Patterson-UTI Will Maintain Elevated Day Rates in 2023 Despite Decelerating North American Rig Count

The U.S. land rig market remains oversaturated, with drillers commanding lower day rates and margins than in the past. Generally, drillers can begin to command pricing power at around 80% utilization. Rig demand in North America has been strong enough to push utilization well over that 80% threshold in recent quarters, supporting significant increases in day rates. We neverthless expect competition among drillers will remain elevated over the long run. Improved rig technologies have increased drilling efficiency, ultimately requiring fewer rigs to meet demand. Patterson acquired Pioneer Energy Services in the fourth quarter of 2021, expanding its U.S. rig capacity and adding exposure to Colombia (where Pioneer maintained eight rigs). We see more potential for drilling growth in international markets, but Patterson's exposure would be small, representing less than 5% of its total annual revenue.