Patterson-UTI Energy Inc. (NASDAQ: PTEN) has amended its $500 million senior unsecured revolving credit agreement to, among other things, extend the maturity date of $357.9 million in revolving credit commitments of certain lenders from September 27, 2017 to March 27, 2019. In addition, the company has repaid the entire outstanding $230 million principal amount of its bank term loans, and has $70 million outstanding under the revolving credit facility.
The amendment provides that borrowings under the revolving credit facility will be subject to a borrowing base calculated by reference to the company's and certain of its subsidiaries' eligible equipment, inventory, accounts receivable and unencumbered cash. When the borrowing base is determined based on July 31, 2016 balances, the company expects its borrowing base to be approximately $360 million.
John Vollmer, Patterson-UTI's CFO added, "We believe that we have further solidified the company's liquidity with this credit facility amendment. The repayment of the two bank term loans reduces our interest costs going forward and, with these repaid, we do not have any term debt maturities until October 2020. Also, we believe the modified line of credit with an extended maturity of March 27, 2019 will provide us with ample liquidity to finance working capital requirements during a recovery in industry activity. Additionally, we believe the amended credit facility effectively eases our ability to pay quarterly cash dividends compared to the restrictive covenant in the now-terminated term loan agreement."
The amendment also amends the interest rates applicable to borrowings under the credit agreement such that the borrowings will bear interest until September 27, 2017 at either the eurodollar rate plus a margin ranging from 2.75% to 3.25% or at the base rate plus a margin ranging from 1.75% to 2.25%, in each case based on the company's debt to capitalization ratio, and on and after September 27, 2017 at either the eurodollar rate plus a margin ranging from 3.25% to 3.75% or at the base rate plus a margin ranging from 2.25% to 2.75%, in each case based on the company's excess availability under the credit agreement.
The amendment also, among other things, amends the debt to capitalization ratio covenant to decrease the maximum permitted ratio to 40%, adds an anti-cash hoarding covenant that limits the holding of proceeds from a borrowing, and adds a covenant that restricts the company's ability to pay dividends and make equity repurchases in certain circumstances. The company would be permitted to make dividend payments and equity repurchases if before and immediately after giving effect to such payment, the pro forma debt service coverage ratio is at least 1.50 to 1.00.
Patterson-UTI Energy Inc. subsidiaries provide onshore contract drilling and pressure pumping services to exploration and production companies in North America. Patterson-UTI Drilling Company LLC and its subsidiaries operate land-based drilling rigs in oil and natural gas producing regions of the continental United States and western Canada. Universal Pressure Pumping Inc. and Universal Well Services Inc. provide pressure pumping services primarily in Texas and the Appalachian region.