July 24, 2019 - 5:00 PM EDT
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Helmerich & Payne, Inc. Announces Third Quarter Fiscal 2019 Results

TULSA, Okla.

  • Quarterly U.S. Land adjusted average rig revenue increased by more than $495(1) per day, up approximately 2% sequentially
  • Quarterly U.S. Land adjusted average rig margin decreased by approximately $170(1) per day, down roughly 2% sequentially
  • H&P upgraded 2 FlexRigs® to super-spec(2) capacity during the third fiscal quarter of 2019 and received multi-year term contracts with attractive pricing
  • The Company incurred a non-cash impairment charge of $224 million related to excess drilling equipment and spares, primarily driven by the reduction of 53 rigs within our FlexRig4 fleet during the quarter
  • The Company sent its first super-spec FlexRig to Argentina and has a letter of intent to deploy a second super-spec FlexRig into the country with a different customer
  • H&P's drilling automation technology, AutoSlideSM, has been commercially deployed in four U.S. shale basins, with the next deployment scheduled during the fourth fiscal quarter
  • On June 5, 2019, Directors of the Company declared a quarterly cash dividend of $0.71 per share

Helmerich & Payne, Inc. (NYSE:HP) reported a net loss of $155 million or $(1.42) per diluted share from operating revenues of $688 million for the quarter ended June 30, 2019, compared to income of $61 million, or $0.55 per diluted share, on revenues of $721 million for the quarter ended March 31, 2019. The net loss per diluted share for the third fiscal quarter and the net income for second fiscal quarter include $(1.82) and $(0.01), respectively, of after-tax losses comprised of select items(3). For the third fiscal quarter select items(3) were comprised of:

  • $0.15 of after-tax gains pertaining to early termination compensation, gains on sales, and discrete tax adjustments
  • $(1.97) of after-tax losses pertaining to impairments of drilling equipment and spares mainly driven by the downsizing of the Flex4 rig fleet, inventory write-downs, abandonments and accelerated depreciation, and a non-cash fair market adjustment to our equity investments

Net cash provided by operating activities was $250 million for the third quarter of fiscal 2019 compared to $200 million for the second fiscal quarter of fiscal 2019.

President and CEO John Lindsay commented, “The industry saw further softening in U.S. drilling activity resulting from a combination of crude oil price volatility and budget discipline by our customers. Against this backdrop, H&P produced solid quarterly operating results and maintained FlexRig super-spec utilization close to 90% during the quarter.

“Our expectation of seeing the bottom of the Company’s rig count during the quarter turned out to be premature as the full effect of the industry’s emphasis on disciplined capital spending continues to reverberate through the oil field services sector. As such, H&P exited the quarter in the U.S. with 214 active rigs, which was slightly below the low end of our guidance range. We are reluctant to predict another bottom and see further softening during our fourth fiscal quarter as our guidance would indicate. That said, the U.S. land industry super-spec utilization is close to 90%, and pricing remains firm for the best-in-class fleet.

“We believe this market environment, with its renewed emphasis on spending discipline and returns, is ideal for demonstrating the benefits of H&P’s software solutions and the meaningful impact these technologies have on well economics through enhanced wellbore quality and placement. AutoSlide, H&P’s drilling automation technology, has been deployed commercially in four U.S. shale basins; the Midland, the Eagle Ford, Scoop/Stack and the Bakken. The Company anticipates introducing this technology to the Delaware Basin later this fiscal year. Additionally, the adoption of our FlexApps continues as customers see the value of these technologies as demonstrated by their requests to use them on non-H&P rigs. Our preparation to respond to this type of demand includes migrating our FlexApp offerings into our H&P Technologies (HPT) business segment and developing rig-neutral solutions to operate the software on non-H&P rigs.

“Our leadership position in the U.S. unconventional basins with FlexRigs and software solutions is allowing us to gain more traction in international markets. The Company saw a pick-up in activity in Bahrain and now has two active rigs. Last quarter we announced a contract to deliver our first super-spec rig into Argentina, and we expect it to commence operations in the fourth fiscal quarter. An additional letter of intent was signed to send a second super-spec FlexRig from the U.S. to Argentina to drill in the Vaca Muerta basin.”

Vice President and CFO Mark Smith also commented, “Despite the lower than expected activity in the U.S. during the quarter, H&P still performed well, generating $250 million in cash flow from operations. During the quarter, we also concluded an extensive evaluation of our Flex4 rig fleet and the expected future utilization of the related drilling equipment and spares on hand. This assessment resulted in downsizing the FlexRig4 fleet and non-cash impairment charges of approximately $225 million.

"It is important to point out three considerations regarding our Flex4 fleet. First, the Flex4 designed rigs are not currently economical candidates for upgrades or conversions to super-spec. Second, H&P started building these rigs in 2005 and has already received its full investment payback as well as generated excess returns over our internal hurdle rate on the Flex4 fleet. Third, over the next few quarters we anticipate realizing over $1.5 million or roughly $25-50 per revenue day in permanent cash cost savings resulting from the reduced costs associated with the decommissioned FlexRig4s as they are removed from the H&P fleet.

"We are pleased with H&P’s cash flow generation this quarter driven by healthy pricing levels and contractual terms as well as improvements in working capital management. Looking forward, our strong financial position and operating cash flow generation combined with our capex discipline, sets the Company up to deliver high levels of free cash flows.”

John Lindsay concluded, “H&P remains well positioned with the largest fleet of super-spec rigs and software solutions that provide improved wellbore quality and placement to deliver economic value. We believe we have the people, the rig fleet and the technology solutions to provide superior value for our customers and to achieve mutual, long-term success in this changing industry climate."

Operating Segment Results for the Third Quarter of Fiscal 2019

U.S. Land Operations:

Segment operating income decreased by $244.3 million to a loss of $138.2 million sequentially. The decrease in operating results was primarily attributable to the impairment of drilling equipment and spares mainly driven by the downsizing of the Flex4 rig fleet, sequential decreases in revenue days and the adjusted average rig margin per day. The number of quarterly revenue days decreased sequentially by approximately 7%.

Adjusted average rig revenue per day improved by $498 to $26,122(1) largely due to increased contributions from FlexApps and a slight increase in the average dayrate during the quarter.

The adjusted average rig expense per day increased sequentially by $667 to $14,862(1) as the quarter was impacted by unfavorable adjustments to self-insurance expenses compared to the prior quarter that benefited from favorable adjustments to self-insurance expenses. Corresponding adjusted average rig margin per day decreased $169 to $11,260(1).

The segment’s depreciation expense for the quarter includes non-cash charges of $2.1 million for abandonments and accelerated depreciation of used drilling rig components related to rig upgrades, compared to similar non-cash charges of $5.3 million during the second fiscal quarter of 2019.

International Land Operations:

Segment operating income decreased by $13.0 million to a loss of $5.0 million sequentially. The decrease in operating income was primarily attributable to an impairment of drilling equipment and spares driven by the downsizing of the Flex4 rig fleet, sequential decreases in revenue days, and start-up costs for rigs in Argentina and Bahrain. Revenue days decreased during the quarter by 3% to 1,510 while the adjusted average rig margin per day decreased by $3,957 to $7,904(1).

Offshore Operations:

Segment operating income increased by $0.5 million to $5.1 million sequentially. The number of quarterly revenue days on H&P-owned platform rigs increased sequentially by approximately 1%, while the average rig margin per day increased sequentially by $7,001 to $12,421 primarily due to higher margin work during the quarter. Segment operating income from management contracts on customer-owned platform rigs contributed approximately $2.0 million, compared to approximately $4.7 million during the prior quarter.

H&P Technologies:

The segment had an operating loss of $8.8 million this quarter as compared to an operating loss of $7.9 million during the previous quarter. The $0.9 million sequential increase in the operating loss was due primarily to lower revenues associated with the lower industry rig count.

Operational Outlook for the Fourth Quarter of Fiscal 2019

U.S. Land Operations:

  • Quarterly revenue days expected to decrease by approximately 5%-6% sequentially representing a roughly 6%-7% decrease in the average number of active rigs; we expect to exit the quarter at between 193-203 active rigs
  • Average rig revenue per day expected to be down slightly to between $25,250-$25,750 (excluding any impact from early termination revenue) with the primary cause of the decline relating to FlexApps now being included in HPT revenues in the fourth fiscal quarter
  • Average rig expense per day expected to be between $14,350-$14,850
  • We expect to upgrade 1-2 FlexRigs to walking super-spec capabilities during the quarter

International Land Operations:

  • Quarterly revenue days expected to increase slightly, representing an average rig count of 17-18 rigs for the quarter
  • Average rig margin per day expected to be flat at $7,500-$8,500 due to rig start-up and mobilization costs

Offshore Operations:

  • Quarterly revenue days expected to increase by approximately 1% sequentially, representing an average rig count of 6 rigs for the quarter
  • Average rig margin per day expected to be flat at $12,000-$13,000
  • Management contracts expected to generate approximately $2 million in operating income

HP Technologies:

  • Fiscal fourth quarter revenue, inclusive of FlexApps, is expected to be between $17-$19 million

Other Estimates for Fiscal 2019

  • Capital expenditures are now expected to be at the lower end of our previous range of approximately $500 to $530 million with roughly 35% expected for super-spec upgrades, 33-38% expected for maintenance and 27-32% expected for continued reactivations and other bulk purchases.
  • Depreciation is now expected to be approximately $565 million, inclusive of abandonment and accelerated depreciation charges estimated at approximately $15 million.

Select Items Included in Net Income per Diluted Share

Third Quarter of Fiscal 2019 net loss of $(1.42) per diluted share included $(1.82) in after-tax losses comprised of the following:

  • $0.01 of after-tax income from long-term contract early termination compensation from customers
  • $0.06 of income tax adjustments related to certain discrete tax items
  • $0.08 of after-tax gains related to the sale of used drilling equipment
  • $(0.02) of non-cash after-tax losses from abandonment charges and accelerated depreciation related to the decommissioning of used drilling equipment
  • $(0.06) of non-cash after-tax losses from inventory write-downs, some of which result from the downsizing of the Flex4 rig fleet
  • $(0.11) of non-cash after-tax losses related to the fair market adjustment of equity investments
  • $(1.78) of non-cash after-tax losses from impairments of drilling equipment and spares driven by the downsizing of the Flex4 rig fleet

Second Quarter of Fiscal 2019 net income of $0.55 per diluted share included $(0.01) in after-tax losses comprised of the following:

  • $0.01 of after-tax income from long-term contract early termination compensation from customers
  • $0.04 of non-cash after-tax gains related to the fair market adjustment of equity investments
  • $0.08 of after-tax gains related to the sale of used drilling equipment
  • $(0.04) of non-cash after-tax losses from abandonment charges and accelerated depreciation related to the decommissioning of used drilling equipment
  • $(0.10) of non-cash after-tax losses from discontinued operations related to adjustments resulting from currency fluctuations

Conference Call

A conference call will be held on Thursday, July 25, 2019 at 11:00 a.m. (EDT) with John Lindsay, President and CEO, Mark Smith, Vice President and CFO, and Dave Wilson, Director of Investor Relations to discuss the Company’s fiscal third quarter 2019 results. Dial-in information for the conference call is (866) 342-8591 for domestic callers or (203) 518-9713 for international callers. The call access code is ‘Helmerich’. You may also listen to the conference call that will be broadcast live over the Internet by logging on to the Company’s website at http://www.hpinc.com and accessing the corresponding link through the Investor Relations section by clicking on “INVESTORS” and then clicking on “Event Calendar” to find the event and the link to the webcast.

About Helmerich & Payne, Inc.

Founded in 1920, Helmerich & Payne, Inc. (H&P) (NYSE: HP) is committed to delivering industry leading levels of drilling productivity and reliability. H&P operates with the highest level of integrity, safety and innovation to deliver superior results for its customers and returns for shareholders. Through its subsidiaries, the Company designs, fabricates and operates high-performance drilling rigs in conventional and unconventional plays around the world. H&P also develops and implements advanced automation, directional drilling and survey management technologies. H&P’s fleet includes 299 land rigs in the U.S., 31 international land rigs and eight offshore platform rigs. For more information, see H&P online at www.hpinc.com.

Forward-Looking Statements

This release includes “forward-looking statements” within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, and such statements are based on current expectations and assumptions that are subject to risks and uncertainties. All statements other than statements of historical facts included in this release, including, without limitation, statements regarding the registrant’s future financial position, operations outlook, business strategy, budgets, projected costs and plans and objectives of management for future operations, are forward-looking statements. For information regarding risks and uncertainties associated with the Company’s business, please refer to the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of the Company’s SEC filings, including but not limited to its annual report on Form 10‑K and quarterly reports on Form 10‑Q. As a result of these factors, Helmerich & Payne, Inc.’s actual results may differ materially from those indicated or implied by such forward-looking statements. We undertake no duty to update or revise our forward-looking statements based on changes in internal estimates, expectations or otherwise, except as required by law.


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, FlexApp and AutoSlide, which may be registered or trademarked in the U.S. and other jurisdictions.

(1) See the Selected Statistical & Operational Highlights table(s) for details on the revenues or charges excluded on a per revenue day basis. The inclusion or exclusion of these amounts results in adjusted revenue, expense, and/or margin per day figures, which are all non-GAAP measures.

(2) The term “super-spec” herein refers to rigs with the following specifications: AC drive, 1,500 hp drawworks, 750,000 lbs. hookload rating, 7,500 psi mud circulating system and multiple-well pad capability.

(3) See the corresponding section of this release for details regarding the select items.

HELMERICH & PAYNE, INC.

(Unaudited)

(in thousands, except per share data)

 

Three Months Ended

 

Nine Months Ended

 

June 30,

 

March 31,

 

June 30,

 

June 30,

 

2019

 

2019

 

2018

 

2019

 

2018

CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

 

 

 

As adjusted

 

 

 

As adjusted

Operating revenues

 

 

 

 

 

 

 

 

 

Contract drilling

$

 

684,788

 

 

$

 

717,653

 

 

$

 

637,548

 

 

$

 

2,139,798

 

 

$

 

1,763,939

 

Other

 

3,186

 

 

 

3,215

 

 

 

11,324

 

 

 

9,642

 

 

 

26,504

 

 

 

687,974

 

 

 

720,868

 

 

 

648,872

 

 

 

2,149,440

 

 

 

1,790,443

 

Operating costs and expenses

 

 

 

 

 

 

 

 

 

Contract drilling operating expenses, excluding depreciation and amortization

 

443,114

 

 

 

441,719

 

 

 

443,087

 

 

 

1,372,426

 

 

 

1,199,422

 

Operating expenses applicable to other revenues

 

1,414

 

 

 

1,620

 

 

 

1,424

 

 

 

4,308

 

 

 

3,728

 

Depreciation and amortization

 

143,297

 

 

 

143,161

 

 

 

144,579

 

 

 

427,917

 

 

 

433,521

 

Asset impairment charge

 

224,327

 

 

 

 

 

 

 

224,327

 

 

 

Research and development

 

7,066

 

 

 

7,262

 

 

 

5,479

 

 

 

21,347

 

 

 

13,149

 

Selling, general and administrative

 

46,590

 

 

 

43,506

 

 

 

52,310

 

 

 

144,604

 

 

 

147,005

 

Gain on sale of assets

 

(9,960

)

 

 

(11,546

)

 

 

(4,313

)

 

 

(27,050

)

 

 

(15,133

)

 

 

855,848

 

 

 

625,722

 

 

 

642,566

 

 

 

2,167,879

 

 

 

1,781,692

 

Operating income (loss) from continuing operations

 

(167,874

)

 

 

95,146

 

 

 

6,306

 

 

 

(18,439

)

 

 

8,751

 

Other income (expense)

 

 

 

 

 

 

 

 

 

Interest and dividend income

 

2,349

 

 

 

2,061

 

 

 

2,109

 

 

 

6,861

 

 

 

5,680

 

Interest expense

 

(6,257

)

 

 

(6,167

)

 

 

(5,993

)

 

 

(17,145

)

 

 

(17,794

)

Gain (loss) on investment securities

 

(13,271

)

 

 

5,878

 

 

 

 

 

(50,228

)

 

 

Other

 

(1,599

)

 

 

17

 

 

 

(61

)

 

 

(1,051

)

 

 

170

 

 

 

(18,778

)

 

 

1,789

 

 

 

(3,945

)

 

 

(61,563

)

 

 

(11,944

)

Income (loss) from continuing operations before income taxes

 

(186,652

)

 

 

96,935

 

 

 

2,361

 

 

 

(80,002

)

 

 

(3,193

)

Income tax provision (benefit)

 

(32,031

)

 

 

25,078

 

 

 

10,535

 

 

 

(5,602

)

 

 

(494,028

)

Income (loss) from continuing operations

 

(154,621

)

 

 

71,857

 

 

 

(8,174

)

 

 

(74,400

)

 

 

490,835

 

Income from discontinued operations before income taxes

 

7,244

 

 

 

2,889

 

 

 

8,383

 

 

 

22,798

 

 

 

9,127

 

Income tax provision

 

7,306

 

 

 

13,855

 

 

 

8,217

 

 

 

23,231

 

 

 

19,743

 

Income (loss) from discontinued operations

 

(62

)

 

 

(10,966

)

 

 

166

 

 

 

(433

)

 

 

(10,616

)

Net income (loss)

$

 

(154,683

)

 

$

 

60,891

 

 

$

 

(8,008

)

 

$

 

(74,833

)

 

$

 

480,219

 

Basic earnings (loss) per common share:

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

$

 

(1.42

)

 

$

 

0.65

 

 

$

 

(0.08

)

 

$

 

(0.71

)

 

$

 

4.47

 

Loss from discontinued operations

$

 

 

 

$

 

(0.10

)

 

$

 

 

 

$

 

 

 

$

 

(0.10

)

Net income (loss)

$

 

(1.42

)

 

$

 

0.55

 

 

$

 

(0.08

)

 

$

 

(0.71

)

 

$

 

4.37

 

Diluted earnings (loss) per common share:

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

$

 

(1.42

)

 

$

 

0.65

 

 

$

 

(0.08

)

 

$

 

(0.71

)

 

$

 

4.45

 

Loss from discontinued operations

$

 

 

 

$

 

(0.10

)

 

$

 

 

 

$

 

 

 

$

 

(0.10

)

Net income (loss)

$

 

(1.42

)

 

$

 

0.55

 

 

$

 

(0.08

)

 

$

 

(0.71

)

 

$

 

4.35

 

Weighted average shares outstanding (in thousands):

 

 

 

 

 

 

 

 

 

Basic

 

109,425

 

 

 

109,406

 

 

 

108,905

 

 

 

109,324

 

 

 

108,818

 

Diluted

 

109,425

 

 

 

109,503

 

 

 

108,905

 

 

 

109,324

 

 

 

109,338

 


“As Adjusted” – Effective October 1, 2018, we adopted Accounting Standards Update No. 2017-07, Compensation-Retirement Benefits – (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The statement of operations for the three and nine months ended June 30, 2018 have been adjusted to reflect changes that were applied retrospectively from that adoption.

HELMERICH & PAYNE, INC.

(Unaudited)

(in thousands)

 

June 30,

 

September 30,

CONDENSED CONSOLIDATED BALANCE SHEETS

2019

 

2018

Assets

 

 

 

Cash and cash equivalents

$

 

334,775

 

 

$

 

284,355

 

Short-term investments

 

45,748

 

 

 

41,461

 

Other current assets

 

735,715

 

 

 

789,734

 

Total current assets

 

1,116,238

 

 

 

1,115,550

 

Investments

 

48,291

 

 

 

98,696

 

Property, plant and equipment, net

 

4,583,673

 

 

 

4,857,382

 

Other noncurrent assets

 

149,177

 

 

 

143,239

 

Total Assets

$

 

5,897,379

 

 

$

 

6,214,867

 

 

 

 

 

Liabilities and Shareholders' Equity

 

 

 

Current liabilities

$

 

390,526

 

 

$

 

377,168

 

Long-term debt, net of debt issuance costs

 

491,651

 

 

 

493,968

 

Other noncurrent liabilities

 

905,517

 

 

 

946,742

 

Noncurrent liabilities - discontinued operations

 

14,631

 

 

 

14,254

 

Total shareholders’ equity

 

4,095,054

 

 

 

4,382,735

 

Total Liabilities and Shareholders' Equity

$

 

5,897,379

 

 

$

 

6,214,867

 

HELMERICH & PAYNE, INC.

(Unaudited)

(in thousands)

 

Nine Months Ended June 30,

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

2019

 

2018

 

 

 

As adjusted

OPERATING ACTIVITIES:

 

 

 

Net income (loss)

$

(74,833

)

 

$

480,219

 

Adjustment for loss from discontinued operations

433

 

 

10,616

 

Income (loss) from continuing operations

(74,400

)

 

490,835

 

Depreciation and amortization

427,917

 

 

433,521

 

Asset impairment charge

224,327

 

 

 

Amortization of debt discount and debt issuance costs

1,176

 

 

798

 

Provision for bad debt

544

 

 

598

 

Stock-based compensation

25,467

 

 

23,472

 

Loss on investment securities

50,228

 

 

 

Gain on sale of assets

(27,050

)

 

(15,133

)

Deferred income tax benefit

(25,503

)

 

(498,491

)

Other

5,356

 

 

3,735

 

Changes in assets and liabilities

51,365

 

 

(67,757

)

Net cash provided by operating activities from continuing operations

659,427

 

 

371,578

 

Net cash used in operating activities from discontinued operations

(56

)

 

(150

)

Net cash provided by operating activities

659,371

 

 

371,428

 

 

 

 

 

INVESTING ACTIVITIES:

 

 

 

Capital expenditures

(403,570

)

 

(322,658

)

Purchase of short-term investments

(71,852

)

 

(52,159

)

Payment for acquisition of business, net of cash acquired

(2,781

)

 

(47,886

)

Proceeds from sale of short-term investments

68,015

 

 

52,470

 

Proceeds from asset sales

36,227

 

 

28,049

 

Net cash used in investing activities

(373,961

)

 

(342,184

)

 

 

 

 

FINANCING ACTIVITIES:

 

 

 

Dividends paid

(235,058

)

 

(230,368

)

Debt issuance costs paid

(3,912

)

 

 

Proceeds from stock option exercises

2,901

 

 

5,160

 

Payments for employee taxes on net settlement of equity awards

(6,420

)

 

(5,978

)

Payment of contingent consideration from acquisition of business

 

 

(10,625

)

Net cash used in financing activities

(242,489

)

 

(241,811

)

 

 

 

 

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

42,921

 

 

(212,567

)

Cash and cash equivalents and restricted cash, beginning of period

326,185

 

 

560,509

 

Cash and cash equivalents and restricted cash, end of period

$

369,106

 

 

$

347,942

 


“As Adjusted” – Effective October 1, 2018, we adopted Accounting Standards Update No. 2016-18, Statement of Cash Flows – (Topic 230): Restricted Cash and Accounting Standards Update No. 2016-15, Statement of Cash Flows – (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The cash flow statement for the nine months ended June 30, 2018 has been adjusted to reflect changes that were applied retrospectively from those adoptions.

 

Three Months Ended

 

Nine Months Ended

 

June 30,

 

March 31,

 

June 30,

 

June 30,

SEGMENT REPORTING (in thousands)

2019

 

2019

 

2018

 

2019

 

2018

 

 

U.S. LAND OPERATIONS

 

 

 

 

 

 

 

 

 

Operating revenues

$

591,455

 

 

$

622,204

 

 

$

536,582

 

 

$

1,837,900

 

 

$

1,480,951

 

Direct operating expenses

374,097

 

 

377,984

 

 

362,037

 

 

1,160,887

 

 

978,789

 

Research and development

165

 

 

 

 

 

 

165

 

 

 

Selling, general and administrative expense

11,450

 

 

11,169

 

 

14,788

 

 

34,276

 

 

42,792

 

Depreciation

127,040

 

 

126,912

 

 

125,418

 

 

378,062

 

 

373,211

 

Asset impairment charge

216,908

 

 

 

 

 

 

216,908

 

 

 

Segment operating income (loss)

$

(138,205

)

 

$

106,139

 

 

$

34,339

 

 

$

47,602

 

 

$

86,159

 

 

 

 

 

 

 

 

 

 

 

Revenue days

19,846

 

 

21,262

 

 

19,917

 

 

63,040

 

 

56,946

 

Average rig revenue per day

$

26,155

 

 

$

25,681

 

 

$

23,698

 

 

$

25,686

 

 

$

23,027

 

Average rig expense per day

$

15,202

 

 

$

14,195

 

 

$

14,934

 

 

$

14,947

 

 

$

14,209

 

Average rig margin per day

$

10,953

 

 

$

11,486

 

 

$

8,764

 

 

$

10,739

 

 

$

8,818

 

Rig utilization

62

%

 

67

%

 

63

%

 

66

%

 

60

%

 

 

 

 

 

 

 

 

 

 

INTERNATIONAL LAND OPERATIONS

 

 

 

 

 

 

 

 

 

Operating revenues

$

46,283

 

 

$

50,808

 

 

$

63,297

 

 

$

163,378

 

 

$

178,970

 

Direct operating expenses

34,146

 

 

33,051

 

 

46,810

 

 

114,736

 

 

132,796

 

Selling, general and administrative expense

1,150

 

 

794

 

 

995

 

 

4,225

 

 

2,959

 

Depreciation

8,591

 

 

8,995

 

 

11,160

 

 

27,423

 

 

36,044

 

Asset impairment charge

7,419

 

 

 

 

 

 

7,419

 

 

 

Segment operating income (loss)

$

(5,023

)

 

$

7,968

 

 

$

4,332

 

 

$

9,575

 

 

$

7,171

 

 

 

 

 

 

 

 

 

 

 

Revenue days

1,510

 

 

1,559

 

 

1,762

 

 

4,828

 

 

4,878

 

Average rig revenue per day

$

29,669

 

 

$

31,130

 

 

$

33,941

 

 

$

32,285

 

 

$

34,919

 

Average rig expense per day

$

21,650

 

 

$

19,269

 

 

$

23,947

 

 

$

21,261

 

 

$

24,941

 

Average rig margin per day

$

8,019

 

 

$

11,861

 

 

$

9,994

 

 

$

11,024

 

 

$

9,978

 

Rig utilization

51

%

 

54

%

 

51

%

 

55

%

 

47

%

 

 

 

 

 

 

 

 

 

 

OFFSHORE OPERATIONS

 

 

 

 

 

 

 

 

 

Operating revenues

$

37,674

 

 

$

34,583

 

 

$

37,669

 

 

$

109,167

 

 

$

104,018

 

Direct operating expenses

28,869

 

 

26,984

 

 

30,146

 

 

82,158

 

 

74,863

 

Selling, general and administrative expense

1,145

 

 

805

 

 

1,126

 

 

2,719

 

 

3,397

 

Depreciation

2,582

 

 

2,263

 

 

2,617

 

 

7,512

 

 

7,804

 

Segment operating income

$

5,078

 

 

$

4,531

 

 

$

3,780

 

 

$

16,778

 

 

$

17,954

 

 

 

 

 

 

 

 

 

 

 

Revenue days

546

 

 

540

 

 

574

 

 

1,611

 

 

1,484

 

Average rig revenue per day

$

39,643

 

 

$

31,361

 

 

$

35,293

 

 

$

35,561

 

 

$

34,924

 

Average rig expense per day

$

27,222

 

 

$

25,941

 

 

$

30,607

 

 

$

26,276

 

 

$

26,394

 

Average rig margin per day

$

12,421

 

 

$

5,420

 

 

$

4,686

 

 

$

9,285

 

 

$

8,530

 

Rig utilization

75

%

 

75

%

 

79

%

 

74

%

 

68

%

 

 

 

 

 

 

 

 

 

 

H&P TECHNOLOGIES

 

 

 

 

 

 

 

 

 

Operating revenues

$

9,376

 

 

$

10,141

 

 

$

7,693

 

 

$

29,353

 

 

$

16,842

 

Direct operating expenses

6,357

 

 

4,214

 

 

4,500

 

 

15,859

 

 

14,105

 

Research and development

4,801

 

 

7,262

 

 

5,479

 

 

19,082

 

 

13,149

 

Selling, general and administrative expense

5,204

 

 

4,782

 

 

5,071

 

 

16,085

 

 

10,889

 

Depreciation and amortization

1,824

 

 

1,816

 

 

1,695

 

 

5,415

 

 

5,099

 

Segment operating loss

$

(8,810

)

 

$

(7,933

)

 

$

(9,052

)

 

$

(27,088

)

 

$

(26,400

)

Operating statistics exclude the effects of offshore platform management contracts and gains and losses from translation of foreign currency transactions and do not include reimbursements of “out-of-pocket” expenses in revenue per day, expense per day and margin calculations.

Reimbursed amounts were as follows:

 

Three Months Ended

 

Nine Months Ended

 

June 30,

 

March 31,

 

June 30,

 

June 30,

 

2019

 

2019

 

2018

 

2019

 

2018

U.S. Land Operations

$

72,386

 

 

$

76,172

 

 

$

64,587

 

 

$

218,648

 

 

$

169,652

 

International Land Operations

1,483

 

 

2,277

 

 

3,492

 

 

7,506

 

 

8,634

 

Offshore Operations

7,277

 

 

5,507

 

 

5,057

 

 

18,534

 

 

14,354

 

Segment operating income for all segments is a non-GAAP financial measure of the Company’s performance, as it excludes general and administrative expenses, corporate depreciation, income from asset sales, and other corporate income and expense. The Company considers segment operating income to be an important supplemental measure of operating performance for presenting trends in the Company’s core businesses. This measure is used by the Company to facilitate period-to-period comparisons in operating performance of the Company’s reportable segments in the aggregate by eliminating items that affect comparability between periods. The Company believes that segment operating income is useful to investors because it provides a means to evaluate the operating performance of the segments and the Company on an ongoing basis using criteria that are used by our internal decision makers. Additionally, it highlights operating trends and aids analytical comparisons. However, segment operating income has limitations and should not be used as an alternative to operating income or loss, a performance measure determined in accordance with GAAP, as it excludes certain costs that may affect the Company’s operating performance in future periods.

The following table reconciles operating income (loss) per the information above to income (loss) from continuing operations before income taxes as reported on the Consolidated Statements of Operations.

 

Three Months Ended

 

Nine Months Ended

 

June 30,

 

March 31,

 

June 30,

 

June 30,

(in thousands)

2019

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

As adjusted

 

 

 

As adjusted

Operating income (loss)

 

 

 

 

 

 

 

 

 

U.S. Land

$

(138,205

)

 

$

106,139

 

 

$

34,339

 

 

$

47,602

 

 

$

86,159

 

International Land

(5,023

)

 

7,968

 

 

4,332

 

 

9,575

 

 

7,171

 

Offshore

5,078

 

 

4,531

 

 

3,780

 

 

16,778

 

 

17,954

 

H&P Technologies

(8,810

)

 

(7,933

)

 

(9,052

)

 

(27,088

)

 

(26,400

)

Other

(731

)

 

1,165

 

 

1,826

 

 

1,988

 

 

4,842

 

Segment operating income (loss)

$

(147,691

)

 

$

111,870

 

 

$

35,225

 

 

$

48,855

 

 

$

89,726

 

Gain on sale of assets

9,960

 

 

11,546

 

 

4,313

 

 

27,050

 

 

15,133

 

Corporate selling, general and administrative costs and corporate depreciation

(30,143

)

 

(28,270

)

 

(33,232

)

 

(94,344

)

 

(96,108

)

Operating income (loss)

$

(167,874

)

 

$

95,146

 

 

$

6,306

 

 

$

(18,439

)

 

$

8,751

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

Interest and dividend income

2,349

 

 

2,061

 

 

2,109

 

 

6,861

 

 

5,680

 

Interest expense

(6,257

)

 

(6,167

)

 

(5,993

)

 

(17,145

)

 

(17,794

)

Gain (loss) on investment securities

(13,271

)

 

5,878

 

 

 

 

(50,228

)

 

 

Other

(1,599

)

 

17

 

 

(61

)

 

(1,051

)

 

170

 

Total unallocated amounts

(18,778

)

 

1,789

 

 

(3,945

)

 

(61,563

)

 

(11,944

)

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations before income taxes

$

(186,652

)

 

$

96,935

 

 

$

2,361

 

 

$

(80,002

)

 

$

(3,193

)


“As Adjusted” – Effective October 1, 2018, we implemented organizational changes, consistent with the manner in which our chief operating decision maker evaluates performance and allocates resources. Certain operations previously reported in “other” within our segment disclosures are now managed and presented within the new H&P Technologies reportable segment. All segment disclosures have been recast for these segment changes. Additionally, effective October 1, 2018, we adopted Accounting Standards Update No. 2017-07, Compensation-Retirement Benefits – (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. Operating results for the three and nine months ended June 30, 2019 have been adjusted to reflect changes that were applied retrospectively from that adoption.

SUPPLEMENTARY STATISTICAL INFORMATION

Unaudited

 

SELECTED STATISTICAL & OPERATIONAL HIGHLIGHTS

(Used to determine adjusted per day statistics for revenue and expense, which are non-GAAP measures)

 

Three Months Ended

(in dollars per revenue day)

June 30, 2019

 

March 31, 2019

U.S. Land Operations

 

 

 

Total impact on U.S. Land revenue per day:

$

 

33

 

 

$

 

57

 

Total impact on U.S. Land expense per day:

 

340

 

 

0

International Land Operations

 

 

 

Total impact on International Land revenue per day:

$

 

115

 

 

$

 

0

 

U.S. LAND RIG COUNTS & MARKETABLE FLEET STATISTICS

 

July 24,

 

June 30,

 

March 31,

 

Q3FY19

 

2019

 

2019

 

2019

 

Average

U.S. Land Operations

 

 

 

 

 

 

 

Term Contract Rigs

138

 

 

143

 

 

146

 

 

142.4

 

Spot Contract Rigs

69

 

 

71

 

 

80

 

 

75.7

 

Total Contracted Rigs

207

 

 

214

 

 

226

 

 

218.1

 

Idle or Other Rigs

92

 

 

85

 

 

124

 

 

131.9

 

Total Marketable Fleet

299

 

 

299

 

 

350

 

 

350.0

 

H&P GLOBAL FLEET UNDER TERM CONTRACT STATISTICS

Number of Rigs Already Under Long-Term Contracts(1)

 

(Estimated Quarterly Average — as of 07/24/19)

 

 

Q4

 

Q1

 

Q2

 

Q3

 

Q4

 

Q1

 

Q2

Segment

FY19

 

FY20

 

FY20

 

FY20

 

FY20

 

FY21

 

FY21

U.S. Land Operations

137.9

 

 

120.6

 

 

91.7

 

 

76.5

 

 

62.1

 

 

44.1

 

 

18.9

 

International Land Operations

11.7

 

 

11.0

 

 

7.2

 

 

2.1

 

 

1.0

 

 

1.0

 

 

1.0

 

Offshore Operations

0.0

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

149.6

 

 

131.6

 

 

98.9

 

 

78.6

 

 

63.1

 

 

45.1

 

 

19.9

 

 


(1) All of the above rig contracts have original terms equal to or in excess of six months and include provisions for early termination fees.

Dave Wilson, Director of Investor Relations
[email protected]
(918) 5885190


Source: Business Wire (July 24, 2019 - 5:00 PM EDT)

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