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Helmerich & Payne, Inc. Announces Fiscal Second Quarter Results

  • The Company reported fiscal second quarter net income of $1.55 per diluted share; including select items(1) of $0.29 per diluted share
  • Quarterly North America Solutions operating income increased $37 million sequentially, while direct margins(2) increased $36 million to approximately $296 million, as revenues increased by $49 million to $676 million and expenses increased by $13 million to $380 million
  • The North America Solutions segment exited the second quarter of fiscal year 2023 with 179 active rigs reflecting an increase in revenue per day of approximately $3,200/day or 10% to $36,300/day on a sequential basis, while direct margins(2) per day increased by roughly $2,300/day or 14% to $18,000/day
  • H&P's North America Solutions segment anticipates averaging 163-167 rigs during the third quarter of fiscal year 2023 and exiting the quarter between 155-160 active rigs due to increased contractual churn, a softer natural gas market, and our prioritizing of disciplined pricing in the face of wavering industry utilization
  • Despite more contractual churn in higher direct margin(2) spot rigs relative to lower direct margin(2) rigs under term contracts and higher cost absorption given fewer active rigs, the Company expects its North America Solutions direct margins(2) per day to remain relatively flat or increase slightly in the fiscal third quarter
  • Fiscal year to date the Company has allocated approximately $250 million of capital as follows: $53 million in base dividends, $50 million in supplemental dividends and $146 million in share repurchases(3)
  • On March 1, 2023, the Board of Directors of the Company declared a quarterly base cash dividend of $0.25 per share and a supplemental cash dividend of $0.235 per share; both dividends are payable on June 1, 2023 to stockholders of record at the close of business on May 18, 2023

Helmerich & Payne, Inc. (NYSE: HP) reported net income of $164 million, or $1.55 per diluted share, from operating revenues of $769 million for the quarter ended March 31, 2023, compared to net income of $97 million, or $0.91 per diluted share, from operating revenues of $720 million for the quarter ended December 31, 2022. The net income per diluted share for the second and first quarters of fiscal 2023 include $0.29 and $(0.20) of after-tax gain and losses, respectively, comprised of select items(1). For the second quarter of fiscal year 2023, select items were comprised of:

  • $0.29 of after-tax gains pertaining to non-cash fair market adjustments to our equity investments

Net cash provided by operating activities was $141 million for the second quarter of fiscal year 2023, which included $114 million in tax payments compared to net cash provided by operating activities of $185 million for the first quarter of fiscal year 2023, which included $22 million in net tax refunds.

President and CEO John Lindsay commented, "H&P delivered another outstanding quarter and executed on a goal we set a year ago to generate 50%(4) direct margins in our NAS segment. The reason for setting that goal was to generate double digit returns that exceed our double digit cost of capital. With this milestone accomplished, our focus now turns to maintaining those levels of returns going forward.

"The past two decades demonstrate that even during upcycles, a certain amount of rig count variability exists, and we are witnessing that today. The macro-outlook has been challenged by political and economic insecurities in the global crude oil market and in the U.S. natural gas market. Volatility in both of these commodity markets has caused some uncertainty which has negatively impacted near-term rig demand. We see these events as shorter-term transitory issues and remain optimistic in the outlook which favors growing global demand for crude oil and natural gas over the long-term.

"H&P intends to remain firm on pricing; favoring returns over market share. That said, the juxtaposition of reduced rig activity and increased contractual churn caused by a weak natural gas market, along with our determined approach regarding fiscal discipline, necessitates a reduction in our forward rig count projections. Nevertheless, our super-spec FlexRig® fleet utilization remains high, and we are committed to sustaining this level of margin performance going forward, believing this path is in the best interest of all our stakeholders. Moreover, from our vantage point, activity in the crude oil market may create the opportunity for the Company to put rigs back into service this summer due to expected industry rig churn and perhaps again later in the calendar year as part of the recent trend of customers contracting additional rigs late in the calendar year as their new fiscal budgets are established.

"Maintaining fiscal discipline goes hand-in-hand with our customer-centric approach. By utilizing our FlexRig® fleet, technology, people and processes, we are able to consistently deliver the outcomes our customers desire, enhance their economic returns, and be compensated appropriately for the value we provide. We continue to develop new commercial models that not only demonstrate the value we create, but also expand collaborative efforts between H&P and its customers.

"On the international front, H&P's potential for longer-term growth prospects remains in focus. During the quarter, we moved our first super-spec rig into our Middle East hub and sent another to Australia. While initially small in terms of rig count, we believe this early progress portends more to come. Along those lines, we still plan to export more super-spec rigs to the Middle East during the back half of the year after undergoing region specific modifications, including conversions to walking systems. Operations in Argentina and Colombia remain relatively steady and are now providing solid financial contributions."

Senior Vice President and CFO Mark Smith also commented, "Several adverse macro issues, such as recessionary concerns, volatile commodity prices, and even anxiety over the financial health of the U.S. regional banking industry have commanded the market's attention this past quarter. We believe this coupled with a lower outlook for rig activity in fiscal 2023 has distracted from the more tangible value the Company has created this past year through higher margins and increased financial and shareholder returns. Accordingly, we have followed through on our capital allocation strategy regarding opportunistic share repurchases and repurchased shares during the second fiscal quarter, buying approximately 2.5 million shares for approximately $107 million. While the amount of share repurchases year-to-date surpasses the $100 million mark, we still have ample cash available to conduct additional repurchases or take advantage of other investment opportunities.

"As mentioned in the previous quarter, expectations can often change quickly, and as such our rig count expectations for the remainder of fiscal 2023 have been revised lower. Our current view is that those activity revisions are far less impactful to our projected cash flow generation than a degradation in our direct margins would be if we attempt to maintain activity levels by lowering pricing. Consequently, we remain confident in our financial plans going forward, keeping our capital allocation strategy unchanged and executing on the fiscal 2023 supplemental shareholder plan."

John Lindsay concluded, “From the perspective of my 36-year career at H&P, we are working more closely with our customers than at any other time, and our collaborations are primarily focused on value added performance rather than the daily cost of the drilling rig. That is due in large part to those customers realizing the near- and long-term benefits of having H&P as their drilling solution provider coupled with our relentless focus on delivering value. All of this is driven by H&P employees utilizing our rig assets and technologies to consistently strive to deliver the desired outcomes for our customers."

Operating Segment Results for the Second Quarter of Fiscal Year 2023

North America Solutions:

This segment had operating income of $182.1 million compared to operating income of $145.3 million during the previous quarter. The increase in operating income reflects more of our older term contracts continuing to reprice at higher contract economics which has improved the overall level of pricing across the fleet.

Direct margins(2) increased by $35.9 million to $296.2 million as both revenues and expenses increased sequentially. Quarterly operating results were impacted by the costs associated with reactivating rigs; $5.2 million in the second fiscal quarter compared to $8.6 million in the previous quarter.

International Solutions:

This segment had operating income of $4.0 million compared to operating income of $1.6 million during the previous quarter. Absent an impairment charge of $8.1 million during the first quarter of fiscal 2023, the decline in operating income was mainly driven by higher expenses associated with rig mobilizations.

Direct margins(2) during the second fiscal quarter were $8.6 million compared to $13.8 million during the previous quarter.

Offshore Gulf of Mexico:

This segment had operating income of $6.7 million compared to operating income of $6.7 million during the previous quarter. Direct margins(2) for the quarter were $9.3 million compared to $9.5 million in the prior quarter.

Operational Outlook for the Third Quarter of Fiscal Year 2023

North America Solutions:

  • We expect North America Solutions direct margins(2) to be between $265-$285 million with an average active rig count of 163-167 rigs during the quarter
  • We expect to exit the quarter between approximately 155-160 contracted rigs

International Solutions:

  • We expect International Solutions direct margins(2) to be between $4-$7 million, exclusive of any foreign exchange gains or losses

Offshore Gulf of Mexico:

  • We expect Offshore Gulf of Mexico direct margins(2) to be between $5.5-$7.5 million

Other Estimates for Fiscal Year 2023

  • Gross capital expenditures are now expected to be approximately $400 to $450 million, exclusive of ongoing asset sales that include reimbursements for lost and damaged tubulars and sales of other used drilling equipment that offset a portion of the gross capital expenditures and are expected to total approximately $65 million in fiscal year 2023
  • Depreciation for fiscal year 2023 is still expected to be approximately $400 million
  • Research and development expenses for fiscal year 2023 are now expected to be roughly $30 million
  • General and administrative expenses for fiscal year 2023 are now expected to be approximately $205 million
  • Cash taxes for fiscal year 2023 are now expected to be approximately $175-$225 million, of which a net $92 million has been paid through March 31, 2023

Select Items(1) Included in Net Income per Diluted Share

Second quarter of fiscal year 2023 net income of $1.55 per diluted share included $0.29 in after-tax gains comprised of the following:

  • $0.29 of non-cash after-tax gains related to fair market value adjustments to equity investments

First quarter of fiscal year 2023 net income of $0.91 per diluted share included $(0.20) in after-tax losses comprised of the following:

  • $(0.09) of non-cash after-tax losses pertaining to an impairment for fair market adjustments to decommissioned rigs and equipment that are held for sale
  • $(0.11) of non-cash after-tax losses related to fair market value adjustments to equity investments

Conference Call

A conference call will be held on Thursday, April 27, 2023 at 11:00 a.m. (ET) with John Lindsay, President and CEO, Mark Smith, Senior Vice President and CFO, and Dave Wilson, Vice President of Investor Relations, to discuss the Company’s second quarter fiscal year 2023 results. Dial-in information for the conference call is (877) 830-2598 for domestic callers or (785) 424-1745 for international callers. The call access code is ‘Helmerich’. You may also listen to the conference call that will be broadcast live over the Internet by logging on to the Company’s website at http://www.helmerichpayne.com and accessing the corresponding link through the investor relations section by clicking on “Investors” and then clicking on “News and Events - Events & Presentations” to find the event and the link to the webcast.

About Helmerich & Payne, Inc.

Founded in 1920, Helmerich & Payne, Inc. (H&P) (NYSE: HP) is committed to delivering industry leading levels of drilling productivity and reliability. H&P operates with the highest level of integrity, safety and innovation to deliver superior results for its customers and returns for shareholders. Through its subsidiaries, the Company designs, fabricates and operates high-performance drilling rigs in conventional and unconventional plays around the world. H&P also develops and implements advanced automation, directional drilling and survey management technologies. At March 31, 2023, H&P's fleet included 233 land rigs in the United States, 22 international land rigs and seven offshore platform rigs. For more information, see H&P online at www.helmerichpayne.com.

Forward-Looking Statements

This release includes “forward-looking statements” within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, and such statements are based on current expectations and assumptions that are subject to risks and uncertainties. All statements other than statements of historical facts included in this release, including, without limitation, statements regarding the registrant’s business strategy, future financial position, operations outlook, future cash flow, future use of generated cash flow, dividend amounts and timing, supplemental shareholder return plans and amounts of any future dividends, share repurchases, investments, active rig count projections, budgets, projected costs and plans, objectives of management for future operations, contract terms, financing and funding, capex spending, outlook for international markets, and actions by customers are forward-looking statements. For information regarding risks and uncertainties associated with the Company’s business, please refer to the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of the Company’s SEC filings, including but not limited to its annual report on Form 10‑K and quarterly reports on Form 10‑Q. As a result of these factors, Helmerich & Payne, Inc.’s actual results may differ materially from those indicated or implied by such forward-looking statements. Investors are cautioned not to put undue reliance on such statements. We undertake no duty to publicly update or revise any forward-looking statements, whether as a result of new information changes in internal estimates, expectations or otherwise, except as required under applicable securities laws.

Helmerich & Payne uses its Investor Relations website as a channel of distribution for material company information. Such information is routinely posted and accessible on its Investor Relations website at www.helmerichpayne.com. Information on our website is not part of this release.

Note Regarding Trademarks. Helmerich & Payne, Inc. owns or has rights to the use of trademarks, service marks and trade names that it uses in conjunction with the operation of its business. Some of the trademarks that appear in this release or otherwise used by H&P include FlexRig, which may be registered or trademarked in the United States and other jurisdictions.

(1) Select items are considered non-GAAP metrics and are included as a supplemental disclosure as the Company believes identifying and excluding select items is useful in assessing and understanding current operational performance, especially in making comparisons over time involving previous and subsequent periods and/or forecasting future periods results. Select items are excluded as they are deemed to be outside the Company's core business operations. See Non-GAAP Measurements.

(2) Direct margin, which is considered a non-GAAP metric, is defined as operating revenues (less reimbursements) less direct operating expenses (less reimbursements) and is included as a supplemental disclosure. We believe it is useful in assessing and understanding our current operational performance, especially in making comparisons over time. See Non-GAAP Measurements for a reconciliation of segment operating income(loss) to direct margin. Expected direct margin for the third quarter of fiscal 2023 is provided on a non-GAAP basis only because certain information necessary to calculate the cost comparable GAAP measure is unavailable due to the uncertainty and inherent difficulty of predicting the occurrence and the future financial statement impact of certain items. Therefore, as a result of the uncertainty and variability of the nature and amount of future items and adjustments, which could be significant, we are unable to provide a reconciliation of expected direct margin to the most comparable GAAP measure without unreasonable effort.

(3) During the second fiscal quarter H&P repurchased approximately 2.5 million shares for approximately $107 million; fiscal year to date the Company has repurchased approximately 3.4 million shares for approximately $146 million

(4) The NAS segment direct margin percentage for the fiscal second quarter, a non-GAAP metric, is calculated by dividing the direct margin for the segment ($296.2 million) by segment revenues ($675.8 million) less reimbursements ($77.4 million).

HELMERICH & PAYNE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

Three Months Ended

 

Six Months Ended

(in thousands, except per share amounts)

March 31,

 

December 31,

 

March 31,

 

March 31,

 

March 31,

2023

 

2022

 

2022

 

2023

 

2022

OPERATING REVENUES

 

 

 

 

 

 

 

 

 

Drilling services

$

766,682

 

 

$

717,170

 

 

$

465,370

 

 

$

1,483,852

 

 

$

872,904

 

Other

 

2,540

 

 

 

2,467

 

 

 

2,227

 

 

 

5,007

 

 

 

4,475

 

 

 

769,222

 

 

 

719,637

 

 

 

467,597

 

 

 

1,488,859

 

 

 

877,379

 

OPERATING COSTS AND EXPENSES

 

 

 

 

 

 

 

 

 

Drilling services operating expenses, excluding depreciation and amortization

 

449,110

 

 

 

428,251

 

 

 

339,759

 

 

 

877,361

 

 

 

639,411

 

Other operating expenses

 

1,188

 

 

 

1,126

 

 

 

1,181

 

 

 

2,314

 

 

 

2,363

 

Depreciation and amortization

 

96,255

 

 

 

96,655

 

 

 

102,937

 

 

 

192,910

 

 

 

203,374

 

Research and development

 

8,702

 

 

 

6,933

 

 

 

6,387

 

 

 

15,635

 

 

 

12,914

 

Selling, general and administrative

 

52,855

 

 

 

48,455

 

 

 

47,051

 

 

 

101,310

 

 

 

90,766

 

Asset impairment charges

 

 

 

 

12,097

 

 

 

 

 

 

12,097

 

 

 

4,363

 

Restructuring charges

 

 

 

 

 

 

 

63

 

 

 

 

 

 

805

 

Gain on reimbursement of drilling equipment

 

(11,574

)

 

 

(15,724

)

 

 

(6,448

)

 

 

(27,298

)

 

 

(11,702

)

Other (gain) loss on sale of assets

 

(2,519

)

 

 

(2,379

)

 

 

(716

)

 

 

(4,898

)

 

 

313

 

 

 

594,017

 

 

 

575,414

 

 

 

490,214

 

 

 

1,169,431

 

 

 

942,607

 

OPERATING INCOME (LOSS) FROM CONTINUING OPERATIONS

 

175,205

 

 

 

144,223

 

 

 

(22,617

)

 

 

319,428

 

 

 

(65,228

)

Other income (expense)

 

 

 

 

 

 

 

 

 

Interest and dividend income

 

5,055

 

 

 

4,705

 

 

 

3,399

 

 

 

9,760

 

 

 

5,988

 

Interest expense

 

(4,239

)

 

 

(4,355

)

 

 

(4,390

)

 

 

(8,594

)

 

 

(10,504

)

Gain (loss) on investment securities

 

39,752

 

 

 

(15,091

)

 

 

22,132

 

 

 

24,661

 

 

 

69,994

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

 

 

 

(60,083

)

Other

 

(743

)

 

 

(660

)

 

 

(476

)

 

 

(1,403

)

 

 

(1,018

)

 

 

39,825

 

 

 

(15,401

)

 

 

20,665

 

 

 

24,424

 

 

 

4,377

 

Income (loss) from continuing operations before income taxes

 

215,030

 

 

 

128,822

 

 

 

(1,952

)

 

 

343,852

 

 

 

(60,851

)

Income tax expense (benefit)

 

51,129

 

 

 

32,395

 

 

 

2,672

 

 

 

83,524

 

 

 

(4,896

)

Income (loss) from continuing operations

 

163,901

 

 

 

96,427

 

 

 

(4,624

)

 

 

260,328

 

 

 

(55,955

)

Income (loss) from discontinued operations before income taxes

 

139

 

 

 

718

 

 

 

(352

)

 

 

857

 

 

 

(383

)

Income tax expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from discontinued operations

 

139

 

 

 

718

 

 

 

(352

)

 

 

857

 

 

 

(383

)

NET INCOME (LOSS)

$

164,040

 

 

$

97,145

 

 

$

(4,976

)

 

$

261,185

 

 

$

(56,338

)

 

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per common share:

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

$

1.55

 

 

$

0.91

 

 

$

(0.05

)

 

$

2.45

 

 

$

(0.53

)

Income from discontinued operations

 

 

 

 

0.01

 

 

 

 

 

 

0.01

 

 

 

 

Net income (loss)

$

1.55

 

 

$

0.92

 

 

$

(0.05

)

 

$

2.46

 

 

$

(0.53

)

 

 

 

 

 

 

 

 

 

 

Diluted earnings (loss) per common share:

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

$

1.55

 

 

$

0.90

 

 

$

(0.05

)

 

$

2.45

 

 

$

(0.53

)

Income from discontinued operations

 

 

 

 

0.01

 

 

 

 

 

 

0.01

 

 

 

 

Net income (loss)

$

1.55

 

 

$

0.91

 

 

$

(0.05

)

 

$

2.46

 

 

$

(0.53

)

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

103,968

 

 

 

105,248

 

 

 

105,393

 

 

 

104,615

 

 

 

106,494

 

Diluted

 

104,363

 

 

 

106,104

 

 

 

105,393

 

 

 

105,003

 

 

 

106,494

 

HELMERICH & PAYNE, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

 

March 31,

 

September 30,

(in thousands except share data and share amounts)

2023

 

2022

ASSETS

 

 

 

Current Assets:

 

 

 

Cash and cash equivalents

$

159,672

 

 

$

232,131

 

Restricted cash

 

53,231

 

 

 

36,246

 

Short-term investments

 

85,090

 

 

 

117,101

 

Accounts receivable, net of allowance of $6,096 and $2,975, respectively

 

525,611

 

 

 

458,713

 

Inventories of materials and supplies, net

 

99,408

 

 

 

87,957

 

Prepaid expenses and other, net

 

80,090

 

 

 

66,463

 

Assets held-for-sale

 

1,349

 

 

 

4,333

 

Total current assets

 

1,004,451

 

 

 

1,002,944

 

 

 

 

 

Investments

 

261,960

 

 

 

218,981

 

Property, plant and equipment, net

 

2,931,301

 

 

 

2,960,809

 

Other Noncurrent Assets:

 

 

 

Goodwill

 

45,653

 

 

 

45,653

 

Intangible assets, net

 

63,790

 

 

 

67,154

 

Operating lease right-of-use asset

 

37,150

 

 

 

39,064

 

Other assets, net

 

21,428

 

 

 

20,926

 

Total other noncurrent assets

 

168,021

 

 

 

172,797

 

 

 

 

 

Total assets

$

4,365,733

 

 

$

4,355,531

 

 

 

 

 

LIABILITIES & SHAREHOLDERS' EQUITY

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

160,101

 

 

$

126,966

 

Dividends payable

 

50,409

 

 

 

26,693

 

Accrued liabilities

 

203,211

 

 

 

241,151

 

Total current liabilities

 

413,721

 

 

 

394,810

 

 

 

 

 

Noncurrent Liabilities:

 

 

 

Long-term debt, net

 

542,734

 

 

 

542,610

 

Deferred income taxes

 

540,316

 

 

 

537,712

 

Other

 

113,156

 

 

 

114,927

 

Total noncurrent liabilities

 

1,196,206

 

 

 

1,195,249

 

 

 

 

 

Shareholders' Equity:

 

 

 

Common stock, $0.10 par value, 160,000,000 shares authorized, 112,222,865 shares issued as of March 31, 2023 and September 30, 2022, and 102,584,517 and 105,293,662 shares outstanding as of March 31, 2023 and September 30, 2022, respectively

 

11,222

 

 

 

11,222

 

Preferred stock, no par value, 1,000,000 shares authorized, no shares issued

 

 

 

 

 

Additional paid-in capital

 

509,205

 

 

 

528,278

 

Retained earnings

 

2,608,100

 

 

 

2,473,572

 

Accumulated other comprehensive loss

 

(11,560

)

 

 

(12,072

)

Treasury stock, at cost, 9,638,348 shares and 6,929,203 shares as of March 31, 2023 and September 30, 2022, respectively

 

(361,161

)

 

 

(235,528

)

Total shareholders’ equity

 

2,755,806

 

 

 

2,765,472

 

Total liabilities and shareholders' equity

$

4,365,733

 

 

$

4,355,531

 

HELMERICH & PAYNE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

Six Months Ended March 31,

(in thousands)

2023

 

2022

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

Net income (loss)

$

261,185

 

 

$

(56,338

)

Adjustment for (income) loss from discontinued operations

 

(857

)

 

 

383

 

Income (loss) from continuing operations

 

260,328

 

 

 

(55,955

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

Depreciation and amortization

 

192,910

 

 

 

203,374

 

Asset impairment charges

 

12,097

 

 

 

4,363

 

Amortization of debt discount and debt issuance costs

 

664

 

 

 

559

 

Loss on extinguishment of debt

 

 

 

 

60,083

 

Provision for credit loss

 

3,222

 

 

 

669

 

Stock-based compensation

 

15,704

 

 

 

14,163

 

Gain on investment securities

 

(24,661

)

 

 

(69,994

)

Gain on reimbursement of drilling equipment

 

(27,298

)

 

 

(11,702

)

Other (gain) loss on sale of assets

 

(4,898

)

 

 

313

 

Deferred income tax expense (benefit)

 

3,165

 

 

 

(11,597

)

Other

 

2,024

 

 

 

(4,287

)

Changes in assets and liabilities

 

(106,952

)

 

 

(111,051

)

Net cash provided by operating activities from continuing operations

 

326,305

 

 

 

18,938

 

Net cash used in operating activities from discontinued operations

 

(51

)

 

 

(42

)

Net cash provided by operating activities

 

326,254

 

 

 

18,896

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

Capital expenditures

 

(181,479

)

 

 

(104,482

)

Other capital expenditures related to assets held-for-sale

 

 

 

 

(10,550

)

Purchase of short-term investments

 

(64,418

)

 

 

(68,565

)

Purchase of long-term investments

 

(18,771

)

 

 

(14,124

)

Proceeds from sale of short-term investments

 

97,744

 

 

 

117,456

 

Proceeds from asset sales

 

47,718

 

 

 

34,944

 

Net cash used in investing activities

 

(119,206

)

 

 

(45,321

)

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

Dividends paid

 

(102,941

)

 

 

(54,007

)

Payments for employee taxes on net settlement of equity awards

 

(14,410

)

 

 

(5,503

)

Payment of contingent consideration from acquisition of business

 

(250

)

 

 

(250

)

Payments for early extinguishment of long-term debt

 

 

 

 

(487,148

)

Make-whole premium payment

 

 

 

 

(56,421

)

Share repurchases

 

(145,013

)

 

 

(76,999

)

Other

 

(540

)

 

 

(587

)

Net cash used in financing activities

 

(263,154

)

 

 

(680,915

)

Net decrease in cash and cash equivalents and restricted cash

 

(56,106

)

 

 

(707,340

)

Cash and cash equivalents and restricted cash, beginning of period

 

269,009

 

 

 

936,716

 

Cash and cash equivalents and restricted cash, end of period

$

212,903

 

 

$

229,376

 

HELMERICH & PAYNE, INC.

SEGMENT REPORTING

 

Three Months Ended

 

Six Months Ended

 

March 31,

 

December 31,

 

March 31,

 

March 31,

 

March 31,

(in thousands, except operating statistics)

2023

 

2022

 

2022

 

2023

 

2022

NORTH AMERICA SOLUTIONS

 

 

 

 

 

 

 

 

 

Operating revenues

$

675,780

 

$

627,163

 

$

408,814

 

 

$

1,302,943

 

$

749,848

 

Direct operating expenses

 

379,611

 

 

366,855

 

 

294,397

 

 

 

746,466

 

 

550,965

 

Depreciation and amortization

 

89,070

 

 

89,814

 

 

95,817

 

 

 

178,884

 

 

189,438

 

Research and development

 

8,738

 

 

7,059

 

 

6,420

 

 

 

15,797

 

 

12,988

 

Selling, general and administrative expense

 

16,212

 

 

14,190

 

 

10,883

 

 

 

30,402

 

 

21,712

 

Asset impairment charges

 

 

 

3,948

 

 

 

 

 

3,948

 

 

1,868

 

Restructuring charges

 

 

 

 

 

 

 

 

 

 

473

 

Segment operating income (loss)

$

182,149

 

$

145,297

 

$

1,297

 

 

$

327,446

 

$

(27,596

)

Financial Data and Other Operating Statistics1:

 

 

 

 

 

 

 

 

 

Direct margin (Non-GAAP)2

$

296,169

 

$

260,308

 

$

114,417

 

 

$

556,477

 

$

198,883

 

Revenue days3

 

16,488

 

 

16,578

 

 

14,752

 

 

 

33,067

 

 

27,698

 

Average active rigs4

 

183

 

 

180

 

 

164

 

 

 

182

 

 

152

 

Number of active rigs at the end of period5

 

179

 

 

184

 

 

171

 

 

 

179

 

 

171

 

Number of available rigs at the end of period

 

233

 

 

235

 

 

236

 

 

 

233

 

 

236

 

Reimbursements of "out-of-pocket" expenses

$

77,442

 

$

79,159

 

$

46,664

 

 

$

156,601

 

$

89,793

 

 

 

 

 

 

 

 

 

 

 

INTERNATIONAL SOLUTIONS

 

 

 

 

 

 

 

 

 

Operating revenues

$

55,890

 

$

54,801

 

$

27,422

 

 

$

110,691

 

$

64,581

 

Direct operating expenses

 

47,275

 

 

40,977

 

 

25,171

 

 

 

88,252

 

 

49,302

 

Depreciation

 

1,652

 

 

1,392

 

 

1,049

 

 

 

3,044

 

 

1,804

 

Selling, general and administrative expense

 

3,008

 

 

2,709

 

 

2,050

 

 

 

5,717

 

 

3,779

 

Asset impairment charge

 

 

 

8,149

 

 

 

 

 

8,149

 

 

2,495

 

Segment operating income (loss)

$

3,955

 

$

1,574

 

$

(848

)

 

$

5,529

 

$

7,201

 

Financial Data and Other Operating Statistics1:

 

 

 

 

 

 

 

 

 

Direct margin (Non-GAAP)2

$

8,615

 

$

13,824

 

$

2,251

 

 

$

22,439

 

$

15,279

 

Revenue days3

 

1,263

 

 

1,140

 

 

636

 

 

 

2,403

 

 

1,283

 

Average active rigs4

 

14

 

 

12

 

 

7

 

 

 

13

 

 

7

 

Number of active rigs at the end of period5

 

15

 

 

13

 

 

6

 

 

 

15

 

 

6

 

Number of available rigs at the end of period

 

22

 

 

20

 

 

28

 

 

 

22

 

 

28

 

Reimbursements of "out-of-pocket" expenses

$

2,789

 

$

2,856

 

$

1,226

 

 

$

5,645

 

$

2,669

 

 

 

 

 

 

 

 

 

 

 

OFFSHORE GULF OF MEXICO

 

 

 

 

 

 

 

 

 

Operating revenues

$

34,979

 

$

35,164

 

$

29,147

 

 

$

70,143

 

$

58,461

 

Direct operating expenses

 

25,688

 

 

25,691

 

 

20,884

 

 

 

51,379

 

 

41,595

 

Depreciation

 

1,904

 

 

1,894

 

 

2,401

 

 

 

3,798

 

 

4,781

 

Selling, general and administrative expense

 

700

 

 

833

 

 

584

 

 

 

1,533

 

 

1,341

 

Segment operating income

$

6,687

 

$

6,746

 

$

5,278

 

 

$

13,433

 

$

10,744

 

Financial Data and Other Operating Statistics1:

 

 

 

 

 

 

 

 

 

Direct margin (Non-GAAP)2

$

9,291

 

$

9,473

 

$

8,263

 

 

$

18,764

 

$

16,866

 

Revenue days3

 

360

 

 

368

 

 

360

 

 

 

728

 

 

728

 

Average active rigs4

 

4

 

 

4

 

 

4

 

 

 

4

 

 

4

 

Number of active rigs at the end of period5

 

4

 

 

4

 

 

4

 

 

 

4

 

 

4

 

Number of available rigs at the end of period

 

7

 

 

7

 

 

7

 

 

 

7

 

 

7

 

Reimbursements of "out-of-pocket" expenses

$

7,994

 

$

7,189

 

$

5,809

 

 

$

15,183

 

$

11,884

 

(1)

These operating metrics and financial data, including average active rigs, are provided to allow investors to analyze the various components of segment financial results in terms of activity, utilization and other key results. Management uses these metrics to analyze historical segment financial results and as the key inputs for forecasting and budgeting segment financial results.

(2)

Direct margin, which is considered a non-GAAP metric, is defined as operating revenues less direct operating expenses and is included as a supplemental disclosure because we believe it is useful in assessing and understanding our current operational performance, especially in making comparisons over time. See — Non-GAAP Measurements below for a reconciliation of segment operating income (loss) to direct margin.

(3)

Defined as the number of contractual days we recognized revenue for during the period.

(4)

Active rigs generate revenue for the Company; accordingly, 'average active rigs' represents the average number of rigs generating revenue during the applicable time period. This metric is calculated by dividing revenue days by total days in the applicable period (i.e. 90, 92 or 182 days).

(5)

Defined as the number of rigs generating revenue at the applicable end date of the time period.

Segment reconciliation amounts were as follows:

 

Three Months Ended March 31, 2023

(in thousands)

North America

Solutions

 

International

Solutions

 

Offshore Gulf

of Mexico

 

Other

 

Eliminations

 

Total

Operating revenue

$

675,780

 

$

55,890

 

$

34,979

 

$

2,573

 

$

 

 

$

769,222

Intersegment

 

 

 

 

 

 

 

17,662

 

 

(17,662

)

 

 

Total operating revenue

$

675,780

 

$

55,890

 

$

34,979

 

$

20,235

 

$

(17,662

)

 

$

769,222

 

 

 

 

 

 

 

 

 

 

 

 

Direct operating expenses

$

366,714

 

$

47,036

 

$

23,716

 

$

12,551

 

$

 

 

$

450,017

Intersegment

 

12,897

 

 

239

 

 

1,972

 

 

105

 

 

(15,213

)

 

 

Total drilling services & other operating expenses

$

379,611

 

$

47,275

 

$

25,688

 

$

12,656

 

$

(15,213

)

 

$

450,017

 

Six Months Ended March 31, 2023

(in thousands)

North America

Solutions

 

International

Solutions

 

Offshore Gulf

of Mexico

 

Other

 

Eliminations

 

Total

Operating revenue

$

1,302,943

 

$

110,691

 

$

70,143

 

$

5,082

 

$

 

 

$

1,488,859

Intersegment

 

 

 

 

 

 

 

34,064

 

 

(34,064

)

 

 

Total operating revenue

$

1,302,943

 

$

110,691

 

$

70,143

 

$

39,146

 

$

(34,064

)

 

$

1,488,859

 

 

 

 

 

 

 

 

 

 

 

 

Direct operating expenses

$

718,029

 

$

87,737

 

$

47,517

 

$

26,111

 

$

 

 

$

879,394

Intersegment

 

28,437

 

 

515

 

 

3,862

 

 

134

 

 

(32,948

)

 

 

Total drilling services & other operating expenses

$

746,466

 

$

88,252

 

$

51,379

 

$

26,245

 

$

(32,948

)

 

$

879,394

Segment operating income (loss) for all segments is a non-GAAP financial measure of the Company’s performance, as it excludes gain on sale of assets, corporate selling, general and administrative expenses, corporate restructuring charges, and corporate depreciation. The Company considers segment operating income (loss) to be an important supplemental measure of operating performance for presenting trends in the Company’s core businesses. This measure is used by the Company to facilitate period-to-period comparisons in operating performance of the Company’s reportable segments in the aggregate by eliminating items that affect comparability between periods. The Company believes that segment operating income (loss) is useful to investors because it provides a means to evaluate the operating performance of the segments and the Company on an ongoing basis using criteria that are used by our internal decision makers. Additionally, it highlights operating trends and aids analytical comparisons. However, segment operating income has limitations and should not be used as an alternative to operating income or loss, a performance measure determined in accordance with GAAP, as it excludes certain costs that may affect the Company’s operating performance in future periods.

The following table reconciles operating income (loss) per the information above to income (loss) from continuing operations before income taxes as reported on the Unaudited Condensed Consolidated Statements of Operations:

 

Three Months Ended

 

Six Months Ended

 

March 31,

 

December 31,

 

March 31,

 

March 31,

 

March 31,

(in thousands)

2023

 

2022

 

2022

 

2023

 

2022

Operating income (loss)

 

 

 

 

 

 

 

 

 

North America Solutions

$

182,149

 

 

$

145,297

 

 

$

1,297

 

 

$

327,446

 

 

$

(27,596

)

International Solutions

 

3,955

 

 

 

1,574

 

 

 

(848

)

 

 

5,529

 

 

 

7,201

 

Offshore Gulf of Mexico

 

6,687

 

 

 

6,746

 

 

 

5,278

 

 

 

13,433

 

 

 

10,744

 

Other

 

6,823

 

 

 

4,677

 

 

 

3,167

 

 

 

11,500

 

 

 

7,096

 

Eliminations

 

(2,267

)

 

 

2,310

 

 

 

(2,031

)

 

 

43

 

 

 

(3,313

)

Segment operating income (loss)

$

197,347

 

 

$

160,604

 

 

$

6,863

 

 

$

357,951

 

 

$

(5,868

)

Gain on reimbursement of drilling equipment

 

11,574

 

 

 

15,724

 

 

 

6,448

 

 

 

27,298

 

 

 

11,702

 

Other gain (loss) on sale of assets

 

2,519

 

 

 

2,379

 

 

 

716

 

 

 

4,898

 

 

 

(313

)

Corporate selling, general and administrative costs, corporate depreciation and corporate restructuring charges

 

(36,235

)

 

 

(34,484

)

 

 

(36,644

)

 

 

(70,719

)

 

 

(70,749

)

Operating income (loss)

$

175,205

 

 

$

144,223

 

 

$

(22,617

)

 

$

319,428

 

 

$

(65,228

)

Other income (expense):

 

 

 

 

 

 

 

 

 

Interest and dividend income

 

5,055

 

 

 

4,705

 

 

 

3,399

 

 

 

9,760

 

 

 

5,988

 

Interest expense

 

(4,239

)

 

 

(4,355

)

 

 

(4,390

)

 

 

(8,594

)

 

 

(10,504

)

Gain (loss) on investment securities

 

39,752

 

 

 

(15,091

)

 

 

22,132

 

 

 

24,661

 

 

 

69,994

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

 

 

 

(60,083

)

Other

 

(743

)

 

 

(660

)

 

 

(476

)

 

 

(1,403

)

 

 

(1,018

)

Total unallocated amounts

 

39,825

 

 

 

(15,401

)

 

 

20,665

 

 

 

24,424

 

 

 

4,377

 

Income (loss) from continuing operations before income taxes

$

215,030

 

 

$

128,822

 

 

$

(1,952

)

 

$

343,852

 

 

$

(60,851

)

SUPPLEMENTARY STATISTICAL INFORMATION

Unaudited

 

U.S. LAND RIG COUNTS & MARKETABLE FLEET STATISTICS

 

 

April 26,

 

March 31,

 

December 31,

 

Q2FY23

 

2023

 

2023

 

2022

 

Average

U.S. Land Operations

 

 

 

 

 

 

 

Term Contract Rigs

101

 

101

 

105

 

103

Spot Contract Rigs

68

 

78

 

79

 

80

Total Contracted Rigs

169

 

179

 

184

 

183

Idle or Other Rigs

64

 

54

 

51

 

51

Total Marketable Fleet

233

 

233

 

235

 

234

H&P GLOBAL FLEET UNDER TERM CONTRACT STATISTICS

Number of Rigs Already Under Long-Term Contracts(*)

(Estimated Quarterly Average — as of 3/31/23)

 

 

Q3

 

Q4

 

Q1

 

Q2

 

Q3

 

Q4

 

Q1

Segment

FY23

 

FY23

 

FY24

 

FY24

 

FY24

 

FY24

 

FY25

U.S. Land Operations

97.2

 

84.5

 

59.7

 

39.6

 

34.7

 

27.0

 

12.7

International Land Operations

9.5

 

8.7

 

8.0

 

6.0

 

5.7

 

4.1

 

4.0

Offshore Operations

 

 

 

 

 

 

Total

106.7

 

93.2

 

67.7

 

45.6

 

40.4

 

31.1

 

16.7

(*) All of the above rig contracts have original terms equal to or in excess of six months and include provisions for early termination fees.

NON-GAAP MEASUREMENTS

 

NON-GAAP RECONCILIATION OF SELECT ITEMS AND ADJUSTED NET INCOME(**)

 

 

Three Months Ended March 31, 2023

(in thousands, except per share data)

Pretax

 

Tax

 

Net

 

EPS

Net income (GAAP basis)

 

 

 

 

$

164,040

 

$

1.55

(-) Fair market adjustment to equity investments

$

39,583

 

$

9,755

 

$

29,828

 

$

0.29

Adjusted net income

 

 

 

 

$

134,212

 

$

1.26

Three Months Ended December 31, 2022

(in thousands, except per share data)

Pretax

 

Tax

 

Net

 

EPS

Net income (GAAP basis)

 

 

 

 

$

97,145

 

 

$

0.91

 

(-) Impairments for fair market value adjustments

$

(12,097

)

 

$

(3,049

)

 

$

(9,048

)

 

$

(0.09

)

(-) Fair market adjustment to equity investments

$

(15,152

)

 

$

(3,818

)

 

$

(11,334

)

 

$

(0.11

)

Adjusted net income

 

 

 

 

$

117,527

 

 

$

1.11

 

(**)The Company believes identifying and excluding select items is useful in assessing and understanding current operational performance, especially in making comparisons over time involving previous and subsequent periods and/or forecasting future period results. Select items are excluded as they are deemed to be outside of the Company's core business operations.

NON-GAAP RECONCILIATION OF DIRECT MARGIN

Direct margin is considered a non-GAAP metric. We define "direct margin" as operating revenues less direct operating expenses. Direct margin is included as a supplemental disclosure because we believe it is useful in assessing and understanding our current operational performance, especially in making comparisons over time. Direct margin is not a substitute for financial measures prepared in accordance with GAAP and should therefore be considered only as supplemental to such GAAP financial measures.

The following table reconciles direct margin to segment operating income (loss), which we believe is the financial measure calculated and presented in accordance with GAAP that is most directly comparable to direct margin..

 

Three Months Ended March 31, 2023

(in thousands)

North America

Solutions

 

International

Solutions

 

Offshore Gulf of

Mexico

Segment operating income

$

182,149

 

$

3,955

 

$

6,687

Add back:

 

 

 

 

 

Depreciation and amortization

 

89,070

 

 

1,652

 

 

1,904

Research and development

 

8,738

 

 

 

 

Selling, general and administrative expense

 

16,212

 

 

3,008

 

 

700

Direct margin (Non-GAAP)

$

296,169

 

$

8,615

 

$

9,291

 

Three Months Ended December 31, 2022

(in thousands)

North America

Solutions

 

International

Solutions

 

Offshore Gulf of

Mexico

Segment operating income

$

145,297

 

$

1,574

 

$

6,746

Add back:

 

 

 

 

 

Depreciation and amortization

 

89,814

 

 

1,392

 

 

1,894

Research and development

 

7,059

 

 

 

 

Selling, general and administrative expense

 

14,190

 

 

2,709

 

 

833

Asset impairment charge

 

3,948

 

 

8,149

 

 

Direct margin (Non-GAAP)

$

260,308

 

$

13,824

 

$

9,473

 

Three Months Ended March 31, 2022

(in thousands)

North America

Solutions

 

International

Solutions

 

Offshore Gulf of

Mexico

Segment operating income (loss)

$

1,297

 

$

(848

)

 

$

5,278

Add back:

 

 

 

 

 

Depreciation and amortization

 

95,817

 

 

1,049

 

 

 

2,401

Research and development

 

6,420

 

 

 

 

 

Selling, general and administrative expense

 

10,883

 

 

2,050

 

 

 

584

Direct margin (Non-GAAP)

$

114,417

 

$

2,251

 

 

$

8,263

 

Six Months Ended March 31, 2023

(in thousands)

North America

Solutions

 

International

Solutions

 

Offshore Gulf of

Mexico

Segment operating income

$

327,446

 

$

5,529

 

$

13,433

Add back:

 

 

 

 

 

Depreciation and amortization

 

178,884

 

 

3,044

 

 

3,798

Research and development

 

15,797

 

 

 

 

Selling, general and administrative expense

 

30,402

 

 

5,717

 

 

1,533

Asset impairment charges

 

3,948

 

 

8,149

 

 

Direct margin (Non-GAAP)

$

556,477

 

$

22,439

 

$

18,764

 

Six Months Ended March 31, 2022

(in thousands)

North America

Solutions

 

International

Solutions

 

Offshore Gulf of

Mexico

Segment operating income (loss)

$

(27,596

)

 

$

7,201

 

$

10,744

Add back:

 

 

 

 

 

Depreciation and amortization

 

189,438

 

 

 

1,804

 

 

4,781

Research and development

 

12,988

 

 

 

 

 

Selling, general and administrative expense

 

21,712

 

 

 

3,779

 

 

1,341

Asset impairment charges

 

1,868

 

 

 

2,495

 

 

Restructuring charges

 

473

 

 

 

 

 

Direct margin (Non-GAAP)

$

198,883

 

 

$

15,279

 

$

16,866

 

 

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