Helmerich & Payne, Inc.

Press Release

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Helmerich & Payne, Inc. Announces Second Quarter Results
  • H&P’s U.S. Land Operations contracted rig count increased by 41 rigs from December 31, 2016 to March 31, 2017 and by 73 rigs from September 30, 2016 to March 31, 2017, and today stands at 177 rigs
  • H&P’s U.S. Land market share increased significantly by approximately 2% from 17% to 19% during the three months of the quarter
  • H&P’s spot pricing in the U.S. Land market continued to increase (approximately 9%) from the date of the first quarter results announcement (January 26, 2017) to April 27, 2017

TULSA, Okla., April 27, 2017 (GLOBE NEWSWIRE) -- Helmerich & Payne, Inc. (NYSE:HP) reported a net loss of $49 million or $(0.45) per diluted share from operating revenues of $405 million for the second quarter of fiscal 2017.  The net loss per diluted share includes $0.02 of after-tax income comprised of select items(1).  Net cash provided by operating activities was $76 million for the second quarter of fiscal 2017.  

President and CEO John Lindsay commented, “We experienced continued activity and spot pricing improvement in the U.S. Land market during our second fiscal quarter and H&P once again led the industry in AC drive rig reactivations and horizontal market share capture.  The driving forces behind this success are our people, our continuing investment in technology and our integrated business model.  Our ability to grow is enabled by promoting and hiring the best people, and delivering industry leading performance.  FlexRig® technology supported by H&P’s integrated model has over 1900 rig years of experience and is the preferred AC drive rig offering in the marketplace.  H&P is uniquely positioned with a fleet of FlexRigs that provide a Family of Solutions™ for our customers, and the right rig for their project.  Our uniform fleet size and scale is unmatched in the U.S. land AC drive segment which provides H&P an opportunity for additional market share capture.  H&P’s experience and expertise within an integrated model of designing, building, learning and upgrading the FlexRig fleet allow us to meet market needs in highest demand and provide the best value for customers.  We can upgrade these higher specification FlexRigs in a very capital-efficient way and meet today’s demand without the need to invest in new rigs to meet customer requirements.  We have 122 super-spec capable rigs in the U.S. land market today and another 50 rigs that are active that can also be upgraded.  In addition, we have approximately 100 idle FlexRigs that are capable of being upgraded to drill the more challenging horizontal wells, representing about two-thirds of the number of idle high-spec AC drive rigs in the industry fleet.

“We see some signs indicating that the recovery in U.S. land continues to modestly build momentum, which should support continued improvements in both FlexRig activity and pricing.  However, we expect our international land and offshore market outlook to remain weak for the foreseeable future.  Our budget for capital expenditures has allowed us to remain ahead of demand.  We have been able to maintain an industry leading cadence for upgrades allowing us to increase our active fleet by 89 rigs since September, including close to 60 rigs upgraded to super-spec capability.  Our supply pipeline of capital spares and upgrade equipment should be sufficient for the level of demand we see going forward.  We believe that the Company is positioned to successfully manage the new market dynamics.  Our organizational effectiveness efforts implemented during the downturn are having a significant effect on our ability to respond to demand and add significant value for our customers.  This is clearly demonstrated by the success we have enjoyed growing our U.S. land market share from 15% to 19% since the peak in 2014. We remain confident about the future for H&P because our competitive advantages remain in our people, performance, technology, reliability and uniform FlexRig fleet.”

Operating Segment Results

U.S. Land Operations

Segment operating loss widened by $21 million sequentially.  The change was primarily attributable to approximately $18 million in abandonment charges, as increasing activity was offset by lower margins.  The abandonment charges are included with depreciation in the segment and are related to the decommissioning of used drilling equipment as a result of our ongoing rig upgrade program.

The number of quarterly revenue days increased sequentially by approximately 35%.  This H&P rate of increase was greater than the overall market’s rate of increase (estimated at 27%)(2), resulting in significant market share growth for the Company.

From the first to the second fiscal quarter of 2017, adjusted average rig revenue per day decreased by $1,690 to $22,201(3), as the proportion of rigs working in the spot market increased significantly quarter to quarter.  The adjusted average rig expense per day increased sequentially by $548 to $15,612(3); the increase in the average was mostly attributable to upfront rig start-up expenses related to reactivating a large number of rigs.  The corresponding adjusted average rig margin per day decreased sequentially by $2,238 to $6,589(3)

Offshore Operations

Segment operating income decreased 13% sequentially.  The number of quarterly revenue days decreased sequentially by approximately 8%, and the average rig margin per day increased sequentially by $339 to $10,817.  Additionally, management contracts on platform rigs contributed approximately $4 million to the segment’s operating income.
             
International Land Operations

The segment had an operating loss this quarter as compared to operating income the previous quarter.  The $12 million sequential change was attributable to declines in average rig margin per day and rig revenue days, as well as the absence of early termination revenues in the most recent quarter.

Quarterly revenue days decreased sequentially by approximately 25%, and the adjusted average rig margin per day decreased sequentially by $5,192 to $3,691 during this year’s second fiscal quarter(3).  Quarterly revenue days and adjusted average rig margin per day declined primarily as a result of the previously announced early termination notice from a customer for five rigs under long-term contracts in the segment.

Operational Outlook for the Third Quarter of Fiscal 2017

U.S. Land Operations:

  • Quarterly revenue days expected to increase by roughly 25% sequentially
  • Average rig revenue per day  expected to be roughly $21,000 (excluding any impact from early termination revenue)
  • Average rig expense per day expected to be roughly $14,300

Offshore Operations:

  • Quarterly revenue days expected to decrease by approximately 10% to 15% sequentially
  • Average rig margin per day expected to be approximately $12,500
  • Management contracts expected to generate approximately $4 million in operating income

International Land Operations:

  • Quarterly revenue days expected to decrease by approximately 10% sequentially
  • Average rig margin per day expected to remain under $4,000

Other Estimates for Fiscal 2017

  • FY17 depreciation is now expected to be approximately $580 million.  Included in this depreciation estimate are approximately $40 million of abandonment charges, about half of which has already been recognized in the first half of the fiscal year.

Other Highlights

  • The Company’s total active rig market share in U.S. Land Lower 48 grew to approximately 19% as of March 31, 2017.
  • Since January 26, 2017 (date of first quarter results announcements), 22 AC drive FlexRigs with 1,500 hp drawworks and 750,000 lbs. hookload ratings were upgraded to include a 7,500 psi mud circulating system and/or multiple-well pad capability, resulting in 122 rigs in our fleet today with rig specifications in highest demand(4).
  • On January 26, 2017, EnergyPoint Research announced, “Helmerich & Payne again rated first in total satisfaction among onshore contract drillers. The company also captured the top spot in performance and reliability, service and professionalism, horizontal and directional wells, high-pressure/high-temperature (HPHT) wells, safety and environmental (HSE), shale-oriented applications, Interior Texas & Mid-continent, and three additional categories.”
  • On March 1, 2017, Directors of the Company declared a quarterly cash dividend of $0.70 per share on the Company’s common stock payable June 1, 2017 (as filed on Form 8-K at the time of the declaration).

Select Items Included in Net Income (or Loss) per Diluted Share

Second Quarter of Fiscal 2017 included $0.02 in after-tax income comprised of the following:

  • $0.04 of after-tax income from long-term contract early termination compensation from customers
  • $0.09 of after-tax gains related to the sale of used drilling equipment
  • $0.11 of after-tax losses from abandonment charges related to the decommissioning of used drilling equipment

First Quarter of Fiscal 2017 included $0.08 in after-tax income comprised of the following:

  • $0.08 of after-tax income from long-term contract early termination compensation from customers
  • $0.01 of after-tax gains related to the sale of used drilling equipment
  • $0.01 of after-tax losses from accrued charges related to a lawsuit settlement agreement

About Helmerich & Payne, Inc.

Helmerich & Payne, Inc. is primarily a contract drilling company.  As of April 27, 2017, the Company’s existing fleet includes 350 land rigs in the U.S., 38 international land rigs, and eight offshore platform rigs.  The Company’s global fleet has a total of 388 land rigs, including 373 AC drive FlexRigs.

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 include FlexRig and Family of Solutions, which may be registered or trademarked in the U.S. and other jurisdictions. 

(1)See the corresponding section of this release for details regarding the select items.
(2)The overall market’s rate of increase was calculated using the average U.S. Land rig counts from the fourth calendar quarter of 2016 and first calendar quarter of 2017 as publicly published by Baker Hughes.
(3)See the Selected Statistical & Operational Highlights table(s) for details on the revenues or charges excluded on a per revenue day basis.
(4)These combined rig specifications are in high demand and fit the description of what some industry followers refer to as “super-spec” rigs.

   
HELMERICH & PAYNE, INC.  
Unaudited  
(in thousands, except per share data)  
                 
                 
      Three Months Ended Six Months Ended  
CONSOLIDATED STATEMENTS OF March 31 December 31 March 31 March 31  
OPERATIONS     2017     2016     2016     2017     2016    
                 
Operating Revenues:              
  Drilling – U.S. Land $   330,967   $   263,636   $   349,283   $   594,603   $   719,088    
  Drilling – Offshore       36,235       33,812       34,325       70,047       76,205    
  Drilling – International Land     34,757       68,031       51,352       102,788       123,546    
  Other         3,324       3,111       3,231       6,435       7,199    
      $   405,283   $   368,590   $   438,191   $   773,873   $   926,038    
                 
Operating costs and expenses:            
  Operating costs, excluding depreciation   296,829     247,679     221,611     544,508     498,255    
  Depreciation      152,777     133,847     141,517     286,624     283,646    
  General and administrative   33,519     34,262     33,811     67,781     65,885    
  Research and development   2,719     2,808     2,315     5,527     5,234    
  Income from asset sales   (14,889 )   (842 )   (2,684 )   (15,731 )   (7,273 )  
        470,955     417,754     396,570     888,709     845,747    
                 
Operating income (loss)   (65,672 )   (49,164 )   41,621     (114,836 )   80,291    
                 
Other income (expense):            
  Interest and dividend income     1,338       990       799       2,328       1,532    
  Interest expense       (6,084 )     (5,055 )     (5,721 )     (11,139 )     (10,245 )  
  Other         174       387       653       561       392    
          (4,572 )     (3,678 )     (4,269 )     (8,250 )     (8,321 )  
                 
Income (loss) from continuing operations            
  before income taxes        (70,244 )     (52,842 )     37,352       (123,086 )     71,970    
Income tax provision        (21,771 )     (18,288 )     12,178       (40,059 )     30,898    
Income (loss) from continuing operations     (48,473 )     (34,554 )     25,174       (83,027 )     41,072    
                 
Income (loss) from discontinued operations,             
  before income taxes      (94 )     (424 )     (56 )     (518 )     48    
Income tax provision       251       85       3,913       336       3,913    
Loss from discontinued operations      (345 )     (509 )     (3,969 )     (854 )     (3,865 )  
                 
NET INCOME (LOSS)   $    (48,818 ) $    (35,063 ) $    21,205   $    (83,881 ) $    37,207    
                 
Basic earnings per common share:            
  Income (loss) from continuing operations $   (0.45 ) $   (0.33 ) $   0.23   $   (0.77 ) $   0.38    
  Loss from discontinued operations $   -    $   -    $   (0.04 ) $   (0.01 ) $   (0.04 )  
                 
  Net income (loss)   $   (0.45 ) $   (0.33 ) $   0.19   $   (0.78 ) $   0.34    
                 
Diluted earnings per common share:            
  Income (loss) from continuing operations $   (0.45 ) $   (0.33 ) $   0.23   $   (0.77 ) $   0.37    
  Loss from discontinued operations $   -    $   -    $   (0.04 ) $   (0.01 ) $   (0.04 )  
                 
  Net income (loss)   $   (0.45 ) $   (0.33 ) $   0.19   $   (0.78 ) $   0.33    
                 
Weighted average shares outstanding:            
  Basic       108,565     108,276     108,014     108,419     107,933    
  Diluted       108,565     108,276     108,466     108,419     108,430    
                 


HELMERICH & PAYNE, INC.
Unaudited
(in thousands)
         
    March 31   September 30
CONSOLIDATED CONDENSED BALANCE SHEETS    2017    2016
         
ASSETS        
  Cash and cash equivalents   $   741,746   $   905,561
  Short-term investments       48,012       44,148
  Other current assets       574,093       622,913
  Current assets of discontinued operations       36       64
  Total current assets       1,363,887       1,572,686
  Investments       88,299       84,955
  Net property, plant, and equipment       5,061,368       5,144,733
  Other assets       24,630       29,645
         
TOTAL ASSETS   $   6,538,184   $   6,832,019
         
LIABILITIES AND SHAREHOLDERS' EQUITY        
  Current liabilities   $   301,377   $   330,061
  Current liabilities of discontinued operations       40       59
  Total current liabilities       301,417       330,120
  Non-current liabilities       1,392,346       1,445,237
  Non-current liabilities of discontinued operations       4,654       3,890
  Long-term debt less unamortized discount and debt issuance costs       492,373       491,847
  Total shareholders’ equity       4,347,394       4,560,925
         
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   $   6,538,184   $   6,832,019
         


HELMERICH & PAYNE, INC.
Unaudited
(in thousands)
       
  Six Months Ended
  March 31
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS   2017       2016  
       
OPERATING ACTIVITIES:      
  Net income (loss) $   (83,881 )   $   37,207  
  Adjustment for loss from discontinued operations     854         3,865  
  Income (loss) from continuing operations     (83,027 )       41,072  
  Depreciation     286,624         283,646  
  Changes in assets and liabilities     (58,283 )       158,870  
  Income from asset sales     (15,731 )       (7,273 )
  Other     16,856         16,104  
  Net cash provided by operating activities from continuing operations     146,439         492,419  
  Net cash provided by (used in) operating activities from discontinued operations     (80 )       98  
  Net cash provided by operating activities     146,359         492,517  
       
INVESTING ACTIVITIES:      
  Capital expenditures     (175,303 )       (180,481 )
  Purchase of short-term investments     (37,899 )       (21,869 )
  Proceeds from sale of short-term investments     34,000         21,676  
  Proceeds from asset sales     13,459         9,715  
  Net cash used in investing activities     (165,743 )       (170,959 )
       
FINANCING ACTIVITIES:      
  Debt issuance costs     -         (32 )
  Dividends paid     (152,617 )       (149,300 )
  Exercise of stock options, net of tax withholding     9,946         (199 )
  Tax withholdings related to net share settlements of restricted stock     (5,679 )       (3,617 )
  Excess tax benefit from stock-based compensation     3,919         219  
  Net cash used in financing activities     (144,431 )       (152,929 )
       
Net increase (decrease) in cash and cash equivalents     (163,815 )       168,629  
Cash and cash equivalents, beginning of period     905,561         729,384  
Cash and cash equivalents, end of period $   741,746     $   898,013  
       


                   
SEGMENT REPORTING Three Months Ended   Six Months Ended
  March 31   December 31   March 31   March 31
    2017       2016       2016       2017       2016  
   (in thousands, except days and per day amounts) 
U.S. LAND OPERATIONS                  
Revenues $  330,967     $   263,636     $   349,283     $   594,603     $  719,088  
Direct operating expenses     238,249         170,606         155,884         408,855         337,425  
General and administrative expense     12,573         11,642         12,196         24,215         24,569  
Depreciation     131,995         112,276         118,682         244,271         239,041  
Segment operating income (loss) $   (51,850 )   $   (30,888 )   $   62,521     $   (82,738 )   $  118,053  
                   
Revenue days     13,166         9,784         9,601         22,950         21,546  
Average rig revenue per day $   22,654     $   24,788     $   34,218     $   23,564     $   31,132  
Average rig expense per day $   15,612     $   15,204     $   14,139     $   15,438     $   13,447  
Average rig margin per day $   7,042     $   9,584     $   20,079     $   8,126     $   17,685  
Rig utilization   42 %     31 %     31 %     36 %     35 %
                   
OFFSHORE OPERATIONS                  
Revenues $   36,235     $   33,812     $   34,325     $   70,047     $   76,205  
Direct operating expenses     26,023         22,845         27,065         48,868         57,358  
General and administrative expense     902         916         837         1,818         1,699  
Depreciation     3,398         3,267         3,124         6,665         6,127  
Segment operating income  $   5,912     $   6,784     $   3,299     $   12,696     $   11,021  
                   
Revenue days     595         644         691         1,239         1,427  
Average rig revenue per day $   36,006     $   31,317     $   28,004     $   33,569     $   27,764  
Average rig expense per day $   25,189     $   20,839     $   20,658     $   22,929     $   20,123  
Average rig margin per day $   10,817     $   10,478     $   7,346     $   10,640     $   7,641  
Rig utilization    77 %     78 %     84 %     77 %     87 %
                   
INTERNATIONAL LAND OPERATIONS                  
Revenues $   34,757     $   68,031     $   51,352     $   102,788     $  123,546  
Direct operating expenses     32,181         53,350         38,113         85,531         102,121  
General and administrative expense     920         669         887         1,589         1,605  
Depreciation     12,633         13,187         14,620         25,820         28,753  
Segment operating income (loss)  $   (10,977 )   $   825     $   (2,268 )   $   (10,152 )   $   (8,933 )
                   
Revenue days     870         1,157         1,307         2,027         2,718  
Average rig revenue per day $   37,340     $   55,880     $   36,774     $   47,923     $   41,580  
Average rig expense per day $   33,649     $   42,911     $   26,287     $   38,936     $   30,406  
Average rig margin per day $   3,691     $   12,969     $   10,487     $   8,987     $   11,174  
Rig utilization    25 %     33 %     38 %     29 %     39 %
                   
Operating statistics exclude the effects of offshore platform management contracts, 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:                  
                   
U.S. Land Operations $   32,704     $   21,098     $   20,751     $   53,802     $   48,322  
Offshore Operations $   6,066     $   4,431     $   6,086     $   10,497     $   12,417  
International Land Operations $   2,272     $   3,377     $   3,288     $   5,649     $   10,532  
                                       
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 per the information above to income (loss) from continuing operations before income taxes as reported on the Consolidated Statements of Operations (in thousands). 


                     
  Three Months Ended   Six Months Ended  
  March 31   December 31   March 31   March 31  
    2017       2016       2016       2017       2016    
Operating income                     
U.S. Land $ (51,850 )   $ (30,888 )   $ 62,521     $ (82,738 )   $ 118,053    
Offshore   5,912       6,784       3,299       12,696       11,021    
International Land   (10,977 )     825       (2,268 )     (10,152 )     (8,933 )  
Other   (1,134 )     (2,049 )     (1,349 )     (3,183 )     (2,653 )  
Segment operating income (loss) $ (58,049 )   $ (25,328 )   $ 62,203     $ (83,377 )   $ 117,488    
Corporate general and administrative   (19,124 )     (21,035 )     (19,891 )     (40,159 )     (38,012 )  
Other depreciation   (3,822 )     (4,077 )     (3,971 )     (7,899 )     (7,581 )  
Inter-segment elimination   434       434       596       868       1,123    
Income from asset sales   14,889       842       2,684       15,731       7,273    
Operating income (loss) $    (65,672 )   $    (49,164 )   $   41,621     $   (114,836 )   $    80,291    
                     
Other income (expense):                    
Interest and dividend income   1,338       990       799       2,328       1,532    
Interest expense   (6,084 )     (5,055 )     (5,721 )     (11,139 )     (10,245 )  
Other   174       387       653       561       392    
Total other income (expense)   (4,572 )     (3,678 )     (4,269 )     (8,250 )     (8,321 )  
                     
                     
Income (loss) from continuing
operations before income taxes
$    (70,244 )   $    (52,842 )   $   37,352     $   (123,086 )   $    71,970    
                     


SUPPLEMENTARY STATISTICAL INFORMATION  
         
The tables and information that follow are additional information that may also help provide further clarity and insight into the operations of the Company.  
         
SELECTED STATISTICAL & OPERATIONAL HIGHLIGHTS   
(Used to determine adjusted per revenue day statistics)  
  Three Months Ended  
  March 31   December 31  
   2017     2016    
  (in dollars per revenue day)  
U.S. Land Operations         
Early contract termination revenues $   453   $   897    
Lawsuit settlement charges $   -   $   (140 )  
Total impact per revenue day: $   453   $   757    
         
International Land Operations        
Early contract termination revenues $   -   $   4,086    
Total impact per revenue day: $   -   $   4,086    
         


U.S. LAND RIG COUNTS & MARKETABLE FLEET STATISTICS 
 
  April 27 March 31 December 31 Q2FY17 
  2017 2017 2016 Average
U.S. Land Operations        
Term Contract Rigs 88 88 82 86.9
Spot Contract Rigs 88 79 42 59.4
Total Rigs Generating Revenue Days 176 167 124 146.3
Other Contracted Rigs 1 1 3 1.0
Total Contracted Rigs 177 168 127 147.3
Idle or Other Rigs 173 182 223 202.7
Total Marketable Fleet 350 350 350 350.0
 


               
H&P GLOBAL FLEET UNDER TERM CONTRACT STATISTICS 
Number of Rigs Already Under Long-Term Contracts(1)
(Estimated Quarterly Average, Including Announced New Builds – as of 4/27/17)
               
  Q3 Q4 Q1 Q2 Q3 Q4 Q1
  FY17 FY17 FY18 FY18 FY18 FY18 FY19
Segment              
U.S. Land Operations 86.4 74.9 65.0 48.8 38.7 32.3 26.8
International Land Operations 11.0 10.0 10.0 10.0 10.0 10.0 10.0
Offshore Operations 2.0 2.0 2.0 2.0 1.9 0.3 0.0
Total 99.4 86.9 77.0 60.8 50.6 42.6 36.8
   

(1)The above term contract coverage excludes long-term contracts for which the Company received early contract termination notifications as of 4/27/17.  Given notifications as of 4/27/17, the Company expects to generate approximately $5 million in the third fiscal quarter of 2017 and over $18 million thereafter from early terminations corresponding to long-term contracts and related to its U.S. Land segment. All of the above rig contracts include provisions for early termination fees.

Contact: Investor Relations
investor.relations@hpinc.com
(918) 588-5190

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