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Patterson-UTI Expects Higher Rig Demand as 2027 Outlook Improves
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Key Takeaways
PTEN expects more rigs to return in early 2027 as U.S. drilling activity and customer demand strengthen.
Patterson-UTI's rig dayrates have climbed to the mid-$30,000 range amid rising demand for advanced rigs.
PTEN sees stronger completion demand in 2027, while disciplined spending and higher pricing support growth.
Patterson-UTI Energy, Inc. (PTEN - Free Report) expects to bring more drilling rigs back into service in early 2027 as U.S. oilfield activity picks up and demand for advanced equipment strengthens. During its third-quarter 2026 earnings call on Oct. 29, this Houston-based oilfield services company reported growing customer interest, higher drilling rates and improving business prospects.
The outlook points to increased spending by exploration and production (E&P) companies, particularly those seeking high-capacity rigs for deeper wells and longer horizontal drilling projects. Patterson-UTI also expects publicly traded oil and gas producers to play a larger role in the next phase of the recovery.
PTEN Sees Further Growth in U.S. Rig Activity
Patterson-UTI ended the third quarter with 104 operating rigs in the United States, up 16 rigs, or about 18%, from its April low. The company averaged 101 rigs during the quarter, supported by stronger demand in major oil-producing regions, including the Permian Basin and the Rockies. For the fourth quarter, PTEN expects an average of approximately 104 operating rigs, with the count projected to finish the year above that level. More rigs could return to service in early 2027 as customers set new drilling budgets and prepare their development plans.
Private E&P companies have led the recent increase in drilling activity. However, management said discussions with larger public operators were gaining pace, suggesting that these producers could account for a greater share of new rig deployments. Some customers have already entered into contracts or begun discussions for rig deployments scheduled around the middle of 2027, giving the company a clearer picture of future demand.
Higher Demand for Advanced Rigs Supports Pricing
Patterson-UTI is also seeing greater interest in upgraded drilling equipment built to handle longer horizontal wells and more demanding drilling conditions. Average rig dayrates have increased from the low-$30,000 range earlier in 2026 to the mid-$30,000 range. Rigs with structural upgrades are earning several thousand dollars more per day than the company's average rate.
The company continues to upgrade its APEX XK rigs to support heavier drilling loads. Its XC+ rigs are designed for some of the deepest wells in the Haynesville and Delaware basins. These improvements are helping PTEN meet customer requirements and secure better contract terms.
Still, management plans to remain selective about bringing idle rigs back into operation. Since the April low, reactivation costs have averaged around $1 million per rig, excluding any extra upgrades requested by customers. With fewer low-cost reactivation opportunities remaining, the company intends to focus more on higher dayrates, favorable contracts and long-term customer relationships instead of increasing its fleet at any cost.
Completion Services Demand May Rise in 2027
An increase in drilling activity could also support Patterson-UTI's Completion Services business, as more newly drilled wells will eventually require hydraulic fracturing before production begins.
The segment reported third-quarter revenues of $808 million and adjusted gross profit of $133 million. Pricing rose by a mid-single-digit percentage from the second quarter, although temporary sand shortages and trucking delays affected some operations. Management expects demand for completion equipment to increase in 2027. However, the supply of available equipment may struggle to keep pace as companies retire older diesel-powered units.
Higher diesel costs are also encouraging operators to choose equipment that can run on natural gas. Patterson-UTI expects nearly 90% of its active horsepower to be capable of using natural gas by the end of 2026. The company plans to replace older equipment with newer natural gas-powered systems while keeping its total completion capacity largely unchanged. This approach could help support pricing as demand increases.
PTEN's Financial Results Support Its Growth Plans
Patterson-UTI reported third-quarter revenues of $1.34 billion, up approximately 9% from the previous quarter. Adjusted EBITDA reached $264 million, reflecting improved performance across its main businesses. Net income attributable to common stockholders totaled about $28 million, in contrast to a loss of $19.6 million in the second quarter. Third-quarter earnings included a gain from equipment sales for use in Venezuela.
The company returned approximately $62 million to its shareholders through dividends and stock repurchases during the quarter. PTEN ended September with $339 million in cash and no outstanding borrowings under its $500 million revolving credit facility. Management expects free cash flow to remain strong in the fourth quarter and improve further in 2027.
The company's improving financial performance, stronger drilling activity and expectations for continued growth in 2027 have coincided with solid stock market gains. Year to date, PTEN’s shares have surged 70.5%, significantly outperforming the broader oil and energy sector (ZS12M), which gained 27.5%.
PTEN Stock Shows Strength Against Energy Sector
Image Source: Zacks Investment Research
What Should Investors Watch?
Patterson-UTI's outlook suggests that recovering U.S. drilling activity could support stronger equipment demand, higher dayrates and better earnings in 2027. However, growth will depend on oil and natural gas prices, customer spending plans and the cost of bringing more rigs into service. Rising equipment costs could also affect investment decisions.
Investors should monitor new drilling contracts, changes in operating rig counts and further pricing gains in both drilling and completion services. With demand for premium equipment increasing and management maintaining a disciplined spending strategy, PTEN could benefit from an improving U.S. oilfield services market in 2027.
Marathon Petroleum is valued at $106.07 billion. The company is a leading U.S. independent refiner, marketer and transporter of petroleum products, with a strong refining footprint and an extensive midstream business. Marathon Petroleum benefits from its integrated operations, strategic refining assets and diversified earnings streams across the energy value chain.
Delek US Holdings is valued at $3.80 billion. It is a diversified downstream energy company engaged in petroleum refining, renewable fuels, asphalt production and logistics operations. Delek US Holdings operates multiple refineries in the United States and is committed to delivering safe, reliable energy while investing in cleaner energy initiatives.
Canadian Natural Resources is valued at $98.72 billion. It is an independent energy company. Canadian Natural Resources is engaged in the exploration, development, production and marketing of crude oil, natural gas and natural gas liquids.
View the Zacks #1 Rank List
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Patterson-UTI Expects Higher Rig Demand as 2027 Outlook Improves
Key Takeaways
Patterson-UTI Energy, Inc. (PTEN - Free Report) expects to bring more drilling rigs back into service in early 2027 as U.S. oilfield activity picks up and demand for advanced equipment strengthens. During its third-quarter 2026 earnings call on Oct. 29, this Houston-based oilfield services company reported growing customer interest, higher drilling rates and improving business prospects.
The outlook points to increased spending by exploration and production (E&P) companies, particularly those seeking high-capacity rigs for deeper wells and longer horizontal drilling projects. Patterson-UTI also expects publicly traded oil and gas producers to play a larger role in the next phase of the recovery.
PTEN Sees Further Growth in U.S. Rig Activity
Patterson-UTI ended the third quarter with 104 operating rigs in the United States, up 16 rigs, or about 18%, from its April low. The company averaged 101 rigs during the quarter, supported by stronger demand in major oil-producing regions, including the Permian Basin and the Rockies. For the fourth quarter, PTEN expects an average of approximately 104 operating rigs, with the count projected to finish the year above that level. More rigs could return to service in early 2027 as customers set new drilling budgets and prepare their development plans.
Private E&P companies have led the recent increase in drilling activity. However, management said discussions with larger public operators were gaining pace, suggesting that these producers could account for a greater share of new rig deployments. Some customers have already entered into contracts or begun discussions for rig deployments scheduled around the middle of 2027, giving the company a clearer picture of future demand.
Higher Demand for Advanced Rigs Supports Pricing
Patterson-UTI is also seeing greater interest in upgraded drilling equipment built to handle longer horizontal wells and more demanding drilling conditions. Average rig dayrates have increased from the low-$30,000 range earlier in 2026 to the mid-$30,000 range. Rigs with structural upgrades are earning several thousand dollars more per day than the company's average rate.
The company continues to upgrade its APEX XK rigs to support heavier drilling loads. Its XC+ rigs are designed for some of the deepest wells in the Haynesville and Delaware basins. These improvements are helping PTEN meet customer requirements and secure better contract terms.
Still, management plans to remain selective about bringing idle rigs back into operation. Since the April low, reactivation costs have averaged around $1 million per rig, excluding any extra upgrades requested by customers. With fewer low-cost reactivation opportunities remaining, the company intends to focus more on higher dayrates, favorable contracts and long-term customer relationships instead of increasing its fleet at any cost.
Completion Services Demand May Rise in 2027
An increase in drilling activity could also support Patterson-UTI's Completion Services business, as more newly drilled wells will eventually require hydraulic fracturing before production begins.
The segment reported third-quarter revenues of $808 million and adjusted gross profit of $133 million. Pricing rose by a mid-single-digit percentage from the second quarter, although temporary sand shortages and trucking delays affected some operations. Management expects demand for completion equipment to increase in 2027. However, the supply of available equipment may struggle to keep pace as companies retire older diesel-powered units.
Higher diesel costs are also encouraging operators to choose equipment that can run on natural gas. Patterson-UTI expects nearly 90% of its active horsepower to be capable of using natural gas by the end of 2026. The company plans to replace older equipment with newer natural gas-powered systems while keeping its total completion capacity largely unchanged. This approach could help support pricing as demand increases.
PTEN's Financial Results Support Its Growth Plans
Patterson-UTI reported third-quarter revenues of $1.34 billion, up approximately 9% from the previous quarter. Adjusted EBITDA reached $264 million, reflecting improved performance across its main businesses. Net income attributable to common stockholders totaled about $28 million, in contrast to a loss of $19.6 million in the second quarter. Third-quarter earnings included a gain from equipment sales for use in Venezuela.
The company returned approximately $62 million to its shareholders through dividends and stock repurchases during the quarter. PTEN ended September with $339 million in cash and no outstanding borrowings under its $500 million revolving credit facility. Management expects free cash flow to remain strong in the fourth quarter and improve further in 2027.
The company's improving financial performance, stronger drilling activity and expectations for continued growth in 2027 have coincided with solid stock market gains. Year to date, PTEN’s shares have surged 70.5%, significantly outperforming the broader oil and energy sector (ZS12M), which gained 27.5%.
PTEN Stock Shows Strength Against Energy Sector
Image Source: Zacks Investment Research
What Should Investors Watch?
Patterson-UTI's outlook suggests that recovering U.S. drilling activity could support stronger equipment demand, higher dayrates and better earnings in 2027. However, growth will depend on oil and natural gas prices, customer spending plans and the cost of bringing more rigs into service. Rising equipment costs could also affect investment decisions.
Investors should monitor new drilling contracts, changes in operating rig counts and further pricing gains in both drilling and completion services. With demand for premium equipment increasing and management maintaining a disciplined spending strategy, PTEN could benefit from an improving U.S. oilfield services market in 2027.
PTEN's Zacks Rank & Other Key Picks
Currently, PTEN holds a Zacks Rank #2 (Buy).
Investors interested in the energy sector might consider other top-ranked stocks, such as Marathon Petroleum (MPC - Free Report) , Delek US Holdings (DK - Free Report) and Canadian Natural Resources Limited (CNQ - Free Report) , each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Marathon Petroleum is valued at $106.07 billion. The company is a leading U.S. independent refiner, marketer and transporter of petroleum products, with a strong refining footprint and an extensive midstream business. Marathon Petroleum benefits from its integrated operations, strategic refining assets and diversified earnings streams across the energy value chain.
Delek US Holdings is valued at $3.80 billion. It is a diversified downstream energy company engaged in petroleum refining, renewable fuels, asphalt production and logistics operations. Delek US Holdings operates multiple refineries in the United States and is committed to delivering safe, reliable energy while investing in cleaner energy initiatives.
Canadian Natural Resources is valued at $98.72 billion. It is an independent energy company. Canadian Natural Resources is engaged in the exploration, development, production and marketing of crude oil, natural gas and natural gas liquids.