Helmerich & Payne, Inc. Announces Fiscal Third Quarter Results

  • The Company reported fiscal third quarter net income of $95 million, or $0.93 per diluted share; including select items(1) of $(0.16) per diluted share
  • Quarterly North America Solutions ("NAS") operating income decreased $13 million sequentially, while direct margins(2) decreased $19 million to approximately $277 million, as revenues decreased by $34 million to $642 million and expenses decreased by $15 million to $365 million
  • The North America Solutions segment exited the third quarter of fiscal year 2023 with 153 active rigs reflecting an increase in revenue per day of approximately $790/day to $37,100/day on a sequential basis, while direct margins(2) per day increased by approximately $410/day to $18,400/day
  • H&P's North America Solutions segment anticipates exiting the fourth quarter of fiscal year 2023 between 141-147 active rigs
  • The natural gas driven decline in rig activity during the third quarter of fiscal year 2023 was mainly concentrated in higher direct margin(2) spot rigs relative to lower direct margin(2) rigs under term contracts, consequently, the Company expects its North America Solutions direct margins(2) per day in the fourth fiscal quarter to decline slightly
  • Fiscal year to date, including share repurchases and dividends paid and declared, the Company has returned approximately $451 million of capital to shareholders as follows: $104 million in base dividends, $98 million in supplemental dividends and $249 million in share repurchases(3)
  • On June 7, 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 August 31, 2023 to stockholders of record at the close of business on August 17, 2023

Helmerich & Payne, Inc. (NYSE: HP) reported net income of $95 million, or $0.93 per diluted share, from operating revenues of $724 million for the quarter ended June 30, 2023, compared to net income of $164 million, or $1.55 per diluted share, from operating revenues of $769 million for the quarter ended March 31, 2023. The net income per diluted share for the third and second quarters of fiscal 2023 include $(0.16) and $0.29 of after-tax losses and gains, respectively, comprised of select items(1). For the third quarter of fiscal year 2023, select items were comprised of:

  • $0.05 of non-cash after-tax gains related to the change in estimates of certain liabilities
  • $(0.21) of after-tax losses related to the non-cash change in the fair value of certain contingent liabilities, the sales of rigs and related equipment that were held for sale and the scrapping of excess equipment, and non-cash fair market adjustments to our equity investments

Net cash provided by operating activities was $293 million for the third quarter of fiscal year 2023, which included $37 million in tax payments, compared to net cash provided by operating activities of $141 million for the second quarter of fiscal year 2023, which included $114 million in tax payments.

President and CEO John Lindsay commented, "H&P's financial results for the third fiscal quarter were significant for a few reasons. First, they demonstrate that we are achieving economic returns in the low-to-mid teens which are just above of our cost of capital. Second, these financial results were achieved during a period when rig activity was declining primarily due to weak natural gas prices, so our emphasis on contract economics rather than market share drove the Company's financial performance this quarter. Finally, the results reflect a behavioral change that has transpired broadly within the energy industry, and is guided by fiscal prudence and capital allocation.

"Uncertainty around the macro-outlook for crude oil and natural gas prices maintained an underlying sense of apprehension in the U.S. drilling market during the quarter. Recently however, some of this uncertainty has receded, and we are starting to see signs of optimism on the horizon. In the near term, we believe that U.S. rig activity declines will likely continue into the September ended quarter, albeit at a more modest pace than experienced thus far this calendar year. These declines appear to be more of a function of customer budget and production discipline rather than a reaction to short-term commodity price movements. For the quarter ending in December, we expect to see an increase in contracting activity as our customers refresh their capital budgets for 2024, and we have already received indications they may increase activity. Looking forward into the medium to longer term, we believe there will be an increase in the demand for rigs relative to current levels due to fundamental supply and demand dynamics inherent in the industry.

"In the face of recent rig count declines, we have been able to remain firm on our contractual economics by working with customers on alternative contracting models, such as performance contracts. Having the operational confidence in our ability to consistently execute enables H&P to enter into alternative contractual arrangements, which can result in win-win economics for both the customer and H&P. Even with these ongoing efforts, we are anticipating our NAS margins in the fourth fiscal quarter to regress slightly as the rigs idled during the second half of our fiscal year have been mainly in the spot market and had contractual margins above the overall average. The absence of those rigs and their associated margins will contribute to, what we believe will be, a nominal decline for NAS margins in the upcoming quarter. We anticipate this decline will be transitory based on expectations for rig additions and some term contract rollovers benefiting margins in the December ended quarter.

"Expanding our international footprint remains a core strategy for the Company, although one that is unfolding at a slower pace which is typical in international markets compared to the U.S. Our rig in Australia is scheduled to commence drilling soon, and we look forward to demonstrating our expertise in drilling efficiencies and providing value-added drilling solutions to our customer. Additionally, we are sending a second rig to the Middle East in anticipation of hearing results regarding our participation in a recent tender. Activities in our other international markets look to remain relatively steady for the foreseeable future."

Senior Vice President and CFO Mark Smith also commented, "Macro-economic issues experienced earlier this calendar year lingered during our third fiscal quarter and were reflected at the company level by a declining rig count. Notwithstanding, the Company kept the focus on generating economic returns despite this market backdrop and executing our capital allocation strategy, including the 2023 Supplemental Shareholder Return Plan. In addition to the planned base and supplemental dividends during the third fiscal quarter, we continued to opportunistically repurchase shares. Specifically, the Company repurchased approximately 3.2 million shares for roughly $103 million in the fiscal quarter, bringing the total fiscal 2023 year-to-date share repurchases to approximately 6.5 million shares for roughly $249 million, representing approximately 6% of the shares outstanding.

"Looking ahead, we are still very early in the process of establishing our fiscal 2024 capital budget, but preliminary estimates suggest our fiscal 2024 budget will be at least at this year's level considering fiscal 2023 capex deferrals, projected maintenance capex and walking rig conversions. When completed, the budget will serve as a basis for determining and refreshing our shareholder return plans for fiscal 2024. Flexibility, not only with capital allocation within a fiscal year, but from one year to the next, were important components of the inaugural design of the Company's supplemental shareholder return plan. As such, we expect the plan for fiscal 2024 will be developed taking into consideration various factors, some of which may be the same or different from those used to establish the plan for fiscal 2023."

John Lindsay concluded, “We remain optimistic that the political and economic uncertainty over the past several quarters impacting the global crude oil and natural gas markets is indeed abating. During the third fiscal quarter, we once again achieved returns in excess of our cost of capital and moving forward, our focus will remain on maintaining these levels of returns by delivering better well economic outcomes for our customers. This level of performance is possible because of the service attitude of our people and their ability to deliver value through drilling efficiencies and technology in collaboration with our customers."

Operating Segment Results for the Third Quarter of Fiscal Year 2023

North America Solutions:

This segment had operating income of $169.5 million compared to operating income of $182.1 million during the previous quarter. The decrease in operating income was primarily attributable to a decline in activity levels during the quarter, which also caused direct margin(2) to decrease by $19.2 million to $276.9 million sequentially. Despite the absolute decreases in operating income and direct margin(2), revenue per day and direct margin(2) per day showed sequential increases quarter over quarter.

International Solutions:

This segment had an operating loss of $1.4 million compared to operating income of $4.0 million during the previous quarter. The decline in operating income was mainly due a lower active rig count and the associated direct margins(2). Direct margin(2) during the third fiscal quarter was $3.3 million compared to $8.6 million during the previous quarter.

Offshore Gulf of Mexico:

This segment had operating income of $4.7 million compared to operating income of $6.7 million during the previous quarter. Direct margin(2) for the quarter was $7.3 million compared to $9.3 million in the prior quarter as a rig demobilized as expected.

Operational Outlook for the Fourth Quarter of Fiscal Year 2023

North America Solutions:

  • We expect North America Solutions direct margins(2) to be between $230-$250 million
  • We expect to exit the quarter between approximately 141-147 contracted rigs

International Solutions:

  • We expect International Solutions direct margins(2) to be between $8.0-$11.0 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 $6.0-$8.0 million

Other Estimates for Fiscal Year 2023

  • Gross capital expenditures are now expected to be approximately $400 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 now expected to total approximately $70 million in fiscal year 2023
  • Depreciation for fiscal year 2023 is now expected to be approximately $385 million
  • Research and development expenses for fiscal year 2023 are still expected to be roughly $30 million
  • General and administrative expenses for fiscal year 2023 are still expected to be approximately $205 million
  • Cash taxes for fiscal year 2023 are now expected to be approximately $180-$205 million, of which $156 million has been paid through June 30, 2023

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

Third quarter of fiscal year 2023 net income of $0.93 per diluted share included $(0.16) in after-tax losses comprised of the following:

  • $0.05 of non-cash after-tax gains related to the change in estimates of certain liabilities
  • $(0.03) of non-cash after-tax losses related to the change in the fair value of certain contingent liabilities
  • $(0.04) of after-tax losses related to the sales of rigs and related equipment that were held for sale and the scrapping of excess equipment
  • $(0.14) of non-cash after-tax losses related to fair market value adjustments to equity investments

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

Conference Call

A conference call will be held on Thursday, July 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 third quarter fiscal year 2023 results. Dial-in information for the conference call is (800) 895-3361 for domestic callers or (785) 424-1062 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 June 30, 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, future 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 domestic and 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 and other disclosure in 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 fourth quarter of fiscal 2023 is provided on a non-GAAP basis only because certain information necessary to calculate the most 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 third fiscal quarter of fiscal 2023, H&P repurchased approximately 3.2 million shares for roughly $103 million; fiscal year to date the Company has repurchased approximately 6.5 million shares for approximately $249 million

HELMERICH & PAYNE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

Three Months Ended

 

Nine Months Ended

(in thousands, except per share amounts)

June 30,

 

March 31,

 

June 30,

 

June 30,

 

June 30,

 

2023

 

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

OPERATING REVENUES

 

 

 

 

 

 

 

 

 

Drilling services

$

721,567

 

 

$

766,682

 

 

$

547,906

 

 

$

2,205,419

 

 

$

1,420,810

 

Other

 

2,389

 

 

 

2,540

 

 

 

2,327

 

 

 

7,396

 

 

 

6,802

 

 

 

723,956

 

 

 

769,222

 

 

 

550,233

 

 

 

2,212,815

 

 

 

1,427,612

 

OPERATING COSTS AND EXPENSES

 

 

 

 

 

 

 

 

 

Drilling services operating expenses, excluding depreciation and amortization

 

429,182

 

 

 

449,110

 

 

 

376,210

 

 

 

1,306,543

 

 

 

1,015,621

 

Other operating expenses

 

1,003

 

 

 

1,188

 

 

 

1,053

 

 

 

3,317

 

 

 

3,416

 

Depreciation and amortization

 

94,811

 

 

 

96,255

 

 

 

100,741

 

 

 

287,721

 

 

 

304,115

 

Research and development

 

7,085

 

 

 

8,702

 

 

 

6,511

 

 

 

22,720

 

 

 

19,425

 

Selling, general and administrative

 

49,271

 

 

 

52,855

 

 

 

44,933

 

 

 

150,581

 

 

 

135,699

 

Asset impairment charges

 

 

 

 

 

 

 

 

 

 

12,097

 

 

 

4,363

 

Restructuring charges

 

 

 

 

 

 

 

33

 

 

 

 

 

 

838

 

Gain on reimbursement of drilling equipment

 

(10,642

)

 

 

(11,574

)

 

 

(9,895

)

 

 

(37,940

)

 

 

(21,597

)

Other (gain) loss on sale of assets

 

4,504

 

 

 

(2,519

)

 

 

(3,075

)

 

 

(394

)

 

 

(2,762

)

 

 

575,214

 

 

 

594,017

 

 

 

516,511

 

 

 

1,744,645

 

 

 

1,459,118

 

OPERATING INCOME (LOSS) FROM CONTINUING OPERATIONS

 

148,742

 

 

 

175,205

 

 

 

33,722

 

 

 

468,170

 

 

 

(31,506

)

Other income (expense)

 

 

 

 

 

 

 

 

 

Interest and dividend income

 

10,748

 

 

 

5,055

 

 

 

5,313

 

 

 

20,508

 

 

 

11,301

 

Interest expense

 

(4,324

)

 

 

(4,239

)

 

 

(4,372

)

 

 

(12,918

)

 

 

(14,876

)

Gain (loss) on investment securities

 

(18,538

)

 

 

39,752

 

 

 

(14,310

)

 

 

6,123

 

 

 

55,684

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

 

 

 

(60,083

)

Other

 

(685

)

 

 

(743

)

 

 

(1,148

)

 

 

(2,088

)

 

 

(2,166

)

 

 

(12,799

)

 

 

39,825

 

 

 

(14,517

)

 

 

11,625

 

 

 

(10,140

)

Income (loss) from continuing operations before income taxes

 

135,943

 

 

 

215,030

 

 

 

19,205

 

 

 

479,795

 

 

 

(41,646

)

Income tax expense (benefit)

 

40,663

 

 

 

51,129

 

 

 

1,730

 

 

 

124,187

 

 

 

(3,166

)

Income (loss) from continuing operations

 

95,280

 

 

 

163,901

 

 

 

17,475

 

 

 

355,608

 

 

 

(38,480

)

Income (loss) from discontinued operations before income taxes

 

13

 

 

 

139

 

 

 

277

 

 

 

870

 

 

 

(106

)

Income tax expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from discontinued operations

 

13

 

 

 

139

 

 

 

277

 

 

 

870

 

 

 

(106

)

NET INCOME (LOSS)

$

95,293

 

 

$

164,040

 

 

$

17,752

 

 

$

356,478

 

 

$

(38,586

)

 

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per common share:

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

$

0.93

 

 

$

1.55

 

 

$

0.16

 

 

$

3.39

 

 

$

(0.37

)

Income from discontinued operations

 

 

 

 

 

 

 

 

 

 

0.01

 

 

 

 

Net income (loss)

$

0.93

 

 

$

1.55

 

 

$

0.16

 

 

$

3.40

 

 

$

(0.37

)

 

 

 

 

 

 

 

 

 

 

Diluted earnings (loss) per common share:

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

$

0.93

 

 

$

1.55

 

 

$

0.16

 

 

$

3.38

 

 

$

(0.37

)

Income from discontinued operations

 

 

 

 

 

 

 

 

 

 

0.01

 

 

 

 

Net income (loss)

$

0.93

 

 

$

1.55

 

 

$

0.16

 

 

$

3.39

 

 

$

(0.37

)

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

101,163

 

 

 

103,968

 

 

 

105,289

 

 

 

103,464

 

 

 

106,092

 

Diluted

 

101,550

 

 

 

104,363

 

 

 

106,021

 

 

 

103,852

 

 

 

106,092

 

HELMERICH & PAYNE, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

 

June 30,

 

September 30,

(in thousands except share data and share amounts)

 

2023

 

 

 

2022

 

ASSETS

 

 

 

Current Assets:

 

 

 

Cash and cash equivalents

$

220,609

 

 

$

232,131

 

Restricted cash

 

61,364

 

 

 

36,246

 

Short-term investments

 

72,609

 

 

 

117,101

 

Accounts receivable, net of allowance of $4,983 and $2,975, respectively

 

449,588

 

 

 

458,713

 

Inventories of materials and supplies, net

 

101,299

 

 

 

87,957

 

Prepaid expenses and other, net

 

86,371

 

 

 

66,463

 

Assets held-for-sale

 

988

 

 

 

4,333

 

Total current assets

 

992,828

 

 

 

1,002,944

 

 

 

 

 

Investments

 

246,059

 

 

 

218,981

 

Property, plant and equipment, net

 

2,932,593

 

 

 

2,960,809

 

Other Noncurrent Assets:

 

 

 

Goodwill

 

45,653

 

 

 

45,653

 

Intangible assets, net

 

62,183

 

 

 

67,154

 

Operating lease right-of-use asset

 

36,972

 

 

 

39,064

 

Other assets, net

 

24,528

 

 

 

20,926

 

Total other noncurrent assets

 

169,336

 

 

 

172,797

 

 

 

 

 

Total assets

$

4,340,816

 

 

$

4,355,531

 

 

 

 

 

LIABILITIES & SHAREHOLDERS' EQUITY

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

151,671

 

 

$

126,966

 

Dividends payable

 

48,878

 

 

 

26,693

 

Accrued liabilities

 

232,947

 

 

 

241,151

 

Total current liabilities

 

433,496

 

 

 

394,810

 

 

 

 

 

Noncurrent Liabilities:

 

 

 

Long-term debt, net

 

544,996

 

 

 

542,610

 

Deferred income taxes

 

541,424

 

 

 

537,712

 

Other

 

112,819

 

 

 

114,927

 

Total noncurrent liabilities

 

1,199,239

 

 

 

1,195,249

 

 

 

 

 

Shareholders' Equity:

 

 

 

Common stock, $0.10 par value, 160,000,000 shares authorized, 112,222,865 shares issued as of June 30, 2023 and September 30, 2022, and 99,426,526 and 105,293,662 shares outstanding as of June 30, 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

 

517,259

 

 

 

528,278

 

Retained earnings

 

2,655,287

 

 

 

2,473,572

 

Accumulated other comprehensive loss

 

(11,305

)

 

 

(12,072

)

Treasury stock, at cost, 12,796,339 shares and 6,929,203 shares as of June 30, 2023 and September 30, 2022, respectively

 

(464,382

)

 

 

(235,528

)

Total shareholders’ equity

 

2,708,081

 

 

 

2,765,472

 

Total liabilities and shareholders' equity

$

4,340,816

 

 

$

4,355,531

 

HELMERICH & PAYNE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

Nine Months Ended June 30,

(in thousands)

 

2023

 

 

 

2022

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

Net income (loss)

$

356,478

 

 

$

(38,586

)

Adjustment for (income) loss from discontinued operations

 

(870

)

 

 

106

 

Income (loss) from continuing operations

 

355,608

 

 

 

(38,480

)

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

 

 

 

Depreciation and amortization

 

287,721

 

 

 

304,115

 

Asset impairment charges

 

12,097

 

 

 

4,363

 

Amortization of debt discount and debt issuance costs

 

931

 

 

 

880

 

Loss on extinguishment of debt

 

 

 

 

60,083

 

Provision for credit loss

 

2,165

 

 

 

1,022

 

Stock-based compensation

 

23,884

 

 

 

21,214

 

Gain on investment securities

 

(6,123

)

 

 

(55,684

)

Gain on reimbursement of drilling equipment

 

(37,940

)

 

 

(21,597

)

Other gain on sale of assets

 

(394

)

 

 

(2,762

)

Deferred income tax expense (benefit)

 

4,197

 

 

 

(36,614

)

Other

 

3,956

 

 

 

(2,765

)

Changes in assets and liabilities

 

(27,045

)

 

 

(117,074

)

Net cash provided by operating activities from continuing operations

 

619,057

 

 

 

116,701

 

Net cash used in operating activities from discontinued operations

 

(57

)

 

 

(60

)

Net cash provided by operating activities

 

619,000

 

 

 

116,641

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

Capital expenditures

 

(281,790

)

 

 

(174,958

)

Other capital expenditures related to assets held-for-sale

 

 

 

 

(18,228

)

Purchase of short-term investments

 

(102,140

)

 

 

(109,318

)

Purchase of long-term investments

 

(18,813

)

 

 

(47,210

)

Proceeds from sale of short-term investments

 

148,651

 

 

 

161,766

 

Proceeds from sale of long-term investments

 

 

 

 

22,042

 

Proceeds from asset sales

 

63,048

 

 

 

50,260

 

Other

 

 

 

 

(7,500

)

Net cash used in investing activities

 

(191,044

)

 

 

(123,146

)

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

Dividends paid

 

(152,579

)

 

 

(80,702

)

Payments for employee taxes on net settlement of equity awards

 

(14,410

)

 

 

(5,515

)

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

 

(247,213

)

 

 

(76,999

)

Other

 

(540

)

 

 

(587

)

Net cash used in financing activities

 

(414,992

)

 

 

(707,622

)

Net increase (decrease) in cash and cash equivalents and restricted cash

 

12,964

 

 

 

(714,127

)

Cash and cash equivalents and restricted cash, beginning of period

 

269,009

 

 

 

936,716

 

Cash and cash equivalents and restricted cash, end of period

$

281,973

 

 

$

222,589

 

HELMERICH & PAYNE, INC.

SEGMENT REPORTING

 

Three Months Ended

 

Nine Months Ended

 

June 30,

 

March 31,

 

June 30,

 

June 30,

 

June 30,

(in thousands, except operating statistics)

 

2023

 

 

2023

 

 

2022

 

 

2023

 

2022

NORTH AMERICA SOLUTIONS

 

 

 

 

 

 

 

 

 

Operating revenues

$

641,612

 

 

$

675,780

 

$

486,004

 

 

$

1,944,555

 

$

1,235,852

Direct operating expenses

 

364,688

 

 

 

379,611

 

 

318,400

 

 

 

1,111,154

 

 

869,365

Depreciation and amortization

 

87,209

 

 

 

89,070

 

 

93,612

 

 

 

266,093

 

 

283,050

Research and development

 

7,254

 

 

 

8,738

 

 

6,545

 

 

 

23,051

 

 

19,533

Selling, general and administrative expense

 

12,962

 

 

 

16,212

 

 

10,069

 

 

 

43,364

 

 

31,781

Asset impairment charges

 

 

 

 

 

 

 

 

 

3,948

 

 

1,868

Restructuring charges

 

 

 

 

 

 

25

 

 

 

 

 

498

Segment operating income

$

169,499

 

 

$

182,149

 

$

57,353

 

 

$

496,945

 

$

29,757

Financial Data and Other Operating Statistics1:

 

 

 

 

 

 

 

 

 

Direct margin (Non-GAAP)2

$

276,924

 

 

$

296,169

 

$

167,604

 

 

$

833,401

 

$

366,487

Revenue days3

 

15,075

 

 

 

16,488

 

 

15,796

 

 

 

48,142

 

 

43,494

Average active rigs4

 

166

 

 

 

183

 

 

174

 

 

 

176

 

 

159

Number of active rigs at the end of period5

 

153

 

 

 

179

 

 

175

 

 

 

153

 

 

175

Number of available rigs at the end of period

 

233

 

 

 

233

 

 

236

 

 

 

233

 

 

236

Reimbursements of "out-of-pocket" expenses

$

82,688

 

 

$

77,442

 

$

67,218

 

 

$

239,288

 

$

157,010

 

 

 

 

 

 

 

 

 

 

INTERNATIONAL SOLUTIONS

 

 

 

 

 

 

 

 

 

Operating revenues

$

48,692

 

 

$

55,890

 

$

29,118

 

 

$

159,383

 

$

93,699

Direct operating expenses

 

45,390

 

 

 

47,275

 

 

32,364

 

 

 

133,642

 

 

81,666

Depreciation

 

2,171

 

 

 

1,652

 

 

1,175

 

 

 

5,215

 

 

2,979

Selling, general and administrative expense

 

2,528

 

 

 

3,008

 

 

2,129

 

 

 

8,245

 

 

5,908

Asset impairment charges

 

 

 

 

 

 

 

 

 

8,149

 

 

2,495

Segment operating income (loss)

$

(1,397

)

 

$

3,955

 

$

(6,550

)

 

$

4,132

 

$

651

Financial Data and Other Operating Statistics1:

 

 

 

 

 

 

 

 

 

Direct margin (Non-GAAP)2

$

3,302

 

 

$

8,615

 

$

(3,246

)

 

$

25,741

 

$

12,033

Revenue days3

 

1,215

 

 

 

1,263

 

 

718

 

 

 

3,618

 

 

2,010

Average active rigs4

 

13

 

 

 

14

 

 

8

 

 

 

13

 

 

7

Number of active rigs at the end of period5

 

13

 

 

 

15

 

 

9

 

 

 

13

 

 

9

Number of available rigs at the end of period

 

22

 

 

 

22

 

 

28

 

 

 

22

 

 

28

Reimbursements of "out-of-pocket" expenses

$

2,098

 

 

$

2,789

 

$

699

 

 

$

7,743

 

$

3,368

 

 

 

 

 

 

 

 

 

 

OFFSHORE GULF OF MEXICO

 

 

 

 

 

 

 

 

 

Operating revenues

$

31,221

 

 

$

34,979

 

$

32,701

 

 

$

101,364

 

$

91,162

Direct operating expenses

 

23,913

 

 

 

25,688

 

 

23,922

 

 

 

75,292

 

 

65,517

Depreciation

 

1,873

 

 

 

1,904

 

 

2,328

 

 

 

5,671

 

 

7,109

Selling, general and administrative expense

 

730

 

 

 

700

 

 

579

 

 

 

2,263

 

 

1,920

Segment operating income

$

4,705

 

 

$

6,687

 

$

5,872

 

 

$

18,138

 

$

16,616

Financial Data and Other Operating Statistics1:

 

 

 

 

 

 

 

 

 

Direct margin (Non-GAAP)2

$

7,308

 

 

$

9,291

 

$

8,779

 

 

$

26,072

 

$

25,645

Revenue days3

 

364

 

 

 

360

 

 

364

 

 

 

1,092

 

 

1,092

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

$

7,823

 

 

$

7,994

 

$

7,219

 

 

$

23,006

 

$

19,103

(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. 91 days for the three months ended June 30, 2023 and 2022, 90 days for the three months ended March 31,2023 and 273 days for the nine months ended June 30, 2023 and 2022).

(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 June 30, 2023

(in thousands)

North America

Solutions

 

International

Solutions

 

Offshore Gulf

of Mexico

 

Other

 

Eliminations

 

Total

Operating revenue

$

641,612

 

$

48,692

 

$

31,221

 

$

2,431

 

$

 

 

$

723,956

Intersegment

 

 

 

 

 

 

 

17,359

 

 

(17,359

)

 

 

Total operating revenue

$

641,612

 

$

48,692

 

$

31,221

 

$

19,790

 

$

(17,359

)

 

$

723,956

 

 

 

 

 

 

 

 

 

 

 

 

Direct operating expenses

$

346,791

 

$

44,706

 

$

21,862

 

$

16,708

 

$

 

 

$

430,067

Intersegment

 

17,897

 

 

684

 

 

2,051

 

 

82

 

 

(20,714

)

 

 

Total drilling services & other operating expenses

$

364,688

 

$

45,390

 

$

23,913

 

$

16,790

 

$

(20,714

)

 

$

430,067

 

Nine Months Ended June 30, 2023

(in thousands)

North America

Solutions

 

International

Solutions

 

Offshore Gulf

of Mexico

 

Other

 

Eliminations

 

Total

Operating revenue

$

1,944,555

 

$

159,383

 

$

101,364

 

$

7,513

 

$

 

 

$

2,212,815

Intersegment

 

 

 

 

 

 

 

51,423

 

 

(51,423

)

 

 

Total operating revenue

$

1,944,555

 

$

159,383

 

$

101,364

 

$

58,936

 

$

(51,423

)

 

$

2,212,815

 

 

 

 

 

 

 

 

 

 

 

 

Direct operating expenses

$

1,064,820

 

$

132,443

 

$

69,379

 

$

42,819

 

$

 

 

$

1,309,461

Intersegment

 

46,334

 

 

1,199

 

 

5,913

 

 

216

 

 

(53,662

)

 

 

Total drilling services & other operating expenses

$

1,111,154

 

$

133,642

 

$

75,292

 

$

43,035

 

$

(53,662

)

 

$

1,309,461

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 (loss) 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

 

Nine Months Ended

 

June 30,

 

March 31,

 

June 30,

 

June 30,

 

June 30,

(in thousands)

 

2023

 

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Operating income (loss)

 

 

 

 

 

 

 

 

 

North America Solutions

$

169,499

 

 

$

182,149

 

 

$

57,353

 

 

$

496,945

 

 

$

29,757

 

International Solutions

 

(1,397

)

 

 

3,955

 

 

 

(6,550

)

 

 

4,132

 

 

 

651

 

Offshore Gulf of Mexico

 

4,705

 

 

 

6,687

 

 

 

5,872

 

 

 

18,138

 

 

 

16,616

 

Other

 

2,104

 

 

 

6,823

 

 

 

1,965

 

 

 

13,604

 

 

 

9,061

 

Eliminations

 

4,470

 

 

 

(2,267

)

 

 

(2,140

)

 

 

4,513

 

 

 

(5,453

)

Segment operating income

$

179,381

 

 

$

197,347

 

 

$

56,500

 

 

$

537,332

 

 

$

50,632

 

Gain on reimbursement of drilling equipment

 

10,642

 

 

 

11,574

 

 

 

9,895

 

 

 

37,940

 

 

 

21,597

 

Other gain (loss) on sale of assets

 

(4,504

)

 

 

2,519

 

 

 

3,075

 

 

 

394

 

 

 

2,762

 

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

 

(36,777

)

 

 

(36,235

)

 

 

(35,748

)

 

 

(107,496

)

 

 

(106,497

)

Operating income (loss)

$

148,742

 

 

$

175,205

 

 

$

33,722

 

 

$

468,170

 

 

$

(31,506

)

Other income (expense):

 

 

 

 

 

 

 

 

 

Interest and dividend income

 

10,748

 

 

 

5,055

 

 

 

5,313

 

 

 

20,508

 

 

 

11,301

 

Interest expense

 

(4,324

)

 

 

(4,239

)

 

 

(4,372

)

 

 

(12,918

)

 

 

(14,876

)

Gain (loss) on investment securities

 

(18,538

)

 

 

39,752

 

 

 

(14,310

)

 

 

6,123

 

 

 

55,684

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

 

 

 

(60,083

)

Other

 

(685

)

 

 

(743

)

 

 

(1,148

)

 

 

(2,088

)

 

 

(2,166

)

Total unallocated amounts

 

(12,799

)

 

 

39,825

 

 

 

(14,517

)

 

 

11,625

 

 

 

(10,140

)

Income (loss) from continuing operations before income taxes

$

135,943

 

 

$

215,030

 

 

$

19,205

 

 

$

479,795

 

 

$

(41,646

)

SUPPLEMENTARY STATISTICAL INFORMATION

Unaudited

U.S. LAND RIG COUNTS & MARKETABLE FLEET STATISTICS

 

July 26,

 

June 30,

 

March 31,

 

Q3FY23

 

2023

 

2023

 

2023

 

Average

U.S. Land Operations

 

 

 

 

 

 

 

Term Contract Rigs

93

 

95

 

101

 

99

Spot Contract Rigs

56

 

58

 

78

 

67

Total Contracted Rigs

149

 

153

 

179

 

166

Idle or Other Rigs

84

 

80

 

54

 

67

Total Marketable Fleet

233

 

233

 

233

 

233

H&P GLOBAL FLEET UNDER TERM CONTRACT STATISTICS

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

(Estimated Quarterly Average — as of 6/30/23)

 

Q4

 

Q1

 

Q2

 

Q3

 

Q4

 

Q1

 

Q2

Segment

FY23

 

FY24

 

FY24

 

FY24

 

FY24

 

FY25

 

FY25

U.S. Land Operations

90.7

 

78.3

 

44.7

 

39.7

 

28.3

 

13.2

 

6.4

International Land Operations

8.7

 

8.0

 

6.0

 

5.7

 

3.6

 

3.0

 

2.4

Offshore Operations

 

 

 

 

 

 

 

Total

99.4

 

86.3

 

50.7

 

45.4

 

31.9

 

16.2

 

8.8

(*) 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 June 30, 2023

(in thousands, except per share data)

Pretax

 

Tax

 

Net

 

EPS

Net income (GAAP basis)

 

 

 

 

$

95,293

 

 

$

0.93

 

(-) Fair market adjustment to equity investments

$

(18,548

)

 

$

(4,419

)

 

$

(14,129

)

 

$

(0.14

)

(-) Loss related to the sale of rigs and related equipment

$

(6,025

)

 

$

(1,555

)

 

$

(4,470

)

 

$

(0.04

)

(-) Change in the fair value of contingent liabilities

$

(4,050

)

 

$

(1,045

)

 

$

(3,005

)

 

$

(0.03

)

(-) Change in estimates of certain liabilities

$

6,396

 

 

$

1,650

 

 

$

4,746

 

 

$

0.05

 

Adjusted net income

 

 

 

 

$

112,151

 

 

$

1.09

 

 

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

(**)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 June 30, 2023

(in thousands)

North America

Solutions

 

International

Solutions

 

Offshore Gulf of

Mexico

Segment operating income (loss)

$

169,499

 

$

(1,397

)

 

$

4,705

Add back:

 

 

 

 

 

Depreciation and amortization

 

87,209

 

 

2,171

 

 

 

1,873

Research and development

 

7,254

 

 

 

 

 

Selling, general and administrative expense

 

12,962

 

 

2,528

 

 

 

730

Direct margin (Non-GAAP)

$

276,924

 

$

3,302

 

 

$

7,308

 

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 June 30, 2022

(in thousands)

North America

Solutions

 

International

Solutions

 

Offshore Gulf of

Mexico

Segment operating income (loss)

$

57,353

 

$

(6,550

)

 

$

5,872

Add back:

 

 

 

 

 

Depreciation and amortization

 

93,612

 

 

1,175

 

 

 

2,328

Research and development

 

6,545

 

 

 

 

 

Selling, general and administrative expense

 

10,069

 

 

2,129

 

 

 

579

Restructuring charges

 

25

 

 

 

 

 

Direct margin (Non-GAAP)

$

167,604

 

$

(3,246

)

 

$

8,779

 

Nine Months Ended June 30, 2023

(in thousands)

North America

Solutions

 

International

Solutions

 

Offshore Gulf of

Mexico

Segment operating income

$

496,945

 

$

4,132

 

$

18,138

Add back:

 

 

 

 

 

Depreciation and amortization

 

266,093

 

 

5,215

 

 

5,671

Research and development

 

23,051

 

 

 

 

Selling, general and administrative expense

 

43,364

 

 

8,245

 

 

2,263

Asset impairment charges

 

3,948

 

 

8,149

 

 

Direct margin (Non-GAAP)

$

833,401

 

$

25,741

 

$

26,072

 

Nine Months Ended June 30, 2022

(in thousands)

North America

Solutions

 

International

Solutions

 

Offshore Gulf of

Mexico

Segment operating income

$

29,757

 

$

651

 

$

16,616

Add back:

 

 

 

 

 

Depreciation and amortization

 

283,050

 

 

2,979

 

 

7,109

Research and development

 

19,533

 

 

 

 

Selling, general and administrative expense

 

31,781

 

 

5,908

 

 

1,920

Asset impairment charges

 

1,868

 

 

2,495

 

 

Restructuring charges

 

498

 

 

 

 

Direct margin (Non-GAAP)

$

366,487

 

$

12,033

 

$

25,645

 

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