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Helmerich & Payne, Inc. Announces Second Quarter Results

April 30, 2021

 

 

  • H&P's North America Solutions segment exited the second quarter of fiscal year 2021 with 109 active rigs up roughly 15% during the quarter
  • The Company ended the quarter with $562 million in cash and short-term investments and no amounts drawn on its $750 million revolving credit facility culminating in approximately $1.3 billion in available liquidity
  • Quarterly North America Solutions operating gross margins(1) increased $19 million to $64 million sequentially, as revenues increased by $48 million to $250 million and expenses increased by $29 million to $186 million
  • The Company reported a fiscal second quarter net loss of $(1.13) per diluted share; including select items(2) of $(0.53) per diluted share
  • The Company incurred a non-cash impairment charge of $54 million related to fair market adjustments for decommissioned rigs that are held for sale and recognized a $23 million loss on sales related to excess drilling equipment and spares
  • Adoption of our drilling automation technologies and new commercial models continues to increase with 25% to 30% of our active FlexRig® fleet utilizing AutoSlide®, and roughly 30% utilizing some form of performance-based contract
  • On March 3, 2021, the Board of Directors of the Company declared a quarterly cash dividend of $0.25 per share, payable on June 1, 2021, to stockholders of record at the close of business on May 17, 2021

TULSA, Okla.--(BUSINESS WIRE)-- Helmerich & Payne, Inc. (NYSE: HP) reported a net loss of $121 million, or $(1.13) per diluted share, from operating revenues of $296 million for the quarter ended March 31, 2021, compared to a net loss of $70 million, or $(0.66) per diluted share, on revenues of $246 million for the quarter ended December 31, 2020. The net losses per diluted share for the second and first quarters of fiscal year 2021 include $(0.53) and $0.16, respectively, of after-tax gains and losses comprised of select items(2). For the second quarter of fiscal year 2021, select items(2) were comprised of:

  • $0.04 of after-tax gains pertaining to a non-cash fair market adjustment to our equity investment, and discontinued operations related to adjustments resulting from currency fluctuations
  • $(0.57) of after-tax losses pertaining to a non-cash impairment for fair market adjustments to decommissioned rigs that are held for sale, loss on sales of excess drilling equipment and spares, and restructuring charges

Net cash provided by operating activities was $78 million for the second quarter of fiscal year 2021 compared to net cash used in operating activities of $20 million for the first quarter of fiscal year 2021.

President and CEO John Lindsay commented, "The increase in activity we experienced during the first half of our fiscal 2021 year has been encouraging, particularly in light of the record industry downturn last year. As in the past, our strong market standing and flexible financial position is enabling us to concentrate on long-term, strategic objectives during volatile and uncertain markets. We are making good progress in deploying digital technology solutions and introducing new commercial models to the industry, but realize there is still a lot of work ahead of us.

"Clearly, the energy industry's capital discipline, which started prior to the global pandemic, remains resolute, and this is something we are actually pleased to see. The attention to controlled spending and generating returns in a variety of commodity price environments is what the industry needs to attract and retain investment. A natural step in capital discipline is deriving the most value per capital dollar spent, not just in a one-year budget cycle, but over the life of an investment. This corresponds directly to where we believe H&P, as the leading drilling solutions provider, delivers the most value to our customers and is the driver behind the development of our digital technology solutions and commercial models that are structured around achieving value-added outcomes.

"H&P's focus will remain on bringing value to the customer by leveraging software, data and FlexRig technology. Our digitally-enabled drilling operations provide automation solutions that deliver both efficiency gains and wellbore quality. Our customers experience not only near-term financial benefits, like lower well costs and the reduction of certain downhole risks, but also have positive economic implications over the long-term life of the well. An important ingredient to a successful technology strategy is the integration of new commercial models, which incorporate performance metrics into the contract. New commercial models are designed to generate win-win outcomes - the customer has a well with improved economics and H&P is compensated for helping to create a portion of that value. Currently, approximately 30% of our active fleet in the U.S. is under some type of performance contract."

Senior Vice President and CFO Mark Smith also commented, "The quality and strength of H&P's financial position, after emerging from one of the most challenging times in the Company's history, bears reiteration. H&P exited the March fiscal quarter with $562 million in cash and short-term investments, a debt-to-cap of 14% and approximately $1.3 billion in available liquidity. Additionally, lenders with $680 million of commitments under our undrawn revolving credit facility recently exercised their option to extend the maturity of our credit facility by one year to 2025. Much like the Company's strong balance sheet, the commitment to our long-standing capital allocation strategy of returning cash to shareholders remains firmly intact.

"As the market landscape continues to evolve, the Company's focus on marketing its highly capable, super-spec FlexRig fleet is more pronounced leading us to initiate a plan in March of this year to sell certain older, less capable rigs, the majority of which were previously decommissioned, written down and expected to be sold for scrap. As a result of this plan, we reclassified those assets to held for sale for accounting purposes and we incurred an impairment of $54 million related to fair market adjustments. Additionally we recognized a $23 million loss on sales related to excess drilling equipment and spares.

"We continue to move forward with our strategies of further rationalizing our operating cost structure by identifying other areas of potential cost improvement. We are now quantifying the expected savings and timing of these strategies with the expectation of implementing these initiatives in the coming quarters. The margin improvements resulting from these additional cost saving initiatives will be recognized over the next few quarters with the full ongoing benefits expected to be realized in fiscal 2022."

John Lindsay concluded, “One of H&P's strengths is its ability to adapt to changing, and often volatile, market conditions. Our people, rig assets and technology, and financial position are the drivers behind why H&P is considered a market leader and partner of choice within the industry. While challenges still remain ahead, I am confident that H&P and our people are up to the task and will be successful."

Operating Segment Results for the Second Quarter of Fiscal Year 2021

North America Solutions:

This segment had an operating loss of $109.8 million compared to an operating loss of $72.9 million during the previous quarter. The increase in the operating loss was due to impairments related to fair market adjustments to decommissioned rigs that are held for sale and restructuring charges. Absent these select items(2), this segment's operating loss declined by $18.8 million on a sequential basis, due mainly to a higher level of rig activity.

Operating gross margins(1) increased by $19.4 million to $64.1 million as both revenues and expenses increased sequentially. There was no early contract termination revenue recognized during the quarter compared to the prior quarter, which benefited from $5.8 million in early contract termination revenue. Operating results were still negatively impacted by the costs associated with reactivating rigs; $9.7 million in the second fiscal quarter compared to $10.6 million in the first fiscal quarter. While 21 idle rigs were reactivated during the quarter, only 15 were incremental to the rig count due to the normal contracting churn. The majority of the remaining reactivated rigs have already returned to service subsequent to March 31, 2021.

International Solutions:

This segment had an operating loss of $3.5 million compared to an operating loss of $8.4 million during the previous quarter. Operating gross margins(1) improved to a negative $1.9 million from a negative $7.0 million in the previous quarter, as the current quarter benefited from additional revenue days and certain revenue reimbursements of approximately $1.9 million. Current quarter results included a $2.4 million foreign currency loss related to our South American operations compared to an approximate $1.9 million foreign currency loss in the first quarter of fiscal year 2021.

Offshore Gulf of Mexico:

This segment had operating income of $3.0 million compared to operating income of $2.7 million during the previous quarter. Operating gross margins(1) remained relatively flat at $6.2 million compared to $6.0 million in the prior quarter.

Operational Outlook for the Third Quarter of Fiscal Year 2021

North America Solutions:

  • We expect North America Solutions operating gross margins(1) to be between $65-$75 million
  • We expect to exit the quarter at between 120-125 contracted rigs

International Solutions:

  • We expect International Solutions operating gross margins(1) to be between $(1)-$(3) million, exclusive of any foreign exchange gains or losses

Offshore Gulf of Mexico:

  • We expect Offshore Gulf of Mexico operating gross margins(1) to be between $6-$9 million

Other Estimates for Fiscal Year 2021

  • Gross capital expenditures are still expected to be approximately $85 to $105 million; roughly one-third expected for maintenance, roughly one-third expected for skidding to walking conversions and roughly one-third for corporate and information technology. Ongoing 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 still expected to total approximately $25 million in fiscal year 2021. Note the sale of the offshore platform rig during the first quarter of fiscal year 2021 is excluded from this number.
  • Depreciation is now expected to be approximately $425 million
  • Research and development expenses for fiscal year 2021 are now expected to be roughly $25 million
  • General and administrative expenses for fiscal year 2021 are still expected to be approximately $160 million

Select Items Included in Net Income per Diluted Share

Second quarter of fiscal year 2021 net loss of $(1.13) per diluted share included $(0.53) in after-tax losses comprised of the following:

  • $0.02 of non-cash after-tax gains related to fair market value adjustments to equity investments
  • $0.02 of non-cash after-tax gains from discontinued operations related to adjustments resulting from currency fluctuations
  • $(0.01) of after-tax losses related to restructuring charges
  • $(0.17) of after-tax losses pertaining to the sale of excess drilling equipment and spares
  • $(0.39) of non-cash after-tax losses for impairments related to fair market value adjustments to decommissioned rigs that are held for sale

First quarter of fiscal year 2021 net loss of $(0.66) per diluted share included $0.16 in after-tax gains comprised of the following:

  • $0.07 of after-tax gains pertaining to the sale of an offshore platform rig
  • $0.07 of non-cash after-tax gains from discontinued operations related to adjustments resulting from currency fluctuations
  • $0.02 of non-cash after-tax gains related to fair market value adjustments to equity investments
  • $(0.00) of after-tax losses related to restructuring charges

Conference Call

A conference call will be held on Friday, April 30, 2021, at 11:00 a.m. (ET) with John Lindsay, President and CEO, Mark Smith, Senior Vice President and CFO, and Dave Wilson, Vice President of Investor Relations, to discuss the Company’s second quarter fiscal year 2021 results. Dial-in information for the conference call is (800) 895-3361 for domestic callers or (785) 424-1062 for international callers. The call access code is ‘Helmerich’. You may also listen to the conference call that will be broadcast live over the internet by logging on to the Company’s website at http://www.helmerichpayne.com and accessing the corresponding link through the investor relations section by clicking on “Investors” and then clicking on “News and Events - Events & Presentations” to find the event and the link to the webcast.

About Helmerich & Payne, Inc.

Founded in 1920, Helmerich & Payne, Inc. (H&P) (NYSE: HP) is committed to delivering industry leading levels of drilling productivity and reliability. H&P operates with the highest level of integrity, safety and innovation to deliver superior results for its customers and returns for shareholders. Through its subsidiaries, the Company designs, fabricates and operates high-performance drilling rigs in conventional and unconventional plays around the world. H&P also develops and implements advanced automation, directional drilling and survey management technologies. At March 31, 2021, H&P's fleet included 242 land rigs in the U.S., 32 international land rigs and seven offshore platform rigs. For more information, see H&P online at www.helmerichpayne.com.

Forward-Looking Statements

This release includes “forward-looking statements” within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, and such statements are based on current expectations and assumptions that are subject to risks and uncertainties. All statements other than statements of historical facts included in this release, including, without limitation, statements regarding the registrant’s future financial position, operations outlook, business strategy, dividends, 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.

We use our Investor Relations website as a channel of distribution for material company information. Such information is routinely posted and accessible on our Investor Relations website at www.helmerichpayne.com.

 

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 is defined as operating revenues less direct operating expenses.

(2) See the corresponding section of this release for details regarding the select items. The Company believes identifying and excluding select items is useful in assessing and understanding current operational performance, especially in making comparisons over time involving previous and subsequent periods and/or forecasting future periods results. Select items are excluded as they are deemed to be outside of the Company's core business operations.

HELMERICH & PAYNE, INC.

Condensed Consolidated Statements of Operations

(Unaudited)

       

 

Three Months Ended

 

Six Months Ended

(in thousands, except per share amounts)

March 31,

 

December 31

 

March 31,

 

March 31,

 

March 31,

2021

 

2020

 

2020

 

2021

 

2020

Operating revenues

 

 

 

 

 

 

 

 

 

Drilling services

$

294,026

 

 

$

244,781

 

 

$

630,290

 

 

$

538,807

 

 

$

1,241,688

 

Other

2,145

 

 

1,596

 

 

3,349

 

 

3,741

 

 

6,608

 

 

296,171

 

 

246,377

 

 

633,639

 

 

542,548

 

 

1,248,296

 

Operating costs and expenses

 

 

 

 

 

 

 

 

 

Drilling services operating expenses, excluding depreciation and amortization

230,313

 

 

198,689

 

 

417,743

 

 

429,002

 

 

817,072

 

Other operating expenses

1,274

 

 

1,362

 

 

1,315

 

 

2,636

 

 

2,737

 

Depreciation and amortization

106,417

 

 

106,861

 

 

132,006

 

 

213,278

 

 

262,137

 

Research and development

5,334

 

 

5,583

 

 

6,214

 

 

10,917

 

 

13,092

 

Selling, general and administrative

39,349

 

 

39,303

 

 

41,978

 

 

78,652

 

 

91,786

 

Asset impairment charge

54,284

 

 

 

 

563,234

 

 

54,284

 

 

563,234

 

Restructuring charges

1,608

 

 

138

 

 

 

 

1,746

 

 

 

(Gain) loss on sale of assets

18,515

 

 

(12,336

)

 

(10,310

)

 

6,179

 

 

(14,589

)

 

457,094

 

 

339,600

 

 

1,152,180

 

 

796,694

 

 

1,735,469

 

Operating loss from continuing operations

(160,923

)

 

(93,223

)

 

(518,541

)

 

(254,146

)

 

(487,173

)

Other income (expense)

 

 

 

 

 

 

 

 

 

Interest and dividend income

4,819

 

 

1,879

 

 

3,566

 

 

6,698

 

 

5,780

 

Interest expense

(5,759

)

 

(6,139

)

 

(6,095

)

 

(11,898

)

 

(12,195

)

Gain (loss) on investment securities

2,520

 

 

2,924

 

 

(12,413

)

 

5,444

 

 

(9,592

)

Gain on sale of subsidiary

 

 

 

 

 

 

 

 

14,963

 

Other

(577

)

 

(1,480

)

 

(398

)

 

(2,057

)

 

(797

)

 

1,003

 

 

(2,816

)

 

(15,340

)

 

(1,813

)

 

(1,841

)

Loss from continuing operations before income taxes

(159,920

)

 

(96,039

)

 

(533,881

)

 

(255,959

)

 

(489,014

)

Income tax benefit

(36,624

)

 

(18,115

)

 

(113,413

)

 

(54,739

)

 

(99,275

)

Loss from continuing operations

(123,296

)

 

(77,924

)

 

(420,468

)

 

(201,220

)

 

(389,739

)

Income from discontinued operations before income taxes

2,293

 

 

7,493

 

 

6,067

 

 

9,786

 

 

13,524

 

Income tax provision

 

 

 

 

6,139

 

 

 

 

13,720

 

Income (loss) from discontinued operations

2,293

 

 

7,493

 

 

(72

)

 

9,786

 

 

(196

)

Net loss

$

(121,003

)

 

$

(70,431

)

 

$

(420,540

)

 

$

(191,434

)

 

$

(389,935

)

 

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per common share:

 

 

 

 

 

 

 

 

 

Loss from continuing operations

$

(1.15

)

 

$

(0.73

)

 

$

(3.88

)

 

$

(1.87

)

 

$

(3.61

)

Income from discontinued operations

$

0.02

 

 

$

0.07

 

 

$

 

 

$

0.09

 

 

$

 

Net loss

$

(1.13

)

 

$

(0.66

)

 

$

(3.88

)

 

$

(1.78

)

 

$

(3.61

)

 

 

 

 

 

 

 

 

 

 

Diluted earnings (loss) per common share:

 

 

 

 

 

 

 

 

 

Loss from continuing operations

$

(1.15

)

 

$

(0.73

)

 

$

(3.88

)

 

$

(1.87

)

 

$

(3.61

)

Income from discontinued operations

$

0.02

 

 

$

0.07

 

 

$

 

 

$

0.09

 

 

$

 

Net loss

$

(1.13

)

 

$

(0.66

)

 

$

(3.88

)

 

$

(1.78

)

 

$

(3.61

)

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding (in thousands):

 

 

 

 

 

 

 

 

 

Basic

107,861

 

 

107,617

 

 

108,577

 

 

107,738

 

 

108,556

 

Diluted

107,861

 

 

107,617

 

 

108,577

 

 

107,738

 

 

108,556

 

HELMERICH & PAYNE, INC.

Condensed Consolidated Balance Sheets

(Unaudited)

       

 

March 31,

 

September 30,

(in thousands except share data and share amounts)

2021

 

2020

Assets

 

 

 

Current Assets:

 

 

 

Cash and cash equivalents

$

427,243

 

 

$

487,884

 

Short-term investments

134,491

 

 

89,335

 

Accounts receivable, net of allowance of $1,806 and $1,820, respectively

209,402

 

 

192,623

 

Inventories of materials and supplies, net

96,504

 

 

104,180

 

Prepaid expenses and other, net

97,857

 

 

89,305

 

Assets held-for-sale

13,076

 

 

 

Total current assets

978,573

 

 

963,327

 

 

 

 

 

Investments

34,569

 

 

31,585

 

Property, plant and equipment, net

3,374,235

 

 

3,646,341

 

Other Noncurrent Assets:

 

 

 

Goodwill

45,653

 

 

45,653

 

Intangible assets, net

77,430

 

 

81,027

 

Operating lease right-of-use asset

56,474

 

 

44,583

 

Other assets, net

21,170

 

 

17,105

 

Total other noncurrent assets

200,727

 

 

188,368

 

 

 

 

 

Total assets

$

4,588,104

 

 

$

4,829,621

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

Current Liabilities:

 

 

 

Accounts payable

$

63,934

 

 

$

36,468

 

Dividends payable

27,327

 

 

27,226

 

Accrued liabilities

160,342

 

 

155,442

 

Total current liabilities

251,603

 

 

219,136

 

 

 

 

 

Noncurrent Liabilities:

 

 

 

Long-term debt, net

481,647

 

 

480,727

 

Deferred income taxes

604,536

 

 

650,675

 

Other

163,063

 

 

147,180

 

Noncurrent liabilities - discontinued operations

3,559

 

 

13,389

 

Total noncurrent liabilities

1,252,805

 

 

1,291,971

 

 

 

 

 

Shareholders' Equity:

 

 

 

Common stock, $.10 par value, 160,000,000 shares authorized, 112,222,865 and 112,151,563 shares issued as of March 31, 2021 and September 30, 2020, respectively, and 107,893,998 and 107,488,242 shares outstanding as of March 31, 2021 and September 30, 2020, respectively

11,222

 

 

11,215

 

Preferred stock, no par value, 1,000,000 shares authorized, no shares issued

 

 

 

Additional paid-in capital

516,870

 

 

521,628

 

Retained earnings

2,762,735

 

 

3,010,012

 

Accumulated other comprehensive loss

(25,274

)

 

(26,188

)

Treasury stock, at cost, 4,328,867 shares and 4,663,321 shares as of March 31, 2021 and September 30, 2020, respectively

(181,857

)

 

(198,153

)

Total shareholders’ equity

3,083,696

 

 

3,318,514

 

Total liabilities and shareholders' equity

$

4,588,104

 

 

$

4,829,621

 

HELMERICH & PAYNE, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

   

 

Six Months Ended March 31,

(in thousands)

2021

 

2020

OPERATING ACTIVITIES:

 

 

 

Net loss

$

(191,434

)

 

$

(389,935

)

Adjustment for (income) loss from discontinued operations

(9,786

)

 

196

 

Loss from continuing operations

(201,220

)

 

(389,739

)

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

 

 

 

Depreciation and amortization

213,278

 

 

262,137

 

Asset impairment charge

54,284

 

 

563,234

 

Amortization of debt discount and debt issuance costs

920

 

 

900

 

Provision for credit loss

(227

)

 

1,779

 

Provision for obsolete inventory

423

 

 

684

 

Stock-based compensation

14,277

 

 

20,952

 

(Gain) loss on investment securities

(5,444

)

 

9,592

 

(Gain) loss on sale of assets

6,179

 

 

(14,589

)

Gain on sale of subsidiary

 

 

(14,963

)

Deferred income tax benefit

(46,068

)

 

(106,878

)

Other

3,646

 

 

(3,779

)

Changes in assets and liabilities

18,779

 

 

(96,660

)

Net cash provided by operating activities from continuing operations

58,827

 

 

232,670

 

Net cash used in operating activities from discontinued operations

(25

)

 

(28

)

Net cash provided by operating activities

58,802

 

 

232,642

 

 

 

 

 

INVESTING ACTIVITIES:

 

 

 

Capital expenditures

(30,745

)

 

(94,312

)

Purchase of investments

(106,731

)

 

(36,336

)

Proceeds from sale of investments

63,742

 

 

43,894

 

Proceeds from sale of subsidiary

 

 

15,056

 

Proceeds from asset sales

13,419

 

 

24,799

 

Other

 

 

(51

)

Net cash used in investing activities

(60,315

)

 

(46,950

)

 

 

 

 

FINANCING ACTIVITIES:

 

 

 

Dividends paid

(54,230

)

 

(155,890

)

Proceeds from stock option exercises

 

 

4,100

 

Payments for employee taxes on net settlement of equity awards

(2,119

)

 

(3,455

)

Payment of contingent consideration from acquisition of business

(250

)

 

(4,250

)

Share repurchase

 

 

(28,504

)

Other

 

 

(445

)

Net cash used in financing activities

(56,599

)

 

(188,444

)

Net decrease in cash and cash equivalents and restricted cash

(58,112

)

 

(2,752

)

Cash and cash equivalents and restricted cash, beginning of period

536,747

 

 

382,971

 

Cash and cash equivalents and restricted cash, end of period

$

478,635

 

 

$

380,219

 

 

Three Months Ended

 

Six Months Ended

SEGMENT REPORTING

March 31,

 

December 31

 

March 31,

 

March 31,

(in thousands, except operating statistics)

2021

 

2020

 

2020(1)

 

2021

 

2020(1)

NORTH AMERICA SOLUTIONS OPERATIONS

 

 

 

 

 

 

 

 

 

Operating revenues

$

249,939

 

 

$

201,990

 

 

$

545,961

 

 

$

451,929

 

 

$

1,070,642

 

Direct operating expenses

185,841

 

 

157,309

 

 

346,564

 

 

343,150

 

 

679,546

 

Segment gross margin (3)

64,098

 

 

44,681

 

 

199,397

 

 

108,779

 

 

391,096

 

 

 

 

 

 

 

 

 

 

 

Depreciation

99,917

 

 

100,324

 

 

117,334

 

 

200,241

 

 

233,399

 

Research and development

5,329

 

 

5,466

 

 

5,663

 

 

10,795

 

 

12,412

 

Selling, general and administrative expense

12,960

 

 

11,680

 

 

12,519

 

 

24,640

 

 

29,265

 

Asset impairment charge

54,284

 

 

 

 

406,548

 

 

54,284

 

 

406,548

 

Restructuring charges

1,442

 

 

139

 

 

 

 

1,581

 

 

 

Segment operating loss

$

(109,834

)

 

$

(72,928

)

 

$

(342,667

)

 

$

(182,762

)

 

$

(290,528

)

Operating Statistics (2):

 

 

 

 

 

 

 

 

 

Average active rigs

105

 

 

81

 

 

190

 

 

93

 

 

191

 

Number of active rigs at the end of period

109

 

 

94

 

 

150

 

 

109

 

 

150

 

Number of available rigs at the end of period

242

 

 

262

 

 

299

 

 

242

 

 

299

 

Reimbursements of "out-of-pocket" expenses

$

27,290

 

 

$

18,789

 

 

$

77,166

 

 

$

46,079

 

 

$

136,734

 

 

 

 

 

 

 

 

 

 

 

INTERNATIONAL SOLUTIONS OPERATIONS

 

 

 

 

 

 

 

 

 

Operating revenues

$

14,813

 

 

$

10,518

 

 

$

51,250

 

 

$

25,331

 

 

$

97,712

 

Direct operating expenses

16,718

 

 

17,523

 

 

37,964

 

 

34,241

 

 

72,039

 

Segment gross margin (3)

(1,905

)

 

(7,005

)

 

13,286

 

 

(8,910

)

 

25,673

 

 

 

 

 

 

 

 

 

 

 

Depreciation

415

 

 

373

 

 

7,821

 

 

788

 

 

15,638

 

Selling, general and administrative expense

1,138

 

 

979

 

 

1,248

 

 

2,117

 

 

2,703

 

Asset impairment charge

 

 

 

 

156,686

 

 

 

 

156,686

 

Segment operating loss

$

(3,458

)

 

$

(8,357

)

 

$

(152,469

)

 

$

(11,815

)

 

$

(149,354

)

Operating Statistics (2):

 

 

 

 

 

 

 

 

 

Average active rigs

4

 

 

4

 

 

17

 

 

4

 

 

17

 

Number of active rigs at the end of period

5

 

 

4

 

 

15

 

 

5

 

 

15

 

Number of available rigs at the end of period

32

 

 

32

 

 

32

 

 

32

 

 

32

 

Reimbursements of "out-of-pocket" expenses

$

1,613

 

 

$

2,559

 

 

$

2,209

 

 

$

4,172

 

 

$

3,796

 

 

 

 

 

 

 

 

 

 

 

OFFSHORE GULF OF MEXICO OPERATIONS

 

 

 

 

 

 

 

 

 

Operating revenues

$

29,274

 

 

$

32,273

 

 

$

33,079

 

 

$

61,547

 

 

$

73,334

 

Direct operating expenses

23,069

 

 

26,256

 

 

32,648

 

 

49,325

 

 

62,693

 

Segment gross margin (3)

6,205

 

 

6,017

 

 

431

 

 

12,222

 

 

10,641

 

 

 

 

 

 

 

 

 

 

 

Depreciation

2,593

 

 

2,606

 

 

2,842

 

 

5,199

 

 

5,587

 

Selling, general and administrative expense

634

 

 

669

 

 

908

 

 

1,303

 

 

2,045

 

Segment operating income (loss)

$

2,978

 

 

$

2,742

 

 

$

(3,319

)

 

$

5,720

 

 

$

3,009

 

Operating Statistics (2):

 

 

 

 

 

 

 

 

 

Average active rigs

4

 

 

5

 

 

5

 

 

5

 

 

6

 

Number of active rigs at the end of period

4

 

 

4

 

 

5

 

 

4

 

 

5

 

Number of available rigs at the end of period

7

 

 

7

 

 

8

 

 

7

 

 

8

 

Reimbursements of "out-of-pocket" expenses

$

5,193

 

 

$

7,868

 

 

$

6,763

 

 

$

13,061

 

 

$

16,663

 

(1)

 

Operations previously reported within the H&P Technologies reportable segment are now managed and presented within the North America Solutions reportable segment.

(2)

 

These operating metrics allow investors to analyze the various components of segment financial results in terms of activity, utilization and other key results. Management uses these metrics to analyze historical segment financial results and as the key inputs for forecasting and budgeting segment financial results. Beginning in the first quarter of fiscal year 2021, these operating metrics replaced previously used per day metrics. As a result, prior year comparative information is also provided above.

(3)

 

Segment gross margin and operating income/loss have limitations and should not be used as alternatives to revenues, expenses, or operating income/loss, which are performance measures determined in accordance with GAAP.

Segment reconciliation amounts were as follows:

 

Three Months Ended March 31, 2021

(in thousands)

North America
Solutions

 

Offshore Gulf
of Mexico

 

International
Solutions

 

Other

 

Eliminations

 

Total

Operating revenue

$

249,939

 

 

$

29,274

 

 

$

14,813

 

 

$

2,145

 

 

$

 

 

$

296,171

 

Intersegment

 

 

 

 

 

 

8,680

 

 

(8,680

)

 

 

Total operating revenue

$

249,939

 

 

$

29,274

 

 

$

14,813

 

 

$

10,825

 

 

$

(8,680

)

 

$

296,171

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct operating expenses

182,698

 

 

21,097

 

 

16,582

 

 

11,210

 

 

 

 

231,587

 

Intersegment

3,143

 

 

1,972

 

 

136

 

 

12

 

 

(5,263

)

 

 

Total drilling services & other operating expenses

$

185,841

 

 

$

23,069

 

 

$

16,718

 

 

$

11,222

 

 

$

(5,263

)

 

$

231,587

 

 

Six Months Ended March 31, 2021

(in thousands)

North America
Solutions

 

Offshore Gulf
of Mexico

 

International
Solutions

 

Other

 

Eliminations

 

Total

Operating revenue

$

451,929

 

 

$

61,547

 

 

$

25,331

 

 

$

3,741

 

 

$

 

 

$

542,548

 

Intersegment

 

 

 

 

 

 

15,802

 

 

(15,802

)

 

 

Total operating revenue

$

451,929

 

 

$

61,547

 

 

$

25,331

 

 

$

19,543

 

 

$

(15,802

)

 

$

542,548

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct operating expenses

337,867

 

 

45,120

 

 

33,936

 

 

14,715

 

 

 

 

431,638

 

Intersegment

5,283

 

 

4,205

 

 

305

 

 

257

 

 

(10,050

)

 

 

Total drilling services & other operating expenses

$

343,150

 

 

$

49,325

 

 

$

34,241

 

 

$

14,972

 

 

$

(10,050

)

 

$

431,638

 

Segment operating income (loss) 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, corporate restructuring charges, and corporate depreciation. The Company considers segment operating income (loss) 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 (loss) 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 segment operating income (loss) per the information above to loss from continuing operations before income taxes as reported on the Unaudited Condensed Consolidated Statements of Operations:

 

Three Months Ended

 

Six Months Ended

 

March 31,

 

December 31

 

March 31,

 

March 31,

 

March 31,

(in thousands)

2021

 

2020

 

2020 (1)

 

2021

 

2020 (1)

Operating income (loss)

 

 

 

 

 

 

 

 

 

North America Solutions

$

(109,834

)

 

$

(72,928

)

 

$

(342,667

)

 

$

(182,762

)

 

$

(290,528

)

International Solutions

(3,458

)

 

(8,357

)

 

(152,469

)

 

(11,815

)

 

(149,354

)

Offshore Gulf of Mexico

2,978

 

 

2,742

 

 

(3,319

)

 

5,720

 

 

3,009

 

Other

(1,072

)

 

4,111

 

 

376

 

 

3,039

 

 

(705

)

Eliminations

(3,433

)

 

(2,126

)

 

 

 

(5,559

)

 

 

Segment operating loss

$

(114,819

)

 

$

(76,558

)

 

$

(498,079

)

 

$

(191,377

)

 

$

(437,578

)

Gain (loss) on sale of assets

(18,515

)

 

12,336

 

 

10,310

 

 

(6,179

)

 

14,589

 

Corporate selling, general and administrative costs and corporate depreciation

(27,589

)

 

(29,001

)

 

(30,772

)

 

(56,590

)

 

(64,184

)

Operating loss

$

(160,923

)

 

$

(93,223

)

 

$

(518,541

)

 

$

(254,146

)

 

$

(487,173

)

Other income (expense):

 

 

 

 

 

 

 

 

 

Interest and dividend income

4,819

 

 

1,879

 

 

3,566

 

 

6,698

 

 

5,780

 

Interest expense

(5,759

)

 

(6,139

)

 

(6,095

)

 

(11,898

)

 

(12,195

)

Gain (loss) on investment securities