Operating out of Snyder, Texas, Patterson-UTI Energy, Inc. is North America's second largest onshore contract drilling company, offering services to major and independent oil and natural gas producers in the Permian Basin of west Texas and southeast New Mexico, south Texas, east Texas, Oklahoma, the Gulf Coast regions of Texas and Louisiana, the Gulf of Mexico, and western Canada. The company is the result of a 2001 merger of equals between Patterson Energy, Inc. and Houston-based UTI Energy Corp., with Patterson becoming the surviving entity. As of December 31, 2002, the company owns a fleet of 324 rigs, which are made up of the structure (hoists and derricks), power sources, and ancillary items such as pumps, blowout preventers, pipe, and other equipment needed to drive a drill bit into rock to depths as much as 30,000 feet. The vast majority of Patterson-UTI's rigs, 286, are mechanical rigs, and the remaining 38 are SCR electrical rigs. In addition, Patterson-UTI offers drilling fluids and completion fluids to customers in order to control pressure while drilling for oil or natural gas wells. Pressure pumping services are provided in the Appalachian Basin to complete new wells and stimulate old ones. The company is also involved in a minor way in the development and exploration of oil and natural gas. Services are contracted in three different ways. Daywork contracts, Patterson-UTI's most common arrangement, are negotiated on a per-day rate for a drilling rig and crew, which the customer is responsible for supervising, and additional lump sums are paid for the mobilization and demobilization of the drilling rig. Under footage contracts Patterson-UTI drills a well for a customer at a fixed rate per foot. Although the risks are greater under this arrangement, if the project is completed ahead of schedule, the company realizes a higher profit than under a daywork contract. A turnkey contract is the riskiest, and potentially most rewarding, contract under which Patterson does business, requiring that the company provide services, supplies, and equipment not called for in a footage contract and the assumption of such risks as blowouts, fires, and the cratering of the well bore. In addition, payment in the form of a fixed fee is only received when the work is completed, requiring Patterson to bear considerable up-front costs that it may not recoup. As a consequence, Patterson-UTI is involved in relatively few turnkey operations.
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