- The Company reported fiscal second quarter net income of
$1.55 per diluted share; including select items(1) of $0.29 per
diluted share
- Quarterly North America Solutions operating income increased
$37 million sequentially, while direct margins(2) increased $36
million to approximately $296 million, as revenues increased by $49
million to $676 million and expenses increased by $13 million to
$380 million
- The North America Solutions segment exited the second
quarter of fiscal year 2023 with 179 active rigs reflecting an
increase in revenue per day of approximately $3,200/day or 10% to
$36,300/day on a sequential basis, while direct margins(2) per day
increased by roughly $2,300/day or 14% to $18,000/day
- H&P's North America Solutions segment anticipates
averaging 163-167 rigs during the third quarter of fiscal year 2023
and exiting the quarter between 155-160 active rigs due to
increased contractual churn, a softer natural gas market, and our
prioritizing of disciplined pricing in the face of wavering
industry utilization
- Despite more contractual churn in higher direct margin(2)
spot rigs relative to lower direct margin(2) rigs under term
contracts and higher cost absorption given fewer active rigs, the
Company expects its North America Solutions direct margins(2) per
day to remain relatively flat or increase slightly in the fiscal
third quarter
- Fiscal year to date the Company has allocated approximately
$250 million of capital as follows: $53 million in base dividends,
$50 million in supplemental dividends and $146 million in share
repurchases(3)
- On March 1, 2023, the Board of Directors of the Company
declared a quarterly base cash dividend of $0.25 per share and a
supplemental cash dividend of $0.235 per share; both dividends are
payable on June 1, 2023 to stockholders of record at the close of
business on May 18, 2023
Helmerich & Payne, Inc. (NYSE: HP) reported net income of
$164 million, or $1.55 per diluted share, from operating revenues
of $769 million for the quarter ended March 31, 2023, compared to
net income of $97 million, or $0.91 per diluted share, from
operating revenues of $720 million for the quarter ended December
31, 2022. The net income per diluted share for the second and first
quarters of fiscal 2023 include $0.29 and $(0.20) of after-tax gain
and losses, respectively, comprised of select items(1). For the
second quarter of fiscal year 2023, select items were comprised
of:
- $0.29 of after-tax gains pertaining to non-cash fair market
adjustments to our equity investments
Net cash provided by operating activities was $141 million for
the second quarter of fiscal year 2023, which included $114 million
in tax payments compared to net cash provided by operating
activities of $185 million for the first quarter of fiscal year
2023, which included $22 million in net tax refunds.
President and CEO John Lindsay commented, "H&P delivered
another outstanding quarter and executed on a goal we set a year
ago to generate 50%(4) direct margins in our NAS segment. The
reason for setting that goal was to generate double digit returns
that exceed our double digit cost of capital. With this milestone
accomplished, our focus now turns to maintaining those levels of
returns going forward.
"The past two decades demonstrate that even during upcycles, a
certain amount of rig count variability exists, and we are
witnessing that today. The macro-outlook has been challenged by
political and economic insecurities in the global crude oil market
and in the U.S. natural gas market. Volatility in both of these
commodity markets has caused some uncertainty which has negatively
impacted near-term rig demand. We see these events as shorter-term
transitory issues and remain optimistic in the outlook which favors
growing global demand for crude oil and natural gas over the
long-term.
"H&P intends to remain firm on pricing; favoring returns
over market share. That said, the juxtaposition of reduced rig
activity and increased contractual churn caused by a weak natural
gas market, along with our determined approach regarding fiscal
discipline, necessitates a reduction in our forward rig count
projections. Nevertheless, our super-spec FlexRig® fleet
utilization remains high, and we are committed to sustaining this
level of margin performance going forward, believing this path is
in the best interest of all our stakeholders. Moreover, from our
vantage point, activity in the crude oil market may create the
opportunity for the Company to put rigs back into service this
summer due to expected industry rig churn and perhaps again later
in the calendar year as part of the recent trend of customers
contracting additional rigs late in the calendar year as their new
fiscal budgets are established.
"Maintaining fiscal discipline goes hand-in-hand with our
customer-centric approach. By utilizing our FlexRig® fleet,
technology, people and processes, we are able to consistently
deliver the outcomes our customers desire, enhance their economic
returns, and be compensated appropriately for the value we provide.
We continue to develop new commercial models that not only
demonstrate the value we create, but also expand collaborative
efforts between H&P and its customers.
"On the international front, H&P's potential for longer-term
growth prospects remains in focus. During the quarter, we moved our
first super-spec rig into our Middle East hub and sent another to
Australia. While initially small in terms of rig count, we believe
this early progress portends more to come. Along those lines, we
still plan to export more super-spec rigs to the Middle East during
the back half of the year after undergoing region specific
modifications, including conversions to walking systems. Operations
in Argentina and Colombia remain relatively steady and are now
providing solid financial contributions."
Senior Vice President and CFO Mark Smith also commented,
"Several adverse macro issues, such as recessionary concerns,
volatile commodity prices, and even anxiety over the financial
health of the U.S. regional banking industry have commanded the
market's attention this past quarter. We believe this coupled with
a lower outlook for rig activity in fiscal 2023 has distracted from
the more tangible value the Company has created this past year
through higher margins and increased financial and shareholder
returns. Accordingly, we have followed through on our capital
allocation strategy regarding opportunistic share repurchases and
repurchased shares during the second fiscal quarter, buying
approximately 2.5 million shares for approximately $107 million.
While the amount of share repurchases year-to-date surpasses the
$100 million mark, we still have ample cash available to conduct
additional repurchases or take advantage of other investment
opportunities.
"As mentioned in the previous quarter, expectations can often
change quickly, and as such our rig count expectations for the
remainder of fiscal 2023 have been revised lower. Our current view
is that those activity revisions are far less impactful to our
projected cash flow generation than a degradation in our direct
margins would be if we attempt to maintain activity levels by
lowering pricing. Consequently, we remain confident in our
financial plans going forward, keeping our capital allocation
strategy unchanged and executing on the fiscal 2023 supplemental
shareholder plan."
John Lindsay concluded, “From the perspective of my 36-year
career at H&P, we are working more closely with our customers
than at any other time, and our collaborations are primarily
focused on value added performance rather than the daily cost of
the drilling rig. That is due in large part to those customers
realizing the near- and long-term benefits of having H&P as
their drilling solution provider coupled with our relentless focus
on delivering value. All of this is driven by H&P employees
utilizing our rig assets and technologies to consistently strive to
deliver the desired outcomes for our customers."
Operating Segment Results for the
Second Quarter of Fiscal Year 2023
North America Solutions:
This segment had operating income of $182.1 million compared to
operating income of $145.3 million during the previous quarter. The
increase in operating income reflects more of our older term
contracts continuing to reprice at higher contract economics which
has improved the overall level of pricing across the fleet.
Direct margins(2) increased by $35.9 million to $296.2 million
as both revenues and expenses increased sequentially. Quarterly
operating results were impacted by the costs associated with
reactivating rigs; $5.2 million in the second fiscal quarter
compared to $8.6 million in the previous quarter.
International Solutions:
This segment had operating income of $4.0 million compared to
operating income of $1.6 million during the previous quarter.
Absent an impairment charge of $8.1 million during the first
quarter of fiscal 2023, the decline in operating income was mainly
driven by higher expenses associated with rig mobilizations.
Direct margins(2) during the second fiscal quarter were $8.6
million compared to $13.8 million during the previous quarter.
Offshore Gulf of Mexico:
This segment had operating income of $6.7 million compared to
operating income of $6.7 million during the previous quarter.
Direct margins(2) for the quarter were $9.3 million compared to
$9.5 million in the prior quarter.
Operational Outlook for the Third
Quarter of Fiscal Year 2023
North America Solutions:
- We expect North America Solutions direct margins(2) to be
between $265-$285 million with an average active rig count of
163-167 rigs during the quarter
- We expect to exit the quarter between approximately 155-160
contracted rigs
International Solutions:
- We expect International Solutions direct margins(2) to be
between $4-$7 million, exclusive of any foreign exchange gains or
losses
Offshore Gulf of Mexico:
- We expect Offshore Gulf of Mexico direct margins(2) to be
between $5.5-$7.5 million
Other Estimates for Fiscal Year
2023
- Gross capital expenditures are now expected to be approximately
$400 to $450 million, exclusive of ongoing asset sales that include
reimbursements for lost and damaged tubulars and sales of other
used drilling equipment that offset a portion of the gross capital
expenditures and are expected to total approximately $65 million in
fiscal year 2023
- Depreciation for fiscal year 2023 is still expected to be
approximately $400 million
- Research and development expenses for fiscal year 2023 are now
expected to be roughly $30 million
- General and administrative expenses for fiscal year 2023 are
now expected to be approximately $205 million
- Cash taxes for fiscal year 2023 are now expected to be
approximately $175-$225 million, of which a net $92 million has
been paid through March 31, 2023
Select Items(1) Included in Net Income
per Diluted Share
Second quarter of fiscal year 2023 net income of $1.55 per
diluted share included $0.29 in after-tax gains comprised of the
following:
- $0.29 of non-cash after-tax gains related to fair market value
adjustments to equity investments
First quarter of fiscal year 2023 net income of $0.91 per
diluted share included $(0.20) in after-tax losses comprised of the
following:
- $(0.09) of non-cash after-tax losses pertaining to an
impairment for fair market adjustments to decommissioned rigs and
equipment that are held for sale
- $(0.11) of non-cash after-tax losses related to fair market
value adjustments to equity investments
Conference Call
A conference call will be held on Thursday, April 27, 2023 at
11:00 a.m. (ET) with John Lindsay, President and CEO, Mark Smith,
Senior Vice President and CFO, and Dave Wilson, Vice President of
Investor Relations, to discuss the Company’s second quarter fiscal
year 2023 results. Dial-in information for the conference call is
(877) 830-2598 for domestic callers or (785) 424-1745 for
international callers. The call access code is ‘Helmerich’. You may
also listen to the conference call that will be broadcast live over
the Internet by logging on to the Company’s website at
http://www.helmerichpayne.com and accessing the corresponding link
through the investor relations section by clicking on “Investors”
and then clicking on “News and Events - Events & Presentations”
to find the event and the link to the webcast.
About Helmerich & Payne,
Inc.
Founded in 1920, Helmerich & Payne, Inc. (H&P) (NYSE:
HP) is committed to delivering industry leading levels of drilling
productivity and reliability. H&P operates with the highest
level of integrity, safety and innovation to deliver superior
results for its customers and returns for shareholders. Through its
subsidiaries, the Company designs, fabricates and operates
high-performance drilling rigs in conventional and unconventional
plays around the world. H&P also develops and implements
advanced automation, directional drilling and survey management
technologies. At March 31, 2023, H&P's fleet included 233 land
rigs in the United States, 22 international land rigs and seven
offshore platform rigs. For more information, see H&P online at
www.helmerichpayne.com.
Forward-Looking
Statements
This release includes “forward-looking statements” within the
meaning of the Securities Act of 1933 and the Securities Exchange
Act of 1934, and such statements are based on current expectations
and assumptions that are subject to risks and uncertainties. All
statements other than statements of historical facts included in
this release, including, without limitation, statements regarding
the registrant’s business strategy, future financial position,
operations outlook, future cash flow, future use of generated cash
flow, dividend amounts and timing, supplemental shareholder return
plans and amounts of any future dividends, share repurchases,
investments, active rig count projections, budgets, projected costs
and plans, objectives of management for future operations, contract
terms, financing and funding, capex spending, outlook for
international markets, and actions by customers are forward-looking
statements. For information regarding risks and uncertainties
associated with the Company’s business, please refer to the “Risk
Factors” and “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” sections of the Company’s SEC
filings, including but not limited to its annual report on Form
10‑K and quarterly reports on Form 10‑Q. As a result of these
factors, Helmerich & Payne, Inc.’s actual results may differ
materially from those indicated or implied by such forward-looking
statements. Investors are cautioned not to put undue reliance on
such statements. We undertake no duty to publicly update or revise
any forward-looking statements, whether as a result of new
information changes in internal estimates, expectations or
otherwise, except as required under applicable securities laws.
Helmerich & Payne uses its Investor Relations website as a
channel of distribution for material company information. Such
information is routinely posted and accessible on its Investor
Relations website at www.helmerichpayne.com. Information on our
website is not part of this release.
Note Regarding Trademarks. Helmerich & Payne, Inc. owns or
has rights to the use of trademarks, service marks and trade names
that it uses in conjunction with the operation of its business.
Some of the trademarks that appear in this release or otherwise
used by H&P include FlexRig, which may be registered or
trademarked in the United States and other jurisdictions.
(1) Select items are considered non-GAAP metrics and are
included as a supplemental disclosure as the Company believes
identifying and excluding select items is useful in assessing and
understanding current operational performance, especially in making
comparisons over time involving previous and subsequent periods
and/or forecasting future periods results. Select items are
excluded as they are deemed to be outside the Company's core
business operations. See Non-GAAP Measurements.
(2) Direct margin, which is considered a non-GAAP metric, is
defined as operating revenues (less reimbursements) less direct
operating expenses (less reimbursements) and is included as a
supplemental disclosure. We believe it is useful in assessing and
understanding our current operational performance, especially in
making comparisons over time. See Non-GAAP Measurements for a
reconciliation of segment operating income(loss) to direct margin.
Expected direct margin for the third quarter of fiscal 2023 is
provided on a non-GAAP basis only because certain information
necessary to calculate the cost comparable GAAP measure is
unavailable due to the uncertainty and inherent difficulty of
predicting the occurrence and the future financial statement impact
of certain items. Therefore, as a result of the uncertainty and
variability of the nature and amount of future items and
adjustments, which could be significant, we are unable to provide a
reconciliation of expected direct margin to the most comparable
GAAP measure without unreasonable effort.
(3) During the second fiscal quarter H&P repurchased
approximately 2.5 million shares for approximately $107 million;
fiscal year to date the Company has repurchased approximately 3.4
million shares for approximately $146 million
(4) The NAS segment direct margin percentage for the fiscal
second quarter, a non-GAAP metric, is calculated by dividing the
direct margin for the segment ($296.2 million) by segment revenues
($675.8 million) less reimbursements ($77.4 million).
HELMERICH & PAYNE, INC.
UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
Three Months Ended
Six Months Ended
(in thousands, except per share
amounts)
March 31,
December 31,
March 31,
March 31,
March 31,
2023
2022
2022
2023
2022
OPERATING REVENUES
Drilling services
$
766,682
$
717,170
$
465,370
$
1,483,852
$
872,904
Other
2,540
2,467
2,227
5,007
4,475
769,222
719,637
467,597
1,488,859
877,379
OPERATING COSTS AND EXPENSES
Drilling services operating expenses,
excluding depreciation and amortization
449,110
428,251
339,759
877,361
639,411
Other operating expenses
1,188
1,126
1,181
2,314
2,363
Depreciation and amortization
96,255
96,655
102,937
192,910
203,374
Research and development
8,702
6,933
6,387
15,635
12,914
Selling, general and administrative
52,855
48,455
47,051
101,310
90,766
Asset impairment charges
—
12,097
—
12,097
4,363
Restructuring charges
—
—
63
—
805
Gain on reimbursement of drilling
equipment
(11,574
)
(15,724
)
(6,448
)
(27,298
)
(11,702
)
Other (gain) loss on sale of assets
(2,519
)
(2,379
)
(716
)
(4,898
)
313
594,017
575,414
490,214
1,169,431
942,607
OPERATING INCOME (LOSS) FROM CONTINUING
OPERATIONS
175,205
144,223
(22,617
)
319,428
(65,228
)
Other income (expense)
Interest and dividend income
5,055
4,705
3,399
9,760
5,988
Interest expense
(4,239
)
(4,355
)
(4,390
)
(8,594
)
(10,504
)
Gain (loss) on investment securities
39,752
(15,091
)
22,132
24,661
69,994
Loss on extinguishment of debt
—
—
—
—
(60,083
)
Other
(743
)
(660
)
(476
)
(1,403
)
(1,018
)
39,825
(15,401
)
20,665
24,424
4,377
Income (loss) from continuing operations
before income taxes
215,030
128,822
(1,952
)
343,852
(60,851
)
Income tax expense (benefit)
51,129
32,395
2,672
83,524
(4,896
)
Income (loss) from continuing
operations
163,901
96,427
(4,624
)
260,328
(55,955
)
Income (loss) from discontinued operations
before income taxes
139
718
(352
)
857
(383
)
Income tax expense
—
—
—
—
—
Income (loss) from discontinued
operations
139
718
(352
)
857
(383
)
NET INCOME (LOSS)
$
164,040
$
97,145
$
(4,976
)
$
261,185
$
(56,338
)
Basic earnings (loss) per common
share:
Income (loss) from continuing
operations
$
1.55
$
0.91
$
(0.05
)
$
2.45
$
(0.53
)
Income from discontinued operations
—
0.01
—
0.01
—
Net income (loss)
$
1.55
$
0.92
$
(0.05
)
$
2.46
$
(0.53
)
Diluted earnings (loss) per common
share:
Income (loss) from continuing
operations
$
1.55
$
0.90
$
(0.05
)
$
2.45
$
(0.53
)
Income from discontinued operations
—
0.01
—
0.01
—
Net income (loss)
$
1.55
$
0.91
$
(0.05
)
$
2.46
$
(0.53
)
Weighted average shares outstanding:
Basic
103,968
105,248
105,393
104,615
106,494
Diluted
104,363
106,104
105,393
105,003
106,494
HELMERICH & PAYNE, INC.
UNAUDITED CONDENSED CONSOLIDATED
BALANCE SHEETS
March 31,
September 30,
(in thousands except share data and share
amounts)
2023
2022
ASSETS
Current Assets:
Cash and cash equivalents
$
159,672
$
232,131
Restricted cash
53,231
36,246
Short-term investments
85,090
117,101
Accounts receivable, net of allowance of
$6,096 and $2,975, respectively
525,611
458,713
Inventories of materials and supplies,
net
99,408
87,957
Prepaid expenses and other, net
80,090
66,463
Assets held-for-sale
1,349
4,333
Total current assets
1,004,451
1,002,944
Investments
261,960
218,981
Property, plant and equipment, net
2,931,301
2,960,809
Other Noncurrent Assets:
Goodwill
45,653
45,653
Intangible assets, net
63,790
67,154
Operating lease right-of-use asset
37,150
39,064
Other assets, net
21,428
20,926
Total other noncurrent assets
168,021
172,797
Total assets
$
4,365,733
$
4,355,531
LIABILITIES & SHAREHOLDERS'
EQUITY
Current liabilities:
Accounts payable
$
160,101
$
126,966
Dividends payable
50,409
26,693
Accrued liabilities
203,211
241,151
Total current liabilities
413,721
394,810
Noncurrent Liabilities:
Long-term debt, net
542,734
542,610
Deferred income taxes
540,316
537,712
Other
113,156
114,927
Total noncurrent liabilities
1,196,206
1,195,249
Shareholders' Equity:
Common stock, $0.10 par value, 160,000,000
shares authorized, 112,222,865 shares issued as of March 31, 2023
and September 30, 2022, and 102,584,517 and 105,293,662 shares
outstanding as of March 31, 2023 and September 30, 2022,
respectively
11,222
11,222
Preferred stock, no par value, 1,000,000
shares authorized, no shares issued
—
—
Additional paid-in capital
509,205
528,278
Retained earnings
2,608,100
2,473,572
Accumulated other comprehensive loss
(11,560
)
(12,072
)
Treasury stock, at cost, 9,638,348 shares
and 6,929,203 shares as of March 31, 2023 and September 30, 2022,
respectively
(361,161
)
(235,528
)
Total shareholders’ equity
2,755,806
2,765,472
Total liabilities and shareholders'
equity
$
4,365,733
$
4,355,531
HELMERICH & PAYNE, INC.
UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
Six Months Ended March
31,
(in thousands)
2023
2022
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss)
$
261,185
$
(56,338
)
Adjustment for (income) loss from
discontinued operations
(857
)
383
Income (loss) from continuing
operations
260,328
(55,955
)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization
192,910
203,374
Asset impairment charges
12,097
4,363
Amortization of debt discount and debt
issuance costs
664
559
Loss on extinguishment of debt
—
60,083
Provision for credit loss
3,222
669
Stock-based compensation
15,704
14,163
Gain on investment securities
(24,661
)
(69,994
)
Gain on reimbursement of drilling
equipment
(27,298
)
(11,702
)
Other (gain) loss on sale of assets
(4,898
)
313
Deferred income tax expense (benefit)
3,165
(11,597
)
Other
2,024
(4,287
)
Changes in assets and liabilities
(106,952
)
(111,051
)
Net cash provided by operating activities
from continuing operations
326,305
18,938
Net cash used in operating activities from
discontinued operations
(51
)
(42
)
Net cash provided by operating
activities
326,254
18,896
CASH FLOWS FROM INVESTING
ACTIVITIES:
Capital expenditures
(181,479
)
(104,482
)
Other capital expenditures related to
assets held-for-sale
—
(10,550
)
Purchase of short-term investments
(64,418
)
(68,565
)
Purchase of long-term investments
(18,771
)
(14,124
)
Proceeds from sale of short-term
investments
97,744
117,456
Proceeds from asset sales
47,718
34,944
Net cash used in investing activities
(119,206
)
(45,321
)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Dividends paid
(102,941
)
(54,007
)
Payments for employee taxes on net
settlement of equity awards
(14,410
)
(5,503
)
Payment of contingent consideration from
acquisition of business
(250
)
(250
)
Payments for early extinguishment of
long-term debt
—
(487,148
)
Make-whole premium payment
—
(56,421
)
Share repurchases
(145,013
)
(76,999
)
Other
(540
)
(587
)
Net cash used in financing activities
(263,154
)
(680,915
)
Net decrease in cash and cash equivalents
and restricted cash
(56,106
)
(707,340
)
Cash and cash equivalents and restricted
cash, beginning of period
269,009
936,716
Cash and cash equivalents and restricted
cash, end of period
$
212,903
$
229,376
HELMERICH & PAYNE, INC.
SEGMENT REPORTING
Three Months Ended
Six Months Ended
March 31,
December 31,
March 31,
March 31,
March 31,
(in thousands, except operating
statistics)
2023
2022
2022
2023
2022
NORTH AMERICA SOLUTIONS
Operating revenues
$
675,780
$
627,163
$
408,814
$
1,302,943
$
749,848
Direct operating expenses
379,611
366,855
294,397
746,466
550,965
Depreciation and amortization
89,070
89,814
95,817
178,884
189,438
Research and development
8,738
7,059
6,420
15,797
12,988
Selling, general and administrative
expense
16,212
14,190
10,883
30,402
21,712
Asset impairment charges
—
3,948
—
3,948
1,868
Restructuring charges
—
—
—
—
473
Segment operating income (loss)
$
182,149
$
145,297
$
1,297
$
327,446
$
(27,596
)
Financial Data and Other Operating
Statistics1:
Direct margin (Non-GAAP)2
$
296,169
$
260,308
$
114,417
$
556,477
$
198,883
Revenue days3
16,488
16,578
14,752
33,067
27,698
Average active rigs4
183
180
164
182
152
Number of active rigs at the end of
period5
179
184
171
179
171
Number of available rigs at the end of
period
233
235
236
233
236
Reimbursements of "out-of-pocket"
expenses
$
77,442
$
79,159
$
46,664
$
156,601
$
89,793
INTERNATIONAL SOLUTIONS
Operating revenues
$
55,890
$
54,801
$
27,422
$
110,691
$
64,581
Direct operating expenses
47,275
40,977
25,171
88,252
49,302
Depreciation
1,652
1,392
1,049
3,044
1,804
Selling, general and administrative
expense
3,008
2,709
2,050
5,717
3,779
Asset impairment charge
—
8,149
—
8,149
2,495
Segment operating income (loss)
$
3,955
$
1,574
$
(848
)
$
5,529
$
7,201
Financial Data and Other Operating
Statistics1:
Direct margin (Non-GAAP)2
$
8,615
$
13,824
$
2,251
$
22,439
$
15,279
Revenue days3
1,263
1,140
636
2,403
1,283
Average active rigs4
14
12
7
13
7
Number of active rigs at the end of
period5
15
13
6
15
6
Number of available rigs at the end of
period
22
20
28
22
28
Reimbursements of "out-of-pocket"
expenses
$
2,789
$
2,856
$
1,226
$
5,645
$
2,669
OFFSHORE GULF OF MEXICO
Operating revenues
$
34,979
$
35,164
$
29,147
$
70,143
$
58,461
Direct operating expenses
25,688
25,691
20,884
51,379
41,595
Depreciation
1,904
1,894
2,401
3,798
4,781
Selling, general and administrative
expense
700
833
584
1,533
1,341
Segment operating income
$
6,687
$
6,746
$
5,278
$
13,433
$
10,744
Financial Data and Other Operating
Statistics1:
Direct margin (Non-GAAP)2
$
9,291
$
9,473
$
8,263
$
18,764
$
16,866
Revenue days3
360
368
360
728
728
Average active rigs4
4
4
4
4
4
Number of active rigs at the end of
period5
4
4
4
4
4
Number of available rigs at the end of
period
7
7
7
7
7
Reimbursements of "out-of-pocket"
expenses
$
7,994
$
7,189
$
5,809
$
15,183
$
11,884
(1)
These operating metrics and financial
data, including average active rigs, are provided to allow
investors to analyze the various components of segment financial
results in terms of activity, utilization and other key results.
Management uses these metrics to analyze historical segment
financial results and as the key inputs for forecasting and
budgeting segment financial results.
(2)
Direct margin, which is considered a
non-GAAP metric, is defined as operating revenues less direct
operating expenses and is included as a supplemental disclosure
because we believe it is useful in assessing and understanding our
current operational performance, especially in making comparisons
over time. See — Non-GAAP Measurements below for a reconciliation
of segment operating income (loss) to direct margin.
(3)
Defined as the number of contractual days
we recognized revenue for during the period.
(4)
Active rigs generate revenue for the
Company; accordingly, 'average active rigs' represents the average
number of rigs generating revenue during the applicable time
period. This metric is calculated by dividing revenue days by total
days in the applicable period (i.e. 90, 92 or 182 days).
(5)
Defined as the number of rigs generating
revenue at the applicable end date of the time period.
Segment reconciliation amounts were as follows:
Three Months Ended March 31,
2023
(in thousands)
North America
Solutions
International
Solutions
Offshore Gulf of
Mexico
Other
Eliminations
Total
Operating revenue
$
675,780
$
55,890
$
34,979
$
2,573
$
—
$
769,222
Intersegment
—
—
—
17,662
(17,662
)
—
Total operating revenue
$
675,780
$
55,890
$
34,979
$
20,235
$
(17,662
)
$
769,222
Direct operating expenses
$
366,714
$
47,036
$
23,716
$
12,551
$
—
$
450,017
Intersegment
12,897
239
1,972
105
(15,213
)
—
Total drilling services & other
operating expenses
$
379,611
$
47,275
$
25,688
$
12,656
$
(15,213
)
$
450,017
Six Months Ended March 31,
2023
(in thousands)
North America
Solutions
International
Solutions
Offshore Gulf of
Mexico
Other
Eliminations
Total
Operating revenue
$
1,302,943
$
110,691
$
70,143
$
5,082
$
—
$
1,488,859
Intersegment
—
—
—
34,064
(34,064
)
—
Total operating revenue
$
1,302,943
$
110,691
$
70,143
$
39,146
$
(34,064
)
$
1,488,859
Direct operating expenses
$
718,029
$
87,737
$
47,517
$
26,111
$
—
$
879,394
Intersegment
28,437
515
3,862
134
(32,948
)
—
Total drilling services & other
operating expenses
$
746,466
$
88,252
$
51,379
$
26,245
$
(32,948
)
$
879,394
Segment operating income (loss) for all segments is a non-GAAP
financial measure of the Company’s performance, as it excludes gain
on sale of assets, corporate selling, general and administrative
expenses, corporate restructuring charges, and corporate
depreciation. The Company considers segment operating income (loss)
to be an important supplemental measure of operating performance
for presenting trends in the Company’s core businesses. This
measure is used by the Company to facilitate period-to-period
comparisons in operating performance of the Company’s reportable
segments in the aggregate by eliminating items that affect
comparability between periods. The Company believes that segment
operating income (loss) is useful to investors because it provides
a means to evaluate the operating performance of the segments and
the Company on an ongoing basis using criteria that are used by our
internal decision makers. Additionally, it highlights operating
trends and aids analytical comparisons. However, segment operating
income has limitations and should not be used as an alternative to
operating income or loss, a performance measure determined in
accordance with GAAP, as it excludes certain costs that may affect
the Company’s operating performance in future periods.
The following table reconciles operating income (loss) per the
information above to income (loss) from continuing operations
before income taxes as reported on the Unaudited Condensed
Consolidated Statements of Operations:
Three Months Ended
Six Months Ended
March 31,
December 31,
March 31,
March 31,
March 31,
(in thousands)
2023
2022
2022
2023
2022
Operating income (loss)
North America Solutions
$
182,149
$
145,297
$
1,297
$
327,446
$
(27,596
)
International Solutions
3,955
1,574
(848
)
5,529
7,201
Offshore Gulf of Mexico
6,687
6,746
5,278
13,433
10,744
Other
6,823
4,677
3,167
11,500
7,096
Eliminations
(2,267
)
2,310
(2,031
)
43
(3,313
)
Segment operating income (loss)
$
197,347
$
160,604
$
6,863
$
357,951
$
(5,868
)
Gain on reimbursement of drilling
equipment
11,574
15,724
6,448
27,298
11,702
Other gain (loss) on sale of assets
2,519
2,379
716
4,898
(313
)
Corporate selling, general and
administrative costs, corporate depreciation and corporate
restructuring charges
(36,235
)
(34,484
)
(36,644
)
(70,719
)
(70,749
)
Operating income (loss)
$
175,205
$
144,223
$
(22,617
)
$
319,428
$
(65,228
)
Other income (expense):
Interest and dividend income
5,055
4,705
3,399
9,760
5,988
Interest expense
(4,239
)
(4,355
)
(4,390
)
(8,594
)
(10,504
)
Gain (loss) on investment securities
39,752
(15,091
)
22,132
24,661
69,994
Loss on extinguishment of debt
—
—
—
—
(60,083
)
Other
(743
)
(660
)
(476
)
(1,403
)
(1,018
)
Total unallocated amounts
39,825
(15,401
)
20,665
24,424
4,377
Income (loss) from continuing operations
before income taxes
$
215,030
$
128,822
$
(1,952
)
$
343,852
$
(60,851
)
SUPPLEMENTARY STATISTICAL
INFORMATION
Unaudited
U.S. LAND RIG COUNTS &
MARKETABLE FLEET STATISTICS
April 26,
March 31,
December 31,
Q2FY23
2023
2023
2022
Average
U.S. Land Operations
Term Contract Rigs
101
101
105
103
Spot Contract Rigs
68
78
79
80
Total Contracted Rigs
169
179
184
183
Idle or Other Rigs
64
54
51
51
Total Marketable Fleet
233
233
235
234
H&P GLOBAL FLEET UNDER
TERM CONTRACT STATISTICS
Number of Rigs Already Under
Long-Term Contracts(*)
(Estimated Quarterly Average —
as of 3/31/23)
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Segment
FY23
FY23
FY24
FY24
FY24
FY24
FY25
U.S. Land Operations
97.2
84.5
59.7
39.6
34.7
27.0
12.7
International Land Operations
9.5
8.7
8.0
6.0
5.7
4.1
4.0
Offshore Operations
—
—
—
—
—
—
—
Total
106.7
93.2
67.7
45.6
40.4
31.1
16.7
(*) All of the above rig contracts have
original terms equal to or in excess of six months and include
provisions for early termination fees.
NON-GAAP MEASUREMENTS
NON-GAAP RECONCILIATION OF
SELECT ITEMS AND ADJUSTED NET INCOME(**)
Three Months Ended March 31,
2023
(in thousands, except per share data)
Pretax
Tax
Net
EPS
Net income (GAAP basis)
$
164,040
$
1.55
(-) Fair market adjustment to equity
investments
$
39,583
$
9,755
$
29,828
$
0.29
Adjusted net income
$
134,212
$
1.26
Three Months Ended December
31, 2022
(in thousands, except per share data)
Pretax
Tax
Net
EPS
Net income (GAAP basis)
$
97,145
$
0.91
(-) Impairments for fair market value
adjustments
$
(12,097
)
$
(3,049
)
$
(9,048
)
$
(0.09
)
(-) Fair market adjustment to equity
investments
$
(15,152
)
$
(3,818
)
$
(11,334
)
$
(0.11
)
Adjusted net income
$
117,527
$
1.11
(**)The Company believes identifying and
excluding select items is useful in assessing and understanding
current operational performance, especially in making comparisons
over time involving previous and subsequent periods and/or
forecasting future period results. Select items are excluded as
they are deemed to be outside of the Company's core business
operations.
NON-GAAP
RECONCILIATION OF DIRECT MARGIN
Direct margin is considered a non-GAAP metric. We define "direct
margin" as operating revenues less direct operating expenses.
Direct margin is included as a supplemental disclosure because we
believe it is useful in assessing and understanding our current
operational performance, especially in making comparisons over
time. Direct margin is not a substitute for financial measures
prepared in accordance with GAAP and should therefore be considered
only as supplemental to such GAAP financial measures.
The following table reconciles direct margin to segment
operating income (loss), which we believe is the financial measure
calculated and presented in accordance with GAAP that is most
directly comparable to direct margin..
Three Months Ended March 31,
2023
(in thousands)
North America
Solutions
International
Solutions
Offshore Gulf of
Mexico
Segment operating income
$
182,149
$
3,955
$
6,687
Add back:
Depreciation and amortization
89,070
1,652
1,904
Research and development
8,738
—
—
Selling, general and administrative
expense
16,212
3,008
700
Direct margin (Non-GAAP)
$
296,169
$
8,615
$
9,291
Three Months Ended December
31, 2022
(in thousands)
North America
Solutions
International
Solutions
Offshore Gulf of
Mexico
Segment operating income
$
145,297
$
1,574
$
6,746
Add back:
Depreciation and amortization
89,814
1,392
1,894
Research and development
7,059
—
—
Selling, general and administrative
expense
14,190
2,709
833
Asset impairment charge
3,948
8,149
—
Direct margin (Non-GAAP)
$
260,308
$
13,824
$
9,473
Three Months Ended March 31,
2022
(in thousands)
North America
Solutions
International
Solutions
Offshore Gulf of
Mexico
Segment operating income (loss)
$
1,297
$
(848
)
$
5,278
Add back:
Depreciation and amortization
95,817
1,049
2,401
Research and development
6,420
—
—
Selling, general and administrative
expense
10,883
2,050
584
Direct margin (Non-GAAP)
$
114,417
$
2,251
$
8,263
Six Months Ended March 31,
2023
(in thousands)
North America
Solutions
International
Solutions
Offshore Gulf of
Mexico
Segment operating income
$
327,446
$
5,529
$
13,433
Add back:
Depreciation and amortization
178,884
3,044
3,798
Research and development
15,797
—
—
Selling, general and administrative
expense
30,402
5,717
1,533
Asset impairment charges
3,948
8,149
—
Direct margin (Non-GAAP)
$
556,477
$
22,439
$
18,764
Six Months Ended March 31,
2022
(in thousands)
North America
Solutions
International
Solutions
Offshore Gulf of
Mexico
Segment operating income (loss)
$
(27,596
)
$
7,201
$
10,744
Add back:
Depreciation and amortization
189,438
1,804
4,781
Research and development
12,988
—
—
Selling, general and administrative
expense
21,712
3,779
1,341
Asset impairment charges
1,868
2,495
—
Restructuring charges
473
—
—
Direct margin (Non-GAAP)
$
198,883
$
15,279
$
16,866
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230426005121/en/
Dave Wilson, Vice President of Investor Relations
investor.relations@hpinc.com (918) 588‑5190
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