1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

[x][X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31,June 30, 2001

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission file number 0-22664

PATTERSONPATTERSON-UTI ENERGY, INC.
(Exact name of registrant as specified in its charter)

DELAWARE
(State or other jurisdiction of 75-2504748
incorporation or organization) (I.R.S. Employer Identification No.)

P. O. BOX 1416, 4510 LAMESA HIGHWAY, SNYDER, TEXAS, 79550
(Address of principal executive offices) (Zip Code)

(915) 573-1104
(Registrant's telephone number, including area code)

No changePatterson Energy, Inc.
(Former name, former address and former fiscal year,
if changed since last report.)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes [x][X] No [ ]

As of May 6,July 23, 2001 the issuer had 76,242,316 outstanding 38,149,816 shares of common
stock, $0.01 par value, its only class of voting stock.

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2

PATTERSONPATTERSON-UTI ENERGY, INC. AND SUBSIDIARIES

INDEX

PAGE

Report of Independent Accountants................................................................ 3
Part I - Financial Information

Item 1. Financial Statements

Unaudited condensed consolidated balance sheets............................ 43

Unaudited condensed consolidated statements of income...................... 54

Unaudited condensed consolidated statement of stockholders' equity......... 65

Unaudited condensed consolidated statements of cash flows.................. 76

Notes to unaudited condensed consolidated financial statements............. 87

Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations...................................................... 1113

Item 3. Quantitative and Qualitative Disclosures About Market Risk................. 1316

Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private
Securities Litigation Reform Act of 1995................................................... 141995............................................. 17

Part II - Other Information

Item 4. Submission of Matters to a Vote of Security Holders........................ 18

Item 6. Exhibits and Reports on Form 8-K........................................... 15

Signatures....................................................................................... 19

Signatures............................................................................... 23

The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.

2
3

REPORT OF INDEPENDENT ACCOUNTANTS

The Board of Directors and Stockholders
of Patterson Energy, Inc.:

We have reviewed the accompanying condensed consolidated balance sheet of
Patterson Energy, Inc. and its subsidiaries as of March 31, 2001 and the related
condensed consolidated statements of income and cash flows for each of the three
month periods ended March 31, 2001 and 2000 and the related condensed
consolidated statement of stockholders' equity for the three month period ended
March 31, 2001. These financial statements are the responsibility of the
Company's management.

We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with auditing standards generally accepted in the United States of America, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should
be made to the accompanying condensed consolidated interim financial statements
for them to be in conformity with accounting principles generally accepted in
the United States of America.

We previously audited, in accordance with auditing standards generally accepted
in the United States of America, the consolidated balance sheet as of December
31, 2000, and the related consolidated statements of operations and cash flows
for the year then ended (not presented herein), and in our report dated February
27, 2001, we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
condensed consolidated balance sheet information as of December 31, 2000 is
fairly stated in all material respects in relation to the consolidated balance
sheet from which it has been derived.

/s/ PricewaterhouseCoopers LLP

Fort Worth, Texas
April 19, 2001

The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.

3
4

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

THE FOLLOWING UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
INCLUDE ALL ADJUSTMENTS WHICH IN THE OPINION OF MANAGEMENT ARE NECESSARY IN
ORDER TO MAKE SUCH FINANCIAL STATEMENTS NOT MISLEADING.

PATTERSONPATTERSON-UTI ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

ASSETS

MARCH 31,JUNE 30, DECEMBER 31,
2001 2000
------------- ---------------------- ------------

ASSETS (IN THOUSANDS, EXCEPT
FOR SHARE DATA)
Current assets:
Cash and cash equivalents ............................................................................................................ $ 60,51426,015 $ 59,35566,916
Accounts receivable:
Trade,receivable, less allowance for doubtful accounts of $1,903$4,041 at March 31,June 30,
2001 and $1,503$3,462 at December 31, 2000 .................. 96,066 78,364
Oil and natural gas sales ........................................ 1,482 1,255.................................................. 195,150 136,894
Federal income taxes receivable ................................................................................................ -- 2,447
Inventories ......................................................... 11,861 12,186Inventory ................................................................................. 14,333 12,953
Deferred income taxes ............................................... 6,346 9,133..................................................................... 10,024 11,090
Other ............................................................... 3,930 3,343
------------- -------------..................................................................................... 5,713 7,442
--------- ---------
Total current assets ............................................ 180,199 166,083.................................................................. 251,235 237,742
Property and equipment, at cost, net .................................... 256,878 204,272.......................................................... 546,239 442,559
Intangible assets, net .................................................. 37,995 38,641........................................................................ 54,224 56,374
Other ................................................................... 4,432 1,590
------------- -------------......................................................................................... 3,168 3,223
--------- ---------
Total assets .............................................................................................................................. $ 479,504854,866 $ 410,586
============= =============
739,898
========= =========

LIABILITIES AND STOCKHOLDERS' EQUITY
MARCH 31, DECEMBER 31,
2001 2000
------------ ------------
(IN THOUSANDS, EXCEPT FOR SHARE DATA)

Current liabilities:
Current maturities of notes payable ........................................................................................ $ 5,697-- $ 4,477
Accounts payable:
Trade ............................................................ 34,264 28,484
Revenue distribution ............................................. 3,624 3,896.................................................................................. 73,365 69,829
Other ............................................................ 8,720.................................................................................. 5,314 10,119
Federal income taxes payable ........................................ 4,514 --.............................................................. 25,273 1,331
Accrued Expenses .................................................... 14,931 9,902
------------ ------------expenses .......................................................................... 41,600 24,687
--------- ---------
Total current liabilities ....................................... 71,750 56,878............................................................. 145,552 110,443
Deferred income taxes, net .............................................. 42,258 30,083.................................................................... 93,029 71,899
Other ................................................................... 735 880......................................................................................... 602 1,318
Notes payable, net of current maturities ................................ 17,499 19,939
------------ ------------...................................................... 20,000 74,939
--------- ---------
Total liabilities ............................................... 132,242 107,780
------------ ------------..................................................................... 259,183 258,599
--------- ---------

Commitments and contingencies ............................................................................................................ -- --

Stockholders' equity:
Preferred stock par value $.01; authorized 1,000,000 shares, no shares issued ............................................................ -- --
Common stock, par value $.01; authorized 50,000,000200,000,000 shares with 38,445,81677,745,964 and
37,477,276and 76,249,642 issued and 38,145,81676,239,416 and 38,177,27674,743,094 outstanding at
March 31,June 30, 2001 and December 31, 2000, respectively ................................ 384 375.................................... 777 763
Additional paid-in capital .......................................... 269,365 245,462................................................................ 427,136 397,489
Retained earnings ................................................... 79,163 58,619......................................................................... 179,749 94,672
Accumulated other comprehensive income .................................................... (324) 30
Treasury stock, at cost, 300,0001,506,548 shares ............................. (1,650) (1,650)
------------ ------------................................................. (11,655) (11,655)
--------- ---------
Total stockholders' equity ...................................... 347,262 302,806
------------ ------------............................................................ 595,683 481,299
--------- ---------
Total liabilities and stockholders' equity ............................................ $ 854,866 $ 739,898
========= =========

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The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.

3
4

PATTERSON-UTI ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

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THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------- ----------------------
2001 2000 2001 2000
--------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

Operating revenues:
Drilling ............................................ $ 247,173 $ 110,984 $ 453,232 $ 211,937
Drilling and completion fluids ...................... 27,516 5,109 47,186 9,474
Pressure pumping .................................... 8,750 3,562 16,087 7,742
Other ............................................... 4,125 3,684 9,645 6,777
--------- --------- --------- ---------
287,564 123,339 526,150 235,930
--------- --------- --------- ---------
Operating costs and expenses:
Drilling ............................................ 137,724 86,219 267,921 168,615
Drilling and completion fluids ...................... 23,210 3,987 39,575 7,534
Pressure pumping .................................... 4,755 2,549 9,150 5,287
Depreciation, depletion and amortization ............ 19,381 15,101 38,701 29,449
General and administrative .......................... 8,757 4,963 16,819 9,940
Merger costs ........................................ 5,943 -- 5,943 --
Restructuring and other charges ..................... 7,202 -- 7,202 --
Other ............................................... 1,343 743 2,430 1,421
--------- --------- --------- ---------
208,315 113,562 387,741 222,246
--------- --------- --------- ---------
Operating income ........................................ 79,249 9,777 138,409 13,684
--------- --------- --------- ---------
Other income (expense):
Interest income ..................................... 665 258 1,516 516
Interest expense .................................... (1,192) (2,989) (2,722) (5,390)
Other ............................................... 63 81 131 97
--------- --------- --------- ---------
(464) (2,650) (1,075) (4,777)
--------- --------- --------- ---------
Income before income taxes .............................. 78,785 7,127 137,334 8,907
--------- --------- --------- ---------
Income tax expense (benefit):
Current ............................................. 21,388 (74) 36,429 1,436
Deferred ............................................ 8,931 2,574 15,828 1,753
--------- --------- --------- ---------
30,319 2,500 52,257 3,189
--------- --------- --------- ---------
Net income .............................................. $ 479,50448,466 $ 410,586
============ ============4,627 $ 85,077 $ 5,718
========= ========= ========= =========
Net income per common share:
Basic ............................................... $ 0.63 $ 0.07 $ 1.12 $ 0.08
========= ========= ========= =========
Diluted ............................................. $ 0.61 $ 0.06 $ 1.07 $ 0.08
========= ========= ========= =========

Weighted average number of common shares
outstanding:
Basic ............................................... 76,350 69,898 76,123 69,754
========= ========= ========= =========
Diluted ............................................. 79,152 73,147 79,158 73,487
========= ========= ========= =========

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The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.

4
5

PATTERSONPATTERSON-UTI ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTSSTATEMENT OF INCOMESTOCKHOLDERS' EQUITY

(Unaudited)
(in thousands)

- --------------------------------------------------------------------------------

THREE MONTHS ENDED
MARCH 31,
-------------------------------
2001 2000
------------ ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)Common Stock Accumulated
--------------------- Additional Other
Number paid-in Retained Comprehensive Treasury
of Shares Amount capital earnings Income Stock Total
--------- --------- ---------- -------- ------------- --------- ---------

Operating revenues:
Drilling ...............................................
Balance, December 31, 2000 ............ 76,250 $ 104,803763 $ 51,157
Drilling and completion fluids ......................... 19,670 4,365
Oil and natural gas .................................... 4,910 2,484
Well operation fees .................................... 553 560
------------ ------------
129,936 58,566
------------ ------------
Operating costs and expenses:
Drilling costs ......................................... 63,478 41,835
Drilling and completion fluids ......................... 16,365 3,547
Lease operating and production ......................... 1,005 632
Exploration cost, dry holes and abandonments ........... 212 168
Depreciation, depletion and amortization ............... 11,341 7,717
General and administrative ............................. 4,846 2,196
------------ ------------
97,247 56,095
------------ ------------
Operating income ........................................... 32,689 2,471
------------ ------------
Other income (expense):
Net gain on sale397,489 $ 94,672 $ 30 $ (11,655) $ 481,299
Issuance of assets ............................. 13 43
Interest income ........................................ 796 113
Interest expense ....................................... (567) (1,193)
Other .................................................. 35 (20)
------------ ------------
277 (1,057)
------------ ------------
Income before income taxes ................................. 32,966 1,414
------------ ------------
Income tax expense (benefit):
Current ................................................ 5,135 731
Deferred ............................................... 7,287 (228)
------------ ------------
12,422 503
------------ ------------common stock .............. 810 8 21,712 -- -- -- 21,720
Exercise of stock options ............. 565 5 3,000 -- -- -- 3,005
Exercise of warrants .................. 121 1 1,819 -- -- -- 1,820
Tax benefit related to exercise of
stock options ..................... -- -- 3,116 -- -- -- 3,116
Foreign currency translation .......... -- -- -- -- (354) -- (354)
Net income ............................................................................. -- -- -- 85,077 -- -- 85,077
--------- --------- ---------- -------- ------------- --------- ---------
Balance, June 30, 2001 ................ 77,746 $ 20,544777 $ 911
============ ============
Net income per common share:
Basic ..................................................427,136 $179,749 $ 0.54(324) $ 0.03
============ ============
Diluted ................................................(11,655) $ 0.52 $ 0.03
============ ============

Weighted average number of common shares
outstanding:
Basic .................................................. 38,295 32,553
============ ============
Diluted ................................................ 39,514 33,972
============ ============595,683
========= ========= ========== ======== ============= ========= =========

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The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.

5
6

PATTERSON ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

(Unaudited)
(in thousands)

Common Stock
---------------------------
Number of Additional Retained Treasury
Shares Amount paid-in capital earnings Stock Total
------------ ------------ --------------- ------------ ------------ ------------

Balance, December 31, 2000 ........... 37,477 $ 375 $ 245,462 $ 58,619 $ (1,650) $ 302,806
Issuance of common stock ............. 810 8 21,712 -- -- 21,720
Exercise of stock options ............ 159 1 1,224 -- -- 1,225
Tax benefit related to exercise of
stock options .................... -- -- 967 -- -- 967
Net income ........................... -- -- -- 20,544 -- 20,544
------------ ------------ ------------ ------------ ------------ ------------
Balance, March 31, 2001 .............. 38,446 $ 384 $ 269,365 $ 79,163 $ (1,650) $ 347,262
============ ============ ============ ============ ============ ============

The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.

6
7

PATTERSONPATTERSON-UTI ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)

- --------------------------------------------------------------------------------

THREESIX MONTHS ENDED
MARCH 31,
-------------------------------JUNE 30,
----------------------
2001 2000
------------ --------------------- ---------

Cash flows from operating activities:
(IN THOUSANDS)
Net income ............................................................................................................................................ $ 20,54485,077 $ 9115,718
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization .................................. 11,341 7,717............................................. 38,701 29,449
Net gain(gain) loss on sale of assets ................................................ (13) (43).................................................... 905 (346)
Amortization of debt discount ........................................................ -- 238
Abandonments ......................................................................... 411 --
Deferred income tax expense (benefit) ..................................... 7,287 (228).......................................................... 16,626 1,753
Change in operating assets and liabilities:
Increase in trade accounts receivable ........................ (11,783) (7,440)
Increase................................... (52,395) (16,624)
(Increase) decrease in oil and natural gas sales receivable ............. (227) (76)
Decrease in inventories ...................................... 325 225inventory ........................................ (1,380) 301
Decrease in accrued federal income taxes receivable ............................................................... 2,447 --
Decrease in other current assets ............................. 281 656........................................ 2,597 1
Increase (decrease) in trade accounts payable ................ (1,074) 4,984
Increase (decrease) in revenue distribution
payable ............................................. (272) 651........................... (3,268) 7,570
Increase in accrued expenses ................................. 6,521 1,488............................................ 18,404 2,697
Increase in federal income taxes payable ..................... 4,514 700................................ 23,942 120
Increase (decrease) in other liabilities ................................ (715) 186
Increase (decrease) in other current payables ................ (1,399) 419
Decrease in other liabilities ................................ (145) (6)
------------ ------------........................... (4,805) 836
--------- ---------
Net cash provided by operating activities ................ 38,347 9,958
------------ ------------........................... 126,547 31,899
--------- ---------
Cash flows from investing activities:
Acquisitions .............................................................. (11,370) (5,261)......................................................................... (27,045) (35,232)
Purchases of property and equipment ....................................... (23,059) (12,009).................................................. (86,429) (35,476)
Proceeds from sales of property and equipment ............................. 78 55........................................ 816 773
Change in other assets .................................................... (2,842) (234)
------------ ------------............................................................... (143) (320)
--------- ---------
Net cash used in investing activities .................... (37,193) (17,449)
------------ ------------............................... (112,801) (70,255)
--------- ---------
Cash flows from financing activities:
Purchase of treasury stock ........................................................................................................... -- (1,650)
Proceeds from notes payable ............................................... -- 9,908.......................................................... 9,760 34,225
Payments of notes payable ................................................. (1,220) --............................................................ (69,177) (1,750)
Proceeds from exercise of stock options ................................... 1,225 896
------------ ------------and warrants ................................. 4,825 2,888
--------- ---------
Net cash provided by (used in) financing activities ................ 5 9,154
------------ ------------................. (54,592) 33,713
--------- ---------
Net increasedecrease in cash and cash equivalents ................ 1,159 1,663........................... (40,846) (4,643)
Foreign currency translation adjustment ............................. (55) (227)
Cash and cash equivalents at beginning of period ............................... 59,355 8,792
------------ ------------.......................................... 66,916 16,339
--------- ---------
Cash and cash equivalents at end of period ..................................................................................... $ 60,51426,015 $ 10,455
============ ============11,469
========= =========
Supplemental disclosure of cash flow information:
Cash received (paid)Net cash paid during the period for:
Interest ....................................................................................................................................... $ (567)3,247 $ (1,193)3,149
Income taxes ............................................................................................................................... $ 1,8507,150 $ --69

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On January 5, 2001, the Company issued 810,070 shares of its common
stock valued at $26.8125 per share and paid approximately $11.5$11.3 million cash as
consideration for Jones Drilling Corporation and certain assets of three other
entities affiliated with Jones Drilling Corporation.

The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.

6
7

8
PATTERSONPATTERSON-UTI ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF CONSOLIDATION AND PRESENTATION

On May 8, 2001, the merger between Patterson Energy, Inc. and UTI
Energy Corp. ("UTI") was consummated by vote of the stockholders of each of the
companies. The merger was treated as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended, and was
accounted for as a pooling of interests for financial accounting purposes.
Accordingly, historical financial statements as presented herein, have been
restated to provide for the retroactive effect of the merger. As a part of the
merger, the name of Patterson Energy, Inc. was changed to "Patterson-UTI Energy,
Inc." (see Note 2).

The consolidated financial statements include the accounts of
PattersonPatterson-UTI Energy, Inc. ("Patterson"Patterson-UTI") and its wholly-owned subsidiaries,
(collectively referred to herein as "Patterson""Patterson-UTI" or the "Company"). All
significant intercompany accounts and transactions have been eliminated.

The interim condensed consolidated financial statements have been
prepared by management of the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted
pursuant to such rules and regulations, although the Company believes the
disclosures included herein are adequate to make the information presented not
misleading. In the opinion of management, all adjustments (consisting of only
normal recurring accruals) considered necessary for presentation of the
information have been included. The unaudited condensed consolidated balance
sheet as of December 31, 2000, as presented herein, was derived from the audited
balance sheet,sheets of the Company and UTI, but does not include all disclosures
required by generally accepted accounting principles.

The U.S. dollar is the functional currency for all of the Company's
operations except for its Canadian operations which uses the Canadian dollar as
functional currency. The effects of exchange rate changes are reflected as a
separate component of stockholders' equity.

The Company provides a dual presentation of its earnings per share;
Basic Earnings per Share ("Basic EPS") and Diluted Earnings per Share ("Diluted
EPS"). Basic EPS is based on the weighted average number of shares outstanding
during the periods presented. Diluted EPS includes common stock equivalents,
which are dilutive to earnings per share. For the three monthsand six-month periods
ended March 31,June 30, 2001, the dilutive securities, consisting of certain stock
options and warrants, were approximately 1.22.8 million and 3.0 million,
respectively, compared to dilutive securities of approximately 1.43.2 million and
3.7 million for the three monthsand six month periods ended March 31, 2000.June 30, 2000,
respectively.

The results of operations for the three and six months ended March 31,June 30,
2001, are not necessarily indicative of the results to be expected for the full
year.

Certain reclassifications have been made to the 2000 consolidated
financial statements in order for them to conform with the 2001 presentation.

Our independent accountants have performed a review of these interim
financial statements in accordance with standards established by the American
Institute of Certified Public Accountants. Pursuant to Rule 436(c) of the
Securities and Exchange Commission Act of 1933, their report of that review
should not be considered as part of any registration prepared or certified by
them within the meaning of Sections 7
and 11 of that Act. 8
PATTERSON-UTI ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-
CONTINUED

2. RECENT ACQUISITIONACQUISITIONS AND PENDINGUTI MERGER

Acquisitions

On January 5, 2001, the Company consummated the transactions
contemplated by a merger agreementcertain agreements among Patterson Energy, Inc., Patterson
Drillingthe Company LP, LLLP ("Patterson Drilling") and Jones Drilling
Corporation,
and asset purchase agreements between Patterson Drilling and Henderson Welding, Inc., L.E.J. Truck and Crane, Inc., and L.E.
Jones Drilling Company.Company (collectively the "Jones Entities"). The acquired assets
consisted of 21 drilling rigs (of which 14 were marketable when acquired) and
related equipment and approximately $2.3 million of net working capital. The net
purchase price of $33.2 million consisted of 810,070 shares of Patterson'sthe Company's
common stock valued at $26.8125 per share and $11.5$11.3 million cash includingplus
approximately $240,000 in transaction costs. The pro forma results of combining
the consolidated results of operations as if the Jones Drilling
Corporation and its related entitiesEntities had been
acquired on January 1, 2000, are considered immaterial and have no effect on
earnings per share

On February 5,share.

In January 2001, the Company announced that its Boardacquired six drilling rigs, through three
separate transactions, for approximately $15.7 million in cash.

The above acquisitions were accounted for as purchases and the related
results of Directors alongoperations and cash flows have been included in the condensed
consolidated financial statements since the respective dates of acquisition. No
goodwill was recorded in connection with the Boardthese acquisitions.

UTI Merger

On February 4, 2001, Patterson Energy, Inc. entered into an Agreement
and Plan of Directors ofMerger with UTI Energy Corp. (UTI), approved aproviding for the merger of the two companies,entities, with
Patterson Energy, Inc. as the surviving entity. According tocompany. On May 8, 2001, the
termsstockholders of each company approved the merger agreement, shareholders of UTI will receive one share of Patterson
common stock for eachmerger. Each outstanding share of UTI
common stock was converted into one share of Patterson-UTI common stock and Patterson will assume UTI'seach
option or warrant then outstanding optionsrepresenting the right to receive UTI common
stock was converted into the right to purchase Patterson-UTI common stock on an
equivalent basis. A total of 37,782,135 shares of Patterson-UTI common stock was
issued pursuant to the merger and warrants.an additional 3,621,079 shares were reserved
for issuance under the then outstanding UTI stock options. Additionally the
stockholders of Patterson-UTI approved an increase in the Company's authorized
shares of common stock from 50 million to 200 million and a name change to
"Patterson-UTI Energy, Inc." following consummation of the merger.

The Company incurred $13.1 million in expenses related to the merger.
Such expenses consisted of $5.9 million in merger costs which were primarily
related to professional fees paid to investment banking firms, attorneys,
accountants, and commercial printers for their professional services rendered
and $7.2 million in restructuring costs and other related charges incurred as a
result of the following:

o severance costs and related expenses of $2.8 million,

o closing of duplicate operational facilities of $1.6 million,

o costs of $1.0 million incurred for repaying the Company's
credit facility (see Note 6),

o fees and expenses related to the transfer of licenses and
leaseholds, and in some instances the impairment of such
leaseholds, the combination or cancellation of various service
contracts and the renegotiation of certain insurance policies
of $1.8 million.

The merger was treated as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended, and was
accounted for as a pooling of interests for financial accounting purposes. The
consolidated financial statements give retroactive effect to the merger, which
includes combining the companies' previous historical consolidated financial
statements as of December 31, 2000 and for the three and six-month periods ended
June 30, 2000. Certain immaterial adjustments were made in those periods to
conform the previous accounting policies of UTI with those of Patterson-UTI.

8
9
PATTERSONPATTERSON-UTI ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED

2. RECENT ACQUISITION AND PENDING MERGER (CONTINUED)

Board of Directors of the combined company will consist of eleven directors, six
to be selected by Patterson and five to be selected by UTI. Although the merger
agreement does not specify who will be the officers of the combined company,
management of the Company understands that Mark S. Siegel, UTI's Chairman of the
Board, would be the Chairman of the Board and Cloyce A. Talbott, Patterson's
Chairman of the Board and Chief Executive Officer, would be Chief Executive
Officer. Patterson's and UTI's special meeting of shareholders to approve the
merger proposal will be held on May 8, 2001. A Joint Proxy Statement/Prospectus
was mailed to shareholders on or about March 16, 2001.STATEMENTS-
CONTINUED

3. STOCKHOLDERS' EQUITY

As a part of the merger with UTI, the Company's stockholders approved
the merger and an amendment to the Company's Charter increasing the number of
authorized shares of the Company's common stock to 200 million (see Note 2).

On May 7, 2001, warrants to purchase 121,250 shares of UTI's common
stock were exercised. The exercise price ranged from $13.25 to $17.50. The $1.8
million in proceeds resulting from the exercise was used as partial payment of
notes payable owed to the same parties (see Note 6).

In January 5, 2001, the Company issued 810,070 shares of its common stock
as partial consideration for the acquisition of Jones Drilling Corporation and
its related entities (see Note 2). The common stock was recorded at $26.8125 per
share, its fair market value on the date of the announcement of the transaction.

4. OTHER COMPREHENSIVE INCOME (LOSS)

The following table illustrates the foreign currency translation
adjustment for the three and six months ended June 30, 2001 and 2000 (unaudited,
in thousands):

THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- --------------------
2001 2000 2001 2000
-------- -------- -------- --------

Net income .................................. $ 48,466 $ 4,627 $ 85,077 $ 5,718
Other comprehensive income (loss):
Foreign currency translation adjustment ..... 1,268 249 (354) 249
-------- -------- -------- --------
Comprehensive income ........................ $ 49,734 $ 4,876 $ 84,723 $ 5,967
======== ======== ======== ========

5 PRO FORMA FINANCIAL INFORMATION

The following includes selected unaudited pro forma combined financial
information (in thousands) as of June 30, 2000 and for the three and six month
periods then ended to give effect to the merger of Patterson-UTI and UTI using
the pooling of interests method of accounting at the exchange ratio of one share
of Patterson-UTI common stock for each share of UTI common stock.

THREE MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, 2000 JUNE 30, 2000
------------- -------------

Patterson revenues ......... $ 67,139 $ 125,705
UTI revenues ............... 55,585 109,858
Adjustments ................ 615 367
------------- -------------
Patterson-UTI revenues ..... $ 123,339 $ 235,930
============= =============

Patterson net income ....... $ 3,808 $ 4,719
UTI net income ............. 745 1,049
Adjustments ................ 74 (50)
------------- -------------
Patterson-UTI net income.... $ 4,627 $ 5,718
============= =============

The adjustments above were made to conform the accounting methods of
Patterson-UTI and UTI to adjust for certain differences between the two
companies' relative methods of accounting for the recognition of revenue under
turnkey drilling contract arrangements. Patterson-UTI applies the completed
contract method to turnkey drilling contracts which requires revenue and costs
associated with drilling the well to be deferred until drilling is complete. UTI
accounts for its turnkey arrangements using the percentage-of-completion method
in which revenue is recognized as costs are incurred relative to the expected
total cost of drilling the well.

9
10

PATTERSON-UTI ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-
CONTINUED

6. NOTES PAYABLE

During the quarter ended June 30, 2001, the Company repaid, prior to
their scheduled maturities, $69.2 million under its existing credit facilities
and other term obligations. The Company incurred expense of $448,000 as a result
of prepayment penalties and $587,000 related to deferred financing costs which
were unamortized at the time the debt was extinguished.

On June 29, 2001, the Company increased its existing revolving line of
credit with CIT Group/Business Credit, Inc., Foothill Capital Corp., Fleet
Capital Corp., and The CIT Group/Equipment Financing, Inc. ("CIT"), to $100.0
million and extended the term of the facility to June 2005. The revolving line
of credit carries a floating interest rate of LIBOR plus 1.75% to 2.75% based on
Patterson-UTI's twelve month trailing Earnings Before Income Taxes Depreciation
and Amortization ("EBITDA"). The facility has no significantly restrictive
financial or operational covenants until amounts drawn under the facility exceed
$80.0 million. As of June 30, 2001, the Company had $20.0 million outstanding
under this revolving line of credit. This CIT line of credit was originally a
facility of UTI and became a credit facility of Patterson-UTI as a result of the
merger.

7. CONTINGENCIES

The Company is involved in several claims arising in the ordinary
course of business. Management believes all such claims are covered by insurance
or that such matters will not have a material adverse effect on the Company's
financial statements.

The Company is self-insured for employee health insurance claims up to
a maximum of $100,000 per employee under medical claims, at which point the
Company is fully insured. The Company is self-insured for workers compensation
up to a maximum of $500,000 per event for workers compensation claims, at which
point the Company is fully insured. Although the Company believes that adequate
reserves have been provided for expected liabilities arising from its
self-insured obligations, management's estimates of these liabilities may change
in the future as circumstances develop.

The Company's operations are subject to the many hazards inherent in
the onshore drilling industry, such as blowouts, explosions, sour gas, well
fires and spills. These hazards can result in personal injury and loss of life,
severe damage to or destruction of property and equipment, pollution or
environmental damage and suspension of operations. Although the Company
maintains insurance protection as management deems appropriate, such insurance
coverage may not provide sufficient funds to protect the Company from all
liabilities that could result from its operations. Also, claims will be subject
to various retentions and deductibles. While the Company has generally been able
to obtain some degree of contractual indemnification from its customers in most
of its dayrate drilling contracts, no such indemnification is typically
available for footage or turnkey contracts. The indemnity agreements require the
customers to hold the Company harmless in the event of loss of production or
reservoir damage. This contractual indemnification may not be supported by
adequate insurance maintained by the customer.

The Company's operations routinely involve the handling of various
materials, including hazardous materials. The Company may be exposed to
liability under numerous state and federal environmental laws, rules and
regulations including dealing with hazardous materials. In addition,
environmental laws and regulations including The Comprehensive Environmental
Response, Compensation and Liability Act (also know as the "Superfund Law"), may
impose strict liability whereby the Company could be liable for clean-up costs,
even if the situation resulted from previous conduct of the Company that was
lawful at the time conducted or from improper conduct of or conditions caused by
previous property owners or other persons not associated with the Company. The
Company maintains insurance coverage against some environmental liabilities,
including pollution caused by sudden and accidental oil spills.

10
11

PATTERSON-UTI ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-
CONTINUED

7. CONTINGENCIES - (CONTINUED)

Management believes it has adequately reserved for these contingencies.
Management believes that the outcome of known and potential claims will not have
a material adverse effect on the Company's operations.

8. BUSINESS SEGMENTS

The Company primarily conducts its business through three distinct
operating activities: contract drilling of oil and natural gas wells oil and
natural gas
exploration, development, acquisitionprovision of pressure pumping services and production and providing drilling and completion fluidsfluid
services to operators in the oil and natural gas industry. Separate financial
data for each of the Company's three business segments is provided below.

- --------------------------------------------------------------------------------

MARCH 31, MARCH 31,THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------- ----------------------
(IN THOUSANDS)
2001 2000 ------------ ------------2001 2000
--------- --------- --------- ---------
Revenues:
(IN 000's)
Drilling .............................................................................. $ 104,803247,173 $ 51,157110,984 $ 453,232 $ 211,937
Drilling and completion fluids ............... 19,670 4,365
Oil and natural gas .......................... 5,463 3,044
------------ ------------................... 27,516 5,109 47,186 9,474
Pressure pumping ................................. 8,750 3,562 16,087 7,742
Other ............................................ 4,125 3,684 9,645 6,777
--------- --------- --------- ---------
Total operating revenues ...................................................... $ 129,936287,564 $ 58,566
============ ============123,339 $ 526,150 $ 235,930
========= ========= ========= =========
Income (loss) from operations:
Drilling .............................................................................. $ 29,90687,508 $ 2,0119,887 $ 144,240 $ 14,266
Drilling and completion fluids ............... 854 (310)
Oil................... 1,271 (32) 2,106 (318)
Pressure pumping ................................. 2,646 (94) 4,283 86
Other ............................................ 969 16 925 (350)
Merger costs and natural gas .......................... 1,964 750
------------ ------------
32,724 2,451
Net gain on sale of assets ....................... 13 43other restructuring charges ..... (13,145) -- (13,145) --
--------- --------- --------- ---------
79,249 9,777 138,409 13,684
Interest income .................................. 796 113...................................... 665 258 1,516 516
Interest expense ................................. (567) (1,193)
------------ ------------..................................... (1,192) (2,989) (2,722) (5,390)
Other ................................................ 63 81 131 97
--------- --------- --------- ---------
Income before income taxes .................................................. $ 32,96678,785 $ 1,414
============ ============7,127 $ 137,334 $ 8,907
========= ========= ========= =========

99. RECENTLY ISSUED ACCOUNTING STANDARDS

The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 141, "Business Combinations," ("SFAS No. 141") in June
2001. SFAS No. 141 addresses financial accounting and reporting for business
combinations and supersedes APB Opinion No. 16, "Business Combinations," and
Financial Accounting Standards Board Statement No. 38, "Accounting for
Preacquisition Contingencies of Purchased Enterprises." SFAS No. 141 is
effective for all business combinations initiated after June 30, 2001 and
provides that such combinations are to be accounted for using one method, the
purchase method. The Company has adopted SFAS No. 141 as of June 30, 2001.

11
10

PATTERSON12

PATTERSON-UTI ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED

5.STATEMENTS-
CONTINUED

9. RECENTLY ISSUED ACCOUNTING STANDARDSTANDARDS - (CONTINUED)

"Intangible Assets." SFAS No. 142 applies to all fiscal years beginning after
December 15, 2001. The Company adoptedprovisions of SFAS No. 142 are not expected to have a
material impact on the Company's consolidated financial statements.

The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 133, as amended,143, "Accounting for Derivative Instruments and Hedging Activities"Asset Retirement Obligations,"
("SFAS No. 133"143") on January 1,in July 2001. SFAS No. 133 establishes143 addresses financial accounting
and
reporting standardsrequirements for derivatives or instruments and for hedging activities.
It requires enterprises to recognize all derivatives as either assets or
liabilities in the balance sheet and measure those instruments at fair value.retirement obligations associated with tangible long-lived
assets. SFAS No. 143 is effective beginning June 15, 2002. The requisite accounting for changes in the fair value of a derivative depends
on the intended use of the derivative and the resulting designation. The Company
was not required to record any transitional adjustment upon the adoptionprovisions of
SFAS No. 133.

10143 are not expected to have a material impact on the Company's
consolidated financial statements.

12
1113

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.OPERATIONS

THE FOLLOWING SUMMARY OF LIQUIDITY AND CAPITAL RESOURCES AND RESULTS OF
OPERATIONS IS BASED ON CONSOLIDATED FINANCIAL INFORMATION THAT HAS BEEN RESTATED
TO REFLECT THE MERGER OF UTI INTO PATTERSON-UTI ON MAY 8, 2001, UNDER THE
POOLING OF INTERESTS METHOD OF ACCOUNTING.

LIQUIDITY AND CAPITAL RESOURCES

As of March 31,June 30, 2001, we had working capital of approximately $108.4$105.7 million
including cash and cash equivalents of $60.5$26.0 million as compared to working
capital of $109.2$127.3 million including cash and cash equivalents of $59.4$66.9 million
at December 31, 2000. For the threesix months ended March 31,June 30, 2001, our various
sources and uses of cash flow were:

Sources:

o $38.3$126.5 million derived from operations primarily attributable to the
following factors:

<-- Net income of $20.5 million,

<-- Increase in average dayrates from $8,912 per day in the
fourth quarter of 2000 to $9,903 per day in the first
quarter of 2001,

<-- Increase in average cash margin from $3,131 per day in the
fourth quarter of 2000 to $3,905 per day in the first
quarter of 2001,

<-- Improved utilization rates as indicated in "Results of
Operations" on page 12, and

<-- Increase in marketable drilling rigs from 124 at December
31, 2000 to 141 at March 31, 2001, primarily due to the
addition of 21 drilling rigs (of which 14 were marketable
when acquired) in January of 2001 with the purchase of Jones
Drilling Corporation.

o $1.2 million from the exercise of stock options, and

o $78,000 from the sale of certain property and equipment.

Uses:

o $11.5 million as partial consideration in the acquisition of
Jones Drilling Corporation and its related entities,

o $1.2 million in payments on our credit facility with Transamerica
Equipment Financial Services,

o $2.8 million of expenses related to the merger with UTI Energy
Corp., and

o $23.1 million for capital maintenance expenditures for the
betterment and refurbishment of both the marketable and
non-marketable drilling rigs, as well as the acquisition and
procurement of drilling equipment, to fund leasehold acquisition,
exploration and development of oil and natural gas properties and
to fund capital expenditures for our drilling and completion
fluids segment.

On January 5, 2001, we consummated the transactions contemplated by a
merger agreement among Patterson Energy, Inc., Patterson Drilling Company LP,
LLLP ("Patterson Drilling") and Jones Drilling Corporation and asset purchase
agreements between Patterson Drilling and Henderson Welding, Inc., L.E.J. Truck
and Crane, Inc., and L.E. Jones Drilling Company. The acquired assets consisted
of 21 drilling rigs (of which 14 were marketable when acquired) and related
equipment. In addition to the $11.5 million paid in cash, we issued 810,070
shares of our common stock valued at $26.8125 per share, for a total purchase
price of $33.2 million.

We believe that the current level of cash and cash equivalents,
together with cash generated from operations should be sufficient to meet our
immediate capital needs. From time to time, acquisition opportunities are
reviewed relating to our business. The timing, size or success of any
acquisition and the associated capital commitments are unpredictable. Should
further opportunities for growth requiring capital arise, we believe we would be
able to satisfy these needs through a combination of working capital, cash
generated from operations, and either debt or equity financing. However, there
can be no assurance that such capital would be available.

11
12o Net income of $85.1 million which was largely attributable to
an:

o Increase in average dayrates from $8,912 per day in the fourth
quarter of 2000 to $10,956 per day in the second quarter of 2001
and resulting increase in average cash margin from $3,131 per
day in the fourth quarter of 2000 to $4,851 per day in the
second quarter of 2001,

o Improvement in utilization rates as indicated in "Results of
Operations" on page 14, and

o Increase in average operating rigs from 209 at December 31, 2000
to 244 at June 30, 2001, primarily due to the addition of 27
drilling rigs in January of 2001 with the purchase of Jones
Drilling Corporation and three other transactions.

o $4.8 million from the exercise of stock options and warrants,

o $816,000 from the sale of certain property and equipment and

o $9.8 million in loan proceeds from the Company's revolving line of
credit.

Uses:

o $11.3 million as partial consideration in the acquisition of Jones
Drilling Corporation and its related entities and $15.7 million for
six drilling rigs from other non-affiliated entities,

o $69.2 million in payments on debt and

o $86.4 million for capital expenditures for the betterment and
refurbishment of both the marketable and non-marketable drilling
rigs, as well as the acquisition and procurement of drilling
equipment, to fund leasehold acquisition, exploration and
development of oil and natural gas properties and to fund capital
expenditures for our drilling and completion fluids segment.

On January 5, 2001, the Company consummated the transactions contemplated by
certain agreements among the Company and Jones Drilling Corporation, Henderson
Welding, Inc., L.E.J. Truck and Crane, Inc., and L.E. Jones Drilling Company.
The acquired assets consisted of 21 drilling rigs (of which 14 were marketable
when acquired) and related equipment and approximately $2.3 million of net
working capital.

13
14

RESULTS OF OPERATIONS

The following tables summarize the operations of the Company for the three months
ended March
31,June 30, 2001 and 2000:

- --------------------------------------------------------------------------------

THREE MONTHS ENDED MARCH 31,
---------------------------JUNE 30,
---------------------------------
CONTRACT DRILLING 2001 2000 % CHANGE
- ----------------- ---------- ---------- ------------------ -------- --------
(DOLLARS IN 000'S)

Revenues ...................................................... $ 104,803 $ 51,157 104.9%.................................. $247,173 $110,984 122.7%
Drilling cost ................................................. 63,478 41,835 51.7%............................. 137,724 86,219 59.7%
General and administrative expense ............................ 2,141 1,032 107.5%........ 1,859 1,631 14.0%
Corporate overhead and other .............. 2,270 451 403.3%
Depreciation and amortization ................................. 9,101 6,279 44.9%............. 17,812 12,796 39.2%
Operating income .............................................. 29,906 2,011 1,387.1%.......................... 87,508 9,887 785.1%
Rig utilization rate .......................................... 84% 65% 29.2%...................... 82% 63% 30.2%
Average # of marketable rigs .................................. 140 114 22.8%owned ................... 302 259 16.6%
Operating days ................................................ 10,582 6,777 56.1%............................ 22,560 14,774 52.7%
Average revenue per operating day ...................................... $ 9.9010.95 $ 7.55 31.1%7.51 45.8%
Average drilling cost per operating day ....................... 6.00 6.17 (2.8)%... 6.10 5.83 4.6%

- --------------------------------------------------------------------------------

The significant increases shown are reflective of increased
productivity in the contract drilling industry as evidenced by:

o increase in average rig utilization and in the number of
operating days and

o the addition of an average 26 marketable43 drilling rigs from the firstsecond
quarter of 2000 to that of 2001, and

o increases in oil and natural gas prices.2001.

- --------------------------------------------------------------------------------

THREE MONTHS ENDED MARCH 31,
--------------------------JUNE 30,
--------------------------------
DRILLING AND COMPLETION FLUIDS 2001 2000 % CHANGE
---------- ---------- ----------- ------------------------------ -------- -------- --------
(DOLLARS IN 000'S)

Revenues .................................................................... $ 19,67027,516 $ 4,365 350.6%5,109 438.6%
Drilling and completion fluids cost ...... 16,365 3,547 361.4%........ 23,210 3,987 482.1%
General and administrative expense ....... 1,884 822 129.2%......... 2,128 811 162.4%
Corporate overhead and other ............... 272 29 837.9%
Depreciation and amortization ............ 586 285 105.6%.............. 635 314 102.2%
Operating income (loss) .................. 854 (310) 375.5%.................... 1,271 (32) 4,071.9%

- --------------------------------------------------------------------------------

The increases noted were primarily attributable to the addition of the
fluids division of Ambar, Inc., during October 2000. Also contributing are
improvements in the industry's economic conditions, which are related to
improved oil and natural gas prices.

- --------------------------------------------------------------------------------

THREE MONTHS ENDED JUNE 30,
-------------------------------
PRESSURE PUMPING 2001 2000 % CHANGE
- ---------------- -------- -------- --------
(DOLLARS IN 000'S)

Revenues ................................... $ 8,750 $ 3,562 145.6%
Pressure pumping costs ..................... 4,755 2,549 86.5%
General and administrative expense ......... 876 708 23.7%
Depreciation ............................... 473 399 18.5%
Operating income (loss) .................... $ 2,646 $ (94) 2,914.9%
Total jobs ................................. 1,052 612 71.9%
Average revenue per job .................... $ 8.32 $ 5.82 42.9%

- --------------------------------------------------------------------------------

The improvement in the pressure pumping segment's operating results are
primarily attributable to improved market conditions as evidenced by the
increase in number of jobs and revenue per job.

14
15

RESULTS OF OPERATIONS - (CONTINUED)

The following tables summarize operations of the Company for the six months
ended June 30, 2001 and 2000:

- --------------------------------------------------------------------------------

SIX MONTHS ENDED JUNE 30,
---------------------------------
CONTRACT DRILLING 2001 2000 % CHANGE
- ----------------- -------- -------- --------
(DOLLARS IN 000'S)

Revenues ................................... $453,232 $211,937 113.9%
Drilling cost .............................. 267,921 168,615 58.9%
General and administrative expense ......... 2,412 3,035 (20.5)%
Corporate overhead and other ............... 4,238 815 420.0%
Depreciation and amortization .............. 34,421 25,206 36.6%
Operating income ........................... 144,240 14,266 911.1%
Rig utilization rate ....................... 79% 61% 29.5%
Average # of rigs owned .................... 301 252 19.4%
Operating days ............................. 43,313 28,178 53.7%
Average revenue per operating day .......... $ 10.46 $ 7.52 39.1%
Average drilling cost per operating day .... 6.18 5.98 3.3%

- --------------------------------------------------------------------------------

The significant increases shown are reflective of increased
productivity in the contract drilling industry as evidenced by:

o increase in average rig utilization and in the number of
operating days and

o the addition of an average 49 drilling rigs from the first six
months of 2000 to that of 2001.

- --------------------------------------------------------------------------------

SIX MONTHS ENDED JUNE 30,
---------------------------------
DRILLING AND COMPLETION FLUIDS 2001 2000 % CHANGE
- ------------------------------ -------- -------- --------
(DOLLARS IN 000'S)

Revenues ................................... $ 47,186 $ 9,474 398.1%
Drilling and completion fluids cost ........ 39,575 7,534 425.3%
General and administrative expense ......... 3,842 1,591 141.5%
Corporate overhead and other ............... 442 70 531.4%
Depreciation and amortization .............. 1,221 597 104.5%
Operating income (loss) .................... 2,106 (318) 762.3%

- --------------------------------------------------------------------------------

The increases noted were primarily attributable to the addition of the
fluids division of Ambar, Inc., during October 2000. Also contributing are
improvements in the industry's economic conditions which are related to
increases in oil and natural gas prices as stated below.

- --------------------------------------------------------------------------------

THREESIX MONTHS ENDED MARCH 31,
--------------------------
OIL AND NATURAL GASJUNE 30,
---------------------------------
PRESSURE PUMPING 2001 2000 % CHANGE
---------- ---------- ----------- ---------------- -------- -------- --------
(DOLLARS IN 000'S, EXCEPT PRICE DATA)000'S)

Revenues ............................................................................ $ 5,46316,087 $ 3,044 79.5%
Exploration cost, dry holes and abandonments ..... 212 168 26.2%7,742 107.8%
Pressure pumping costs ..................... 9,150 5,287 73.1%
General and administrative expense ............... 821 342 140.1%......... 1,794 1,566 14.6%
Depletion and depreciation ....................... 1,654 1,153 43.5%................. 860 803 7.1%
Operating income ........................... $ 4,283 $ 86 4,880.2%
Total jobs ................................. 1,964 750 161.9%
Volume of oil and natural gas sold (BOE) ......... 131,112 106,948 22.6%2,020 1,265 59.7%
Average pricerevenue per Bbl of crude oil ...............job .................... $ 29.397.96 $ 28.47 3.2%
Average price per Mcf of natural gas ............. $ 7.65 $ 2.62 192.0%6.12 30.1%

- --------------------------------------------------------------------------------

The increasesimprovement in the oil and natural gaspressure pumping segment's operating results are
primarily attributable to improved market conditions as evidenced by the
increased commodity pricesincrease in number of jobs and production.

12revenue per job.

15
1316
VOLATILITY OF OIL AND NATURAL GAS PRICES AND ITS IMPACT ON OPERATIONS

Our revenue, profitability and future rate of growth are substantially
dependent upon prevailing prices for oil and natural gas, with respect to our
contract drilling, oil and natural gaspressure pumping and drilling and completion fluids segments.
Historically, oil and natural gas prices and markets have been volatile. Prices
are affected by market supply and demand factors as well as actions of state and
local agencies, the United States and foreign governments and international
cartels. All of these are beyond our control. Any significant or extended
decline in oil and/or natural gas prices would have a material adverse effect on
our financial condition and results of operations. Low level commodity prices
beginning in the fourth quarter of 1997 and continuing into mid-1999 adversely
impacted our operations. Although there has been significant improvement in oil
and natural gas prices since mid-1999, we expect oil and natural gas prices to
continue to be volatile and therefore to affect our financial condition and
operations and our ability to access capital sources.

IMPACT OF INFLATION

We believe that inflation will not have a significant impact on our
financial position or operations.

RECENTLY ISSUED ACCOUNTING STANDARD

We adoptedSTANDARDS

The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 133, as
amended, "Accounting for Derivative Instruments and Hedging Activities"141, "Business Combinations," ("SFAS No. 133"141") on January 1,in June
2001. SFAS No. 133 establishes141 addresses financial accounting and reporting standards for derivatives or instrumentsbusiness
combinations and supersedes APB Opinion No. 16, "Business Combinations," and
Financial Accounting Standards Board Statement No. 38, "Accounting for
hedging activities. It requires
enterprisesPreacquisition Contingencies of Purchased Enterprises." SFAS No. 141 is
effective for all business combinations initiated after June 30, 2001 and
provides that such combinations are to recognizebe accounted for using one method, the
purchase method. The Company has adopted SFAS No. 141 as of June 30, 2001.

The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 142, "Goodwill and Other Intangible Assets," ("SFAS No.
142") in June 2001. SFAS No. 142 addresses financial accounting and reporting
for acquired goodwill and other intangible assets and supersedes APB Opinion No.
17, "Intangible Assets." SFAS No. 142 applies to all derivatives as either assets or liabilities in the
balance sheet and measure those instruments at fair value.fiscal years beginning
after December 15, 2001. The requisite
accounting for changes in the fair value of a derivative depends on the intended
use of the derivative and the resulting designation. We were not required to
record any transitional adjustment upon the adoptionprovisions of SFAS No. 133.142 are not expected to have
a material impact on the Company's consolidated financial statements.

The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 143, "Accounting for Asset Retirement Obligations,"
("SFAS No. 143") in July 2001. SFAS No. 143 addresses financial accounting
requirements for retirement obligations associated with tangible long-lived
assets. SFAS No. 143 is effective beginning June 15, 2002. The provisions of
SFAS No. 143 are not expected to have a material impact on the Company's
consolidated financial statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We have exposure to market risk associated with the floating rate
portion of the interest charged on the $23.2$20.0 million outstanding under our
credit facility with Transamerica Equipment Financial Services Corporation.CIT. The CIT credit facility, which matures on January 1, 2006,June 29,
2005, bears interest at LIBOR plus 3.101.75 % to 3.51%.2.75% based on the Company's twelve
month trailing EBITDA. Our exposure to interest rate risk due to changes in
LIBOR is not expected to be material. At March 31,June 30, 2001, the fair value of the
obligation approximates its related carrying value because the obligation bears
interest at the current market rate.

1316
14

---------------17

----------

CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995

"Management's Discussion and Analysis of Financial Condition and
Results of Operations" included in Item 2 of this Report contains
forward-looking statements which are made pursuant to the "safe harbor"
provisions of The Private Securities Litigation Reform Act of 1995. These
statements include, without limitation, statements relating to: liquidity;
financing of operations; continued volatility of oil and natural gas prices;
source and sufficiency of funds required for immediate capital needs and
additional rig acquisitions (if further opportunities arise); and such other
matters. The words "believes," "plans," "intends," "expected," "estimates" or
"budgeted" and similar expressions identify forward-looking statements. The
forward-looking statements are based on certain assumptions and analyses we make
in light of our experience and our perception of historical trends, current
conditions, expected future developments and other factors we believe are
appropriate in the circumstances. We do not undertake to update, revise or
correct any of the forward-looking information. Factors that could cause actual
results to differ materially from our expectations expressed in the
forward-looking statements include, but are not limited to, the following:
projected revenues following the merger being lower than expected; intense
competition in the contract drilling industry; low oil prices and/or natural gas
prices; adverse market conditions for contract drilling services; drill-pipe
shortages; labor shortages, primarily qualified drilling rig personnel;
insurance coverage limitations and requirements; inability to acquire additional
drilling rigs on terms favorable to us and the loss of key personnel,
particularly Cloyce A. Talbott and A. Glenn Patterson, our Chairman and Chief Executive
Officer and our President and Chief Operating Officer, respectively. For a more
complete explanation of these various factors and others, see "Cautionary
Statement for Purposes of the 'Safe Harbor' Provisions of the Private Securities
Litigation Reform Act of 1995" included in our Annual Report on Form 10-K for
the year ended December 31, 2000, beginning on page 20.

---------------20, and "Risk Factors"
included in our joint proxy statement/prospectus dated March 14, 2001, beginning
on page 19 included as a part of our registration statement on Form S-4 filed
with the SEC on March 7, 2001, in connection with the UTI merger.

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17
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PART II - OTHER INFORMATION

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Company held a special meeting of its stockholders on May 8, 2001.
The following table sets forth certain information relating to each of the
matters voted upon at the meeting.

WITHHELD/ BROKER
MATTERS VOTED UPON FOR AGAINST ABSTAIN NON-VOTES
------------------ ---------- --------- --------- ---------

1. Adoption of the Agreement and Plan of Merger,
dated as of February 4, 2001 between the Company
and UTI and approval of the merger of UTI into the
Company contemplated thereby. 31,186,164 61,473 10,290 0

2. Approval of the Amendment to the Restated
Certificate of Incorporation of the Company to
increase the Company's authorized shares of common
stock from 50,000,000 shares to 200,000,000 shares. 22,129,732 9,108,274 19,921 0

3. Approval of the Amendment to the Restated
Certificate of Incorporation of the Company to
change the Company's corporate name to
"Patterson-UTI Energy, Inc." 31,035,483 203,415 19,029 0

18
19

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.8-K

(a) EXHIBITS.

The following exhibits are filed herewith or incorporated by reference:

2.1 Plan and Agreement of Merger dated October 14, 1993, between Patterson
Energy, Inc., a Texas corporation, and Patterson Energy, Inc., a
Delaware corporation, together with related Certificates of Merger.(1)

2.2 Agreement and Plan of Merger, dated April 22, 1996 among Patterson
Energy, Inc., Patterson Drilling Company and Tucker Drilling Company,
Inc.(2)

2.2.1 Amendment to Agreement and Plan of Merger, dated May 16, 1996 among
Patterson Energy, Inc., Patterson Drilling Company and Tucker Drilling
Company, Inc.(3)

2.3 Stock Purchase Agreement, dated January 5, 1998, among Patterson
Energy, Inc., Spencer D. Armour, III and Richard G. Price.(16)

2.4 Stock Purchase Agreement, dated September 17, 1998, among Lone Star
Mud, Inc. and Mark Campbell (shareholder of Tejas Drilling Fluids,
Inc.).(4)

2.5 Asset Purchase Agreement dated as of September 30, 2000 between Ambar
Drilling Fluids LP, LLLP and Ambar, Inc.(5)

2.6 (4)

2.4 Agreement and Plan of Merger dated as of January 5, 2001 among
Patterson Energy, Inc., Patterson Drilling Company LP, LLPLLLP and Jones
Drilling Corporation.(6)

2.7 (5)

2.5 Asset Purchase Agreement, dated as of January 5, 2001 among Patterson
Energy, Inc., Patterson Drilling Company LP, LLPLLLP and L.E. Jones
Drilling Company.(6)

2.8 (5)

2.6 Agreement and Plan of Merger, dated February 4, 2001, by and between
UTI Energy Corp. and Patterson Energy, Inc. Disclosure schedules for
each of the parties to the merger agreement setting forth exceptions of
other information relating to their respective representations and
warrants in the agreement have not been filed with this exhibit. They
will, however, be made available supplementally by the SEC upon
request.(7)(6)

3.1 Restated Certificate of Incorporation.(8)

3.1.1 Certificate of Amendment to the Certificate of Incorporation.(9) (7)

3.2 Bylaws.(1)

3.3 Rights Agreement dated January 2, 1997, between Patterson Energy, Inc.
and Continental Stock Transfer & Trust Company.(16) (8)

4.1 Excerpt from Restated Certificate of Incorporation of PattersonPatterson-UTI
Energy, Inc. regarding authorized Common Stock and Preferred Stock.(10)

10.1 Loan and Security Agreement, dated December 21, 1999 among Patterson
Drilling CompanyNovember 22, 1999.

10.1.1 First Amendment to Loan and Transamerica Equipment Financial Services
Corporation.(18)

10.1.1Security Agreement, dated May 2, 2000.

10.1.2 Second Amendment to Loan and Security Agreement, dated May 18, 2000.

10.1.3 Third Amendment to Loan and Security Agreement, dated October 18, 2000.

10.1.4 Fourth Amendment to Loan and Security Agreement, dated May 8, 2001.

10.1.5 Fifth Amendment to Loan and Security Agreement, dated June 29, 2001.

10.1.6 Revolving Loan Promissory Note, dated December 21, 1999 between Patterson Drilling
Company and Transamerica Equipment Financial Services Corporation.(18)

10.1.2 Corporate guarantees of Lone Star Mud, Inc. and Patterson Energy,
Inc.(18)

15June 29, 2001.

10.1.7 Guaranty Agreement, dated June 29, 2001.

10.1.8 Pledge Agreement, dated June 29, 2001.

19
1620

10.2 Aircraft Lease, dated December 20, 2000, (effective January 1, 2001)
between Talbott Aviation, Inc. and Patterson Energy, Inc.(19) (9)

10.3 Participation Agreement, dated October 19, 1994, between Patterson
Petroleum Trading Company, Inc. and BHT Marketing, Inc.(11)

10.3.1 Participation Agreement dated October 24, 1995, between Patterson
Petroleum Trading Company, Inc. and BHT Marketing, Inc.(12)

10.4 Crude Oil Purchase Contract, dated October 19, 1994, between Patterson
Petroleum, Inc. and BHT Marketing, Inc.(11)

10.4.1 Crude Oil Purchase Contract, dated October 24, 1995, between Patterson
Petroleum, Inc. and BHT Marketing, Inc.(12)

10.5 PattersonPatterson-UTI Energy, Inc. 1993 Stock Incentive Plan, as amended.(13)

10.6 Patterson (10)

10.4 Patterson-UTI Energy, Inc. Non-Employee Directors' Stock Option Plan,
as amended.(14) (11)

10.5 Patterson-UTI Energy, Inc. Amended and Restated 1997 Long-Term
Incentive Plan. (12)

10.6 Amended and Restated Non-Employee Director Stock Option Plan of
Patterson-UTI Energy, Inc. (13)

10.7 Amended and Restated Patterson-UTI Energy, Inc. 1996 Employee Stock
Option Plan. (13)

10.8 1997 Stock Option Plan of DSI Industries, Inc. (12)

10.9 Model Form Operating Agreement.(15)

10.8 (14)

10.10 Form of Drilling Bid Proposal and Footage Drilling Contract.(15)

10.9 (14)

10.11 Form of Turnkey Drilling Agreement.(15)

15.1 Awareness Letter of Independent Accountants (14)

- PricewaterhouseCoopers
LLP

21.1 Subsidiaries of the registrant.(19)

----------

1620
1721

(1) Incorporated herein by reference to Item 27, "Exhibits" to Amendment
No. 2 to Registration Statement on Form SB-2 (File No. 33-68058-FW);
filed on October 28, 1993.

(2) Incorporated by reference to Item 7, "Financial Statements and
Exhibits" to Form 8-K dated April 22, 1996 and filed on April 30, 1996.

(3) Incorporated by reference to Item 7, "Financial Statements and
Exhibits" to Form 8-K dated May 16, 1996 and filed on May 22, 1996.

(4) Incorporated herein by reference to Item 14, "Exhibits, Financial
Statement Schedules and Reports on Form 8-K", to Form 10-K dated
December 31, 1998.

(5) Incorporated by reference to Item 7, "Financial Statements and
Exhibits", to Form 8-K dated October 3, 2000 and filed on November 6,
2000.

(6)(5) Incorporated by reference to Item 16, "Exhibits" to Registration
Statement on Form S-3 filed with the Securities Exchange Commission on January 8, 2001.

(6) Incorporated herein by reference to Joint Proxy Statement/Prospectus
filed on March 14, 2001.

(7) Incorporated herein by reference to Item 7, "Financial Statements and
Exhibits" to Form 8-K dated February 4, 2001 and filed February 16,on May 8, 2001.

(8) Incorporated herein by reference to Item 6, "Exhibits and Reports on
Form 8-K" to Form 10-Q for the quarterly period ended June 30, 1996;
filed August 12, 1996.

(9) Incorporated herein by reference to Item 6. "Exhibits and Reports on
Form 8-K" to Form 10-Q for the quarterly period ended June 30, 1997;
filed August 14, 1997.

(10) Incorporated herein by reference to Item 16, "Exhibits" to Registration
Statement on Form S-3 filed with the Securities Exchange Commission on
December 18, 1996.

(11) Incorporated herein by reference to Item 27, "Exhibits" to Post
Effective Amendment No. 1 to Registration Statement on Form SB-2 (File
No. 33-68058-FW); filed on June 21, 1995.

(12) Incorporated by reference to Item 13, "Exhibits and Reports on Form
8-K" to Form 10-KSB for the year ended December 31, 1995.

(13) Incorporated herein by reference to Item 8, "Exhibits" to Registration
Statement on Form S-8 (File No. 333-47917); filed March 13, 1998.

(14) Incorporated herein by reference to Item 8, "Exhibits" to Registration
Statement on Form S-8 (File No. 33-39471); filed November 4, 1997.

(15) Incorporated by reference to Item 27, "Exhibits" to Registration
Statement on Form SB-2 (File No. 33-68058-FW); filed on August 30,
1993.

(16) Incorporated by reference to Item 2, "Exhibits" to Registration
Statement on FormFor 8-A filed on January 14, 1997.

(17) Incorporated herein by reference to Item 16, "Exhibits" to Registration
Statement on Form S-3 filed January 5, 1998.

(18) Incorporated by reference to Item 14, "Exhibits, Financial Statement
Schedules and Reports on Form 8-K" to Form 10-K dated December 31,
1999.

17
18

(19)(9) Incorporated herein by reference to Item 14, "Exhibits, Financial
Statement Schedules and Reports on Form 8-K" to Form 10-K dated
December 31, 2000.

(10) Incorporated herein by reference to Item 8, "Exhibits" to Registration
Statement on Form S-8 (File No. 333-47917) filed on March 13, 1998.

(11) Incorporated herein by reference to Item 8, "Exhibits" to Registration
Statement on Form S-8 (File No. 33-39471) filed on November 4, 1997.

(12) Incorporated herein by reference to Item 8, "Exhibits" to
Post-Effective Amendment No. 1 to Registration Statement on Form S-8
(file No. 333-60470) filed on July 25, 2001.

(13) Incorporated herein by reference to Item 8, "Exhibits" to
Post-Effective Amendment No.1 to Registration Statement on Form S-8
(file No. 333-60466) filed on July 25, 2001.

(14) Incorporated by reference to Item 27, "Exhibits" to Registration
Statement on Form SB-2 (File No. 33-68058-FW) filed on August 30, 1993.

21
22

(b) REPORTS ON FORM 8-K.

The following reports on Form 8-k were filed:

(1) Report dated March 27,May 8, 2001 announcing the completion of the merger
between Patterson Energy, Inc. and UTI Energy Corp., filed May 8,
2001.

(2) Report dated April 19, 2001 announcing the Company's clearance
of the waiting period of Hart-Scott-Rodino Antitrust
Improvements Act of 1976, related to its merger with UTI
Energy Corp.,first quarter
2001 results from operations, filed March 27, 2001.

(2) Report dated February 4, 2001 announcing the Company's
Agreement and Plan of Merger with UTI Energy, Inc. filed
February 16,April 23, 2001.

(3) Report dated February 5,May 8, 2001 announcing the approvalunaudited Pro Forma
Financial Statements of the
Company's Agreement and Plan of Merger with UTIPatterson-UTI Energy, Inc. by the Boards of Directors of both companies filed February 6,July 23,
2001.

1822
1923

SIGNATURE

In accordance with the requirements of the Securities Exchange Act of 1934,
the registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

PATTERSON ENERGY, INC.

By: /s/ Cloyce A. Talbott
-----------------------------------------------------------------------
Cloyce A. Talbott
Chairman of the Board and
Chief Executive Officer

By: /s/ Jonathan D. Nelson
-----------------------------------
Jonathan D. (Jody) Nelson
Vice President-Finance
Chief Financial Officer

DATED: May 7,August 1, 2001

1923
2024

EXHIBIT INDEX

EXHIBIT
NUMBER DESCRIPTION
------- ------- -----------

15.1 Awareness Letter4.1 Excerpt from Restated Certificate of Independent Accountants,
PricewaterhouseCoopers LLPIncorporation of
Patterson-UTI Energy, Inc. regarding authorized common stock and
preferred stock.

10.1 Loan and Security Agreement, dated November 22, 1999.

10.1.1 First Amendment to Loan and Security Agreement, dated May 2,
2000.

10.1.2 Second Amendment to Loan and Security Agreement, dated May 18,
2000.

10.1.3 Third Amendment to Loan and Security Agreement, dated October
18, 2000.

10.1.4 Fourth Amendment to Loan and Security Agreement, dated May 8,
2001.

10.1.5 Fifth Amendment to Laon and Security Agreement, dated June 29,
2001.

10.1.6 Revolving Loan Promissory Note, dated June 29, 2001.

10.1.7 Guaranty Agreement, dated June 29, 2001.

10.1.8 Pledge Agreement, dated June 29, 2001.

2024