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Helmerich & Payne, Inc. Announces Third Quarter Results

  • The Company reported fiscal third quarter net income of $0.16 per diluted share; including select items(1) of $(0.11) per diluted share
  • H&P's North America Solutions segment exited the third quarter of fiscal year 2022 with 175 active rigs
  • Quarterly North America Solutions operating income increased $56 million sequentially, while direct margins(2) increased $53 million to $168 million sequentially, as revenues increased by $77 million to $486 million and expenses increased by $24 million to $318 million
  • North America Solutions revenue per day increased approximately $1,950/day or 8% to $26,500/day on a sequential basis, while direct margins(2) per day increased approximately $2,850/day or 37% to $10,600/day
  • Expect North America Solutions direct margins(2) to increase by approximately 15% on sequential basis with only a modest increase in revenue days in the fourth quarter of fiscal year 2022
  • On May 31, 2022, the Board of Directors of the Company declared a quarterly cash dividend of $0.25 per share, payable on September 1, 2022 to stockholders of record at the close of business on August 17, 2022

Helmerich & Payne, Inc. (NYSE: HP) reported net income of $18 million, or $0.16 per diluted share, from operating revenues of $550 million for the quarter ended June 30, 2022, compared to a net loss of $5 million, or $(0.05) per diluted share, on operating revenues of $468 million for the quarter ended March 31, 2022. The net income per diluted share for the third quarter of fiscal year 2022 and the net loss per diluted share for the second quarter of fiscal year 2022 include $(0.11) and $0.12, respectively, of after-tax losses and gains comprised of select items(1). For the third quarter of fiscal year 2022, select items(1) were comprised of:

  • $(0.11) of after-tax losses pertaining to non-cash fair market value adjustments to equity investments

Net cash provided by operating activities was $98 million for the third quarter of fiscal year 2022 compared to $23 million in the prior quarter.

President and CEO John Lindsay commented, "I am pleased with our performance during the quarter. Our financial results are beginning to reflect the benefits of a number of strategic initiatives, particularly those impacting pricing in our North America Solutions segment. The efforts made earlier this calendar year to achieve more sustainable contract economics continue and will accumulate further as pricing improves across our super-spec FlexRig® fleet. We recognize that we still have further to go before achieving returns that fully reflect the value we deliver to customers and will continue to push on this front. Our scale and technology enhance profitability in the US and these advantages are also providing a pathway to grow internationally, both of which will ultimately lead to improved economic returns for all our stakeholders over time.

"As expected, we ended the quarter at 175 rigs representing only a modest rig count growth during the quarter. Fiscal discipline together with additional contractual churn allowed us to re-contract rigs without incurring additional reactivation costs and redeploy them at significantly higher rates. Our rapidly improving contract economics are primarily driven by H&P's value proposition to customers in a tight market for readily available super-spec rigs. We believe the drilling solutions and outcomes we provide are increasingly being recognized and coveted by customers. Capital discipline by many among the land drillers combined with supply chain and labor constraints are governing the drilling industry's cadence of reactivating idle super-spec rigs at scale. This will likely perpetuate the supply-demand tightness for super-spec rigs leading to further improvements in our contract economics. H&P is preparing to respond to the future demand for super-spec rigs from our idled FlexRig® fleet in fiscal year 2023, and we will do so by applying the same disciplined approach, focusing on financial returns, and seeking to receive commensurate compensation for the value we are providing.

"Our Offshore Gulf of Mexico segment has provided steady contribution to the Company over several decades, particularly during the recent pandemic. We have increased pricing offshore as well and expect the margin contribution to improve going forward at a moderately higher level. On the international front, activity continues to tick higher with the potential for further improvements in our South American operations in the coming quarters. In the Middle East, preparations are underway to export some of our idle super-spec capacity as part of our hub strategy. Current plans have one rig moving in the coming months with others possible shortly thereafter depending on the timing of opportunities in the region compared to other competing international locations. We view this as an important step in establishing our Middle East hub and expanding our presence within the region as part of a longer-term growth strategy."

Senior Vice President and CFO Mark Smith also commented, "Our financial results reflect the margin expansion we are experiencing which is frankly needed to sustain our capital intensive and technologically demanding business in the long term. We anticipate further improvements in the coming quarters as our contracts in our North America Solutions segment continue to reprice at higher levels.

"Coinciding with the improvements in margins is the amount of cash we expect to generate from our operations. Cash returns to shareholders remain a top priority with our existing dividend and we have a desire to augment these returns in the future. However, our strong capital discipline dictates that we take a measured approach, especially as we head into our fourth fiscal quarter and look ahead into fiscal 2023 considering upcoming maintenance and reactivation capex and potential investments toward further international expansion."

John Lindsay concluded, “On a daily basis, I get to see the achievements attained by the strong dedication of our employees and the passion they bring to the Company; striving to do better than the day before and enhancing the value we provide to our customers and shareholders. As we move forward, I am confident our shared values and commitments will endure and enable the Company to maintain its leadership position within the oil service industry."

Operating Segment Results for the Third Quarter of Fiscal Year 2022

North America Solutions:

This segment had operating income of $57.4 million compared to operating income of $1.3 million during the previous quarter. The increase in operating income was primarily due to improving contract economics and modestly higher activity levels during the quarter.

Direct margins(2) increased by $53.2 million to $167.6 million as both revenues and expenses increased sequentially. Operating results continue to be negatively impacted by the costs associated with reactivating rigs; $6.5 million in the third fiscal quarter compared to $14.2 million in the previous quarter.

International Solutions:

This segment had an operating loss of $6.6 million compared to an operating loss of $0.8 million during the previous quarter. The decrease in operating income is primarily attributable to costs incurred with establishing our Middle East hub, which includes preparing a rig to be exported from the U.S.

Direct margins(2) during the third fiscal quarter were a negative $3.2 million compared to a positive $2.3 million during the previous quarter. Current quarter results included a $1.1 million foreign currency loss compared to a $2.4 million foreign currency loss the previous quarter.

Offshore Gulf of Mexico:

This segment had operating income of $5.9 million compared to operating income of $5.3 million during the previous quarter. Direct margins(2) for the quarter were $8.8 million compared to $8.3 million in the prior quarter.

Operational Outlook for the Fourth Quarter of Fiscal Year 2022

North America Solutions:

  • We expect North America Solutions direct margins(2) to be between $185-$205 million, which includes approximately $6.0 million in estimated reactivation costs
  • We expect to exit the quarter at approximately 176 contracted rigs

International Solutions:

  • We expect International Solutions direct margins(2) to be between $4 - $7 million, exclusive of any foreign exchange gains or losses
  • International Solutions direct margins(2) are still expected to be negatively impacted by costs associated with establishing a Middle East hub

Offshore Gulf of Mexico:

  • We expect Offshore Gulf of Mexico direct margins(2) to be between $9-$11 million

Other Estimates for Fiscal Year 2022

  • Gross capital expenditures are still expected to be approximately $250 to $270 million; 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 still expected to total approximately $45 million in fiscal year 2022
  • Depreciation and amortization expenses are still expected to be approximately $405 million
  • Research and development expenses for fiscal year 2022 are still expected to be roughly $27 million
  • Selling, general and administrative expenses for fiscal year 2022 are still expected to be just over $180 million

Select Items Included in Net Income per Diluted Share

Third quarter of fiscal year 2022 net income of $0.16 per diluted share included $(0.11) in after-tax losses comprised of the following:

  • $(0.11) of non-cash after-tax losses related to fair market value adjustments to equity investments
  • $(0.00) of after-tax losses related to restructuring charges

Second quarter of fiscal year 2022 net loss of $(0.05) per diluted share included $0.12 in after-tax gains comprised of the following:

  • $0.13 of non-cash after-tax gains related to fair market value adjustments to equity investments
  • $(0.00) of after-tax losses related to restructuring charges
  • $(0.01) of after-tax losses related to the sale of assets

Conference Call

A conference call will be held on Thursday, July 28, 2022, 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 2022 results. Dial-in information for the conference call is (877) 830-2596 for domestic callers or (785) 424-1881 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 strives to operate 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. As of June 30, 2022, H&P's fleet included 236 land rigs in the U.S., 28 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 our future financial position, operations outlook, business strategy, dividends, share repurchases, budgets, projected costs and plans, objectives of management for future operations, contract terms, financing and funding, spot contract economics, future supply-demand tightness, capex spending and outlook for international markets 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 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.

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.helmerichpayne.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, which may be registered or trademarked in the U.S. 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 of 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 fourth quarter of fiscal 2022 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 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.

HELMERICH & PAYNE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

Three Months Ended

 

Six Months Ended

(in thousands, except per share

amounts)

June 30,

 

March 31,

 

June 30,

 

June 30,

 

June 30,

 

2022

 

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

OPERATING REVENUES

 

 

 

 

 

 

 

 

 

Drilling services

$

547,906

 

 

$

465,370

 

 

$

329,774

 

 

$

1,420,810

 

 

$

868,581

 

Other

 

2,327

 

 

 

2,227

 

 

 

2,439

 

 

 

6,802

 

 

 

6,180

 

 

 

550,233

 

 

 

467,597

 

 

 

332,213

 

 

 

1,427,612

 

 

 

874,761

 

OPERATING COSTS AND EXPENSES

 

 

 

 

 

 

 

 

 

Drilling services operating expenses, excluding depreciation and amortization

 

376,210

 

 

 

339,759

 

 

 

255,471

 

 

 

1,015,621

 

 

 

684,473

 

Other operating expenses

 

1,053

 

 

 

1,181

 

 

 

1,481

 

 

 

3,416

 

 

 

4,117

 

Depreciation and amortization

 

100,741

 

 

 

102,937

 

 

 

104,493

 

 

 

304,115

 

 

 

317,771

 

Research and development

 

6,511

 

 

 

6,387

 

 

 

5,610

 

 

 

19,425

 

 

 

16,527

 

Selling, general and administrative

 

44,933

 

 

 

47,051

 

 

 

41,719

 

 

 

135,699

 

 

 

120,371

 

Asset impairment charge

 

 

 

 

 

 

 

2,130

 

 

 

4,363

 

 

 

56,414

 

Restructuring charges

 

33

 

 

 

63

 

 

 

2,110

 

 

 

838

 

 

 

3,856

 

Gain on reimbursement of drilling equipment

 

(9,895

)

 

 

(6,448

)

 

 

(4,268

)

 

 

(21,597

)

 

 

(10,207

)

Other (gain) loss on sale of assets

 

(3,075

)

 

 

(716

)

 

 

834

 

 

 

(2,762

)

 

 

12,952

 

 

 

516,511

 

 

 

490,214

 

 

 

409,580

 

 

 

1,459,118

 

 

 

1,206,274

 

OPERATING INCOME (LOSS) FROM CONTINUING OPERATIONS

 

33,722

 

 

 

(22,617

)

 

 

(77,367

)

 

 

(31,506

)

 

 

(331,513

)

Other income (expense)

 

 

 

 

 

 

 

 

 

Interest and dividend income

 

5,313

 

 

 

3,399

 

 

 

1,527

 

 

 

11,301

 

 

 

8,225

 

Interest expense

 

(4,372

)

 

 

(4,390

)

 

 

(5,963

)

 

 

(14,876

)

 

 

(17,861

)

Gain (loss) on investment securities

 

(14,310

)

 

 

22,132

 

 

 

2,409

 

 

 

55,684

 

 

 

7,853

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

(60,083

)

 

 

 

Other

 

(1,148

)

 

 

(476

)

 

 

(970

)

 

 

(2,166

)

 

 

(3,027

)

 

 

(14,517

)

 

 

20,665

 

 

 

(2,997

)

 

 

(10,140

)

 

 

(4,810

)

Income (loss) from continuing operations before income taxes

 

19,205

 

 

 

(1,952

)

 

 

(80,364

)

 

 

(41,646

)

 

 

(336,323

)

Income tax expense (benefit)

 

1,730

 

 

 

2,672

 

 

 

(23,659

)

 

 

(3,166

)

 

 

(78,398

)

Gain (loss) from continuing operations

 

17,475

 

 

 

(4,624

)

 

 

(56,705

)

 

 

(38,480

)

 

 

(257,925

)

Income (loss) from discontinued operations before income taxes

 

277

 

 

 

(352

)

 

 

1,150

 

 

 

(106

)

 

 

10,936

 

Income tax provision

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from discontinued operations

 

277

 

 

 

(352

)

 

 

1,150

 

 

 

(106

)

 

 

10,936

 

NET INCOME (LOSS)

$

17,752

 

 

$

(4,976

)

 

$

(55,555

)

 

$

(38,586

)

 

$

(246,989

)

 

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per common share:

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

$

0.16

 

 

$

(0.05

)

 

$

(0.53

)

 

$

(0.37

)

 

$

(2.40

)

Income from discontinued operations

$

 

 

$

 

 

$

0.01

 

 

$

 

 

$

0.10

 

Net income (loss)

$

0.16

 

 

$

(0.05

)

 

$

(0.52

)

 

$

(0.37

)

 

$

(2.30

)

 

 

 

 

 

 

 

 

 

 

Diluted earnings (loss) per common share:

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

$

0.16

 

 

$

(0.05

)

 

$

(0.53

)

 

$

(0.37

)

 

$

(2.40

)

Income from discontinued operations

$

 

 

$

 

 

$

0.01

 

 

$

 

 

$

0.10

 

Net income (loss)

$

0.16

 

 

$

(0.05

)

 

$

(0.52

)

 

$

(0.37

)

 

$

(2.30

)

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding (in thousands):

 

 

 

 

 

 

 

 

 

Basic

 

105,289

 

 

 

105,393

 

 

 

107,896

 

 

 

106,092

 

 

 

107,790

 

Diluted

 

106,021

 

 

 

105,393

 

 

 

107,896

 

 

 

106,092

 

 

 

107,790

 

HELMERICH & PAYNE, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

 

June 30,

 

September 30,

(in thousands except share data and share amounts)

 

2022

 

 

 

2021

 

ASSETS

 

 

 

Current Assets:

 

 

 

Cash and cash equivalents

$

188,663

 

 

$

917,534

 

Short-term investments

 

144,331

 

 

 

198,700

 

Accounts receivable, net of allowance of $3,032 and $2,068, respectively

 

397,880

 

 

 

228,894

 

Inventories of materials and supplies, net

 

86,091

 

 

 

84,057

 

Prepaid expenses and other, net

 

103,589

 

 

 

85,928

 

Assets held-for-sale

 

25,604

 

 

 

71,453

 

Total current assets

 

946,158

 

 

 

1,586,566

 

 

 

 

 

Investments

 

213,956

 

 

 

135,444

 

Property, plant and equipment, net

 

2,987,107

 

 

 

3,127,287

 

Other Noncurrent Assets:

 

 

 

Goodwill

 

45,653

 

 

 

45,653

 

Intangible assets, net

 

68,950

 

 

 

73,838

 

Operating lease right-of-use assets

 

40,539

 

 

 

49,187

 

Other assets, net

 

20,247

 

 

 

16,153

 

Total other noncurrent assets

 

175,389

 

 

 

184,831

 

 

 

 

 

Total assets

$

4,322,610

 

 

$

5,034,128

 

 

 

 

 

LIABILITIES & SHAREHOLDERS' EQUITY

 

 

 

Current Liabilities:

 

 

 

Accounts payable

$

119,972

 

 

$

71,996

 

Dividends payable

 

26,693

 

 

 

27,332

 

Current portion of long-term debt, net

 

 

 

 

483,486

 

Accrued liabilities

 

254,611

 

 

 

283,492

 

Total current liabilities

 

401,276

 

 

 

866,306

 

 

 

 

 

Noncurrent Liabilities:

 

 

 

Long-term debt, net

 

542,290

 

 

 

541,997

 

Deferred income taxes

 

527,545

 

 

 

563,437

 

Other

 

116,770

 

 

 

147,757

 

Noncurrent liabilities - discontinued operations

 

2,061

 

 

 

2,013

 

Total noncurrent liabilities

 

1,188,666

 

 

 

1,255,204

 

 

 

 

 

Shareholders' Equity:

 

 

 

Common stock, $.10 par value, 160,000,000 shares authorized, 112,222,865 shares issued as of both June 30, 2022 and September 30, 2021, and 105,290,017 and 107,898,859 shares outstanding as of June 30, 2022 and September 30, 2021, respectively

 

11,222

 

 

 

11,222

 

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

 

 

 

 

 

Additional paid-in capital

 

521,439

 

 

 

529,903

 

Retained earnings

 

2,454,726

 

 

 

2,573,375

 

Accumulated other comprehensive loss

 

(19,067

)

 

 

(20,244

)

Treasury stock, at cost, 6,932,848 shares and 4,324,006 shares as of June 30, 2022 and September 30, 2021, respectively

 

(235,652

)

 

 

(181,638

)

Total shareholders’ equity

 

2,732,668

 

 

 

2,912,618

 

Total liabilities and shareholders' equity

$

4,322,610

 

 

$

5,034,128

 

HELMERICH & PAYNE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

Nine Months Ended June 30,

(in thousands)

 

2022

 

 

 

2021

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

Net loss

$

(38,586

)

 

$

(246,989

)

Adjustment for (income) loss from discontinued operations

 

106

 

 

 

(10,936

)

Loss from continuing operations

 

(38,480

)

 

 

(257,925

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

Depreciation and amortization

 

304,115

 

 

 

317,771

 

Asset impairment charge

 

4,363

 

 

 

56,414

 

Amortization of debt discount and debt issuance costs

 

880

 

 

 

994

 

Loss on extinguishment of debt

 

60,083

 

 

 

 

Provision for credit loss

 

1,022

 

 

 

8

 

Stock-based compensation

 

21,214

 

 

 

21,240

 

Gain on investment securities

 

(55,684

)

 

 

(7,853

)

Gain on reimbursement of drilling equipment

 

(21,597

)

 

 

(10,207

)

Other (gain) loss on sale of assets

 

(2,762

)

 

 

12,952

 

Deferred income tax benefit

 

(36,614

)

 

 

(66,102

)

Other

 

(2,765

)

 

 

8,849

 

Changes in assets and liabilities

 

(117,074

)

 

 

13,721

 

Net cash provided by operating activities from continuing operations

 

116,701

 

 

 

89,862

 

Net cash used in operating activities from discontinued operations

 

(60

)

 

 

(41

)

Net cash provided by operating activities

 

116,641

 

 

 

89,821

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

Capital expenditures

 

(174,958

)

 

 

(49,173

)

Other capital expenditures related to assets held-for-sale

 

(18,228

)

 

 

 

Purchase of short-term investments

 

(109,318

)

 

 

(234,465

)

Purchase of long-term investments

 

(47,210

)

 

 

(2,319

)

Proceeds from sale of short-term investments

 

161,766

 

 

 

139,430

 

Proceeds from sale of long-term investments

 

22,042

 

 

 

 

Proceeds from asset sales

 

50,260

 

 

 

26,775

 

Other

 

(7,500

)

 

 

 

Net cash used in investing activities

 

(123,146

)

 

 

(119,752

)

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

Dividends paid

 

(80,702

)

 

 

(81,815

)

Payments for employee taxes on net settlement of equity awards

 

(5,515

)

 

 

(2,160

)

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

 

(76,999

)

 

 

 

Other

 

(587

)

 

 

(719

)

Net cash used in financing activities

 

(707,622

)

 

 

(84,944

)

Net decrease in cash and cash equivalents and restricted cash

 

(714,127

)

 

 

(114,875

)

Cash and cash equivalents and restricted cash, beginning of period

 

936,716

 

 

 

536,747

 

Cash and cash equivalents and restricted cash, end of period

$

222,589

 

$

421,872

HELMERICH & PAYNE, INC.

SEGMENT REPORTING

 

Three Months Ended

 

Nine Months Ended

 

June 30,

 

March 31,

 

June 30,

 

June 30,

(in thousands, except operating statistics)

 

2022

 

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

2021

 

NORTH AMERICA SOLUTIONS

 

 

 

 

 

 

 

 

 

Operating revenues

$

486,004

 

 

$

408,814

 

 

$

281,132

 

 

$

1,235,852

 

$

733,061

 

Direct operating expenses

 

318,400

 

 

 

294,397

 

 

 

206,172

 

 

 

869,365

 

 

549,322

 

Depreciation and amortization

 

93,612

 

 

 

95,817

 

 

 

96,997

 

 

 

283,050

 

 

297,238

 

Research and development

 

6,545

 

 

 

6,420

 

 

 

5,605

 

 

 

19,533

 

 

16,400

 

Selling, general and administrative expense

 

10,069

 

 

 

10,883

 

 

 

12,583

 

 

 

31,781

 

 

37,223

 

Asset impairment charge

 

 

 

 

 

 

 

2,130

 

 

 

1,868

 

 

56,414

 

Restructuring charges

 

25

 

 

 

 

 

 

1,388

 

 

 

498

 

 

2,969

 

Segment operating income (loss)

$

57,353

 

 

$

1,297

 

 

$

(43,743

)

 

$

29,757

 

$

(226,505

)

Financial Data and Other Operating Statistics1:

 

 

 

 

 

 

 

 

 

Direct margin (Non-GAAP)2

 

167,604

 

 

 

114,417

 

 

 

74,960

 

 

 

366,487

 

 

183,739

 

Revenue days3

 

15,796

 

 

 

14,752

 

 

 

10,854

 

 

 

43,494

 

 

27,770

 

Average active rigs4

 

174

 

 

 

164

 

 

 

119

 

 

 

159

 

 

102

 

Number of active rigs at the end of period5

 

175

 

 

 

171

 

 

 

121

 

 

 

175

 

 

121

 

Number of available rigs at the end of period

 

236

 

 

 

236

 

 

 

242

 

 

 

236

 

 

242

 

Reimbursements of "out-of-pocket" expenses

$

67,218

 

 

$

46,664

 

 

$

33,282

 

 

$

157,010

 

$

79,361

 

 

 

 

 

 

 

 

 

 

 

INTERNATIONAL SOLUTIONS

 

 

 

 

 

 

 

 

 

Operating revenues

 

29,118

 

 

 

27,422

 

 

 

15,278

 

 

 

93,699

 

 

40,609

 

Direct operating expenses

 

32,364

 

 

 

25,171

 

 

 

16,690

 

 

 

81,666

 

 

50,931

 

Depreciation

 

1,175

 

 

 

1,049

 

 

 

573

 

 

 

2,979

 

 

1,361

 

Selling, general and administrative expense

 

2,129

 

 

 

2,050

 

 

 

1,346

 

 

 

5,908

 

 

3,463

 

Asset impairment charge

 

 

 

 

 

 

 

 

 

 

2,495

 

 

 

Restructuring charges

 

 

 

 

 

 

 

207

 

 

 

 

 

207

 

Segment operating income (loss)

$

(6,550

)

 

$

(848

)

 

$

(3,538

)

 

$

651

 

$

(15,353

)

Financial Data and Other Operating Statistics1:

 

 

 

 

 

 

 

 

 

Direct margin (Non-GAAP)2

 

(3,246

)

 

 

2,251

 

 

 

(1,412

)

 

 

12,033

 

 

(10,322

)

Revenue days3

 

718

 

 

 

636

 

 

 

488

 

 

 

2,010

 

 

1,229

 

Average active rigs4

 

8

 

 

 

7

 

 

 

5

 

 

 

7

 

 

5

 

Number of active rigs at the end of period5

 

9

 

 

 

6

 

 

 

6

 

 

 

9

 

 

6

 

Number of available rigs at the end of period

 

28

 

 

 

28

 

 

 

32

 

 

 

28

 

 

32

 

Reimbursements of "out-of-pocket" expenses

$

699

 

 

$

1,226

 

 

$

1,152

 

 

$

3,368

 

$

5,324

 

 

 

 

 

 

 

 

 

 

 

OFFSHORE GULF OF MEXICO

 

 

 

 

 

 

 

 

 

Operating revenues

$

32,701

 

 

$

29,147

 

 

$

33,364

 

 

 

91,162

 

 

94,911

 

Direct operating expenses

 

23,922

 

 

 

20,884

 

 

 

24,127

 

 

 

65,517

 

 

73,452

 

Depreciation

 

2,328

 

 

 

2,401

 

 

 

2,938

 

 

 

7,109

 

 

8,137

 

Selling, general and administrative expense

 

579

 

 

 

584

 

 

 

592

 

 

 

1,920

 

 

1,895

 

Segment operating income

$

5,872

 

 

$

5,278

 

 

$

5,707

 

 

$

16,616

 

$

11,427

 

Financial Data and Other Operating Statistics1:

 

 

 

 

 

 

 

 

 

Direct margin (Non-GAAP)2

 

8,779

 

 

 

8,263

 

 

 

9,237

 

 

 

25,645

 

 

21,459

 

Revenue days3

 

364

 

 

 

360

 

 

 

364

 

 

 

1,092

 

 

1,184

 

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

$

7,219

 

 

$

5,809

 

 

$

8,342

 

 

$

19,103

 

$

21,403

 

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 (e.g. 91 days for the three months ended June 30, 2022 and 2021, 90 days for the three months ended March 31, 2022 and 273 days for the nine months ended June 30, 2022 and 2021).

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, 2022

(in thousands)

North America

Solutions

 

International

Solutions

 

Offshore Gulf

of Mexico

 

Other

 

Eliminations

 

Total

Operating revenue

$

486,004

 

$

29,118

 

$

32,701

 

$

2,410

 

 

$

 

 

$

550,233

Intersegment

 

 

 

 

 

 

 

14,725

 

 

 

(14,725

)

 

 

Total operating revenue

$

486,004

 

$

29,118

 

$

32,701

 

$

17,135

 

 

$

(14,725

)

 

$

550,233

 

 

 

 

 

 

 

 

 

 

 

 

Direct operating expenses

$

308,238

 

$

32,208

 

$

22,123

 

$

14,694

 

 

$

 

 

$

377,263

Intersegment

 

10,162

 

 

156

 

 

1,799

 

 

(4

)

 

 

(12,113

)

 

 

Total drilling services & other operating expenses

$

318,400

 

$

32,364

 

$

23,922

 

$

14,690

 

 

$

(12,113

)

 

$

377,263

 

Nine Months Ended June 30, 2022

(in thousands)

North America

Solutions

 

International

Solutions

 

Offshore Gulf

of Mexico

 

Other

 

Eliminations

 

Total

Operating revenue

$ 1,235,852

 

$ 93,699

 

$ 91,162

 

$ 6,899

 

$ —

 

$ 1,427,612

Intersegment

 

 

 

41,577

 

(41,577)

 

Total operating revenue

$ 1,235,852

 

$ 93,699

 

$ 91,162

 

$ 48,476

 

$ (41,577)

 

$ 1,427,612

 

 

 

 

 

 

 

 

 

 

 

 

Direct operating expenses

$ 840,501

 

$ 81,252

 

$ 60,059

 

$ 37,225

 

$ —

 

$ 1,019,037

Intersegment

28,864

 

414

 

5,458

 

63

 

(34,799)

 

Total drilling services & other operating expenses

$ 869,365

 

$ 81,666

 

$ 65,517

 

$ 37,288

 

$ (34,799)

 

$ 1,019,037

The following table reconciles segment 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,

(in thousands)

 

2022

 

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Operating income (loss)

 

 

 

 

 

 

 

 

 

North America Solutions

$

57,353

 

 

$

1,297

 

 

$

(43,743

)

 

$

29,757

 

 

$

(226,505

)

International Solutions

 

(6,550

)

 

 

(848

)

 

 

(3,538

)

 

 

651

 

 

 

(15,353

)

Offshore Gulf of Mexico

 

5,872

 

 

 

5,278

 

 

 

5,707

 

 

 

16,616

 

 

 

11,427

 

Other

 

1,965

 

 

 

3,167

 

 

 

(4,670

)

 

 

9,061

 

 

 

(1,631

)

Eliminations

 

(2,140

)

 

 

(2,031

)

 

 

(3,298

)

 

 

(5,453

)

 

 

(8,857

)

Segment operating income (loss)

$

56,500

 

 

$

6,863

 

 

$

(49,542

)

 

$

50,632

 

 

$

(240,919

)

Gain on reimbursement of drilling equipment

 

9,895

 

 

 

6,448

 

 

 

4,268

 

 

 

21,597

 

 

 

10,207

 

Other gain (loss) on sale of assets

 

3,075

 

 

 

716

 

 

 

(834

)

 

 

2,762

 

 

 

(12,952

)

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

 

(35,748

)

 

 

(36,644

)

 

 

(31,259

)

 

 

(106,497

)

 

 

(87,849

)

Operating income (loss) from continuing operations

$

33,722

 

 

$

(22,617

)

 

$

(77,367

)

 

$

(31,506

)

 

$

(331,513

)

Other income (expense):

 

 

 

 

 

 

 

 

 

Interest and dividend income

 

5,313

 

 

 

3,399

 

 

 

1,527

 

 

 

11,301

 

 

 

8,225

 

Interest expense

 

(4,372

)

 

 

(4,390

)

 

 

(5,963

)

 

 

(14,876

)

 

 

(17,861

)

Gain (loss) on investment securities

 

(14,310

)

 

 

22,132

 

 

 

2,409

 

 

 

55,684

 

 

 

7,853

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

(60,083

)

 

 

 

Other

 

(1,148

)

 

 

(476

)

 

 

(970

)

 

 

(2,166

)

 

 

(3,027

)

Total unallocated amounts

 

(14,517

)

 

 

20,665

 

 

 

(2,997

)

 

 

(10,140

)

 

 

(4,810

)

Income (loss) from continuing operations before income taxes

$

19,205

 

 

$

(1,952

)

 

$

(80,364

)

 

$

(41,646

)

 

$

(336,323

)

SUPPLEMENTARY STATISTICAL INFORMATION

Unaudited

 

U.S. LAND RIG COUNTS & MARKETABLE FLEET STATISTICS

 

 

July 27,

 

June 30,

 

March 31,

 

Q3FY22

 

2022

 

2022

 

2022

 

Average

U.S. Land Operations

 

 

 

 

 

 

 

Term Contract Rigs

116

 

115

 

103

 

113

Spot Contract Rigs

60

 

60

 

68

 

61

Total Contracted Rigs

176

 

175

 

171

 

174

Idle or Other Rigs

60

 

61

 

65

 

62

Total Marketable Fleet

236

 

236

 

236

 

236

H&P GLOBAL FLEET UNDER TERM CONTRACT STATISTICS

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

(Estimated Quarterly Average — as of 6/30/22)

 

 

Q4

 

Q1

 

Q2

 

Q3

 

Q4

 

Q1

 

Q2

Segment

FY22

 

FY23

 

FY23

 

FY23

 

FY23

 

FY24

 

FY24

U.S. Land Operations

116.5

 

77.2

 

34.9

 

24.9

 

17.4

 

13.4

 

10.9

International Land Operations

8.4

 

8.8

 

8.0

 

6.8

 

5.5

 

5.0

 

4.0

Offshore Operations

 

 

 

 

 

 

Total

124.9

 

86.0

 

42.9

 

31.7

 

22.9

 

18.4

 

14.9

(*) 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 LOSS(**)

 

 

Three Months Ended June 30, 2022

(in thousands, except per share data)

Pretax

 

Tax

 

Net

 

EPS

Net loss (GAAP basis)

 

 

 

 

$

17,752

 

 

$

0.16

 

(-) Fair market adjustments to equity investments

$

(14,268

)

 

$

(3,028

)

 

 

(11,240

)

 

 

(0.11

)

(-) Restructuring charges

 

(33

)

 

 

(68

)

 

 

35

 

 

 

 

Adjusted net loss (Non-GAAP)

 

 

 

 

$

28,957

 

 

$

0.27

 

 

Three Months Ended March 31, 2022

(in thousands, except per share data)

Pretax

 

Tax

 

Net

 

EPS

Net loss (GAAP basis)

 

 

 

 

$

(4,976

)

 

$

(0.05

)

(-) Fair market adjustments to equity investments

$

22,308

 

 

$

8,483

 

 

 

13,825

 

 

 

0.13

 

(-) Restructuring charges

 

(63

)

 

 

(10

)

 

 

(53

)

 

 

 

(-) Loss related to the sale of equipment

 

(1,353

)

 

 

(205

)

 

 

(1,148

)

 

 

(0.01

)

Adjusted net loss (Non-GAAP)

 

 

 

 

$

(17,600

)

 

$

(0.17

)

(**)Select items and adjusted net loss are considered non-GAAP metrics. 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, 2022

(in thousands)

North America

Solutions

 

Offshore Gulf of

Mexico

 

International

Solutions

Segment operating income (loss)

$

57,353

 

$

5,872

 

$

(6,550

)

Add back:

 

 

 

 

 

Depreciation and amortization

 

93,612

 

 

2,328

 

 

1,175

 

Research and development

 

6,545

 

 

 

 

 

Selling, general and administrative expense

 

10,069

 

 

579

 

 

2,129

 

Restructuring charges

 

25

 

 

 

 

 

Direct margin (Non-GAAP)

$

167,604

 

$

8,779

 

$

(3,246

)

 

Three Months Ended March 31, 2022

(in thousands)

North America

Solutions

 

Offshore Gulf of

Mexico

 

International

Solutions

Segment operating income (loss)

$

1,297

 

$

5,278

 

$

(848

)

Add back:

 

 

 

 

 

Depreciation and amortization

 

95,817

 

 

2,401

 

 

1,049

 

Research and development

 

6,420

 

 

 

 

 

Selling, general and administrative expense

 

10,883

 

 

584

 

 

2,050

 

Direct margin (Non-GAAP)

$

114,417

 

$

8,263

 

$

2,251

 

 

Three Months Ended June 30, 2021

(in thousands)

North America

Solutions

 

Offshore Gulf of

Mexico

 

International

Solutions

Segment operating income (loss)

$

(43,743

)

 

$

5,707

 

$

(3,538

)

Add back:

 

 

 

 

 

Depreciation and amortization

 

96,997

 

 

 

2,938

 

 

573

 

Research and development

 

5,605

 

 

 

 

 

 

Selling, general and administrative expense

 

12,583

 

 

 

592

 

 

1,346

 

Asset impairment charge

 

2,130

 

 

 

 

 

 

Restructuring charges

 

1,388

 

 

 

 

 

207

 

Direct margin (Non-GAAP)

$

74,960

 

 

$

9,237

 

$

(1,412

)

 

Nine Months Ended June 30, 2022

(in thousands)

North America

Solutions

 

Offshore Gulf of

Mexico

 

International

Solutions

Segment operating income

$

29,757

 

$

16,616

 

$

651

Add back:

 

 

 

 

 

Depreciation and amortization

 

283,050

 

 

7,109

 

 

2,979

Research and development

 

19,533

 

 

 

 

Selling, general and administrative expense

 

31,781

 

 

1,920

 

 

5,908

Asset impairment charge

 

1,868

 

 

 

 

2,495

Restructuring charges

 

498

 

 

 

 

Direct margin (Non-GAAP)

$

366,487

 

$

25,645

 

$

12,033

 

Nine Months Ended June 30, 2021

(in thousands)

North America

Solutions

 

Offshore Gulf of

Mexico

 

International

Solutions

Segment operating income (loss)

$

(226,505

)

 

$

11,427

 

$

(15,353

)

Add back:

 

 

 

 

 

Depreciation and amortization

 

297,238

 

 

 

8,137

 

 

1,361

 

Research and development

 

16,400

 

 

 

 

 

 

Selling, general and administrative expense

 

37,223

 

 

 

1,895

 

 

3,463

 

Asset impairment charge

 

56,414

 

 

 

 

 

 

Restructuring charges

 

2,969

 

 

 

 

 

207

 

Direct margin (Non-GAAP)

$

183,739

 

 

$

21,459

 

$

(10,322

)

 

 

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