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Helmerich & Payne, Inc. Announces Second Quarter Results

May 2, 2016

TULSA, Okla., May 02, 2016 (GLOBE NEWSWIRE) -- Helmerich & Payne, Inc. (NYSE:HP) reported net income of $21 million ($0.19 per diluted share) from operating revenues of $438 million for the second quarter of fiscal 2016, compared to net income of $154 million ($1.41 per diluted share, as adjusted) from operating revenues of $886 million during the second quarter of fiscal 2015, and net income of $16 million ($0.15 per diluted share) from operating revenues of $488 million during the first quarter of fiscal 2016.  Included in net income per diluted share for this year’s and last year’s second fiscal quarters as well as this year’s first fiscal quarter are approximately $0.47, $0.40, and $0.10, respectively, of after-tax income related to a combination of select items (including long-term contract early termination compensation from customers) as described in a separate section of this press release.

President and CEO John Lindsay commented, “These are demanding times in the energy service space, and the challenge for many is now one of survival.   The U.S. land rig count is comparable to the all-time record lows reached in 1999.  Sharp reductions in personnel, expenses, and investments are occurring worldwide, and we expect to see further deterioration in terms of drilling activity during the third fiscal quarter.

“But even if this difficult environment persists, we believe that H&P’s competitive and financial positions remain very strong.  Our long-term contracts have allowed the Company to remain profitable and protect FlexRig®* investments.  We are able to focus energy on efforts that add value to our customers and help us to become even more efficient and effective as an organization.  Whether we see more declines in activity or a significant improvement in demand, H&P is well positioned to respond.  As we have described in the past, our strong and liquid balance sheet, robust backlog, and lower spending requirements should allow us to continue to return cash to shareholders.  Our strength is driven by our people, and we appreciate their attitude in the face of this adversity and their dedication to the Company through these difficult times.”

Operating Segment Results

Segment operating income for the Company’s U.S. land operations was $63 million for the second quarter of fiscal 2016, compared with $225 million for last year’s second fiscal quarter and $56 million for this year’s first fiscal quarter.  As compared to the first quarter of fiscal 2016, segment operating income increased as a result of a higher level of early termination revenue during the second fiscal quarter, which was partially offset by lower quarterly levels of activity and rig margins.  The number of quarterly revenue days decreased sequentially by approximately 20% to 9,601 days.  Excluding the impact of $2,417 and $8,287 per day corresponding to revenues from early contract terminations during this year’s first and second fiscal quarters, respectively, the average rig revenue per day decreased sequentially by $303 to $25,931, and the average rig margin per day decreased sequentially by $1,552 to $11,792.  The average rig expense per day increased sequentially by $1,249 to $14,139.  Rig utilization for the segment was 31% for this year’s second fiscal quarter, compared with 68% and 39% for last year’s second fiscal quarter and this year’s first fiscal quarter, respectively.  At March 31, 2016, the Company’s U.S. land segment had approximately 94 contracted rigs generating revenue (including 82 under long-term contracts) and 253 idle rigs. 

Segment operating income for the Company’s offshore operations was $3.3 million for the second quarter of fiscal 2016, compared with $19.0 million (as adjusted) for last year’s second fiscal quarter and $7.7 million for this year’s first fiscal quarter.  The sequential decrease in operating income was attributable to declines in management contract activity, average daily margins and rig revenue days. The average rig margin per day decreased sequentially from $7,920 to $7,346, and quarterly revenue days decreased from 736 days to 691 days during the second fiscal quarter.

The Company’s international land operations reported a segment operating loss of $2.3 million for this year’s second fiscal quarter, compared with operating income of $10.6 million (as adjusted) for last year’s second fiscal quarter and an operating loss of $6.7 million for this year’s first fiscal quarter.  The sequential improvement in operating results was attributable to a significant currency exchange loss that negatively impacted the first fiscal quarter.  The average rig margin per day decreased sequentially from $11,811 to $10,487 during the second fiscal quarter.  The number of quarterly revenue days decreased sequentially by approximately 7% to 1,307 days.

Drilling Operations Outlook for the Third Quarter of Fiscal 2016

In the U.S. land segment, the Company expects revenue days (activity) to decrease by roughly 25% to 28% during the third fiscal quarter as compared to the second fiscal quarter of 2016.  Excluding any impact from early termination revenue, the average rig revenue per day is expected to be roughly $25,000, and the corresponding average rig expense per day is expected to decrease to roughly $13,800.  As of today, the U.S. land segment has approximately 84 contracted rigs that are generating revenue (including 77 under term contracts) and 263 idle rigs.

In the offshore segment, the Company expects revenue days to decrease by approximately 8% during the third fiscal quarter as compared to the second fiscal quarter of 2016. The average rig margin per day is expected to be approximately $8,000 during the third quarter of fiscal 2016. 

In the international land segment, the Company expects revenue days to decrease by approximately 3% during the third quarter as compared to the second quarter of fiscal 2016. The average rig margin per day is expected to be roughly $11,000 during the third quarter of fiscal 2016.

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

Included in net income per diluted share corresponding to the second quarter of fiscal 2016 are approximately $0.47 of after-tax income related to a combination of the following:  $0.49 of after-tax gains from long-term contract early termination compensation from customers; $0.02 of after-tax gains related to the sale of used drilling equipment; and $0.04 of losses from discontinued operations. 

Included in net income per diluted share corresponding to the second quarter of fiscal 2015 are approximately $0.40 of after-tax income related to a combination of the following:  $0.44 of after-tax gains from long-term contract early termination compensation from customers; $0.02 of after-tax gains related to the sale of used drilling equipment; and $0.06 of after-tax losses from abandonment charges related to the decommissioning of certain (SCR) land rigs and other used drilling equipment. 

Included in net income per diluted share corresponding to the first quarter of fiscal 2016 are approximately $0.10 of after-tax income related to a combination of the following:  $0.17 of after-tax gains from long-term contract early termination compensation from customers; $0.03 of after-tax gains related to the sale of used drilling equipment; $0.05 of after-tax losses related to a currency exchange loss; and a negative $0.05 impact on income tax expense primarily due to a fiscal 2015 adjustment to the Domestic Production Deduction that resulted from a U.S. tax law change in December 2015 extending bonus depreciation allowances that had expired December 31, 2014

About Helmerich & Payne, Inc.

Helmerich & Payne, Inc. is primarily a contract drilling company.  As of May 2, 2016, the Company’s existing fleet includes 347 land rigs in the U.S., 38 international land rigs, and nine offshore platform rigs.  In addition, the Company is scheduled to deliver another three new H&P-designed and operated FlexRigs during this fiscal year, all under long-term contracts with customers.  Upon completion of these commitments, the Company’s global fleet is expected to have 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.

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

 


HELMERICH & PAYNE, INC.
Unaudited
(in thousands, except per share data)
    
  Three Months EndedSix Months Ended
CONSOLIDATED STATEMENTS OF December 31March 31March 31
  20152016  2015  2016  2015 
INCOME   (As adjusted) (As adjusted)
       
Operating Revenues:      
Drilling – U.S. Land $369,805 $349,283 $718,463 $719,088 $1,608,510 
Drilling – Offshore  41,880  34,325  62,428  76,205  132,315 
Drilling – International Land  72,194  51,352  101,038  123,546  197,711 
Other  3,968  3,231  3,741  7,199  7,921 
  $487,847 $438,191 $885,670 $926,038 $1,946,457 
       
Operating costs and expenses:      
Operating costs, excluding depreciation  276,644  221,611  467,099  498,255  1,026,562 
Depreciation  142,129  141,517  150,248  283,646  288,480 
General and administrative  32,074  33,811  34,995  65,885  67,731 
Research and development  2,919  2,315  4,857  5,234  9,015 
Income from asset sales  (4,589) (2,684) (2,855) (7,273) (7,028)
   449,177  396,570  654,344  845,747  1,384,760 
       
Operating income   38,670  41,621  231,326  80,291  561,697 
       
Other income (expense):      
Interest and dividend income  733  799  2,564  1,532  2,859 
Interest expense  (4,524) (5,721) (2,600) (10,245) (3,190)
Other  (261) 653  55  392  369 
   (4,052) (4,269) 19  (8,321) 38 
       
Income from continuing operations      
before income taxes  34,618  37,352  231,345  71,970  561,735 
Income tax provision  18,720  12,178  77,803  30,898  204,570 
Income from continuing operations  15,898  25,174  153,542  41,072  357,165 
       
Income (loss) from discontinued operations, before income taxes  104  (56) (76) 48  (91)
Income tax provision  -  3,913  (77) 3,913  (77)
Income (loss) from discontinued operations  104  (3,969) 1  (3,865) (14)
         
NET INCOME $    16,002 $    21,205 $    153,543 $    37,207 $    357,151 
       
Basic earnings per common share:      
Income from continuing operations $0.15 $0.23 $1.42 $0.38 $3.29 
Income from discontinued operations $- $(0.04)$- $(0.04)$- 
       
Net income $0.15 $0.19 $1.42 $0.34 $3.29 
                 
Diluted earnings per common share:                
Income from continuing operations $0.15 $0.23 $1.41 $0.37 $3.27 
Income from discontinued operations $- $(0.04)$- $(0.04)$- 
                 
Net income $0.15 $0.19 $1.41 $0.33 $3.27 
                 
Weighted average shares outstanding:                
Basic  107,852  108,014  107,646  107,933  107,812 
Diluted  108,409  108,466  108,370  108,430  108,620 
                 
Effective October 1, 2015, the Company eliminated a legacy one-month lag period between its U.S. fiscal year and its foreign subsidiaries’ fiscal years.  As required, the elimination of the one-month lag has been applied retrospectively to all periods presented herein.
                 


HELMERICH & PAYNE, INC.
Unaudited
(in thousands)
     
  March 31
2016 
 September 30
2015
(As Adjusted)
CONSOLIDATED CONDENSED BALANCE SHEETS  
     
ASSETS    
Cash and cash equivalents $898,013  $729,384 
Short term investments  45,526   45,543 
Other current assets  516,608   656,170 
Current assets of discontinued operations  230   8,097 
Total current assets  1,460,377   1,439,194 
Investments  83,363   104,354 
Net property, plant, and equipment  5,446,352   5,563,170 
Other assets  35,013   40,524 
TOTAL ASSETS $7,025,105  $7,147,242 
     
LIABILITIES AND SHAREHOLDERS' EQUITY    
Current liabilities $371,246  $344,820 
Current liabilities of discontinued operations  82   3,377 
Total current liabilities  371,328   348,197 
Non-current liabilities  1,374,648   1,406,036 
Non-current liabilities of discontinued operations  4,110   4,720 
Long-term notes payable  492,919   492,443 
Total shareholders’ equity  4,782,100   4,895,846 
     
     
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $7,025,105  $7,147,242 
         


HELMERICH & PAYNE, INC.
Unaudited
(in thousands)
  Six Months Ended
  March 31
   2016  2015 
 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS  (As Adjusted)
    
OPERATING ACTIVITIES:   
Net income $37,207 $357,151 
Adjustment for loss from discontinued operations  3,865  14 
Income from continuing operations  41,072  357,165 
Depreciation  283,646  288,480 
Changes in assets and liabilities  158,870  164,666 
Gain on sale of assets  (7,273) (7,028)
Other  16,104  13,299 
Net cash provided by operating activities from continuing operations  492,419  816,582 
Net cash provided by (used in) operating activities from discontinued operations  98  (14)
Net cash provided by operating activities  492,517  816,568 
    
INVESTING ACTIVITIES:   
Capital expenditures  (180,481) (766,029)
Purchase of short-term investments  (21,869) - 
Proceeds from sales of short-term investments  21,676  - 
Proceeds from sale of assets and invested securities  9,715  15,155 
Net cash used in investing activities  (170,959) (750,874)
    
FINANCING  ACTIVITIES:   
Proceeds from senior notes, net of discount and debt issuance costs  (32) 492,791 
Proceeds from short-term debt  -  1,002 
Payments on short-term debt  -  (1,002)
Increase in bank overdraft  -  12,560 
Dividends paid  (149,300) (149,347)
Repurchase of common stock  -  (59,654)
Exercise of stock options  (199) (1,079)
Tax withholdings related to net share settlements of restricted stock  (3,617) (4,248)
Excess tax benefit from stock-based compensation  219  2,761 
Net cash provided by (used in) financing activities  (152,929) 293,784 
    
Net increase in cash and cash equivalents  168,629  359,478 
Cash and cash equivalents, beginning of period  729,384  360,307 
Cash and cash equivalents, end of period $898,013 $719,785 
    


SEGMENT REPORTINGThree Months EndedSix Months Ended
 December 31
 March 31
March 31
  2015  2016 2015 2016 2015
       (As adjusted)   (As adjusted)
 (in thousands, except days and per day amounts)
U.S. LAND OPERATIONS     
Revenues$369,805 $349,283 $718,463 $719,088 $1,608,510 
Direct operating expenses 181,541  155,884  352,489  337,425  793,615 
General and administrative expense 12,373  12,196  12,605  24,569  24,320 
Depreciation 120,359  118,682  128,510  239,041  247,587 
Segment operating income$55,532 $62,521 $224,859 $118,053 $542,988 
      
Revenue days 11,945  9,601  20,802  21,546  48,157 
Average rig revenue per day$28,651 $34,218 $30,988 $31,132 $30,118 
Average rig expense per day$12,890 $14,139 $13,395 $13,447 $13,196 
Average rig margin per day$15,761 $20,079 $17,593 $17,685 $16,922 
Rig utilization 39% 31% 68% 35% 78%
      
OFFSHORE OPERATIONS     
Revenues$41,880 $34,325 $62,428 $76,205 $132,315 
Direct operating expenses 30,293  27,065  39,264  57,358  83,739 
General and administrative expense 862  837  954  1,699  1,780 
Depreciation 3,003  3,124  3,170  6,127  6,094 
Segment operating income$7,722 $3,299 $19,040 $11,021 $40,702 
      
Revenue days 736  691  794  1,427  1,603 
Average rig revenue per day$27,539 $28,004 $49,783 $27,764 $52,588 
Average rig expense per day$19,619 $20,658 $31,112 $20,123 $32,877 
Average rig margin per day$7,920 $7,346 $18,671 $7,641 $19,711 
Rig utilization 89% 84% 98% 87% 98%
      
INTERNATIONAL LAND OPERATIONS     
Revenues$72,194 $  51,352 $101,038 $123,546 $197,711 
Direct operating expenses 64,008  38,113  75,391  102,121  149,314 
General and administrative expense 718  887  1,112  1,605  1,628 
Depreciation 14,133  14,620  13,956  28,753  25,629 
Segment operating income (loss)$  (6,665)$  (2,268)$    10,579 $(8,933)$  21,140 
                
Revenue days 1,411  1,307  1,771    2,718    3,840 
Average rig revenue per day$46,031 $    36,774 $52,054 $41,580 $  46,014 
Average rig expense per day$34,220 $26,287 $    37,761 $30,406 $  33,850 
Average rig margin per day$11,811 $      10,487 $14,293 $11,174 $  12,164 
Rig utilization   40%   38% 49% 39% 54%
                
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$27,571  $20,751 $73,853 $48,322 $  158,115 
Offshore Operations$6,331  $6,086 $    5,096 $12,417 $10,828 
International Land Operations$7,244  $3,288 $    8,850 $10,532 $21,017 
                 

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).

    Three Months EndedSix Months Ended
  December 31March 31March 31
   2015  2016 2015 2016 2015
        (As adjusted)   (As adjusted)
Operating income       
U.S. Land $55,532 $62,521 $224,859 $118,053 $542,988 
Offshore  7,722  3,299  19,040  11,021  40,702 
International Land  (6,665) (2,268) 10,579  (8,933) 21,140 
Other  (1,304) (1,349) (3,217) (2,653) (5,116)
Segment operating income  $55,285 $62,203 $251,261 $117,488 $599,714 
Corporate general and administrative  (18,121) (19,891) (20,324) (38,012) (40,003)
Other depreciation  (3,610) (3,971) (3,767) (7,581) (7,648)
Inter-segment elimination  527  596  1,301  1,123  2,606 
Income from asset sales  4,589  2,684  2,855  7,273  7,028 
Operating income  $  38,670 $  41,621 $231,326 $  80,291 $561,697 
       
Other income (expense):      
Interest and dividend income  733  799  2,564  1,532  2,859 
Interest expense  (4,524) (5,721) (2,600) (10,245) (3,190)
Gain on sale of investment securities  -  -  -  -  - 
Other  (261) 653  55  392  369 
Total other income (expense)  (4,052) (4,269) 19  (8,321) 38 
       
       
Income from continuing operations before income taxes  $    34,618 $  37,352 $   231,345 $   71,970 $  561,735 
                 
Contact:
Investor Relations
investor.relations@hpinc.com
(918) 588-5190

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Source: Helmerich & Payne, Incorporated