With higher commodity prices and a continued steady increase in its number of rigs in operation, Patterson-UTI Energy, Inc. expects to see improved revenue and earnings in 2003 over 2002. The company, the second-largest operator of land-based oil and gas drilling rigs in North America, announced Tuesday it had acquired seven new rigs to take advantage of the expanding market.

Patterson-UTI Chairman Mark S. Siegel said business has progressed steadily from having an average of 117 drilling rigs running in the first quarter of 2002 to 140 in the fourth quarter and 163 average in 1Q03. As of last week Patterson-UTI, based in Snyder, TX, had 175 rigs in operation. With the additional purchases the company now owns 331 rigs, of which 293 are currently in good operating condition.

With the market showing strong natural gas prices and “too little gas in storage, we’re very optimistic about 2003,” Siegel said in an earnings conference call. “We’re getting far more phone calls from customers today than we were a month ago.” Another Patterson-UTI executive said it appeared customers were tending toward shallower prospects. “That’s the same as it has been in the past, the higher the prices, the shallower the wells.”

Siegel said Patterson-UTI’s 2002 results, while down compared to 2001, were better than expected. Net income for 2002 was $2.2 million, or $0.03 per share, compared to net income of $164.2 million, or $2.07 per share for 2001. In the fourth quarter the company reported net income of $1.8 million, or $0.02 per share, compared to net income of $18.7 million, or $0.24 per share for 4Q2001.

The numbers alone don’t tell the whole story. “We achieved positive results in what was clearly a down year for our industry. We generated approximately $100 million in EBITDA and our balance sheet at year-end was even stronger than it was when the year began,” Siegel said. “As of Dec. 31, 2002, we had no long-term debt, $168 million in working capital and more than $80 million in available cash, allowing us to continue to be prudent and patient buyers when appropriate opportunities arise, as was the case with the acquisitions we are announcing today.”

“Our policy of retaining our most experienced field personnel and refurbishing our equipment during the downtimes has begun to pay off as we had anticipated,” CEO Cloyce A. Talbott told analysts. “Because of this practice we have been able to respond quickly and efficiently to the improving industry conditions.”

The company’s customers traditionally have been split with 6% of them majors, 34% major independents and 60% non-public independents. Company officials said business has picked up about equally in all categories.

Patterson-UTI announced Tuesday it has entered into agreements to acquire seven additional land-based drilling rigs, six of which are marketable, along with a yard, top drive, spare drilling equipment and inventory, for a total of $16.5 million in cash. Four of the rigs will be marketed in Utah, increasing the company’s marketable rigs in the Rocky Mountain region to nine, and the remaining rigs will be deployed in South and East Texas. The Utah transaction has been completed, and the acquisition of the Texas rigs should occur before the end of February.

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