highly uncertain. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">The Company acknowledges that: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%">&nbsp;</TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the Company is responsible for the adequacy and accuracy of the disclosure in the filing; </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%">&nbsp;</TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Staff comments or changes to disclosure in response to Staff comments do not foreclose the Commission from taking any action with respect to the filing; and </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%">&nbsp;</TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">the Company may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States. </TD></TR></TABLE>
<P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">Please do not hesitate to call me at (214)&nbsp;765-5525 if you have any questions or would like any additional information regarding these
matters. </P>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">6 </P>


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<TD WIDTH="100%"></TD></TR>


<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">Very truly yours,</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="16"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">/s/ John E. Vollmer III</TD></TR>
<TR STYLE="font-size:1pt">
<TD HEIGHT="8"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">John E. Vollmer III</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">Senior Vice President-Corporate Development,</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">Chief Financial Officer and Treasurer</TD></TR>
</TABLE></DIV>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">7 </P>


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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>Exhibit 1 &#150; Control Premiums Considered as of December&nbsp;31, 2014 </B></P>
<P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="84%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="15%"></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1.00pt solid #000000; width:31.10pt; font-size:8pt; font-family:Times New Roman"><B>Acquirer</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Acquiree</B></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Date</B></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>Premium*</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Halliburton</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">Baker&nbsp;Hughes</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="center">December&nbsp;2014</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">50</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Siemens</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">Dresser Rand</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="center">September&nbsp;2014</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">32</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">GE</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">Lufkin&nbsp;Industries</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="center">July 2013</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">38</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Paragon</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">Prospector&nbsp;Offshore&nbsp;Drilling</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="center">November 2014</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">49</TD>
<TD NOWRAP VALIGN="bottom">%&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Note: With the exception of the GE transaction, which closed on the date indicated, the above dates represent announcement
dates as the transactions had not closed as of December&nbsp;31, 2014. </B></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><B>*</B></TD>
<TD ALIGN="left" VALIGN="top"><B>Control premiums are implied based on pre-announcement share values of the acquiree and the announced offer consideration. Where consideration involved cash and securities, values for securities exchanged were also
determined pre-announcement. </B></TD></TR></TABLE>
 <p STYLE="margin-top:0pt;margin-bottom:0pt ; font-size:8pt">&nbsp;</P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">8 </P>

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