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Helmerich & Payne, Inc. Announces First Quarter Results

February 3, 2020

  • Quarterly U.S. Land revenue decreased $36 million to $509 million sequentially, while operating gross margins(1) decreased by $7 million to $182 million sequentially; revenue days decreased 6% to 17,684 from 18,765 in the prior quarter
  • Both quarterly U.S. Land adjusted average rig revenue of $25,397(2) per day and U.S Land adjusted average rig margin of $10,410(2) per day were roughly flat sequentially
  • H&P's drilling automation technology, AutoSlideSM, has been commercially deployed in six U.S. shale basins, and has drilled over 150 wells and 2.6 million feet
  • Approximately 10% of the Company’s active U.S. FlexRig® fleet operated under non-traditional dayrate contracts during the quarter
  • On December 13, 2019, Directors of the Company declared a quarterly cash dividend of $0.71 per share
  • In 2020, the Company is celebrating its Centennial Anniversary and over 60 years as a public company

TULSA, Okla.--(BUSINESS WIRE)-- Helmerich & Payne, Inc. (NYSE: HP) reported income of $31 million or $0.27 per diluted share from operating revenues of $615 million for the quarter ended December 31, 2019, compared to net income of $41 million, or $0.37 per diluted share, on revenues of $649 million for the quarter ended September 30, 2019. The net income per diluted share for the first fiscal quarter of 2020 and the fourth fiscal quarter of 2019 include $0.14 and $(0.01), respectively, of after-tax gains and losses comprised of select items(3). For the first fiscal quarter, select items(3) were comprised of:

  • $0.15 of after-tax gains pertaining to gains on sales and a net mark-to-market gain related to our equity investments
  • $(0.01) of after-tax losses pertaining to abandonments and accelerated depreciation

Net cash provided by operating activities was $112 million for the first quarter of fiscal 2020 compared to $196 million for the fourth fiscal quarter of fiscal 2019. The timing of certain accruals and payments and a seasonal slowdown in receivable collections combined with modestly lower activity contributed to the sequential decline in operating cash flow.

President and CEO John Lindsay commented, “As we look back on the challenges the industry experienced in 2019, our leadership position and performance continued to demonstrate our ability to deliver value while adapting to rapidly changing market conditions. This quarter's results reflect the momentum of those successes.

“H&P continued to gain market share during the quarter while the overall industry rig count declined. This is indicative of the growing preference for super-spec(4) rigs and the performance these rigs deliver relative to legacy SCR rigs, which still represented roughly 15% of the unconventional activity at calendar year-end. We believe this replacement trend will persist as our super-spec FlexRig fleet's performance and efficiency gains create value for our customers.

"H&P remains committed to developing new pricing models that enable us to share in an equitable portion of the value created. While performance and commodity-based contracts made up 10% of our U.S. contract mix during the first fiscal quarter, today we have approximately 15% of our active U.S. FlexRig fleet contracted under non-traditional dayrate contracts, the majority of which are performance-based contracts.

“We are encouraged as we head into fiscal 2020. For the first time in four quarters our ending rig count was sequentially higher than the previous quarter's ending rig count. We believe capital discipline by our customers will remain a prevailing theme and we expect industry activity to look similar to the average level experienced during the second half of calendar 2019, which implies a modest increase from current levels.

“Our H&P Technologies (HPT) segment solutions continue to gain momentum with customers, particularly AutoSlide, our software that automatically controls the rig to execute steering of the well with a simple press of a button. To date, AutoSlide's deployment count is more than 150 wells, executing the drilling of the vertical, curve and horizontal wellbore totaling over 2.6 million feet. Customers using AutoSlide are seeing significant benefits from wellbore quality and placement in the forms of efficiency, predictability, and risk mitigation that only automation can provide.

"The power of predictability in performance has enabled our customers to optimize completion stages, increase contact with the reservoir in ways that are better for life of the well, and push the envelope on new methods and techniques that ultimately lead to production increases. We believe these advantages are improving well economics, capital certainty and becoming overriding factors for increasing adoption of our software solutions.

“Turning to our international operations, we remain optimistic about the opportunities we are seeing in the Middle East. Our rigs in the Middle East are now fully utilized and prospects for further growth will likely result in exporting additional FlexRig drilling rigs from the U.S. In Argentina, the Company has a strong market presence in the Vaca Muerta, and economic concerns notwithstanding, we continue to believe this world-class resource play remains an attractive area for further industry activity in the future.”

Senior Vice President and CFO Mark Smith also commented, "As we move into calendar 2020, we remain confident that our balance sheet strength and level of free cash flow generation will allow us to maintain industry leading returns to stockholders and have ample flexibility to take advantage of additional investment opportunities should they develop. H&P's cash flow from operations during the first fiscal quarter was impacted by several seasonal and one-time events. We expect it to be higher in the remaining quarters of the fiscal year. Our fiscal 2020 capex budget remains in the range we initially set, which is between $275 and $300 million.”

John Lindsay concluded, “The year 2020 is momentous for the Company as it is our centennial year. In keeping with this milestone, we remain focused on maintaining our position as the industry's most trusted partner in drilling productivity and technological innovation. H&P's unmatched expertise, experience and people are the linchpin of our leadership position as a drilling solutions provider. Along with our exceptional workforce, our best-in-class FlexRig fleet, balance sheet and leading-edge digital technology, we continue to enable well economics and returns that have strengthened our customer commitment of achieving shared, long-term success.”

Operating Segment Results for the First Quarter of Fiscal 2020

U.S. Land Operations:

Segment operating income decreased $2.6 million to $56.7 million sequentially. The decrease in operating results was primarily attributable to a decline in revenue days, which decreased by approximately 6% sequentially.

Adjusted average rig revenue per day increased slightly by $32 to $25,397(2) largely due to an increase in our FlexServices (trucking, casing running, rental equipment) during the quarter. The adjusted average rig expense per day increased sequentially by $53 to $14,987(2). Corresponding adjusted average rig margin per day decreased $21, less than half of a percent, to $10,410(2).

The segment’s depreciation expense for the quarter includes non-cash charges of $1.3 million for abandonments and accelerated depreciation related to used drilling rig components related to rig upgrades and scrapping of idle equipment, compared to similar non-cash charges of $4.6 million during the fourth fiscal quarter of 2019.

International Land Operations:

Segment operating income increased by $7.3 million to $3.1 million sequentially. The increase in operating income was primarily attributable to higher average margins per day and a foreign currency gain. Prior quarter results included a $3.5 million foreign currency loss related to our Argentina operations compared to an approximate $0.7 million foreign currency gain in the first fiscal quarter. Revenue days increased during the quarter by 1% to 1,619 while the average rig margin per day increased by $1,731 to $7,208.

Offshore Operations:

Segment operating income increased by $3.5 million to $6.3 million sequentially. The number of quarterly revenue days on H&P-owned platform rigs was relatively flat sequentially at 550, while the average rig margin per day increased sequentially by $5,777 to $13,237 due to unexpected repair down time that adversely impacted prior quarter results. Segment operating income from management contracts on customer-owned platform rigs contributed approximately $2.9 million, compared to approximately $2.2 million during the prior quarter.

H&P Technologies:

The segment had an operating loss of $4.6 million compared to income of $0.6 million during the previous quarter. Prior quarter results benefited from a change in the fair value of a contingent liability. Excluding this benefit, HPT's operating loss decreased by $3.7 million sequentially. The sequential decrease in the operating loss was due primarily to higher revenues.

Operational Outlook for the Second Quarter of Fiscal 2020

U.S. Land Operations:

  • Quarterly revenue days expected to be flat-to-up 1.5% sequentially, representing a roughly 1%-3% increase in the average number of active rigs given the lower number of calendar days in the second fiscal quarter; we expect to exit the quarter at between 193-203 active rigs
  • Average rig revenue per day expected to be relatively flat sequentially and in the range of $25,000-$25,500 (excluding any impact from early termination revenue)
  • Average rig expense per day expected to be between $14,650-$15,150

International Land Operations:

  • Quarterly revenue days expected to decrease roughly 7% sequentially, representing an average rig count of approximately 16-17 rigs for the quarter
  • Average rig margin per day expected to decrease to $6,000-$7,000

Offshore Operations:

  • Quarterly revenue days expected to decrease by approximately 30% sequentially, representing an average rig count of 4-5 rigs for the quarter, as one rig demobilized to the yard and one rig transitions between customers
  • Despite recent rate increases, the average rig margin per day is expected to decrease to $10,000-$11,000 due to the aforementioned rig demobilization and transition
  • Management contracts expected to generate approximately $2 million in operating income

HP Technologies:

  • Fiscal second quarter revenue is expected to be between $16-$19 million, roughly flat sequentially

Other Estimates for Fiscal 2020

  • Gross capital expenditures are still expected to be approximately $275 to $300 million; 57-62% expected for maintenance, 17-19% expected for tubular purchases, 11-15% for walking conversions, and roughly 10% for corporate and information technology projects. Asset sales include reimbursements for lost and damaged tubulars and sales of other used drilling equipment that offset a portion of the gross capital expenditures and are expected to total $35 to $45 million in fiscal 2020.
  • General and administrative expenses for fiscal 2020 are still expected to be approximately $200 million
  • Depreciation is still expected to be approximately $540 million

Select Items Included in Net Income per Diluted Share

First Quarter of Fiscal 2020 net income of $0.27 per diluted share included $0.14 in after-tax gains comprised of the following:

  • $0.02 of a net after-tax gain related to fair market adjustments to equity investments
  • $0.03 of after-tax gains related to the sale of used drilling equipment
  • $0.10 of after-tax gains related to the sale of a subsidiary
  • $(0.01) of non-cash after-tax losses from abandonment charges and accelerated depreciation related to used drilling equipment

Fourth Quarter of Fiscal 2019 net income of $0.37 per diluted share included $(0.01) in after-tax losses comprised of the following:

  • $0.01 of after-tax income from long-term contract early termination compensation from customers
  • $0.05 of after-tax gains related to the change in fair value of a contingent liability
  • $0.07 of after-tax gains related to the sale of used drilling equipment
  • $(0.01) of after-tax losses related to bond redemption fees
  • $(0.01) of after-tax losses related to acquisition costs
  • $(0.01) of after-tax losses from discontinued operations related to adjustments resulting from currency fluctuations
  • $(0.02) of a net after-tax loss related to fair market adjustments to equity investments and the sale of a portion of equity investments
  • $(0.03) of non-cash after-tax losses from abandonment charges and accelerated depreciation related to the decommissioning of used drilling equipment
  • $(0.06) of after-tax losses from the settlement of a lawsuit

Conference Call

A conference call will be held on Tuesday, February 4, 2020 at 11:00 a.m. (ET) with John Lindsay, President and CEO, Mark Smith, Senior Vice President and CFO, and Dave Wilson, Director of Investor Relations to discuss the Company’s fiscal first quarter 2020 results. Dial-in information for the conference call is (877) 876-9174 for domestic callers or (785) 424-1667 for international callers. The call access code is ‘Helmerich’. You may also listen to the conference call that will be broadcast live over the Internet by logging on to the Company’s website at http://www.hpinc.com and accessing the corresponding link through the Investor Relations section by clicking on “INVESTORS” and then clicking on “Event Calendar” to find the event and the link to the webcast.

About Helmerich & Payne, Inc.

Founded in 1920, Helmerich & Payne, Inc. (H&P) (NYSE: HP) is committed to delivering industry leading levels of drilling productivity and reliability. H&P operates with the highest level of integrity, safety and innovation to deliver superior results for its customers and returns for shareholders. Through its subsidiaries, the Company designs, fabricates and operates high-performance drilling rigs in conventional and unconventional plays around the world. H&P also develops and implements advanced automation, directional drilling and survey management technologies. H&P’s fleet includes 299 land rigs in the U.S., 32 international land rigs and eight offshore platform rigs. For more information, see H&P online at www.hpinc.com.

Forward-Looking Statements

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

Note Regarding Trademarks. Helmerich & Payne, Inc. owns or has rights to the use of trademarks, service marks and trade names that it uses in conjunction with the operation of its business. Some of the trademarks that appear in this release or otherwise used by H&P include FlexRig, and AutoSlide, which may be registered or trademarked in the U.S. and other jurisdictions.

(1) Operating gross margin defined as operating revenues less direct operating expenses.

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

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

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

 

HELMERICH & PAYNE, INC.

(Unaudited)

(in thousands, except per share data)

 

Three Months Ended

 

December 31,

 

September 30,

 

December 31,

 

2019

 

2019

 

2018

CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

 

 

 

Operating revenues

 

 

 

 

 

Contract drilling services

$

611,398

 

 

$

645,759

 

 

$

737,358

 

Other

3,259

 

 

3,291

 

 

3,240

 

 

614,657

 

 

649,050

 

 

740,598

 

Operating costs and expenses

 

 

 

 

 

Contract drilling services operating expenses, excluding depreciation and amortization

389,206

 

 

430,778

 

 

487,593

 

Other operating expenses

11,545

 

 

1,072

 

 

1,274

 

Depreciation and amortization

130,131

 

 

134,887

 

 

141,460

 

Research and development

6,878

 

 

6,121

 

 

7,019

 

Selling, general and administrative

49,808

 

 

49,812

 

 

54,508

 

Gain on sale of assets

(4,279

)

 

(12,641

)

 

(5,545

)

 

583,289

 

 

610,029

 

 

686,309

 

Operating income (loss) from continuing operations

31,368

 

 

39,021

 

 

54,289

 

Other income (expense)

 

 

 

 

 

Interest and dividend income

2,214

 

 

2,607

 

 

2,450

 

Interest expense

(6,100

)

 

(8,043

)

 

(4,720

)

Gain (loss) on investment securities

2,821

 

 

(4,260

)

 

(42,844

)

Gain on sale of subsidiary

14,963

 

 

—

 

 

—

 

Other

(399

)

 

(546

)

 

541

 

 

13,499

 

 

(10,242

)

 

(44,573

)

Income from continuing operations before income taxes

44,867

 

 

28,779

 

 

9,716

 

Income tax provision (benefit)

14,138

 

 

(13,110

)

 

1,352

 

Income from continuing operations

30,729

 

 

41,889

 

 

8,364

 

Income from discontinued operations before income taxes

7,457

 

 

10,050

 

 

12,665

 

Income tax provision

7,581

 

 

10,763

 

 

2,070

 

Income (loss) from discontinued operations

(124

)

 

(713

)

 

10,595

 

Net income

$

30,605

 

 

$

41,176

 

 

$

18,959

 

Basic earnings (loss) per common share:

 

 

 

 

 

Income from continuing operations

$

0.27

 

 

$

0.38

 

 

$

0.07

 

Income (loss) from discontinued operations

$

—

 

 

$

(0.01

)

 

$

0.10

 

Net income

$

0.27

 

 

$

0.37

 

 

$

0.17

 

Diluted earnings (loss) per common share:

 

 

 

 

 

Income from continuing operations

$

0.27

 

 

$

0.38

 

 

$

0.07

 

Income (loss) from discontinued operations

$

—

 

 

$

(0.01

)

 

$

0.10

 

Net income

$

0.27

 

 

$

0.37

 

 

$

0.17

 

Weighted average shares outstanding (in thousands):

 

 

 

 

 

Basic

108,555

 

 

108,896

 

 

109,142

 

Diluted

108,724

 

 

108,950

 

 

109,425

 

HELMERICH & PAYNE, INC.

(Unaudited)

(in thousands)

 

December 31,

 

September 30,

CONDENSED CONSOLIDATED BALANCE SHEETS

2019

 

2019

Assets

 

 

 

Cash and cash equivalents

$

355,010

 

 

$

347,943

 

Short-term investments

57,044

 

 

52,960

 

Other current assets

742,590

 

 

714,183

 

Total current assets

1,154,644

 

 

1,115,086

 

Investments

35,149

 

 

31,991

 

Property, plant and equipment, net

4,412,359

 

 

4,502,084

 

Other noncurrent assets

239,358

 

 

190,354

 

Total Assets

$

5,841,510

 

 

$

5,839,515

 

 

 

 

 

Liabilities and Shareholders' Equity

 

 

 

Current liabilities

$

419,347

 

 

$

410,238

 

Long-term debt, net

479,355

 

 

479,356

 

Other noncurrent liabilities

951,828

 

 

922,357

 

Noncurrent liabilities - discontinued operations

15,443

 

 

15,341

 

Total shareholders’ equity

3,975,537

 

 

4,012,223

 

Total Liabilities and Shareholders' Equity

$

5,841,510

 

 

$

5,839,515

 

HELMERICH & PAYNE, INC.

(Unaudited)

(in thousands)

 

Three Months Ended

 

December 31,

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

2019

 

2018

OPERATING ACTIVITIES:

 

 

 

Net income

$

30,605

 

 

$

18,959

 

Adjustment for (income) loss from discontinued operations

124

 

 

(10,595

)

Income (loss) from continuing operations

30,729

 

 

8,364

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

Depreciation and amortization

130,131

 

 

141,460

 

Amortization of debt discount and debt issuance costs

444

 

 

329

 

Provision for bad debt

(2,069

)

 

873

 

Stock-based compensation

10,201

 

 

7,158

 

(Gain) loss on investment securities

(2,821

)

 

42,844

 

Gain on sale of assets

(4,279

)

 

(5,545

)

Gain on sale of subsidiary

(14,963

)

 

—

 

Deferred income tax (benefit) expense

(7,966

)

 

1,107

 

Other

(139

)

 

168

 

Changes in assets and liabilities

(27,487

)

 

12,750

 

Net cash provided by operating activities from continuing operations

111,781

 

 

209,508

 

Net cash used in operating activities from discontinued operations

—

 

 

(26

)

Net cash provided by operating activities

111,781

 

 

209,482

 

 

 

 

 

INVESTING ACTIVITIES:

 

 

 

Capital expenditures

(46,021

)

 

(196,094

)

Purchase of short-term investments

(28,948

)

 

(31,324

)

Payment for acquisition of business, net of cash acquired

—

 

 

(2,781

)

Proceeds from sale of short-term investments

25,000

 

 

31,860

 

Proceeds from sale of subsidiary

15,056

 

 

—

 

Proceeds from asset sales

11,878

 

 

11,609

 

Net cash used in investing activities

(23,035

)

 

(186,730

)

 

 

 

 

FINANCING ACTIVITIES:

 

 

 

Dividends paid

(77,602

)

 

(78,122

)

Debt issuance costs paid

—

 

 

(3,912

)

Proceeds from stock option exercises

4,100

 

 

1,954

 

Payments for employee taxes on net settlement of equity awards

(3,455

)

 

(6,267

)

Other

(445

)

 

0

 

Net cash used in financing activities

(77,402

)

 

(86,347

)

 

 

 

 

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

11,344

 

 

(63,595

)

Cash and cash equivalents and restricted cash, beginning of period

382,971

 

 

326,185

 

Cash and cash equivalents and restricted cash, end of period

$

394,315

 

 

$

262,590

 

 

Three Months Ended

 

December 31,

 

September 30,

 

December 31,

SEGMENT REPORTING (in thousands, except operating statistics)

2019

 

2019

 

2018

U.S. LAND OPERATIONS

 

 

 

 

 

Operating revenues

$

508,828

 

 

$

545,060

 

 

$

619,425

 

Direct operating expenses

327,292

 

 

356,704

 

 

407,852

 

Research and development

259

 

 

188

 

 

166

 

Selling, general and administrative expense

10,861

 

 

9,864

 

 

11,656

 

Depreciation

113,726

 

 

119,060

 

 

124,003

 

Segment operating income

$

56,690

 

 

$

59,244

 

 

$

75,748

 

 

 

 

 

 

 

Revenue days

17,684

 

 

18,765

 

 

21,933

 

Average rig revenue per day

$

25,405

 

 

$

25,478

 

 

$

25,047

 

Average rig expense per day

14,987

 

 

15,440

 

 

15,400

 

Average rig margin per day

$

10,418

 

 

$

10,038

 

 

$

9,647

 

Rig utilization

64

%

 

68

%

 

68

%

 

 

 

 

 

 

INTERNATIONAL LAND OPERATIONS

 

 

 

 

 

Operating revenues

$

46,462

 

 

$

48,353

 

 

$

66,287

 

Direct operating expenses

34,075

 

 

43,119

 

 

47,539

 

Selling, general and administrative expense

1,455

 

 

1,399

 

 

2,281

 

Depreciation

7,817

 

 

8,042

 

 

9,837

 

Segment operating income (loss)

$

3,115

 

 

$

(4,207

)

 

$

6,630

 

 

 

 

 

 

 

Revenue days

1,619

 

 

1,598

 

 

1,758

 

Average rig revenue per day

$

27,714

 

 

$

28,199

 

 

$

35,575

 

Average rig expense per day

20,506

 

 

22,722

 

 

22,704

 

Average rig margin per day

$

7,208

 

 

$

5,477

 

 

$

12,871

 

Rig utilization

57

%

 

56

%

 

60

%

 

 

 

 

 

 

OFFSHORE OPERATIONS

 

 

 

 

 

Operating revenues

$

40,255

 

 

$

38,468

 

 

$

36,910

 

Direct operating expenses

30,045

 

 

32,148

 

 

26,305

 

Selling, general and administrative expense

1,137

 

 

1,004

 

 

769

 

Depreciation

2,745

 

 

2,499

 

 

2,668

 

Segment operating income

$

6,328

 

 

$

2,817

 

 

$

7,168

 

 

 

 

 

 

 

Revenue days

550

 

 

552

 

 

525

 

Average rig revenue per day

$

43,839

 

 

$

43,072

 

 

$

35,635

 

Average rig expense per day

30,602

 

 

35,612

 

 

25,637

 

Average rig margin per day

$

13,237

 

 

$

7,460

 

 

$

9,998

 

Rig utilization

75

%

 

75

%

 

71

%

 

 

 

 

 

 

H&P TECHNOLOGIES

 

 

 

 

 

Operating revenues

$

18,552

 

 

$

13,878

 

 

$

14,736

 

Direct operating expenses

8,389

 

 

(874

)

 

6,326

 

Research and development

6,490

 

 

5,730

 

 

6,853

 

Selling, general and administrative expense

5,885

 

 

6,471

 

 

6,056

 

Depreciation and amortization

2,339

 

 

1,928

 

 

1,882

 

Segment operating income (loss)

$

(4,551

)

 

$

623

 

 

$

(6,381

)

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

Reimbursed amounts were as follows:

 

Three Months Ended

 

December 31,

 

September 30,

 

December 31,

(in thousands)

2019

 

2019

 

2018

U.S. Land Operations

$

59,566

 

 

$

66,966

 

 

$

70,090

 

International Land Operations

1,587

 

 

3,291

 

 

3,746

 

Offshore Operations

9,902

 

 

7,899

 

 

5,750

 

Intercompany amounts were as follows:

 

Three Months Ended

 

December 31,

 

September 30,

 

December 31,

(in thousands)

2019

 

2019

 

2018

U.S. Land Operations - Direct operating expenses

$

2,699,000

 

 

$

—

 

 

$

—

 

 

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

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

 

Three Months Ended

 

December 31,

 

September 30,

 

December 31,

(in thousands)

2019

 

2019

 

2018

Operating income

 

 

 

 

 

U.S. Land

$

56,690

 

 

$

59,244

 

 

$

75,748

 

International Land

3,115

 

 

(4,207

)

 

6,630

 

Offshore

6,328

 

 

2,817

 

 

7,168

 

H&P Technologies

(4,551

)

 

623

 

 

(6,381

)

Other

(1,237

)

 

1,388

 

 

1,554

 

Segment operating income

$

60,345

 

 

$

59,865

 

 

$

84,719

 

Gain on sale of assets

4,279

 

 

12,641

 

 

5,545

 

Corporate selling, general and administrative costs and corporate depreciation

(33,256

)

 

(33,485

)

 

(35,975

)

Operating income

$

31,368

 

 

$

39,021

 

 

$

54,289

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

Interest and dividend income

$

2,214

 

 

$

2,607

 

 

$

2,450

 

Interest expense

(6,100

)

 

(8,043

)

 

(4,720

)

Gain (loss) on investment securities

2,821

 

 

(4,260

)

 

(42,844

)

Gain on sale of subsidiary

14,963

 

 

—

 

 

—

 

Other

(399

)

 

(546

)

 

541

 

Total unallocated amounts

13,499

 

 

(10,242

)

 

(44,573

)

 

 

 

 

 

 

Income from continuing operations before income taxes

$

44,867

 

 

$

28,779

 

 

$

9,716

 

 

SUPPLEMENTARY STATISTICAL INFORMATION

Unaudited

 

SELECTED STATISTICAL & OPERATIONAL HIGHLIGHTS

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

 

Three Months Ended

(in dollars per revenue day)

December 31,
2019

 

September 30,
2019

U.S. Land Operations

 

 

 

Early contract termination revenue

$

8

 

 

$

113

 

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

8

 

 

113

 

 

 

 

 

Settlement of lawsuit

—

 

 

506

 

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

—

 

 

506

 

U.S. LAND RIG COUNTS & MARKETABLE FLEET STATISTICS

 

February 3,

 

December 31,

 

September 30,

 

Q1FY20

 

2020

 

2019

 

2019

 

Average

U.S. Land Operations

 

 

 

 

 

 

 

Term Contract Rigs

128

 

 

132

 

 

124

 

 

128

 

Spot Contract Rigs

69

 

 

63

 

 

70

 

 

64

 

Total Contracted Rigs

197

 

 

195

 

 

194

 

 

192

 

Idle or Other Rigs

102

 

 

104

 

 

105

 

 

107

 

Total Marketable Fleet

299

 

 

299

 

 

299

 

 

299

 

H&P GLOBAL FLEET UNDER TERM CONTRACT STATISTICS

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

 

(Estimated Quarterly Average — as of 2/3/20)

 

Q2

 

Q3

 

Q4

 

Q1

 

Q2

 

Q3

 

Q4

Segment

FY20

 

FY20

 

FY20

 

FY21

 

FY21

 

FY21

 

FY21

U.S. Land Operations

125.6

 

 

101.5

 

 

81.5

 

 

64.2

 

 

32.4

 

 

23.0

 

 

20.1

 

International Land Operations

7.2

 

 

2.1

 

 

1.0

 

 

1.0

 

 

1.0

 

 

1.0

 

 

1.0

 

Offshore Operations

—

 

 

—

 

 

—

 

 

—

 

 

—

 

 

—

 

 

—

 

Total

132.8

 

 

103.6

 

 

82.5

 

 

65.2

 

 

33.4

 

 

24.0

 

 

21.1

 

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

Dave Wilson, Director of Investor Relations
investor.relations@hpinc.com
(918) 588-5190

Source: Helmerich & Payne, Inc.