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Business Combinations
 12 Months Ended
Dec. 31, 2024
Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract]  
Business Combinations Business Combinations
Ulterra Drilling Technologies, L.P.
On August 14, 2023, we completed the Ulterra acquisition. Total consideration for the acquisition included the issuance of 34.9 million shares of our common stock and payment of approximately $373 million of cash (after purchase price adjustments), which based on the closing price of our common stock of $14.94 on August 14, 2023, valued the transaction at closing at approximately $894 million.
The total fair value of the consideration transferred was determined as follows (in thousands, except stock price):
Shares of our common stock issued to Ulterra34,900
Our common stock price on August 14, 2023$14.94 
Common stock equity consideration$521,406 
Plus net cash consideration372,757 
Total consideration transferred$894,163 
The acquisition was accounted for as a business combination using the acquisition method. Under the acquisition method of accounting, the fair value of the consideration transferred is allocated to the tangible and intangible assets acquired and the liabilities assumed based on their estimated fair values as of the acquisition date.
The aggregate purchase price noted above was allocated to the major categories of assets acquired and liabilities assumed based on preliminary estimated fair values as of the date of the business combination. We applied significant judgment in estimating the fair value of assets acquired and liabilities assumed, which involved the use of significant estimates and assumptions with respect to future rig counts, cash flow projections, estimated economic useful lives, operating and capital cost estimates, customer attrition rates, contributory asset charges, royalty rates and discount rate (10.5%). The carrying amounts of cash and cash equivalents, accounts receivable, other assets, accounts payable and accrued liabilities approximate their fair values due to their nature or the short-term maturity of instruments. The remaining assets acquired and liabilities assumed are based on inputs that are not observable in the market and thus represent Level 3 inputs. The fair value of inventory and rental equipment was determined using a replacement cost approach. Intangible assets primarily consist of customer relationships and developed technology, the fair values of which were determined using an income approach. Property and equipment was valued using a combination of indirect cost and a market approach. The fair value was estimated by using a multi-period excess earnings method for customer relationships and a relief from royalty method for trade name and developed technology. The purchase price allocation was finalized in the third quarter of 2024. The valuation period adjustments did not have a material impact on our consolidated financial statements.
The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition:
Assets acquired:
Cash and cash equivalents$18,426 
Accounts receivable68,467 
Inventory (1)
36,313 
Rental equipment (2)
109,055 
Property and equipment27,583 
Intangible assets313,000 
Operating lease right of use asset7,513 
Finance lease right of use asset5,228 
Other assets15,989 
Total assets acquired601,574 
 
Liabilities assumed:
Accounts payable23,258 
Accrued liabilities33,323 
Operating lease liability7,513 
Finance lease liability5,228 
Deferred tax liabilities79,863 
Total liabilities assumed149,185 
Less: noncontrolling interest(8,729)
Net assets acquired443,660 
Goodwill450,503 
Total consideration transferred$894,163 

(1)We recorded an adjustment of $5.5 million to write-up acquired drill bits classified as inventory to estimated fair value. This adjustment will be recorded as direct operating expense as acquired drill bits are sold.
(2)We recorded an adjustment of $74.4 million to write-up acquired drill bits classified as long-lived assets to estimated fair value. This adjustment will be depreciated as acquired drill bits are rented over a weighted-average estimated useful life of 7.5 runs.
The goodwill recognized in the acquisition represents the excess of the gross consideration transferred over the fair value of the underlying net tangible and identifiable intangible assets acquired and liabilities assumed. Goodwill represents the potential for new growth opportunities internationally with the acquisition of Ulterra as well as the recognition of deferred taxes for the difference between the fair value of the assets acquired and liabilities assumed and the respective carry-over tax basis. Goodwill is not deductible for tax purposes. All of the goodwill was assigned to our Drilling Products segment. See Note 7.
Approximately $135 million of revenues and $3.4 million of net loss attributed to the Ulterra acquisition are included in the consolidated statements of operations for the period from the closing date on August 14, 2023 through December 31, 2023. We incurred $5.6 million of merger and integration expense related to the Ulterra acquisition in 2023. We did not incur any material merger and integration expense related to the Ulterra acquisition in 2024.
A portion of the fair value consideration transferred has been provisionally assigned to identifiable intangible assets as follows:
Fair Value
(in thousands)		Weighted Average Useful Life
(in years)
Customer relationships$245,000 15
Trade name16,000 11
Developed technology52,000 5
Intangible assets$313,000 
Pro Forma
The following pro forma condensed combined financial information was derived from our and Ulterra’s historical financial statements and gives effect to the acquisition as if it had occurred on January 1, 2022. The below information reflects pro forma adjustments based on available information and certain assumptions we believe are reasonable, including (i) adjustments related to the depreciation and amortization of the step up to fair value of $77.6 million for acquired intangibles, $74.4 million for acquired drill bits classified as long-lived assets, and $5.5 million for acquired drill bits classified as inventory, (ii) removal of $12.8 million in 2023 and $28.1 million in 2022 of historical interest expense of the acquired entity and (iii) $17.4 million in 2023 and $11.3 million in 2022 of tax benefit relating to the aforementioned pro forma adjustments.
The pro forma results of operations do not include any anticipated cost savings or other synergies that may result from the Ulterra acquisition nor do they include any estimated costs that will be incurred to integrate Ulterra operations. The pro forma results of operations include our merger and integration expense of $5.6 million as if they had been incurred in the first quarter of 2022.
The pro forma condensed combined financial information has been included for comparative purposes and is not necessarily indicative of the results that might have actually occurred had the Ulterra acquisition taken place on January 1, 2022. Furthermore, the financial information is not intended to be a projection of future results. The following table summarizes our selected financial information on a pro forma basis (in thousands, except per share data):

20232022
(Unaudited)
Revenues$4,369,596 $3,017,778 
Net income$190,136 $141,458 
NexTier Oilfield Solutions Inc.
On September 1, 2023, we completed the NexTier merger. Under the terms of the merger agreement, NexTier became our wholly-owned subsidiary. Each share of NexTier common stock issued and outstanding immediately prior to the effective time of the merger was converted into the right to receive 0.752 shares of our common stock. Additionally, certain equity awards that were granted and outstanding under NexTier long-term incentive plans were assumed by us, and such equity awards were converted into equity awards in respect of our common stock in accordance with the merger agreement.
NexTier is a predominately U.S. land-focused oilfield service provider, with a diverse set of well completion and production services across a variety of active basins.
The total fair value of the consideration transferred was determined as follows (in thousands, except exchange ratio and stock price):
Number of shares of NexTier common stock outstanding as of September 1, 2023228,846
Multiplied by the exchange ratio0.752
Number of shares of Patterson-UTI Energy, Inc. common stock issued in connection with the merger172,092
Patterson-UTI Energy, Inc. common stock price on September 1, 2023$14.91 
Common stock equity consideration2,565,895 
Acceleration of RSU awards1,997 
Fair value of replacement equity awards (1)
70,416 
NexTier long-term debt repaid by Patterson-UTI Energy, Inc.161,000 
Consideration transferred$2,799,308 
(1)In connection with the merger, each of the share-based awards held by legacy NexTier employees were replaced with our share-based awards on the merger date. The fair value of the replacement awards has been allocated between each employee’s pre-combination and post-combination services. Amounts allocated to pre-combination services have been included as consideration transferred as part of the merger. See Note 12 for replacement awards details.
The transaction was accounted for as a business combination using the acquisition method with Patterson-UTI Energy, Inc. determined to be the acquirer. Under the acquisition method of accounting, the fair value of the consideration transferred is allocated to the tangible and intangible assets acquired and the liabilities assumed based on their estimated fair values as of the acquisition date.
The aggregate purchase price noted above was allocated to the major categories of assets acquired and liabilities assumed based on preliminary estimated fair values as of the date of the business combination. We applied significant judgment in estimating the fair value of assets acquired and liabilities assumed, which involved the use of significant estimates and assumptions with respect to future rig counts, cash flow projections, estimated economic useful lives, operating and capital cost estimates, customer attrition rates, contributory asset charges, royalty rates and discount rate (14.0%). The carrying amounts of cash and cash equivalents, accounts receivable, inventory, other assets, accounts payable, accrued liabilities, and other liabilities approximate their fair values due to their nature or the short-term maturity of instruments. The remaining assets acquired and liabilities assumed are based on inputs that are not observable in the market and thus represent Level 3 inputs. The fair value of property and equipment was determined using a combination of replacement cost and indirect cost. Intangible assets were valued using an income approach. The fair value was estimated by using multi-period excess earnings method for customer relationships and a relief from royalty method for trade name and developed technology. The purchase price allocation was finalized in the third quarter of 2024. The valuation period adjustments did not have a material impact on our consolidated financial statements.
The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of the merger:
Assets acquired:
Cash and cash equivalents$95,815 
Accounts receivable420,200 
Inventory71,930 
Property and equipment (1)
1,045,610 
Intangible assets768,000 
Operating lease right of use asset19,091 
Finance lease right of use asset50,733 
Other assets84,677 
Total assets acquired2,556,056 
 
Liabilities assumed: 
Accounts payable358,873 
Accrued liabilities129,535 
Operating lease liability19,091 
Finance lease liability50,733 
Deferred tax liabilities86,293 
Long-term debt22,533 
Other liabilities11,815 
Total liabilities assumed678,873 
Net assets acquired1,877,183 
Goodwill922,125 
Total consideration transferred$2,799,308 
(1)We recorded an adjustment of $263 million to write-up acquired property and equipment to estimated fair value. This adjustment will be depreciated on a straight-line basis over a weighted average period of six years .
The goodwill recognized in the merger represents the excess of the gross consideration transferred over the fair value of the underlying net tangible and identifiable intangible assets acquired and liabilities assumed. Goodwill largely consisted of the expected synergies and economies of scale from the combined operations of Patterson-UTI and NexTier as well as the recognition of deferred taxes for the difference between the fair value of the assets acquired and liabilities assumed and the respective carry-over tax basis. All of the goodwill was assigned to our completion services segment. See Note 7.
Approximately $1.1 billion of revenues and $12.5 million of net income attributed to the NexTier merger are included in the consolidated statements of operations for the period from the closing date on September 1, 2023 through December 31, 2023. During the twelve months ended December 31, 2024 and 2023, we incurred costs related to the NexTier merger totaling $28.7 million and $92.5 million, respectively, which are included in our consolidated statements of operations as “Merger and integration expense.”
A portion of the fair value consideration transferred has been provisionally assigned to identifiable intangible assets as follows:
Fair Value
(in thousands)		Weighted Average Useful Life
(in years)
Customer relationships$540,000 10
Trade name85,000 10
Developed technology143,000 5
Intangible assets$768,000 
Pro Forma
The following pro forma condensed combined financial information was derived from our and NexTier's historical financial statements and gives effect to the acquisition as if it had occurred on January 1, 2022. The below information reflects pro forma adjustments based on available information and certain assumptions we believe are reasonable, including (i) adjustments related to the depreciation and amortization of the step up to fair value of $720.7 million for acquired intangibles and $262.7 million for acquired property and equipment, (ii) removal of $17.7 million in 2023 and $30.0 million in 2022 of historical interest expense of the acquired entity and (iii) $15.1 million in 2023 and $72.7 million of tax benefit in 2022 relating to the aforementioned pro forma adjustments.
The pro forma results of operations do not include any anticipated cost savings or other synergies that may result from the NexTier merger nor do they include any estimated costs that will be incurred to integrate NexTier operations. The pro forma results of operations include our merger and integration expense of $92.5 million as if they had been incurred in the first quarter of 2022.
The pro forma condensed combined financial information has been included for comparative purposes and is not necessarily indicative of the results that might have actually occurred had the NexTier merger taken place on January 1, 2022. Furthermore, the financial information is not intended to be a projection of future results. The following table summarizes our selected financial information on a pro forma basis (in thousands, except per share data):
20232022
(Unaudited)
Revenues$6,604,824 $5,892,414 
Net income$598,709 $196,220