PATTERSON UTI ENERGY INC

The Patterson-UTI Energy, Inc. 2021 Long-Term Incentive Plan (as previously amended, the “2021 Plan”) was originally approved by Patterson-UTI's stockholders effective as of June 3, 2021. On June 8, 2023, our stockholders approved an amendment to the 2021 Plan to increase the number of shares available for issuance thereunder by 5.445 million shares. On September 1, 2023, in connection with the NexTier merger, our Board of Directors approved a second amendment to the 2021 Plan to assume 10,050,932 shares previously reserved for issuance under the NexTier Oilfield Solutions Inc. Equity and Incentive Award Plan (the “NexTier Plan” and such assumed shares, the “NexTier Pool”) as permitted by Nasdaq Rule 5635(c). Pursuant to Nasdaq Rule 5635(c) and such amendment, the NexTier Pool may only be used for awards granted on or prior to January 3, 2027 to persons who were not employees, directors, consultants or advisors of the Company or any of its subsidiaries as of immediately prior to the September 1, 2023 NexTier merger closing date.

Subject to the approval of our stockholders, on March 28, 2024 our Board of Directors approved a third amendment to the 2021 Plan (the “Plan Amendment”) to (i) increase the number of shares available for issuance under the plan by 20 million shares, (ii) eliminate the NexTier Pool on a go forward basis, (iii) expand the plan’s restrictions on share recycling, and (iv) make certain edits to the recoupment provisions under the plan. No other changes are proposed by the Plan Amendment. Participation in the 2021 Plan is broad based, with approximately 240 employees and directors participating in 2023. The elimination of the NexTier Pool, and the concurrent increase in the overall number of shares available for issuance under the 2021 Plan, are being proposed in order to preserve the flexibility of the Company to grant future awards to all of its employees, directors, consultants or advisors without the limitations to which the NexTier Pool is subject.

In considering the Plan Amendment, our Board of Directors considered the dilutive impact of the additional share pool request, and in particular our overhang level. Overhang is equal to the total number of shares subject to equity awards outstanding (assuming target payout of all performance units (PSUs) then outstanding) plus the total number of shares available for grant under the Company’s equity plans, divided by the sum of the total common shares outstanding, the number of shares subject to equity awards outstanding (assuming target payout of all PSUs then outstanding) and the total number of shares available for grant under the Company’s equity plans. Our total overhang was 5.4% based on our shares and shares subject to equity awards outstanding (assuming target payout of all PSUs then outstanding) as of March 28, 2024, and would increase to 7.6% upon approval of the Plan Amendment (given the elimination of the NexTier pool and the additional share request). Approval of the Plan Amendment requires the affirmative vote of the holders of a majority of the shares of Common Stock that are present in person or by proxy and entitled to vote at the Meeting.

If the Plan Amendment is not approved by stockholders, the 2021 Plan will remain in effect with its current share pool. As of March 28, 2024, there were 13,616,988 shares of common stock remaining available for grant under the 2021 Plan, assuming a target payout of all PSUs then outstanding. Of these shares available for grant, (i) 3,728,086 of these shares were available for awards to any employees, directors, consultants or advisors of the Company, and (ii) 9,888,902 of these shares were available for awards using the NexTier Pool, which may only be used for awards to persons who were not employees, directors, consultants or advisors of the Company or any of its subsidiaries as of immediately prior to September 1, 2023. If the Plan Amendment is not approved by stockholders, we will continue to be limited with respect to the awards that can be granted from the NexTier Pool and will not be able to continue our equity-based long term incentive program once these remaining pools are depleted, which would require us to increase significantly the cash component of our employee compensation program in order to remain competitive and adequately compensate our employees.

Certain material terms of the 2021 Plan are discussed below; however, the description is subject to, and qualified by the full text of the 2021 Plan, attached hereto as Annex A, which includes the Plan Amendment highlighted in bold. Unless otherwise indicated, references to the “2021 Plan” in the following description of the material terms of the 2021 Plan reflect the 2021 Plan as amended by the Plan Amendment.