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Helmerich & Payne, Inc. Announces Fiscal Second Quarter Results
$0.03 of after-tax gains related to the non-cash fair market value adjustments to our equity investments $(0.03) of after-tax losses related to research and development expenses associated with an asset acquisition
Net cash provided by operating activities was $144 million for the second quarter of fiscal year 2024 compared to net cash provided by operating activities of $175 million for the first quarter of fiscal year 2024.
President and CEO John Lindsay commented, "Fiscal second quarter results are reflective of the Company's continual focus on commercial economics through value delivery in our North America Solutions segment. The direct margins we have been generating in what has been, and continues to be, a somewhat choppy North America Solutions market are a testament to the value creation we provide for our customers. From our perspective, there has been a pronounced and necessary shift in the industry's historical behavior, that is moving its fiscal foundation toward a more sustainable and investable future. Along those lines, we are extremely pleased with the announcement we made during the quarter regarding expanding our presence in the Middle East, with the finalization of the contractual terms with Saudi Aramco for a seven-rig tender award.
"In the U.S. market, contractual churn is still prevalent and pushed our rig count just below the projected exit rate late in the quarter. This churn has been a product of the volatility created by a weaker natural gas market, some recent E&P consolidations, and a variety of other factors. Some of this natural gas volatility is reminiscent of this time last year; however, we believe the impact on our overall activity will be less this year going forward. That said, we do expect the underlying factors causing the churn in the market currently to persist resulting in what we expect to be a fairly stable outlook for our rig count through the third fiscal quarter. Furthermore, we expect stability and resiliency in our direct margins on a per day basis as well. We will remain focused on direct margins and believe the consistent and reliable drilling outcomes we provide to customers is what ultimately drives our market share.
"Regarding the International Solutions segment, our first rig awarded by Saudi Aramco last August is expected to arrive and commence operations later this summer. For the more recent seven-rig tender award, preparations are ongoing from both a rig and operational perspective with expectations that a majority of these rigs will arrive in Saudi Arabia during the fourth calendar quarter of 2024, and commence operations shortly thereafter. During these preparations we will continue to spend our 2024 budgeted capex towards this project and incur start-up operational expenses, which may disproportionately impact near-term international segment margins. We are looking forward to working with Saudi Aramco and believe we are at the beginning of a longer-term presence in the region. The Company's other international operations in South America and Australia are expected to remain relatively stable over the next quarter, as well as our Offshore Gulf of Mexico operations."
Senior Vice President and CFO Mark Smith also commented, "Returning cash to shareholders remains a capital allocation priority as the Company provided roughly $46 million in shareholder returns under its fiscal 2024 supplemental shareholder return plan during the quarter. There was approximately $4 million worth of shares repurchased during the quarter and $42 million paid to shareholders in the form of base and supplemental dividends, representing over a 4% yield. That said, we are cognizant that the current higher interest rate environment may be masking some of the longer-term attractiveness of our dividend yield and flexibility embedded in our supplemental shareholder return plan.
"Currently, we expect our rig count in the third fiscal quarter to average in the high-140 range, which is lower compared to the 155 rig average realized during the second fiscal quarter. To reiterate, this lower activity is a result of contractual churn and a weaker natural gas environment and as such has not deterred the Company's approach to pricing or the use of performance contracts to better recognize the total value H&P provides to our customers. We believe our commitment to preserving contract economics is reflected in our direct margin guidance for the upcoming quarter."
John Lindsay concluded, "Working closely with our customers and collaborating through the use of performance contracts is really driving improved and more reliable outcomes. Our people, FlexRigs, and technology solutions are key components of this success and will continue to be drivers of that success in the future."
Operating Segment Results for the Second Quarter of Fiscal Year 2024
North America Solutions:
This segment had operating income of $147.1 million compared to operating income of $144.5 million during the previous quarter. The increase in operating income was primarily attributable to a higher direct margin offset by higher depreciation expense associated with walking rig conversions and higher research and development expense, some of which related to a recent asset acquisition. Direct margin(2) increased by $15.3 million to $271.4 million sequentially.
International Solutions:
This segment had operating income of $3.6 million compared to an operating income of $5.4 million during the previous quarter. The decrease in operating income was mainly due to modestly lower activity during the quarter. Direct margin(2) during the second fiscal quarter was $8.4 million compared to $10.2 million during the previous quarter, and was higher than anticipated due to the financial results from our Argentina operations not being as negatively impacted by the local currency and inflationary environment as anticipated. Current quarter results included a $0.5 million foreign currency loss compared to a $1.8 million foreign currency loss in the previous quarter.
Offshore Gulf of Mexico:
This segment had operating income of $0.1 million compared to operating income of $3.1 million during the previous quarter. Direct margin(2) for the quarter was $2.9 million compared to $6.0 million in the previous quarter and was lower than expected due primarily to one rig moving onto full rate later in the quarter than anticipated.
Operational Outlook for the Third Quarter of Fiscal Year 2024
North America Solutions:
We expect North America Solutions direct margins(2) to be between $255-$275 million We expect to exit the quarter between approximately 145-151 contracted rigs
International Solutions:
We expect International Solutions direct margins(2) to be between $(2)-$2 million, exclusive of any foreign exchange gains or losses, but inclusive of approximately $10-$12 million of rig preparation and start-up expense related to our Saudi Arabia operations
Offshore Gulf of Mexico:
We expect Offshore Gulf of Mexico direct margins(2) to be between $5-$8 million
Other Estimates for Fiscal Year 2024
Gross capital expenditures are now expected to be approximately $500 million; ongoing asset sales that include reimbursements for lost and damaged tubulars and sales of other used drilling equipment offset a portion of the gross capital expenditures, and are still expected to total approximately $50 million in fiscal year 2024 Depreciation for fiscal year 2024 is now expected to be approximately $405 million Research and development expenses for fiscal year 2024 are now expected to be roughly $37 million General and administrative expenses for fiscal year 2024 are now expected to be approximately $240 million Cash taxes to be paid in fiscal year 2024 are still expected to be approximately $150-$200 million
Select Items(1) Included in Net Income per Diluted Share
Second quarter of fiscal year 2024 net income of $0.84 per diluted share included a net impact $0.00 per share in after-tax gains and losses comprised of the following:
$0.03 of non-cash after-tax gains related to fair market value adjustments to equity investments $(0.03) of after-tax losses related to research and development expenses associated with an asset acquisition
First quarter of fiscal year 2024 net income of $0.94 per diluted share included $(0.03) in after-tax losses comprised of the following:
$(0.03) 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 25, 2024 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 2024 results. Dial-in information for the conference call is (800) 267-6316 for domestic callers or (203) 518-9708 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, 2024, 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, future share repurchases, investments, active rig count projections, projected costs and plans, objectives of management for future operations, contract terms, financing and funding, capex spending and budgets, outlook for domestic and international markets, future commodity prices, and future customer activity and relationships 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 and other disclosures in 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.
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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 2024 is provided on a non-GAAP basis only because certain information necessary to calculate the most comparable GAAP measure is unavailable due to the uncertainty and inherent difficulty of predicting the occurrence and the future financial statement impact of certain items. Therefore, as a result of the uncertainty and variability of the nature and amount of future 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 of fiscal 2024, H&P repurchased approximately 102 thousand shares for approximately $3.9 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,
2024 2023 2023 2024 2023
-------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
OPERATING REVENUES
$ 685,131 $ 674,565 $ 766,682 $ 1,359,696 $ 1,483,852
Drilling services
2,812 2,582 2,540 5,394 5,007
Other
-------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
687,943 677,147 769,222 1,365,090 1,488,859
OPERATING COSTS AND EXPENSES
401,851 403,303 449,110 805,154 877,361
Drilling services operating expenses, excluding depreciation and amortization
1,026 1,137 1,188 2,163 2,314
Other operating expenses
104,545 93,991 96,255 198,536 192,910
Depreciation and amortization
12,942 8,608 8,702 21,550 15,635
Research and development
62,037 56,577 52,855 118,614 101,310
Selling, general and administrative
-- -- -- -- 12,097
Asset impairment charges
(7,461 ) (7,494 ) (11,574 ) (14,955 ) (27,298 )
Gain on reimbursement of drilling equipment
2,431 (2,443 ) (2,519 ) (12 ) (4,898 )
Other (gain) loss on sale of assets
-------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
577,371 553,679 594,017 1,131,050 1,169,431
-------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
OPERATING INCOME 110,572 123,468 175,205 234,040 319,428
Other income (expense)
6,567 10,734 5,055 17,301 9,760
Interest and dividend income
(4,261 ) (4,372 ) (4,239 ) (8,633 ) (8,594 )
Interest expense
3,747 (4,034 ) 39,752 (287 ) 24,661
Gain (loss) on investment securities
400 (543 ) (604 ) (143 ) (546 )
Other
-------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
6,453 1,785 39,964 8,238 25,281
-------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
117,025 125,253 215,169 242,278 344,709
Income before income taxes
32,194 30,080 51,129 62,274 83,524
Income tax expense
-------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
NET INCOME $ 84,831 $ 95,173 $ 164,040 $ 180,004 $ 261,185
==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ====================
------------------------------------------------------------ ------------------------------------------------------------ ------------------------------------------------------------ ------------------------------------------------------------ ------------------------------------------------------------
Basic earnings per common share $ 0.85 $ 0.95 $ 1.55 $ 1.79 $ 2.46
==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ====================
------------------------------------------------------------ ------------------------------------------------------------ ------------------------------------------------------------ ------------------------------------------------------------ ------------------------------------------------------------
Diluted earnings per common share $ 0.84 $ 0.94 $ 1.55 $ 1.79 $ 2.46
==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ==================== ====================
Weighted average shares outstanding:
98,774 99,143 103,968 98,960 104,615
Basic
HELMERICH & PAYNE, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
March 31, September 30,
(in thousands except share data and share amounts) 2024 2023
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ -------------------- -------------- -------------------- -------------------- -------------- --------------------
ASSETS
Current Assets:
$ 193,636 $ 257,174
Cash and cash equivalents
68,547 59,064
Restricted cash
83,390 93,600
Short-term investments
Accounts receivable, net of allowance of $2,769 and $2,688, respectively 431,681 404,188
107,210 94,227
Inventories of materials and supplies, net
64,316 97,727
Prepaid expenses and other, net
-- 645
Assets held-for-sale
-------------------- -------------- -------------------- -------------------- -------------- --------------------
948,780 1,006,625
Total current assets
274,446 264,947
Investments
2,993,825 2,921,695
Property, plant and equipment, net
Other Noncurrent Assets:
45,653 45,653
Goodwill
57,360 60,575
Intangible assets, net
59,730 50,400
Operating lease right-of-use asset
45,054 32,061
Other assets, net
-------------------- -------------- -------------------- -------------------- -------------- --------------------
207,797 188,689
Total other noncurrent assets
------------------------------------------------------ ------------------------------------------------------
$ 4,424,848 $ 4,381,956
Total assets
==================== ============== ==================== ==================== ============== ====================
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities:
$ 158,296 $ 130,852
Accounts payable
42,047 25,194
Dividends payable
238,494 262,885
Accrued liabilities
-------------------- -------------- -------------------- -------------------- -------------- --------------------
438,837 418,931
Total current liabilities
Noncurrent Liabilities:
545,441 545,144
Long-term debt, net
502,088 517,809
Deferred income taxes
135,408 128,129
Other
-------------------- -------------- -------------------- -------------------- -------------- --------------------
1,182,937 1,191,082
Total noncurrent liabilities
Shareholders' Equity:
Common stock, $0.10 par value, 160,000,000 shares authorized, 112,222,865 shares issued as of March 31, 2024 and September 30, 2023, and 98,752,018 and 99,426,526 shares outstanding as of March 31, 2024 and September 30, 2023, respectively 11,222 11,222
-- --
Preferred stock, no par value, 1,000,000 shares authorized, no shares issued
502,586 525,369
Additional paid-in capital
2,786,495 2,707,715
Retained earnings
Accumulated other comprehensive loss (7,713 ) (7,981 )
Treasury stock, at cost, 13,470,847 shares and 12,796,339 shares as of March 31, 2024 and September 30, 2023, respectively (489,516 ) (464,382 )
-------------------- -------------- -------------------- -------------------- -------------- --------------------
2,803,074 2,771,943
Total shareholders' equity
-------------------- -------------- -------------------- -------------------- -------------- --------------------
HELMERICH & PAYNE, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Six Months Ended March 31,
--------------------------------------------------------------------------------------------------------------------------------
(in thousands) 2024 2023
------------------------------------------------------------------------------------- -------------------- -------------- -------------------- -------------------- -------------- --------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
$ 180,004 $ 261,185
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
198,536 192,910
Depreciation and amortization
-- 12,097
Asset impairment charges
90 3,222
Provision for credit loss
16,101 15,704
Stock-based compensation
287 (24,661 )
(Gain) loss on investment securities
(14,955 ) (27,298 )
Gain on reimbursement of drilling equipment
(12 ) (4,898 )
Other gain on sale of assets
(15,933 ) 3,165
Deferred income tax expense (benefit)
1,630 1,780
Other
(47,231 ) (106,952 )
Changes in assets and liabilities
-------------------- -------------- -------------------- -------------------- -------------- --------------------
318,517 326,254
Net cash provided by operating activities
-------------------- -------------- -------------------- -------------------- -------------- --------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
(254,711 ) (181,479 )
Capital expenditures
(74,749 ) (64,418 )
Purchase of short-term investments
(8,013 ) (18,771 )
Purchase of long-term investments
87,122 97,744
Proceeds from sale of short-term investments
4,980 --
Insurance proceeds from involuntary conversion
20,898 47,718
Proceeds from asset sales
-------------------- -------------- -------------------- -------------------- -------------- --------------------
(224,473 ) (119,206 )
Net cash used in investing activities
-------------------- -------------- -------------------- -------------------- -------------- --------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
(84,371 ) (102,941 )
Dividends paid
(12,176 ) (14,410 )
Payments for employee taxes on net settlement of equity awards
(51,302 ) (145,013 )
Share repurchases
(250 ) (790 )
Other
-------------------- -------------- -------------------- -------------------- -------------- --------------------
(148,099 ) (263,154 )
Net cash used in financing activities
-------------------- -------------- -------------------- -------------------- -------------- --------------------
Net increase (decrease) in cash and cash equivalents and restricted cash (54,055 ) (56,106 )
Cash and cash equivalents and restricted cash, beginning of period 316,238 269,009
-------------------- -------------- -------------------- -------------------- -------------- --------------------
HELMERICH & PAYNE, INC.
SEGMENT REPORTING
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Three Months Ended Six Months Ended
---------------------------------------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------
March 31, December 31, March 31, March 31, March 31,
(in thousands, except operating statistics) 2024 2023 2023 2024 2023
--------------------------------------------------- ---------------------------------- ---------------------------------- ---------------------------------- ---------------------------------- ------------------------------
NORTH AMERICA SOLUTIONS
$ 613,339 $ 594,282 $ 675,780 $ 1,207,621 $ 1,302,943
Operating revenues
341,938 338,208 379,611 680,146 746,466
Direct operating expenses
97,573 87,019 89,070 184,592 178,884
Depreciation and amortization
13,006 8,689 8,738 21,695 15,797
Research and development
13,692 15,876 16,212 29,568 30,402
Selling, general and administrative expense
-- -- -- -- 3,948
Asset impairment charges
-------------------- -------------- -------------------- -------------- -------------------- -------------- -------------------- -------------- -------------------- ----------
$ 147,130 $ 144,490 $ 182,149 $ 291,620 $ 327,446
Segment operating income
==================== ============== ==================== ============== ==================== ============== ==================== ============== ==================== ==========
Financial Data and Other Operating Statistics(1:)
$ 271,401 $ 256,074 $ 296,169 $ 527,475 $ 556,477
Direct margin (Non-GAAP)(2)
14,123 13,711 16,488 27,834 33,067
Revenue days(3)
155 149 183 152 182
Average active rigs(4)
152 151 179 152 179
Number of active rigs at the end of period(5)
233 233 233 233 233
Number of available rigs at the end of period
$ 73,584 $ 69,728 $ 77,442 $ 143,312 $ 156,601
Reimbursements of "out-of-pocket" expenses
INTERNATIONAL SOLUTIONS
$ 45,878 $ 54,752 $ 55,890 $ 100,630 $ 110,691
Operating revenues
37,514 44,519 47,275 82,033 88,252
Direct operating expenses
2,418 2,334 1,652 4,752 3,044
Depreciation
2,377 2,476 3,008 4,853 5,717
Selling, general and administrative expense
-- -- -- -- 8,149
Asset impairment charges
-------------------- -------------- -------------------- -------------- -------------------- -------------- -------------------- -------------- -------------------- ----------
$ 3,569 $ 5,423 $ 3,955 $ 8,992 $ 5,529
Segment operating income
==================== ============== ==================== ============== ==================== ============== ==================== ============== ==================== ==========
Financial Data and Other Operating Statistics(1):
$ 8,364 $ 10,233 $ 8,615 $ 18,597 $ 22,439
Direct margin (Non-GAAP)(2)
1,038 1,173 1,263 2,211 2,403
Revenue days(3)
11 13 14 12 13
Average active rigs(4)
11 12 15 11 15
Number of active rigs at the end of period(5)
22 22 22 22 22
Number of available rigs at the end of period
$ 1,964 $ 3,384 $ 2,789 $ 5,348 $ 5,645
Reimbursements of "out-of-pocket" expenses
OFFSHORE GULF OF MEXICO
$ 25,913 $ 25,531 $ 34,979 $ 51,444 $ 70,143
Operating revenues
23,010 19,579 2