PATTERSON UTI ENERGY INCPTEN
PATTERSON UTI ENERGY INC Income Taxes Disclosure
Income Taxes
Income (loss) before income taxes for the United States and non-U.S. jurisdictions for the years ended December 31, 2025, 2024 and 2023 are as follows (in thousands):
| 2025 | 2024 | 2023 | |||||||||||||||
| Income (loss) before income taxes: | |||||||||||||||||
| United States | $ | (72,151) | $ | (946,388) | $ | 315,897 | |||||||||||
| Non-U.S. | (30,840) | (10,558) | (8,793) | ||||||||||||||
| $ | (102,991) | $ | (956,946) | $ | 307,104 | ||||||||||||
Components of the income tax provision applicable to federal, state and foreign income taxes for the years ended December 31, 2025, 2024 and 2023 are as follows (in thousands):
| 2025 | 2024 | 2023 | |||||||||||||||
| Federal income tax expense (benefit): | |||||||||||||||||
| Current | $ | 1,460 | $ | 417 | $ | — | |||||||||||
| Deferred | (3,740) | (1,390) | 44,369 | ||||||||||||||
| (2,280) | (973) | 44,369 | |||||||||||||||
| State income tax expense (benefit): | |||||||||||||||||
| Current | 4,804 | 4,882 | 7,002 | ||||||||||||||
| Deferred | (13,623) | (1,412) | 11,279 | ||||||||||||||
| (8,819) | 3,470 | 18,281 | |||||||||||||||
| Foreign income tax expense (benefit): | |||||||||||||||||
| Current | 5,476 | 5,269 | 1,578 | ||||||||||||||
| Deferred | (4,314) | 1,687 | (3,076) | ||||||||||||||
| 1,162 | 6,956 | (1,498) | |||||||||||||||
| Total income tax expense (benefit): | |||||||||||||||||
| Current | 11,740 | 10,568 | 8,580 | ||||||||||||||
| Deferred | (21,677) | (1,115) | 52,572 | ||||||||||||||
| Total income tax expense | $ | (9,937) | $ | 9,453 | $ | 61,152 | |||||||||||
Effective January 1, 2025, we adopted ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The guidance has been applied prospectively. Accordingly, the enhanced disaggregation of income tax rate reconciliation items is presented only for the year ended December 31, 2025. Prior periods continue to reflect disclosures under the previous guidance.
The differences between the statutory U.S. federal income tax rate and the effective income tax rate for the year ended December 31, 2025 are summarized as follows:
| 2025 | |||||||||||
| Amount | Percent | ||||||||||
| U.S. federal statutory tax rate | $ | (21,628) | 21.0 | % | |||||||
State and local income taxes, net of federal income tax effect (1) | (6,970) | 6.8 | |||||||||
| Foreign tax effects | |||||||||||
| Canada | |||||||||||
| Return to provision adjustments | 786 | (0.8) | |||||||||
| Other | 457 | (0.4) | |||||||||
| Colombia | |||||||||||
| Changes in valuation allowances | 7,201 | (7.0) | |||||||||
| Other | 1,034 | (1.0) | |||||||||
| Saudi Arabia | |||||||||||
| Assertions on indefinite reinvestment of earnings | (1,484) | 1.4 | |||||||||
| Other | 153 | (0.1) | |||||||||
| Other foreign jurisdictions | (509) | 0.5 | |||||||||
| Effect of changes in tax laws or rates enacted in the current period | — | 0.0 | |||||||||
| Effect of cross-border tax laws | (45) | 0.0 | |||||||||
| Tax credits | |||||||||||
| Foreign tax credits | (1,008) | 1.0 | |||||||||
| Research and development tax credits | (2,660) | 2.6 | |||||||||
| Changes in valuation allowances | 1,289 | (1.3) | |||||||||
| Nontaxable or nondeductible items | |||||||||||
| Non-deductible meals and related expenses | 3,583 | (3.5) | |||||||||
| Items from consolidated pass-through entities | 1,086 | (1.1) | |||||||||
| Share-based compensation | 6,674 | (6.5) | |||||||||
| Non-deductible compensation | 1,183 | (1.1) | |||||||||
| Other | 921 | (0.9) | |||||||||
| Changes in unrecognized tax benefits | — | 0.0 | |||||||||
| Other adjustments | — | 0.0 | |||||||||
| Effective tax rate | $ | (9,937) | 9.6 | % | |||||||
(1)State and local income taxes in Texas made up the majority (greater than 50 percent) of the tax effect in this category.
The differences between the statutory U.S. federal income tax rate and the effective income tax rate for the years ended December 31, 2024 and 2023 are summarized as follows:
| 2024 | 2023 | ||||||||||
| Statutory tax rate | 21.0 | % | 21.0 | % | |||||||
| State income taxes - net of the federal income tax benefit | 0.5 | 3.2 | |||||||||
| State deferred tax remeasurement | (0.7) | (0.3) | |||||||||
| Goodwill impairment | (19.4) | — | |||||||||
| Valuation allowance | (1.3) | (9.2) | |||||||||
| U.S. impact of foreign operations | (0.2) | — | |||||||||
| Acquisition related costs | — | 1.1 | |||||||||
| Effect of foreign taxes | 0.3 | 0.1 | |||||||||
| Non-deductible compensation | (0.7) | 1.8 | |||||||||
| Share-based compensation | (0.3) | 1.6 | |||||||||
| Non-deductible expenses | (0.7) | 0.7 | |||||||||
| Other differences, net | 0.5 | (0.1) | |||||||||
| Effective tax rate | (1.0 | %) | 19.9 | % | |||||||
Our effective income tax rate fluctuates based on, among other factors, changes in pre-tax income in countries with varying statutory tax rates, changes in valuation allowances, and the impacts of various other permanent adjustments.
The impact of goodwill impairment that is not deductible for income tax had a significant impact on our effective tax rate for the year ended December 31, 2024.
The tax effect of temporary differences and tax attributes representing deferred tax assets and liabilities at December 31, 2025 and 2024 are as follows (in thousands):
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Net operating loss carryforwards | $ | 384,392 | $ | 406,876 | |||||||
| Tax credits | 15,525 | 17,254 | |||||||||
| Expense associated with stock options and restricted stock units | 5,680 | 8,344 | |||||||||
| Workers’ compensation allowance | 9,216 | 9,437 | |||||||||
| Other deferred tax asset | 41,222 | 79,132 | |||||||||
| 456,035 | 521,043 | ||||||||||
| Less: | |||||||||||
| Allowance to reduce deferred tax asset to expected realizable value | (91,425) | (86,693) | |||||||||
| Total deferred tax assets | 364,610 | 434,350 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Property and equipment basis difference | (420,401) | (505,631) | |||||||||
| Intangible asset basis difference | (155,371) | (148,910) | |||||||||
| Other | (4,656) | (17,906) | |||||||||
| Total deferred tax liabilities | (580,428) | (672,447) | |||||||||
| Net deferred tax liability | $ | (215,818) | $ | (238,097) | |||||||
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized, and when necessary, valuation allowances are provided. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences are realized. We assess the realizability of our deferred tax assets quarterly and consider carryback availability, the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. During 2025, we increased the valuation allowance against our net deferred tax assets by $4.7 million which primarily related to U.S. state and foreign activity.
The income taxes paid, net of refunds received, disaggregated by jurisdiction for the year ended December 31, 2025 are as follows (in thousands):
| 2025 | |||||
| U.S. federal | $ | (7) | |||
| U.S. state and local | |||||
| New Mexico | 550 | ||||
| Oklahoma | 702 | ||||
| Texas | 925 | ||||
| Other jurisdictions | 209 | ||||
| Foreign | |||||
| Canada | 2,079 | ||||
| Ecuador | 680 | ||||
| Oman | 429 | ||||
| Saudi Arabia | 1,959 | ||||
| Other jurisdictions | 596 | ||||
| Income taxes paid | $ | 8,122 | |||
For income tax purposes, we had approximately $1.4 billion of gross U.S. federal net operating losses, approximately $60.0 million of gross Canadian net operating losses and approximately $889 million of post-apportionment U.S. state net operating losses as of December 31, 2025, before valuation allowances. The majority of the U.S. federal net operating losses were generated after 2017 and can be carried forward indefinitely. Canadian net operating losses will expire in varying amounts, if unused, between 2036 and 2045. U.S. state net operating losses will expire in varying amounts, if unused, between 2028 and 2045.
As of December 31, 2025, we have not recognized any liabilities associated with unrecognized tax benefits. We have established a policy to account for interest and penalties related to uncertain income tax positions as operating expenses. As of December 31, 2025, the tax years ended December 31, 2010 through December 31, 2024 are open for examination by U.S. taxing authorities and the tax years ended December 31, 2017 through December 31, 2024 are open for examination by various foreign taxing authorities.
We continue to monitor income tax developments, including OECD Pillar 2 legislation, in the United States and other countries where we have legal entities or operations. We will incorporate into our future financial statements the impacts, if any, of future regulations and additional authoritative guidance when finalized.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 10, 2026 | Showing above |
| 2024 | Feb 11, 2025 | |
| 2023 | Feb 27, 2024 | |
| 2022 | Feb 13, 2023 | |
| 2021 | Feb 16, 2022 | |
| 2020 | Feb 9, 2021 | |
| 2019 | Feb 13, 2020 | |
| 2018 | Feb 13, 2019 | |
| 2017 | Feb 20, 2018 | |
| 2016 | Feb 13, 2017 | |
| 2015 | Feb 10, 2016 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.