Snyder, Texas (between Abilene and Lubbock)-based Patterson-UTI Energy, Inc., one of the largest land-based drilling contractors in the U.S., raised a few eyebrows on Friday with the announcement that it is investigating the possible embezzlement of $70 million by a former undisclosed official who apparently arranged for payments to a shell company for assets that were never delivered over a five year period (Chronicle story is here). Although it is not known whether he is the Patterson employee under investigation, Patterson’s chief financial officer, Jonathan D. “Jody” Nelson, resigned on Nov. 3 for “personal reasons” and, a day later, he made a regulatory filing of his intent to unload about $13 million of Patterson stock.

Patterson-UTI was was formed in 2001 when the independent exploration and production company Patterson Energy acquired UTI Energy. The company operates about 400 drilling rigs, which is the second-largest land-based fleet in North America behind that of Nabors Industries, and employs about 7,000 employees. The news of the possible embezzlement comes at an otherwise robust time for Patterson and the rest of the oilfield service sector. Rising demand for rigs has driven up utilization rates and the lease cost of rigs to their highest levels since the period of the late 1970’s and early 80’s. Last year, Patterson-UTI reported profit of $108.7 million on sales of over $1 billion and, for the first nine months of this year, the company reported $247.5 million of earnings on revenue of $1.2 billion. However, after the announcement yesterday, shares of Patterson fell almost 9% on the Nasdaq to close at $30. Options on Patterson’s stock also were heavily traded after the news, resulting in wide price swings.
By the way, Patterson-UTI’s auditors are PriceWaterhouseCoopers, LLP. I knew you’d want to know.