Helmerich & Payne, Inc. Announces Record Fiscal Year-End Results and Additional New Build Contracts

November 14, 2013

TULSA, Okla., Nov. 14, 2013 (GLOBE NEWSWIRE) -- Helmerich & Payne, Inc. (NYSE:HP) reported record income from continuing operations of $721.5 million ($6.65 per diluted share) and record operating revenues of $3.4 billion for its fiscal year ended September 30, 2013, compared to income from continuing operations of $573.6 million ($5.27 per diluted share) from operating revenues of $3.2 billion during the prior fiscal year ended September 30, 2012. Included in income from continuing operations during fiscal 2013 were $0.91 per diluted share corresponding to after-tax gains from the sale of investment securities. Also included in income from continuing operations during fiscal 2013 and fiscal 2012 were $0.11 per diluted share each year of after-tax gains related to the sale of used drilling equipment. Net income for fiscal 2013 was also at an all-time high level of $736.6 million ($6.79 per diluted share), compared to $581.0 million ($5.34 per diluted share) for fiscal 2012.

Income from continuing operations for the fourth quarter of fiscal 2013 was $159.8 million ($1.47 per diluted share) from operating revenues of $864.5 million, compared to income from continuing operations of $149.6 million ($1.39 per diluted share) from operating revenues of $829.4 million during the fourth fiscal quarter of 2012, and income from continuing operations of $251.0 million ($2.32 per diluted share) from operating revenues of $840.2 million during the third fiscal quarter of 2013. Included in this year's and last year's fourth fiscal quarter income from continuing operations were $0.03 per diluted share of after-tax gains in each quarter related to the sale of used drilling equipment. Included is this year's third fiscal quarter income from continuing operations were $0.02 per diluted share of after-tax gains related to the sale of used drilling equipment and $0.86 per diluted share of after-tax gains related to the sale of investment securities. Net income for the fourth fiscal quarter of 2013 was $159.8 million ($1.47 per diluted share), compared to net income of $157.1 million ($1.46 per diluted share) during the fourth fiscal quarter of 2012, and net income of $266.2 million ($2.46 per diluted share) during the third fiscal quarter of 2013.

The Company also announced today that it has entered into agreements with three exploration and production companies to build and operate six additional FlexRigs®* in the U.S. All of these rigs were ordered under multi-year term contracts and are expected to generate attractive economic returns for the Company.

Chairman and CEO Hans Helmerich commented, "We are pleased to have once again delivered record levels of revenue and operating income during the most recent quarter. Our fiscal 2013 results have also been record-breaking, even if we exclude almost $100 million in after-tax gains from the sale of investment securities.

"During the last few months we have commented on encouraging signs in the market. Including those announced today, we are pleased to have reported a total of 13 new build orders with customer commitments since the beginning of our 2014 fiscal year. We believe customers are now planning to incrementally increase their development efforts and drilling activity with a continued focus on drilling rig capabilities and efficiencies. As has been the case for a considerable time, these trends clearly work to H&P's advantage. We look forward to continuing to help our customers lower their drilling costs through steady productivity gains and performance improvements."

Operating Segment Results

Segment operating income for U.S. land operations was $235.8 million for the fourth fiscal quarter of 2013, compared with $236.6 million for last year's fourth fiscal quarter and $236.4 million for this year's third fiscal quarter. As compared to this year's third fiscal quarter, the number of revenue days for the segment slightly increased to 22,520 during the fourth fiscal quarter of 2013. Average rig revenue per day increased by $898 to $29,058 as compared to this year's third fiscal quarter. This increase was offset by a sequential increase of $892 in the average rig expense per day, resulting in the average rig margin per day remaining relatively flat at $15,420 during this year's fourth fiscal quarter. The rig revenue and margin per day averages included approximately $730 per day of early termination and customer requested delivery delay fees during the fourth fiscal quarter. Rig utilization for the Company's U.S. land segment was 82% for this year's fourth fiscal quarter, compared with 85% for last year's fourth fiscal quarter and 83% for this year's third fiscal quarter. At September 30, 2013, the Company's U.S. land segment had 248 contracted rigs (including 158 under term contracts) and 54 idle rigs. 

Segment operating income for the Company's offshore operations was $10.3 million for the fourth fiscal quarter of 2013, compared with $12.0 million for last year's fourth fiscal quarter and $14.1 million for this year's third fiscal quarter. The sequential decline in segment operating income was primarily attributable to a $6.4 million charge stemming from a recently disclosed plea agreement between Helmerich & Payne International Drilling Co. and the United States Department of Justice, United States Attorney's Office for the Eastern District of Louisiana, and related to an investigation of events initiated by the Company in 2010 on one of its offshore platform rigs. Excluding the corresponding charge, the average rig margin per day would have increased by $1,569 to $26,677 during the fourth quarter of fiscal 2013. The number of revenue days between periods increased only slightly to 736, resulting in a rig utilization level of 89% for each of the last two quarters of the fiscal year. 

The Company's international land segment operating income was $13.9 million for this year's fourth fiscal quarter, compared with $7.1 million for last year's fourth fiscal quarter and $8.5 million for this year's third fiscal quarter. The sequential increase in segment operating income was attributable to increased activity and stronger margins during this year's fourth fiscal quarter. The average rig margin per day increased to $10,634 in the fourth fiscal quarter, from $8,591 in the third fiscal quarter of 2013. In addition, revenue days for the fourth fiscal quarter increased by approximately 9% to 2,315 as compared to the previous quarter, resulting in a rig utilization level of 87% as compared to 80% during the third quarter of fiscal 2013.    

Drilling Operations Outlook for the First Quarter of Fiscal 2014

In the U.S. land segment, the Company expects average rig revenue per day during the first quarter to decline by less than 1% as compared to the fourth fiscal quarter of 2013 (excluding early termination and delay revenues). Average rig expense per day is expected to decline to roughly $13,000 during the first fiscal quarter, which is slightly under the twelve-month trailing average and significantly under the average corresponding to the fourth fiscal quarter of 2013. The total number of revenue days is expected to increase by approximately 3% quarter to quarter. Early termination and delay revenue for the quarter is currently estimated at approximately $10 million. As of today, the U.S. land segment has approximately 255 active rigs, including 156 under term contracts.

In the offshore segment, the Company expects an average rig margin per day level of approximately $25,000 during the first fiscal quarter and flat rig utilization levels as compared to the prior quarter. 

In the international land segment, the Company expects total revenue days during the first fiscal quarter to decline by approximately 10% and the average rig margin per day to be relatively flat as compared to the prior quarter. 

Capital Expenditures and Other Early Estimates for Fiscal 2014

The Company's current capital expenditures estimate for fiscal 2014 is $850 million. This assumes a continued new build cadence of two rigs per month through the end of the fiscal year. As a result, depreciation expense is expected to increase to approximately $500 million during fiscal 2014. General and administrative expenses are expected to slightly increase to approximately $130 million.

About Helmerich & Payne, Inc.

Helmerich & Payne, Inc. is primarily a contract drilling company. As of November 14, 2013, the Company's existing fleet included 305 land rigs in the U.S., 29 international land rigs and 9 offshore platform rigs. In addition, the Company is scheduled to complete another 9 new H&P-designed and operated FlexRigs and one 3,000 horsepower AC drive rig under long-term contracts with customers by early calendar 2014. Upon completion of these commitments, the Company's global fleet is expected to have a total of 344 land rigs, including 314 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, 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 & Analysis of Results of Operations and Financial Condition" 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.

*FlexRig® is a registered trademark of Helmerich & Payne, Inc.  

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 from continuing operations before income taxes as reported on the Consolidated Statements of Income (in thousands).

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