HP Helmerich and Payne Inc

• The Company reported fiscal first quarter net income of $0.91 per diluted share; including select items(1) of $(0.20) per diluted share
• Quarterly North America Solutions operating income increased $53 million sequentially, while direct margins(2) increased $57 million to approximately $260 million, as revenues increased by $75 million to $627 million and expenses increased by $18 million to $367 million
• The North America Solutions segment exited the first quarter of fiscal year 2023 with 184 active rigs reflecting an increase in revenue per day of approximately $3,500/day or 12% to $33,000/day on a sequential basis, while direct margins(2) per day increased by roughly $3,000/day or almost 25% to $15,700/day
• H&P's North America Solutions segment anticipates exiting the second quarter of fiscal year 2023 between 183-188 active rigs with the ability to get to 191 rigs during fiscal year 2023 dependent on customer demand
• For the fiscal second quarter, the Company expects its North America Solutions direct margins(2) per day to increase by another 7%-15% on a sequential basis
• In December 2022, the Company published its 2nd annual sustainability report maintaining the commitment to providing transparency to its various stakeholders
• Fiscal year-to-date H&P has repurchased approximately 1.3(3) million shares for approximately $60(3) million at an average share price of roughly $47/share
• On December 9, 2022, the Board of Directors of the Company increased the maximum number of shares authorized to be repurchased in calendar year 2023 to five million common shares representing a one million share increase from the previous year's authorization
• On December 9, 2022, 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 February 28, 2023 to stockholders of record at the close of business on February 14, 2023

Helmerich & Payne, Inc. (NYSE: HP) reported net income of $97 million, or $0.91 per diluted share, from operating revenues of $720 million for the quarter ended December 31, 2022, compared to net income of $46 million, or $0.42 per diluted share, from operating revenues of $631 million for the quarter ended September 30, 2022. The net income per diluted share for first quarter of fiscal 2023 and fourth quarter of fiscal year 2022 include $(0.20) and $(0.03) of after-tax losses, respectively, comprised of select items(1). For the first quarter of fiscal year 2023, select items were comprised of:

• $(0.20) of after-tax losses pertaining to a non-cash impairment for fair market adjustments to decommissioned rigs and equipment that are held for sale and non-cash fair market adjustments to our equity investments

Net cash provided by operating activities was $185 million for the first quarter of fiscal year 2023 compared to $117 million for the fourth quarter of fiscal year 2022.

President and CEO John Lindsay commented, "Almost a year has passed since we set into motion plans to achieve revenue per day in excess of $30,000 and direct margins of 50% in our NAS segment. These financial guideposts were established as proxies for what is required to generate favorable economic returns in this capital-intensive business. This recent quarter marks a milestone in achieving that revenue per day goal, and we are making strong progress towards the direct margin goal. The Company has made significant headway in just a year which has generated considerable shareholder value. Our first fiscal quarter results of 2023 show another strong sequential improvement in our financial performance and the continuation of momentum established in fiscal 2022.

"As expected, both the industry's and H&P's incremental rig adds during the December quarter moderated relative to what we have seen during the December quarters of the last two years. This is largely attributed to capital discipline exhibited by our customers and their desires to maintain capital budgets and improve more sustainable shareholder returns. We believe our customers' discipline has been positive for the overall economic health of this cyclical industry, enabling oilfield service companies, like ourselves, to better plan and mirror a similar discipline within our own business. Accordingly, we intend to maintain our plan of adding no more than 16 incremental rigs to our NAS rig count during fiscal 2023 dependent upon customer demand and will look for contract rollovers, also referred to as contractual or rig churn, to satisfy other points of rig demand. We anticipate financial results to remain on an upward trajectory, with direct margins per day during our second fiscal quarter moving closer towards our targeted margin levels. This trend continues to be driven by improved contract pricing impacting more of our fleet, especially with rollovers of term contracts even as incremental rig adds temper.

"Turning to the other operational segments, our Offshore Gulf of Mexico segment remains a steady, reliable contributor to the Company's overall financial performance; however, we do expect some variability later in the year as one rig's contract is set to expire in the fourth fiscal quarter. Regarding the International Solutions segment, the main concentration of the Company's expansion efforts here is centered around unconventional drilling, where we have extensive experience and can provide substantive value to customers with a compliment of people, processes, rigs and technology. We are moving forward on several fronts to set the Company up for future growth. Preparations to send a super-spec rig to Australia are well underway, as is the completion of our planned super-spec upgrades in Argentina in fiscal 2023. Efforts to grow our Middle East presence continue with the pursuit of additional work in the region and our operational hub, which should be stood up during the last half of fiscal 2023."

Senior Vice President and CFO Mark Smith also commented, "Maintaining a fiscally disciplined approach to the business remains a key tenet in our strategy and is a major driver behind the Company's improving financial results. This approach culminates with the 2023 supplemental shareholder return plan, which is projected to augment our established $1.00 per share annual base dividend with an expected supplemental dividend of $0.94 per share. Additionally, the plan allows the flexibility for further investment opportunities, additional supplemental dividends, and/or share repurchases. Along those lines, since the beginning of the fiscal year, we executed on what we view as opportunistic repurchases and bought back approximately 1.3 million shares for roughly $60 million. Additionally, our evergreen authorization to repurchase up to 4 million shares in any calendar year was increased for calendar 2023 by 1 million shares by our Board of Directors bringing the 2023 authorization to 5 million shares.

"During the quarter, as part of our international expansion strategic initiative, we evaluated the make-up and applicability for future work across our global rig fleet from the perspective that our international growth focus is centered around unconventional drilling. As a result, we decommissioned eight international rigs in Argentina and incurred a $12 million impairment charge. Going forward, the preponderance of our global onshore rig fleet is designed for unconventional drilling and we still plan to export six rigs to the Middle East after they are converted to walking configurations in the back half of fiscal year 2023.

"Ours is a dynamic business and expectations change and can often change quickly due to a variety of circumstances. In that regard, while we still expect to activate up to 16 rigs in our North America Solutions segment during fiscal 2023, the highest potential active rig count that we expect to achieve is now 191 due to the loss of a rig in a fire. Additionally, expectations on the timing of sending super-spec rigs to the Middle East and Australia were delayed a few months and hence so were the costs associated with those rig mobilizations resulting in our International Solutions direct margins being higher than anticipated for the first fiscal quarter."

John Lindsay concluded, “Through the hard work and dedication of our employees during this past year, we were able to take advantage of healthier industry conditions and H&P's fiscal discipline to improve the profitability of the Company. Working closely with customers to identify and then provide industry-leading drilling solutions, we are creating value for these customers and receiving compensation for the value we helped create. We will carry this mindset forward to the benefit of both customers and shareholders."

Operating Segment Results for the First Quarter of Fiscal Year 2023

North America Solutions:

This segment had operating income of $145.3 million compared to operating income of $92.1 million during the previous quarter. The increase in operating income was primarily due to the continued benefit of healthy contract economics especially as rollovers of older term contracts drove improved average pricing across the fleet.

Direct margins(2) increased by $56.8 million to $260.3 million as both revenues and expenses increased sequentially. Quarterly operating results were impacted by the costs associated with reactivating rigs; $8.6 million in the first fiscal quarter compared to $7.5 million in the previous quarter.

International Solutions:

This segment had operating income of $1.6 million compared to an operating loss of $0.8 million during the previous quarter. Absent an impairment charge of $8.1 million during the first quarter of fiscal 2023, the improvement in operating income was driven by the increase in revenue days and lower expenses primarily associated with rig mobilizations that were delayed.

Direct margins(2) during the first fiscal quarter were $13.8 million compared to $3.3 million during the previous quarter. Current quarter results included a $0.3 million foreign currency loss compared to a $1.2 million foreign currency loss in the previous quarter.

Offshore Gulf of Mexico:

This segment had operating income of $6.7 million compared to operating income of $6.6 million during the previous quarter. Direct margins(2) for the quarter were $9.5 million compared to $9.4 million in the prior quarter.

Operational Outlook for the Second Quarter of Fiscal Year 2023

North America Solutions:

• We expect North America Solutions direct margins(2) to be between $280-$300 million, which includes approximately $4.0 million in estimated reactivation costs
• We expect to exit the quarter between approximately 183-188 contracted rigs

International Solutions:

• We expect International Solutions direct margins(2) to be between $7-$10 million, exclusive of any foreign exchange gains or losses
• International Solutions direct margins(2) are expected to be reduced by operating costs related to establishing our Middle East hub

Offshore Gulf of Mexico:

• We expect Offshore Gulf of Mexico direct margins(2) to be between $8-$10 million

Other Estimates for Fiscal Year 2023

• Gross capital expenditures are still expected to be approximately $425 to $475 million;
  • approximately two-thirds expected for North America Solutions, including maintenance per active rig of $1.1 to $1.3 million and reactivating up to 16 super-spec rigs, of which six are planned walking conversions
  • approximately one-quarter for International Solutions, including five super-spec upgrades and six reactivations that will be also converted to walking capabilities for export from the U.S. fleet
  • remainder for corporate and information technology expenditures
  • ongoing 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 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 still expected to be roughly $28 million
• General and administrative expenses for fiscal year 2023 are still expected to be approximately $195 million
• Cash taxes for fiscal year 2023 are still expected to be approximately $190-$240 million

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

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

Fourth quarter of fiscal year 2022 net income of $0.42 per diluted share included $(0.03) in after-tax losses comprised of the following:

• $0.02 of non-cash after-tax gains related to fair market value adjustments to equity investments
• $0.01 of after-tax gains related to the sale of equipment
• $(0.06) of after-tax losses related to a lump sum settlement for a distribution from the pension plan

Conference Call

A conference call will be held on Tuesday, January 31, 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 first 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 December 31, 2022, H&P's fleet included 235 land rigs in the United States, 20 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 direct operating expenses 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 second 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 first fiscal quarter of 2023 we repurchased 844,018 shares for $39,060,000. During our second fiscal quarter through January 27, 2023 we repurchased an additional 433,929 shares for $20,513,000.

HELMERICH & PAYNE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

Three Months Ended

(in thousands, except per share amounts)

December 31,

 

September 30,

 

December 31,

2022

 

2022

 

2021

OPERATING REVENUES

 

 

 

 

 

Drilling services

$

717,170

 

 

$

629,031

 

 

$

407,534

 

Other

 

2,467

 

 

 

2,301

 

 

 

2,248

 

 

 

719,637

 

 

 

631,332

 

 

 

409,782

 

OPERATING COSTS AND EXPENSES

 

 

 

 

 

Drilling services operating expenses, excluding depreciation and amortization

 

428,251

 

 

 

410,968

 

 

 

299,652

 

Other operating expenses

 

1,126

 

 

 

1,222

 

 

 

1,182

 

Depreciation and amortization

 

96,655

 

 

 

99,055

 

 

 

100,437

 

Research and development

 

6,933

 

 

 

7,138

 

 

 

6,527

 

Selling, general and administrative

 

48,455

 

 

 

46,667

 

 

 

43,715

 

Asset impairment charges

 

12,097

 

 

 

—

 

 

 

4,363

 

Restructuring charges

 

—

 

 

 

—

 

 

 

742

 

Gain on reimbursement of drilling equipment

 

(15,724

)

 

 

(7,846

)

 

 

(5,254

)

Other (gain) loss on sale of assets

 

(2,379

)

 

 

(2,670

)

 

 

1,029

 

 

 

575,414

 

 

 

554,534

 

 

 

452,393

 

OPERATING INCOME (LOSS) FROM CONTINUING OPERATIONS

 

144,223

 

 

 

76,798

 

 

 

(42,611

)

Other income (expense)

 

 

 

 

 

Interest and dividend income

 

4,705

 

 

 

6,789

 

 

 

2,589

 

Interest expense

 

(4,355

)

 

 

(4,327

)

 

 

(6,114

)

Gain (loss) on investment securities

 

(15,091

)

 

 

2,253

 

 

 

47,862

 

Loss on extinguishment of debt

 

—

 

 

 

—

 

 

 

(60,083

)

Other

 

(660

)

 

 

(8,949

)

 

 

(542

)

 

 

(15,401

)

 

 

(4,234

)

 

 

(16,288

)

Income (loss) from continuing operations before income taxes

 

128,822

 

 

 

72,564

 

 

 

(58,899

)

Income tax expense (benefit)

 

32,395

 

 

 

27,532

 

 

 

(7,568

)

Income (loss) from continuing operations

 

96,427

 

 

 

45,032

 

 

 

(51,331

)

Income (loss) from discontinued operations before income taxes

 

718

 

 

 

507

 

 

 

(31

)

Income tax expense

 

—

 

 

 

—

 

 

 

—

 

Income (loss) from discontinued operations

 

718

 

 

 

507

 

 

 

(31

)

NET INCOME (LOSS)

$

97,145

 

 

$

45,539

 

 

$

(51,362

)

 

 

 

 

 

 

Basic earnings (loss) per common share:

 

 

 

 

 

Income (loss) from continuing operations

$

0.91

 

 

$

0.42

 

 

$

(0.48

)

Income from discontinued operations

 

0.01

 

 

 

—

 

 

 

—

 

Net income (loss)

$

0.92

 

 

$

0.42

 

 

$

(0.48

)

 

 

 

 

 

 

Diluted earnings (loss) per common share:

 

 

 

 

 

Income (loss) from continuing operations

$

0.90

 

 

$

0.42

 

 

$

(0.48

)

Income from discontinued operations

 

0.01

 

 

 

—

 

 

 

—

 

Net income (loss)

$

0.91

 

 

$

0.42

 

 

$

(0.48

)

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

Basic

 

105,248

 

 

 

105,292

 

 

 

107,571

 

Diluted

 

106,104

 

 

 

106,078

 

 

 

107,571

 

HELMERICH & PAYNE, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

 

December 31,

 

September 30,

(in thousands except share data and share amounts)

2022

 

2022

ASSETS

 

 

 

Current Assets:

 

 

 

Cash and cash equivalents

$

229,186

 

 

$

232,131

 

Restricted cash

 

42,472

 

 

 

36,246

 

Short-term investments

 

118,457

 

 

 

117,101

 

Accounts receivable, net of allowance of $6,242 and $2,975, respectively

 

512,681

 

 

 

458,713

 

Inventories of materials and supplies, net

 

90,761

 

 

 

87,957

 

Prepaid expenses and other, net

 

83,506

 

 

 

66,463

 

Assets held-for-sale

 

1,551

 

 

 

4,333

 

Total current assets

 

1,078,614

 

 

 

1,002,944

 

 

 

 

 

Investments

 

220,892

 

 

 

218,981

 

Property, plant and equipment, net

 

2,942,059

 

 

 

2,960,809

 

Other Noncurrent Assets:

 

 

 

Goodwill

 

45,653

 

 

 

45,653

 

Intangible assets, net

 

65,398

 

 

 

67,154

 

Operating lease right-of-use asset

 

38,539

 

 

 

39,064

 

Other assets, net

 

20,693

 

 

 

20,926

 

Total other noncurrent assets

 

170,283

 

 

 

172,797

 

 

 

 

 

Total assets

$

4,411,848

 

 

$

4,355,531

 

 

 

 

 

LIABILITIES & SHAREHOLDERS' EQUITY

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

145,784

 

 

$

126,966

 

Dividends payable

 

51,540

 

 

 

26,693

 

Accrued liabilities

 

272,247

 

 

 

241,151

 

Total current liabilities

 

469,571

 

 

 

394,810

 

 

 

 

 

Noncurrent Liabilities:

 

 

 

Long-term debt, net

 

542,932

 

 

 

542,610

 

Deferred income taxes

 

537,264

 

 

 

537,712

 

Other

 

116,136

 

 

 

113,387

 

Noncurrent liabilities - discontinued operations

 

800

 

 

 

1,540

 

Total noncurrent liabilities

 

1,197,132

 

 

 

1,195,249

 

 

 

 

 

Shareholders' Equity:

 

 

 

Common stock, $0.10 par value, 160,000,000 shares authorized, 112,222,865 shares issued as of December 31, 2022 and September 30, 2022, and 104,898,566 and 105,293,662 shares outstanding as of December 31, 2022 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

 

512,928

 

 

 

528,278

 

Retained earnings

 

2,494,106

 

 

 

2,473,572

 

Accumulated other comprehensive loss

 

(11,816

)

 

 

(12,072

)

Treasury stock, at cost, 7,324,299 shares and 6,929,203 shares as of December 31, 2022 and September 30, 2022, respectively

 

(261,295

)

 

 

(235,528

)

Total shareholders’ equity

 

2,745,145

 

 

 

2,765,472

 

Total liabilities and shareholders' equity

$

4,411,848

 

 

$

4,355,531

 

HELMERICH & PAYNE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

Three Months Ended December 31,

(in thousands)

2022

 

2021

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

Net income (loss)

$

97,145

 

 

$

(51,362

)

Adjustment for (income) loss from discontinued operations

 

(718

)

 

 

31

 

Income (loss) from continuing operations

 

96,427

 

 

 

(51,331

)

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

 

 

 

Depreciation and amortization

 

96,655

 

 

 

100,437

 

Asset impairment charges

 

12,097

 

 

 

4,363

 

Amortization of debt discount and debt issuance costs

 

322

 

 

 

239

 

Loss on extinguishment of debt

 

—

 

 

 

60,083

 

Provision for credit loss

 

3,358

 

 

 

(112

)

Stock-based compensation

 

8,273

 

 

 

6,218

 

(Gain) loss on investment securities

 

15,091

 

 

 

(47,862

)

Gain on reimbursement of drilling equipment

 

(15,724

)

 

 

(5,254

)

Other (gain) loss on sale of assets

 

(2,379

)

 

 

1,029

 

Deferred income tax expense (benefit)

 

188

 

 

 

(17,750

)

Other

 

7,692

 

 

 

(4,489

)

Changes in assets and liabilities

 

(36,603

)

 

 

(49,276

)

Net cash provided by (used in) operating activities from continuing operations

 

185,397

 

 

 

(3,705

)

Net cash used in operating activities from discontinued operations

 

(22

)

 

 

(13

)

Net cash provided by (used in) operating activities

 

185,375

 

 

 

(3,718

)

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

Capital expenditures

 

(96,027

)

 

 

(44,014

)

Other capital expenditures related to assets held-for-sale

 

—

 

 

 

(3,877

)

Purchase of short-term investments

 

(41,641

)

 

 

(47,083

)

Purchase of long-term investments

 

(16,237

)

 

 

(9,015

)

Proceeds from sale of short-term investments

 

40,758

 

 

 

37,777

 

Proceeds from asset sales

 

30,978

 

 

 

21,483

 

Net cash used in investing activities

 

(82,169

)

 

 

(44,729

)

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

Dividends paid

 

(51,764

)

 

 

(27,320

)

Payments for employee taxes on net settlement of equity awards

 

(9,483

)

 

 

(4,113

)

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

 

(39,060

)

 

 

(60,358

)

Net cash used in financing activities

 

(100,557

)

 

 

(635,610

)

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

 

2,649

 

 

 

(684,057

)

Cash and cash equivalents and restricted cash, beginning of period

 

269,009

 

 

 

936,716

 

Cash and cash equivalents and restricted cash, end of period

$

271,658

 

 

$

252,659

 

HELMERICH & PAYNE, INC.

SEGMENT REPORTING

 

Three Months Ended

 

December 31,

 

September 30,

 

December 31,

(in thousands, except operating statistics)

2022

 

2022

 

2021

NORTH AMERICA SOLUTIONS

 

 

 

 

 

Operating revenues

$

627,163

 

$

552,315

 

 

$

341,034

 

Direct operating expenses

 

366,855

 

 

348,769

 

 

 

256,568

 

Depreciation and amortization

 

89,814

 

 

92,200

 

 

 

93,621

 

Research and development

 

7,059

 

 

7,195

 

 

 

6,568

 

Selling, general and administrative expense

 

14,190

 

 

12,015

 

 

 

10,829

 

Asset impairment charges

 

3,948

 

 

—

 

 

 

1,868

 

Restructuring charges

 

—

 

 

—

 

 

 

473

 

Segment operating income (loss)

$

145,297

 

$

92,136

 

 

$

(28,893

)

Financial Data and Other Operating Statistics1:

 

 

 

 

 

Direct margin (Non-GAAP)2

$

260,308

 

$

203,546

 

 

$

84,466

 

Revenue days3

 

16,578

 

 

16,178

 

 

 

12,946

 

Average active rigs4

 

180.2

 

 

175.8

 

 

 

140.7

 

Number of active rigs at the end of period5

 

184

 

 

176

 

 

 

154

 

Number of available rigs at the end of period

 

235

 

 

236

 

 

 

236

 

Reimbursements of "out-of-pocket" expenses

$

79,159

 

$

75,082

 

 

$

43,129

 

 

 

 

 

 

 

INTERNATIONAL SOLUTIONS

 

 

 

 

 

Operating revenues

$

54,801

 

$

42,373

 

 

$

37,159

 

Direct operating expenses

 

40,977

 

 

39,114

 

 

 

24,131

 

Depreciation

 

1,392

 

 

1,177

 

 

 

755

 

Selling, general and administrative expense

 

2,709

 

 

2,871

 

 

 

1,729

 

Asset impairment charge

 

8,149

 

 

—

 

 

 

2,495

 

Segment operating income (loss)

$

1,574

 

$

(789

)

 

$

8,049

 

Financial Data and Other Operating Statistics1:

 

 

 

 

 

Direct margin (Non-GAAP)2

$

13,824

 

$

3,259

 

 

$

13,028

 

Revenue days3

 

1,140

 

 

1,035

 

 

 

647

 

Average active rigs4

 

12.3

 

 

11.3

 

 

 

7.0

 

Number of active rigs at the end of period5

 

13

 

 

12

 

 

 

8

 

Number of available rigs at the end of period

 

20

 

 

28

 

 

 

28

 

Reimbursements of "out-of-pocket" expenses

$

2,856

 

$

1,542

 

 

$

1,443

 

 

 

 

 

 

 

OFFSHORE GULF OF MEXICO

 

 

 

 

 

Operating revenues

$

35,164

 

$

34,303

 

 

$

29,314

 

Direct operating expenses

 

25,691

 

 

24,898

 

 

 

20,711

 

Depreciation

 

1,894

 

 

2,066

 

 

 

2,380

 

Selling, general and administrative expense

 

833

 

 

741

 

 

 

757

 

Segment operating income

$

6,746

 

$

6,598

 

 

$

5,466

 

Financial Data and Other Operating Statistics1:

 

 

 

 

 

Direct margin (Non-GAAP)2

$

9,473

 

$

9,405

 

 

$

8,603

 

Revenue days3

 

368

 

 

368

 

 

 

368

 

Average active rigs4

 

4.0

 

 

4.0

 

 

 

4.0

 

Number of active rigs at the end of period5

 

4

 

 

4

 

 

 

4

 

Number of available rigs at the end of period

 

7

 

 

7

 

 

 

7

 

Reimbursements of "out-of-pocket" expenses

$

7,189

 

$

6,974

 

 

$

6,075

 

(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. 92 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 December 31, 2022

(in thousands)

North America Solutions

 

International Solutions

 

Offshore Gulf of Mexico

Other

 

Eliminations

 

Total

Operating revenue

$

627,163

 

$

54,801

 

$

35,164

$

2,509

 

$

—

 

 

$

719,637

Intersegment

 

—

 

 

—

 

 

—

 

16,402

 

 

(16,402

)

 

 

—

Total operating revenue

$

627,163

 

$

54,801

 

$

35,164

$

18,911

 

$

(16,402

)

 

$

719,637

 

 

 

 

 

 

 

 

 

 

 

Direct operating expenses

$

351,315

 

$

40,701

 

$

23,801

$

13,560

 

$

—

 

 

$

429,377

Intersegment

 

15,540

 

 

276

 

 

1,890

 

29

 

 

(17,735

)

 

 

—

Total drilling services & other operating expenses

$

366,855

 

$

40,977

 

$

25,691

$

13,589

 

$

(17,735

)

 

$

429,377

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

 

December 31,

 

September 30,

 

December 31,

(in thousands)

2022

 

2022

 

2021

Operating income (loss)

 

 

 

 

 

North America Solutions

$

145,297

 

 

$

92,136

 

 

$

(28,893

)

International Solutions

 

1,574

 

 

 

(789

)

 

 

8,049

 

Offshore Gulf of Mexico

 

6,746

 

 

 

6,598

 

 

 

5,466

 

Other

 

4,677

 

 

 

3,659

 

 

 

3,929

 

Eliminations

 

2,310

 

 

 

(969

)

 

 

(1,282

)

Segment operating income (loss)

$

160,604

 

 

$

100,635

 

 

$

(12,731

)

Gain on reimbursement of drilling equipment

 

15,724

 

 

 

7,846

 

 

 

5,254

 

Other gain (loss) on sale of assets

 

2,379

 

 

 

2,670

 

 

 

(1,029

)

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

 

(34,484

)

 

 

(34,353

)

 

 

(34,105

)

Operating income (loss)

$

144,223

 

 

$

76,798

 

 

$

(42,611

)

Other income (expense):

 

 

 

 

 

Interest and dividend income

 

4,705

 

 

 

6,789

 

 

 

2,589

 

Interest expense

 

(4,355

)

 

 

(4,327

)

 

 

(6,114

)

Gain (loss) on investment securities

 

(15,091

)

 

 

2,253

 

 

 

47,862

 

Loss on extinguishment of debt

 

—

 

 

 

—

 

 

 

(60,083

)

Other

 

(660

)

 

 

(8,949

)

 

 

(542

)

Total unallocated amounts

 

(15,401

)

 

 

(4,234

)

 

 

(16,288

)

Income (loss) from continuing operations before income taxes

$

128,822

 

 

$

72,564

 

 

$

(58,899

)

SUPPLEMENTARY STATISTICAL INFORMATION

Unaudited

 

U.S. LAND RIG COUNTS & MARKETABLE FLEET STATISTICS

 

 

January 30,

 

December 31,

 

September 30,

 

Q1FY23

 

2023

 

2022

 

2022

 

Average

U.S. Land Operations

 

 

 

 

 

 

 

Term Contract Rigs

103

 

105

 

119

 

116

Spot Contract Rigs

82

 

79

 

57

 

64

Total Contracted Rigs

185

 

184

 

176

 

180

Idle or Other Rigs

50

 

51

 

60

 

60

Total Marketable Fleet

235

 

235

 

236

 

236

H&P GLOBAL FLEET UNDER TERM CONTRACT STATISTICS

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

(Estimated Quarterly Average — as of 12/31/22)

 

 

Q2

 

Q3

 

Q4

 

Q1

 

Q2

 

Q3

 

Q4

Segment

FY23

 

FY23

 

FY23

 

FY24

 

FY24

 

FY24

 

FY24

U.S. Land Operations

101.2

 

92.8

 

72.9

 

38.9

 

35.4

 

32.7

 

25.2

International Land Operations

10.0

 

8.8

 

8.7

 

8.0

 

6.0

 

5.7

 

4.1

Offshore Operations

—

 

—

 

—

 

—

 

—

 

—

 

—

Total

111.2

 

101.6

 

81.6

 

46.9

 

41.4

 

38.4

 

29.3

 

(*) 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 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

 

 

Three Months Ended September 30, 2022

(in thousands, except per share data)

Pretax

 

Tax

 

Net

 

EPS

Net income (GAAP basis)

 

 

 

 

$

45,539

 

 

$

0.42

 

(-) Fair market value adjustments to equity investments

$

2,287

 

 

$

518

 

 

$

1,769

 

 

$

0.02

 

(-) Gain related to the sale of equipment

$

2,019

 

 

$

458

 

 

$

1,561

 

 

$

0.01

 

(-) Lump sum settlement for distribution from pension

$

(8,270

)

 

$

(1,873

)

 

$

(6,397

)

 

$

(0.06

)

Adjusted net income

 

 

 

 

$

48,606

 

 

$

0.45

 

 

(**)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 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 charges

 

3,948

 

 

8,149

 

 

—

Direct margin (Non-GAAP)

$

260,308

 

$

13,824

 

$

9,473

 

Three Months Ended September 30, 2022

(in thousands)

North America Solutions

 

International Solutions

 

Offshore Gulf of Mexico

Segment operating income (loss)

$

92,136

 

$

(789

)

 

$

6,598

Add back:

 

 

 

 

 

Depreciation and amortization

 

92,200

 

 

1,177

 

 

2,066

Research and development

 

7,195

 

 

—

 

 

—

Selling, general and administrative expense

 

12,015

 

 

2,871

 

 

741

Direct margin (Non-GAAP)

$

203,546

 

$

3,259

 

$

9,405

 

Three Months Ended December 31, 2021

(in thousands)

North America Solutions

 

International Solutions

 

Offshore Gulf of Mexico

Segment operating income (loss)

$

(28,893

)

 

$

8,049

 

$

5,466

Add back:

 

 

 

 

 

Depreciation and amortization

 

93,621

 

 

 

755

 

 

2,380

Research and development

 

6,568

 

 

 

—

 

 

—

Selling, general and administrative expense

 

10,829

 

 

 

1,729

 

 

757

Asset impairment charges

 

1,868

 

 

 

2,495

 

 

—

Restructuring charges

 

473

 

 

 

—

 

 

—

Direct margin (Non-GAAP)

$

84,466

 

 

$

13,028

 

$

8,603

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20230130005068/en/

Dave Wilson, Vice President of Investor Relations investor.relations@hpinc.com (918) 588‑5190