COVID-19
Update
The unprecedented events caused by COVID-19 have had a dramatic
impact on the world and our Company. In this uncertain environment,
we moved quickly and took several actions to maintain the health
and safety of H&P employees, customers and stakeholders and to
preserve our financial strength.
- H&P's highest priority is the health and safety of
employees and customers. Operational protocols have been put into
place that meet or exceed those of the CDC and local jurisdictions.
Those include:
- Moved to a global "remote work" model for office personnel
(beginning March 13, 2020)
- Suspended all non-essential travel
- Required operational and third party personnel to complete a
COVID-19 questionnaire prior to reporting to a rig site in order to
evaluate actual and potential COVID-19 exposures
- Initiated daily temperature checks on operational personnel,
including prior to entering a rig site
- Implemented enhanced sanitation and cleaning protocols
- The Company is an ‘essential critical infrastructure’ company
as defined by the Department of Homeland Security and the
Cybersecurity and Infrastructure Security Agency and as such,
continues to operate rigs and technology solutions, providing
valuable services to our customers in support of the global energy
infrastructure.
- The Company revised its capital allocation policy and
implemented cost controls to proactively preserve its strong
financial position. Those include:
- Announced intention to reduce annual dividends by $200
million
- Reduced planned capital expenditures by approximately $95
million
- Reduced operational fixed costs by $50 million
- H&P has a debt-to-cap ratio of 12% with approximately $380
million in cash on hand and short-term investments and no amounts
drawn on our $750 million revolving credit facility.
Quarter
Highlights
- Quarterly U.S. Land revenue increased $22 million to $531
million sequentially, while operating gross margins(1) increased by
$2 million to $183 million sequentially; revenue days decreased
approximately 2% to 17,273 from 17,684 in the prior quarter
- Quarterly U.S. Land adjusted average rig revenue of $25,667(2)
per day increased approximately 1% on a sequential basis, while U.S
Land adjusted average rig margin of $9,762(2) per day decreased by
roughly 6% sequentially
- H&P's drilling automation technology, AutoSlide℠, has
drilled more than 225 wells and over 4.0 million feet; AutoSlide
technology is enabling customers to reduce personnel at the
rig
- The Company incurred a non-cash impairment charge of $563
million related to goodwill, less capable rigs, and excess related
equipment and inventory
- On March 4, 2020, Directors of the Company declared a quarterly
cash dividend of $0.71 per share on June 1, 2020 to stockholders of
record at the close of business May 11, 2020
- On March 31, 2020, the Company announced its intention to
reduce any future quarterly dividends to $0.25 per share commencing
with the quarterly cash distribution to be declared in the third
quarter of fiscal year 2020
Helmerich & Payne, Inc. (NYSE: HP) reported a net loss of
$421 million or $(3.88) per diluted share from operating revenues
of $634 million for the quarter ended March 31, 2020, compared to
net income of $31 million, or $0.27 per diluted share, on revenues
of $615 million for the quarter ended December 31, 2019. The net
loss per diluted share for the second quarter of fiscal year 2020
and the net income per diluted share for the first quarter of
fiscal year 2020 include $(3.87) and $0.14, respectively, of
after-tax gains and losses comprised of select items(3). For the
second quarter of fiscal year 2020, select items(3) were comprised
of:
- $0.26 of after-tax gains pertaining to gains on sales, a
reduction in the fair value of a contingent liability, the reversal
of accrued compensation and early termination compensation
- $(4.13) of after-tax losses pertaining to non-cash impairments
of goodwill, less capable rigs, and excess related equipment and
inventory, abandonments and accelerated depreciation, and a
non-cash fair market adjustment to our equity investment
Net cash provided by operating activities was $121 million for
the second quarter of fiscal year 2020 compared to $112 million for
the first quarter of fiscal year 2020.
President and CEO John Lindsay commented, “Throughout our
history the Company has sought to be in a position of strength both
operationally and financially to face the inherent cyclicality and
uncertainties in the energy industry. We have taken swift actions
to maintain the health and safety of our employees and customers
and have made difficult, but necessary, measured decisions to
uphold the Company's long-standing financial strength. The primary
purposes of these actions centered around health and safety, but
they have also served to minimize the impact of COVID-19 on our
ongoing operations and financial position.
"While the crude oil market imbalance is a global phenomenon, it
has more acutely impacted the U.S. market recently due to storage
limitations. The abruptness and overall size of the decrease in
demand for refined products, such as gasoline and diesel, has
created an abundance of supply for such products and is pushing
inventory levels to capacity. This has significantly reduced, or in
some cases, eliminated the need for additional crude oil in some
markets. As such, our customers may have limited opportunities to
deliver their oil production and even then, possibly selling it at
very low, uneconomical prices. Consequently, some E&P companies
are having to shut-in and stop production, and are not completing
or drilling additional wells until the supply-demand balance is
restored and production and drilling become economically viable
once again. We believe these ramifications have yet to be fully
reflected in industry activity levels and we expect steeper
declines in our third fiscal quarter.
"H&P has responded to many downturns and we believe that our
consistent long-term perspective and our financial strength enables
us to further the strategic objectives of the Company. In this
regard, we will remain focused on new commercial models, expanding
our digital technology offerings to the market, increasing our
international presence and cost management.
"We continue our efforts to develop new commercial pricing
models that are designed to enable us to earn an equitable share of
the value we create with our drilling solutions. Such value is
arguably even more pertinent in strained market conditions. While
the reduction in our rig count has adversely affected the number of
rigs we currently have under performance-based contracts, we expect
the total of these to represent a larger percentage of our active
FlexRig fleet over time. The importance of well economics is
magnified under these stressed conditions and the use of our
digital technology solutions becomes even more appealing to those
customers who recognize that wellbore quality and placement
improves production and reserves. This current environment has
provided additional impetus for some customers to embrace
AutoSlide, because drilling automation improves reliability and
reduces the number of individuals present at the drill site.
Although the impact of COVID-19 is being felt on a global scale and
across all of our operations, we are still actively pursuing
long-term growth opportunities in our international operations.
While we are encouraged about what the future holds for H&P
internationally, the timing and development of these opportunities
will be protracted given the current travel and operational hurdles
resulting from COVID-19."
Senior Vice President and CFO Mark Smith also commented, "Our
strong financial position is the cornerstone upon which we have
been able to endure and it is a significant differentiator for us
in this volatile and cyclical industry. In times of extreme
challenge, like the present, it is paramount for survival. In order
to maintain our financial profile, we re-assessed our capital
allocation policy and planned spending based on lower activity
levels. This assessment resulted in our intention to reduce the
Company's annual dividends by approximately $200 million, a
reduction of our planned capital expenditures by roughly $95
million from our initial projection and the implementation of
measures that will reduce fixed operational overhead by nearly $50
million. Further cost reductions will come to fruition over the
coming quarters as we reduce additional overhead and implement
evergreen cost reductions throughout the Company, to right-size the
cost structure for a lower expected activity level.
"Following calendar 2019 where we saw industry utilization for
non-super-spec rigs fall at a faster rate than for super-spec(4)
rigs, the pronounced declines in crude oil prices and rig demand
shines a brighter light on the performance and efficiency
differences between non-super-spec and super-spec rigs. During the
quarter, we performed an extensive valuation of our non-super-spec
FlexRig fleet and the related expected future utilization of that
portion of our fleet. This assessment combined with an evaluation
of our intangible assets, including goodwill, resulted in non-cash
impairment charges of approximately $563 million. We had 95 rigs
impacted by the impairment, of which 37 were decommissioned
subsequent to the quarter end.
"The full extent of the COVID-19 pandemic is uncertain, and we
are unable to reasonably estimate the duration and ultimate impact,
including the timing of or level to which the industry will
recover. Consequently, we cannot be certain of the degree of the
impact on H&P's operations or financial position in the future.
That said, the Company currently remains on solid economic footing
with approximately $380 million in cash on hand and short-term
investments and no amounts drawn on our $750 million revolving
credit facility. Our debt-to-cap is 12%, with no maturities until
2025, and rating agencies have made no changes to our investment
grade credit rating. With our strong balance sheet and ample
liquidity of over $1 billion, we believe the Company is well
positioned in this challenging market environment and is able to
continue to plan for the long-term as a leader in the
industry."
John Lindsay concluded, “I am very proud of the remarkable way
our H&P employees have responded to these unprecedented events.
While the celebration of our centennial anniversary coincides with
one of the most challenging environments in the Company's history,
it underscores the operational and financial resilience that is
ingrained within H&P."
Operating Segment Results for the Second
Quarter of Fiscal Year 2020
U.S. Land Operations:
This segment had an operating loss of $309.1 million compared to
operating income of $56.7 million during the previous quarter. The
operating loss was due to impairments of drilling equipment and
related spares, and was partially offset by higher revenues
resulting from early contract terminations and lump sum
demobilization payments.
Adjusted average rig revenue per day increased by $270 to
$25,667(2) largely due to an increase in rig demobilization
revenues during the quarter partially offset by lower average
dayrates. The adjusted average rig expense per day increased
sequentially by $918 to $15,905(2) primarily due to self-insurance
adjustments related to prior year reserves and rig stacking costs.
Corresponding adjusted average rig margin per day decreased $648 to
$9,762(2).
The segment’s depreciation expense for the quarter includes
non-cash charges of $1.4 million for abandonments and accelerated
depreciation associated with used drilling rig components related
to rig upgrades and scrapping of idle equipment, compared to
similar non-cash charges of $1.3 million during the first quarter
of fiscal year 2020.
International Land Operations:
This segment had an operating loss of $152.5 million compared to
operating income of $3.1 million during the previous quarter. The
decrease in operating income was primarily attributable to
impairments of drilling equipment partially offset by a higher
average margin per day due to higher than expected mobilization
revenue. Current quarter results included a $3.4 million foreign
currency loss related to our South American operations compared to
an approximate $0.7 million foreign currency gain in the first
quarter of fiscal year 2020. Revenue days decreased during the
quarter by 4% to 1,547 while the adjusted average rig margin per
day increased by $2,885 to $10,093(2).
Offshore Operations:
This segment had an operating loss of $3.3 million compared to
operating income of $6.3 million during the previous quarter. The
number of quarterly revenue days on H&P-owned platform rigs
declined 17% sequentially to 457. The adjusted average rig margin
per day was negative at $7,561(2) per day decreasing sequentially
by $20,798 due to an increase in bad debt expense, downtime repairs
and demobilization expense. Segment operating income from
management contracts on customer-owned platform rigs contributed
approximately $3.2 million, compared to approximately $2.9 million
during the prior quarter.
H&P Technologies:
This segment had an operating loss of $33.6 million compared to
an operating loss of $4.6 million during the previous quarter.
Current quarter results were negatively impacted by an impairment
of goodwill, but also benefited from a change in the fair value of
a contingent liability and reversal of accrued compensation.
Excluding these items, HPT had an adjusted operating loss of
$0.3(2) million. The $4.2 million sequential decrease in the
adjusted operating loss was due primarily to lower expense incurred
during the quarter.
Operational Outlook for the Third Quarter
of Fiscal Year 2020
U.S. Land Operations:
- We expect U.S. Land operating gross margins(1) to be between
$90-$105 million, inclusive of approximately $45 million of
contract early termination compensation
- Based on more than 115 rig release notifications since early
March 2020, we expect to end the quarter below 70 rigs with much of
the decline occurring prior to June 1, 2020.
International Land Operations:
- We expect International Land operating gross margins(1) to be
negative and to be between $(4)-$(6) million
Offshore Operations:
- We expect Offshore operating gross margins(1) to be between
$4-$6 million
- Management contracts are expected to generate approximately $2
million in operating income
HP Technologies:
- Fiscal third quarter revenue is expected to be between $4-$7
million
Other Estimates for Fiscal Year
2020
- Gross capital expenditures are expected to be approximately
$185 to $205 million. Asset sales 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 $30 to $40 million in fiscal year 2020.
- General and administrative expenses for fiscal year 2020 are
expected to be approximately $180 million, excluding any future
one-time items
- Depreciation is expected to be approximately $485 million
Select Items Included in Net Income per
Diluted Share
Second quarter of fiscal year 2020 net loss of $(3.88) per
diluted share included $(3.87) in after-tax losses comprised of the
following:
- $0.03 of after-tax gains related to the change in fair value of
a contingent liability
- $0.03 of after-tax gains related to the sale of used drilling
equipment
- $0.07 of after-tax income from contract early termination
compensation from customers
- $0.13 of after-tax benefits from the reversal of accrued
compensation
- $(0.01) of non-cash after-tax losses from abandonment charges
and accelerated depreciation related to used drilling
equipment
- $(0.09) of non-cash after-tax losses related to fair market
value adjustments to equity investments
- $(4.03) of non-cash after-tax losses related to the impairment
of goodwill, less capable rigs and excess related equipment and
inventory
First quarter of fiscal year 2020 net income of $0.27 per
diluted share included $0.14 in after-tax gains comprised of the
following:
- $0.02 of a net after-tax gain related to fair market value
adjustments to equity investments
- $0.03 of after-tax gains related to the sale of used drilling
equipment
- $0.10 of after-tax gains related to the sale of a
subsidiary
- $(0.01) of non-cash after-tax losses from abandonment charges
and accelerated depreciation related to used drilling
equipment
Conference Call
A conference call will be held on Friday, May 1, 2020 at 11:00
a.m. (ET) with John Lindsay, President and CEO, Mark Smith, Senior
Vice President and CFO, and Dave Wilson, Director of Investor
Relations to discuss the Company’s second quarter of fiscal year
2020 results. Dial-in information for the conference call is (866)
342-8591 for domestic callers or (203) 518-9713 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.hpinc.com and accessing the corresponding link through
the Investor Relations section by clicking on “INVESTORS” and then
clicking on “Event Calendar” 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, 2020, H&P's fleet included 299 land
rigs in the U.S., 32 international land rigs and eight offshore
platform rigs; 37 rigs were subsequently decommissioned and the
Company's rig fleet now consists of 262 land rigs in U.S., 32
international land rigs and eight offshore platform rigs. For more
information, see H&P online at www.hpinc.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 future financial position, operations outlook,
business strategy, budgets, projected costs and plans and
objectives of management for future operations, and the impact or
duration of the COVID-19 pandemic and any subsequent recovery, 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. We undertake no duty to update or
revise our forward-looking statements based on changes in internal
estimates, expectations or otherwise, except as required by
law.
We use our Investor Relations website as a channel of
distribution for material company information. Such information is
routinely posted and accessible on our Investor Relations website
at www.hpinc.com.
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 and AutoSlide, which may be
registered or trademarked in the U.S. and other jurisdictions.
(1) Operating gross margin defined as operating revenues less
direct operating expenses. (2) See the Selected Statistical &
Operational Highlights table(s) for details on the revenues or
charges excluded on a per revenue day basis or a segment operating
income level. The inclusion or exclusion of these amounts results
in adjusted revenue, expense, and/or margin per day figures and
adjusted segment operating income/loss, which are all non-GAAP
measures. The Company considers per revenue day metrics and segment
operating income to be important supplemental measures of operating
performance for presenting trends in the Company’s core businesses.
These measures are 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 per revenue day metrics and segment operating income are
useful to investors because they provide 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, they highlight operating trends and aids analytical
comparisons. However, per revenue day metrics and segment operating
income have limitations and should not be used as alternatives to
revenues, expenses, or operating income or loss, performance
measures determined in accordance with GAAP, as they exclude
certain revenues and costs that may affect the Company’s operating
performance in future periods. (3) See the corresponding section of
this release for details regarding the select items. (4) The term
“super-spec” herein refers to rigs with the following
specifications: AC drive, 1,500 hp drawworks, 750,000 lbs. hookload
rating, 7,500 psi mud circulating system and multiple-well pad
capability.
HELMERICH & PAYNE,
INC.
(Unaudited)
(in thousands, except per
share data)
Three Months Ended
Six Months Ended
March 31,
December 31,
March 31,
March 31,
CONSOLIDATED STATEMENTS OF
OPERATIONS
2020
2019
2019
2020
2019
Operating revenues
Contract drilling services
$
630,290
$
611,398
$
717,653
$
1,241,688
$
1,455,011
Other
3,349
3,259
3,215
6,608
6,455
633,639
614,657
720,868
1,248,296
1,461,466
Operating costs and expenses
Contract drilling services operating
expenses, excluding depreciation and amortization
417,743
399,329
441,719
817,072
929,312
Other operating expenses
1,315
1,422
1,620
2,737
2,894
Depreciation and amortization
132,006
130,131
143,161
262,137
284,620
Research and development
6,214
6,878
7,262
13,092
14,281
Selling, general and administrative
41,978
49,808
43,506
91,786
98,014
Asset impairment charge
563,234
—
—
563,234
—
Gain on sale of assets
(10,310
)
(4,279
)
(11,546
)
(14,589
)
(17,090
)
1,152,180
583,289
625,722
1,735,469
1,312,031
Operating income (loss) from continuing
operations
(518,541
)
31,368
95,146
(487,173
)
149,435
Other income (expense)
Interest and dividend income
3,566
2,214
2,061
5,780
4,512
Interest expense
(6,095
)
(6,100
)
(6,167
)
(12,195
)
(10,888
)
Gain (loss) on investment securities
(12,413
)
2,821
5,878
(9,592
)
(36,957
)
Gain on sale of subsidiary
—
14,963
—
14,963
—
Other
(398
)
(399
)
17
(797
)
548
(15,340
)
13,499
1,789
(1,841
)
(42,785
)
Income (loss) from continuing operations
before income taxes
(533,881
)
44,867
96,935
(489,014
)
106,650
Income tax provision (benefit)
(113,413
)
14,138
25,078
(99,275
)
26,429
Income (loss) from continuing
operations
(420,468
)
30,729
71,857
(389,739
)
80,221
Income from discontinued operations before
income taxes
6,067
7,457
2,889
13,524
15,554
Income tax provision
6,139
7,581
13,855
13,720
15,925
Loss from discontinued operations
(72
)
(124
)
(10,966
)
(196
)
(371
)
Net income (loss)
$
(420,540
)
$
30,605
$
60,891
$
(389,935
)
$
79,850
Basic earnings (loss) per common
share:
Income (loss) from continuing
operations
$
(3.88
)
$
0.27
$
0.65
$
(3.61
)
$
0.72
Loss from discontinued operations
—
—
(0.10
)
—
—
Net income (loss)
$
(3.88
)
$
0.27
$
0.55
$
(3.61
)
$
0.72
Diluted earnings (loss) per common
share:
Income (loss) from continuing
operations
$
(3.88
)
$
0.27
$
0.65
$
(3.61
)
$
0.72
Loss from discontinued operations
—
—
(0.10
)
—
—
Net income (loss)
$
(3.88
)
$
0.27
$
0.55
$
(3.61
)
$
0.72
Weighted average shares outstanding (in
thousands):
Basic
108,557
108,555
109,406
108,556
109,273
Diluted
108,557
108,724
109,503
108,556
109,452
HELMERICH & PAYNE,
INC.
(Unaudited)
(in thousands)
March 31,
September 30,
CONDENSED CONSOLIDATED BALANCE
SHEETS
2020
2019
Assets
Cash and cash equivalents
$
336,089
$
347,943
Short-term investments
45,655
52,960
Other current assets
738,372
714,183
Total current assets
1,120,116
1,115,086
Investments
20,300
31,991
Property, plant and equipment, net
3,840,213
4,502,084
Other noncurrent assets
196,125
190,354
Total Assets
$
5,176,754
$
5,839,515
Liabilities and Shareholders'
Equity
Current liabilities
$
377,419
$
410,238
Long-term debt, net
479,811
479,356
Other noncurrent liabilities
843,024
922,357
Noncurrent liabilities - discontinued
operations
15,494
15,341
Total shareholders’ equity
3,461,006
4,012,223
Total Liabilities and Shareholders'
Equity
$
5,176,754
$
5,839,515
HELMERICH & PAYNE,
INC.
(Unaudited)
(in thousands)
Six Months Ended March
31,
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
2020
2019
OPERATING ACTIVITIES:
Net income (loss)
$
(389,935
)
$
79,850
Adjustment for loss from discontinued
operations
196
371
Income (loss) from continuing
operations
(389,739
)
80,221
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
262,137
284,620
Asset impairment charge
563,234
—
Amortization of debt discount and debt
issuance costs
900
752
Provision for (recovery of) bad debt
1,779
(75
)
Stock-based compensation
20,952
16,589
Loss on investment securities
9,592
36,957
Gain on sale of assets
(14,589
)
(17,090
)
Gain on sale of subsidiary
(14,963
)
—
Deferred income tax (benefit) expense
(106,878
)
8,827
Other
(3,779
)
(3,209
)
Changes in assets and liabilities
(95,976
)
1,471
Net cash provided by operating activities
from continuing operations
232,670
409,063
Net cash used in operating activities from
discontinued operations
(28
)
(45
)
Net cash provided by operating
activities
232,642
409,018
INVESTING ACTIVITIES:
Capital expenditures
(94,312
)
(329,980
)
Purchase of short-term investments
(36,336
)
(42,406
)
Payment for acquisition of business, net
of cash acquired
—
(2,781
)
Proceeds from sale of short-term
investments
43,894
58,015
Proceeds from sale of subsidiary
15,056
—
Proceeds from asset sales
24,799
24,559
Other
(51
)
—
Net cash used in investing activities
(46,950
)
(292,593
)
FINANCING ACTIVITIES:
Dividends paid
(155,890
)
(156,580
)
Debt issuance costs paid
—
(3,912
)
Proceeds from stock option exercises
4,100
2,257
Payments for employee taxes on net
settlement of equity awards
(3,455
)
(6,268
)
Payment of contingent consideration from
acquisition of business
(4,250
)
—
Share repurchase
(28,504
)
—
Other
(445
)
—
Net cash used in financing activities
(188,444
)
(164,503
)
Net decrease in cash and cash equivalents
and restricted cash
(2,752
)
(48,078
)
Cash and cash equivalents and restricted
cash, beginning of period
382,971
326,185
Cash and cash equivalents and restricted
cash, end of period
$
380,219
$
278,107
Three Months Ended
Six Months Ended
March 31,
December 31,
March 31,
March 31,
SEGMENT REPORTING
(in thousands, except operating
statistics)
2020
2019
20191
2020
20191
U.S. LAND OPERATIONS
Operating revenues
$
530,664
$
508,828
$
617,533
$
1,039,492
$
1,236,958
Direct operating expenses
347,241
327,292
377,430
674,533
785,116
Research and development
860
259
134
1,119
301
Selling, general and administrative
expense
8,514
10,861
11,169
19,375
22,826
Depreciation
114,927
113,726
126,785
228,653
250,787
Asset impairment charge
368,215
—
—
368,215
—
Segment operating income (loss)
$
(309,093
)
$
56,690
$
102,015
$
(252,403
)
$
177,928
Revenue days
17,273
17,684
21,262
34,957
43,194
Average rig revenue per day
$
26,256
$
25,405
$
25,462
$
25,825
$
25,251
Average rig expense per day
15,497
14,987
14,169
15,239
14,790
Average rig margin per day
$
10,759
$
10,418
$
11,293
$
10,586
$
10,461
Rig utilization
63
%
64
%
67
%
64
%
68
%
INTERNATIONAL LAND OPERATIONS
Operating revenues
$
51,250
$
46,462
$
50,808
$
97,712
$
117,095
Direct operating expenses
37,964
34,075
33,051
72,039
80,590
Selling, general and administrative
expense
1,248
1,455
794
2,703
3,076
Depreciation
7,821
7,817
8,995
15,638
18,832
Asset impairment charge
156,686
—
—
156,686
—
Segment operating income (loss)
$
(152,469
)
$
3,115
$
7,968
$
(149,354
)
$
14,597
Revenue days
1,547
1,619
1,559
3,166
3,318
Average rig revenue per day
$
31,706
$
27,714
$
31,130
$
29,664
$
33,476
Average rig expense per day
20,922
20,506
19,269
20,710
21,083
Average rig margin per day
$
10,784
$
7,208
$
11,861
$
8,954
$
12,393
Rig utilization
53
%
57
%
54
%
55
%
57
%
OFFSHORE OPERATIONS
Operating revenues
$
33,079
$
40,255
$
34,583
$
73,334
$
71,493
Direct operating expenses
32,648
30,045
26,984
62,693
53,289
Selling, general and administrative
expense
908
1,137
805
2,045
1,574
Depreciation
2,842
2,745
2,263
5,587
4,931
Segment operating income (loss)
$
(3,319
)
$
6,328
$
4,531
$
3,009
$
11,699
Revenue days
457
550
540
1,007
1,065
Average rig revenue per day
$
42,098
$
43,839
$
31,361
$
43,049
$
33,468
Average rig expense per day
48,117
30,602
25,941
38,545
25,791
Average rig margin per day
$
(6,019
)
$
13,237
$
5,420
$
4,504
$
7,677
Rig utilization
63
%
75
%
75
%
69
%
73
%
H&P TECHNOLOGIES
Operating revenues
$
17,709
$
18,552
$
14,729
$
36,261
$
29,465
Direct operating expenses
1,735
8,389
4,683
10,124
11,176
Research and development
4,803
6,490
7,128
11,293
13,980
Selling, general and administrative
expense
4,005
5,885
4,783
9,890
10,881
Depreciation and amortization
2,407
2,339
1,943
4,746
3,825
Asset impairment charge
38,333
—
—
38,333
—
Segment operating loss
$
(33,574
)
$
(4,551
)
$
(3,808
)
$
(38,125
)
$
(10,397
)
1 During the fourth quarter of fiscal year 2019, we migrated our
FlexApp offerings into our H&P Technologies segment. The
activity of our FlexApps was previously included in our U.S. Land
segment. All segment disclosures have been restated, as
practicable, for this segment change.
Operating statistics exclude the effects of offshore platform
management contracts and gains and losses from translation of
foreign currency transactions and do not include reimbursements of
“out-of-pocket” expenses in revenue per day, expense per day and
margin per day calculations. Additionally, expense per day and
margin per day calculations do not include intercompany
expenses.
Reimbursed amounts were as follows:
Three Months Ended
Six Months Ended
March 31,
December 31,
March 31,
March 31,
(in thousands)
2020
2019
2019
2020
2019
U.S. Land Operations
$
77,146
$
59,566
$
76,172
$
136,713
$
146,262
International Land Operations
2,209
1,587
2,277
3,796
6,023
Offshore Operations
6,770
9,902
5,507
16,672
11,257
Intercompany amounts were as follows:
Three Months Ended
Six Months Ended
March 31,
December 31,
March 31,
March 31,
(in thousands)
2020
2019
2019
2020
2019
U.S. Land Operations - Direct operating
expenses
$
2,412
$
2,699
$
—
$
5,111
$
—
Segment reconciliation amounts were as follows:
Three Months Ended March 31,
2020
(in thousands)
U.S. Land
Offshore
International Land
H&P Technologies
Other
Eliminations
Total
Operating revenue
$
530,664
$
33,079
$
51,250
$
15,297
$
3,349
$
—
$
633,639
Intersegment
—
—
—
2,412
10,649
(13,061
)
—
Total operating revenue
$
530,664
$
33,079
$
51,250
$
17,709
$
13,998
$
(13,061
)
$
633,639
Direct operating expenses
335,548
31,521
37,723
1,735
12,531
—
419,058
Intersegment - self-insurance expenses
9,281
1,127
241
—
—
(10,649
)
—
Intersegment - FlexApps
2,412
—
—
—
—
(2,412
)
—
Total contract drilling services &
other operating expenses
$
347,241
$
32,648
$
37,964
$
1,735
$
12,531
$
(13,061
)
$
419,058
Six Months Ended March 31,
2020
(in thousands)
U.S. Land
Offshore
International Land
H&P Technologies
Other
Eliminations
Total
Operating revenue
$
1,039,492
$
73,334
$
97,712
$
31,150
$
6,608
$
—
$
1,248,296
Intersegment
—
—
—
5,111
18,545
(23,656
)
—
Total operating revenue
$
1,039,492
$
73,334
$
97,712
$
36,261
$
25,153
$
(23,656
)
$
1,248,296
Direct operating expenses
$
653,753
$
60,298
$
71,558
$
10,124
$
24,076
$
—
$
819,809
Intersegment - self-insurance expenses
15,669
2,395
481
—
—
(18,545
)
—
Intersegment - FlexApps
5,111
—
—
—
—
(5,111
)
—
Total contract drilling services &
other operating expenses
$
674,533
$
62,693
$
72,039
$
10,124
$
24,076
$
(23,656
)
$
819,809
Segment operating income 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 and corporate depreciation. The Company considers segment
operating income 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 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 Consolidated Statements of
Operations:
Three Months Ended
Six Months Ended
March 31,
December 31,
March 31,
March 31,
(in thousands)
2020
2019
20191
2020
20191
Operating income (loss)
U.S. Land
$
(309,093
)
$
56,690
$
102,015
$
(252,403
)
$
177,928
International Land
(152,469
)
3,115
7,968
(149,354
)
14,597
Offshore
(3,319
)
6,328
4,531
3,009
11,699
H&P Technologies
(33,574
)
(4,551
)
(3,808
)
(38,125
)
(10,397
)
Other
376
(1,237
)
1,164
(705
)
2,718
Segment operating income (loss)
$
(498,079
)
$
60,345
$
111,870
$
(437,578
)
$
196,545
Gain on sale of assets
10,310
4,279
11,546
14,589
17,090
Corporate selling, general and
administrative costs and corporate depreciation
(30,772
)
(33,256
)
(28,270
)
(64,184
)
(64,200
)
Operating income (loss)
$
(518,541
)
$
31,368
$
95,146
$
(487,173
)
$
149,435
Other income (expense):
Interest and dividend income
$
3,566
$
2,214
$
2,061
$
5,780
$
4,512
Interest expense
(6,095
)
(6,100
)
(6,167
)
(12,195
)
(10,888
)
Gain (loss) on investment securities
(12,413
)
2,821
5,878
(9,592
)
(36,957
)
Gain on sale of subsidiary
—
14,963
—
14,963
—
Other
(398
)
(399
)
17
(797
)
548
Total unallocated amounts
(15,340
)
13,499
1,789
(1,841
)
(42,785
)
Income (loss) from continuing
operations before income taxes
$
(533,881
)
$
44,867
$
96,935
$
(489,014
)
$
106,650
1 During the fourth quarter of fiscal year 2019, we migrated our
FlexApp offerings into our H&P Technologies segment. The
activity of our FlexApps was previously included in our U.S. Land
segment. All segment disclosures have been restated, as
practicable, for this segment change.
SUPPLEMENTARY STATISTICAL
INFORMATION
Unaudited
SELECTED STATISTICAL &
OPERATIONAL HIGHLIGHTS
(Used to determine adjusted per
day statistics for revenue and expense, which are non-GAAP
measures)
Three Months Ended
(in thousands, except operating
statistics)
March 31, 2020
December 31, 2019
U.S. Land Operations
Average rig revenue per day
$
26,256
$
25,405
Early contract termination revenue
$
(589
)
$
(8
)
Adjusted average rig revenue per day
$
25,667
$
25,397
Average rig expense per day
$
15,497
$
14,987
Reversal of accrued compensation
$
408
$
—
Adjusted average rig expense per day
$
15,905
$
14,987
Adjusted average rig margin per day
$
9,762
$
10,410
International Land Operations
Average rig revenue per day
$
31,706
$
27,714
Early contract termination revenue
$
(103
)
$
—
Adjusted average rig revenue per day
$
31,603
$
27,714
Average rig expense per day
$
20,922
$
20,506
Reversal of accrued compensation
$
588
$
—
Adjusted average rig expense per day
$
21,510
$
20,506
Adjusted average rig margin per day
$
10,093
$
7,208
Offshore Operations
Average rig revenue per day
$
42,098
$
43,839
Adjusted average rig revenue per day
$
42,098
$
43,839
Average rig expense per day
$
48,117
$
30,602
Reversal of accrued compensation
$
1,542
$
—
Adjusted average rig expense per day
$
49,659
$
30,602
Adjusted average rig margin per day
$
(7,561
)
$
13,237
H&P Technologies
Operating loss
$
(33,574
)
$
(4,551
)
Goodwill impairment
$
38,333
$
—
Change in fair value of contingent
liability
$
(3,600
)
$
—
Reversal of accrued compensation
$
(1,508
)
$
—
Adjusted operating loss
$
(349
)
$
(4,551
)
U.S. LAND RIG COUNTS &
MARKETABLE FLEET STATISTICS
April 30,
March 31,
December 31,
Q2FY20
2020*
2020
2019
Average
U.S. Land Operations
Term Contract Rigs
59
90
132
123
Spot Contract Rigs
27
60
63
67
Total Contracted Rigs
86
150
195
190
Idle or Other Rigs
176
149
104
109
Total Marketable Fleet
262
299
299
299
(*) As of April 30, 2020, the
Company had 10 contracted rigs generating revenue that were
idle.
H&P GLOBAL FLEET UNDER
TERM CONTRACT STATISTICS
Number of Rigs Already Under
Long-Term Contracts(**)
(Estimated Quarterly Average — as
of 4/30/20)
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Segment
FY20
FY20
FY21
FY21
FY21
FY21
FY22
U.S. Land Operations
65.6
49.6
44.9
38.4
32.2
23.9
14.2
International Land Operations
2.1
1.0
1.0
1.0
1.0
1.0
1.0
Offshore Operations
—
—
—
—
—
—
—
Total
67.7
50.6
45.9
39.4
33.2
24.9
15.2
(**) All of the above rig
contracts have original terms equal to or in excess of six months
and include provisions for early termination fees.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200430006005/en/
Dave Wilson, Director of Investor Relations
investor.relations@hpinc.com (918) 588‑5190
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