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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Helmerich and Payne Inc | NYSE:HP | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.29 | 0.75% | 39.02 | 39.25 | 38.515 | 38.79 | 752,900 | 23:46:34 |
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:
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:
International Solutions:
Offshore Gulf of Mexico:
Other Estimates for Fiscal Year 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:
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:
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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