Helmerich & Payne, Inc. Announces Second Quarter Results
April 30, 2020
COVID-19 Update
The unprecedented events caused by COVID-19 have had a dramatic impact on the world and our Company. In this uncertain environment, we moved quickly and took several actions to maintain the health and safety of H&P employees, customers and stakeholders and to preserve our financial strength.
-
H&P's highest priority is the health and safety of employees and customers. Operational protocols have been put into place that meet or exceed those of the CDC and local jurisdictions. Those include:
-
Moved to a global "remote work" model for office personnel (beginning
March 13, 2020 ) - Suspended all non-essential travel
- Required operational and third party personnel to complete a COVID-19 questionnaire prior to reporting to a rig site in order to evaluate actual and potential COVID-19 exposures
- Initiated daily temperature checks on operational personnel, including prior to entering a rig site
- Implemented enhanced sanitation and cleaning protocols
-
Moved to a global "remote work" model for office personnel (beginning
-
The Company is an ‘essential critical infrastructure’ company as defined by the
Department of Homeland Security and theCybersecurity and Infrastructure Security Agency and as such, continues to operate rigs and technology solutions, providing valuable services to our customers in support of the global energy infrastructure.
-
The Company revised its capital allocation policy and implemented cost controls to proactively preserve its strong financial position. Those include:
-
Announced intention to reduce annual dividends by
$200 million -
Reduced planned capital expenditures by approximately
$95 million -
Reduced operational fixed costs by
$50 million
-
Announced intention to reduce annual dividends by
-
H&P has a debt-to-cap ratio of 12% with approximately
$380 million in cash on hand and short-term investments and no amounts drawn on our$750 million revolving credit facility.
Quarter Highlights
-
Quarterly
U.S. Land revenue increased$22 million to$531 million sequentially, while operating gross margins(1) increased by$2 million to$183 million sequentially; revenue days decreased approximately 2% to 17,273 from 17,684 in the prior quarter
-
Quarterly
U.S. Land adjusted average rig revenue of$25,667 (2) per day increased approximately 1% on a sequential basis, whileU.S Land adjusted average rig margin of$9,762 (2) per day decreased by roughly 6% sequentially
- H&P's drilling automation technology, AutoSlide℠, has drilled more than 225 wells and over 4.0 million feet; AutoSlide technology is enabling customers to reduce personnel at the rig
-
The Company incurred a non-cash impairment charge of
$563 million related to goodwill, less capable rigs, and excess related equipment and inventory
-
On
March 4, 2020 , Directors of the Company declared a quarterly cash dividend of$0.71 per share onJune 1, 2020 to stockholders of record at the close of businessMay 11, 2020
-
On
March 31, 2020 , the Company announced its intention to reduce any future quarterly dividends to$0.25 per share commencing with the quarterly cash distribution to be declared in the third quarter of fiscal year 2020
-
$0.26 of after-tax gains pertaining to gains on sales, a reduction in the fair value of a contingent liability, the reversal of accrued compensation and early termination compensation
-
$(4.13) of after-tax losses pertaining to non-cash impairments of goodwill, less capable rigs, and excess related equipment and inventory, abandonments and accelerated depreciation, and a non-cash fair market adjustment to our equity investment
Net cash provided by operating activities was
President and CEO
"While the crude oil market imbalance is a global phenomenon, it has more acutely impacted the U.S. market recently due to storage limitations. The abruptness and overall size of the decrease in demand for refined products, such as gasoline and diesel, has created an abundance of supply for such products and is pushing inventory levels to capacity. This has significantly reduced, or in some cases, eliminated the need for additional crude oil in some markets. As such, our customers may have limited opportunities to deliver their oil production and even then, possibly selling it at very low, uneconomical prices. Consequently, some E&P companies are having to shut-in and stop production, and are not completing or drilling additional wells until the supply-demand balance is restored and production and drilling become economically viable once again. We believe these ramifications have yet to be fully reflected in industry activity levels and we expect steeper declines in our third fiscal quarter.
"H&P has responded to many downturns and we believe that our consistent long-term perspective and our financial strength enables us to further the strategic objectives of the Company. In this regard, we will remain focused on new commercial models, expanding our digital technology offerings to the market, increasing our international presence and cost management.
"We continue our efforts to develop new commercial pricing models that are designed to enable us to earn an equitable share of the value we create with our drilling solutions. Such value is arguably even more pertinent in strained market conditions. While the reduction in our rig count has adversely affected the number of rigs we currently have under performance-based contracts, we expect the total of these to represent a larger percentage of our active FlexRig fleet over time. The importance of well economics is magnified under these stressed conditions and the use of our digital technology solutions becomes even more appealing to those customers who recognize that wellbore quality and placement improves production and reserves. This current environment has provided additional impetus for some customers to embrace AutoSlide, because drilling automation improves reliability and reduces the number of individuals present at the drill site. Although the impact of COVID-19 is being felt on a global scale and across all of our operations, we are still actively pursuing long-term growth opportunities in our international operations. While we are encouraged about what the future holds for H&P internationally, the timing and development of these opportunities will be protracted given the current travel and operational hurdles resulting from COVID-19."
Senior Vice President and CFO
"Following calendar 2019 where we saw industry utilization for non-super-spec rigs fall at a faster rate than for super-spec(4) rigs, the pronounced declines in crude oil prices and rig demand shines a brighter light on the performance and efficiency differences between non-super-spec and super-spec rigs. During the quarter, we performed an extensive valuation of our non-super-spec FlexRig fleet and the related expected future utilization of that portion of our fleet. This assessment combined with an evaluation of our intangible assets, including goodwill, resulted in non-cash impairment charges of approximately
"The full extent of the COVID-19 pandemic is uncertain, and we are unable to reasonably estimate the duration and ultimate impact, including the timing of or level to which the industry will recover. Consequently, we cannot be certain of the degree of the impact on H&P's operations or financial position in the future. That said, the Company currently remains on solid economic footing with approximately
Operating Segment Results for the Second Quarter of Fiscal Year 2020
This segment had an operating loss of
Adjusted average rig revenue per day increased by
The segment’s depreciation expense for the quarter includes non-cash charges of
International Land Operations:
This segment had an operating loss of
Offshore Operations:
This segment had an operating loss of
H&P Technologies:
This segment had an operating loss of
Operational Outlook for the Third Quarter of Fiscal Year 2020
-
We expect
U.S. Land operating gross margins(1) to be between$90-$105 million , inclusive of approximately$45 million of contract early termination compensation -
Based on more than 115 rig release notifications since early
March 2020 , we expect to end the quarter below 70 rigs with much of the decline occurring prior toJune 1, 2020 .
International Land Operations:
-
We expect International Land operating gross margins(1) to be negative and to be between
$(4)-$(6) million
Offshore Operations:
-
We expect Offshore operating gross margins(1) to be between
$4-$6 million -
Management contracts are expected to generate approximately
$2 million in operating income
HP Technologies:
-
Fiscal third quarter revenue is expected to be between
$4-$7 million
Other Estimates for Fiscal Year 2020
-
Gross capital expenditures are expected to be approximately
$185 to$205 million . 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$30 to$40 million in fiscal year 2020. -
General and administrative expenses for fiscal year 2020 are expected to be approximately
$180 million , excluding any future one-time items -
Depreciation is expected to be approximately
$485 million
Select Items Included in Net Income per Diluted Share
Second quarter of fiscal year 2020 net loss of
-
$0.03 of after-tax gains related to the change in fair value of a contingent liability -
$0.03 of after-tax gains related to the sale of used drilling equipment -
$0.07 of after-tax income from contract early termination compensation from customers -
$0.13 of after-tax benefits from the reversal of accrued compensation -
$(0.01) of non-cash after-tax losses from abandonment charges and accelerated depreciation related to used drilling equipment -
$(0.09) of non-cash after-tax losses related to fair market value adjustments to equity investments -
$(4.03) of non-cash after-tax losses related to the impairment of goodwill, less capable rigs and excess related equipment and inventory
First quarter of fiscal year 2020 net income of
-
$0.02 of a net after-tax gain related to fair market value 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
Conference Call
A conference call will be held on
About
Founded in 1920,
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, and the impact or duration of the COVID-19 pandemic and any subsequent recovery, 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
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.hpinc.com.
Note Regarding Trademarks.
(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 or a segment operating income level. The inclusion or exclusion of these amounts results in adjusted revenue, expense, and/or margin per day figures and adjusted segment operating income/loss, which are all non-GAAP measures. The Company considers per revenue day metrics and segment operating income to be important supplemental measures of operating performance for presenting trends in the Company’s core businesses. These measures are 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 per revenue day metrics and segment operating income are useful to investors because they provide 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, they highlight operating trends and aids analytical comparisons. However, per revenue day metrics and segment operating income have limitations and should not be used as alternatives to revenues, expenses, or operating income or loss, performance measures determined in accordance with GAAP, as they exclude certain revenues and costs that may affect the Company’s operating performance in future periods.
(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.
|
|||||||||||||||||||
(Unaudited) (in thousands, except per share data) |
|||||||||||||||||||
|
Three Months Ended |
|
Six Months Ended |
||||||||||||||||
|
|
|
|
|
|
|
|
||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS |
2020 |
|
2019 |
|
2019 |
|
2020 |
|
2019 |
||||||||||
Operating revenues |
|
|
|
|
|
|
|
|
|
||||||||||
Contract drilling services |
$ |
630,290 |
|
|
$ |
611,398 |
|
|
$ |
717,653 |
|
|
$ |
1,241,688 |
|
|
$ |
1,455,011 |
|
Other |
3,349 |
|
|
3,259 |
|
|
3,215 |
|
|
6,608 |
|
|
6,455 |
|
|||||
|
633,639 |
|
|
614,657 |
|
|
720,868 |
|
|
1,248,296 |
|
|
1,461,466 |
|
|||||
Operating costs and expenses |
|
|
|
|
|
|
|
|
|
||||||||||
Contract drilling services operating expenses, excluding depreciation and amortization |
417,743 |
|
|
399,329 |
|
|
441,719 |
|
|
817,072 |
|
|
929,312 |
|
|||||
Other operating expenses |
1,315 |
|
|
1,422 |
|
|
1,620 |
|
|
2,737 |
|
|
2,894 |
|
|||||
Depreciation and amortization |
132,006 |
|
|
130,131 |
|
|
143,161 |
|
|
262,137 |
|
|
284,620 |
|
|||||
Research and development |
6,214 |
|
|
6,878 |
|
|
7,262 |
|
|
13,092 |
|
|
14,281 |
|
|||||
Selling, general and administrative |
41,978 |
|
|
49,808 |
|
|
43,506 |
|
|
91,786 |
|
|
98,014 |
|
|||||
Asset impairment charge |
563,234 |
|
|
— |
|
|
— |
|
|
563,234 |
|
|
— |
|
|||||
Gain on sale of assets |
(10,310 |
) |
|
(4,279 |
) |
|
(11,546 |
) |
|
(14,589 |
) |
|
(17,090 |
) |
|||||
|
1,152,180 |
|
|
583,289 |
|
|
625,722 |
|
|
1,735,469 |
|
|
1,312,031 |
|
|||||
Operating income (loss) from continuing operations |
(518,541 |
) |
|
31,368 |
|
|
95,146 |
|
|
(487,173 |
) |
|
149,435 |
|
|||||
Other income (expense) |
|
|
|
|
|
|
|
|
|
||||||||||
Interest and dividend income |
3,566 |
|
|
2,214 |
|
|
2,061 |
|
|
5,780 |
|
|
4,512 |
|
|||||
Interest expense |
(6,095 |
) |
|
(6,100 |
) |
|
(6,167 |
) |
|
(12,195 |
) |
|
(10,888 |
) |
|||||
Gain (loss) on investment securities |
(12,413 |
) |
|
2,821 |
|
|
5,878 |
|
|
(9,592 |
) |
|
(36,957 |
) |
|||||
Gain on sale of subsidiary |
— |
|
|
14,963 |
|
|
— |
|
|
14,963 |
|
|
— |
|
|||||
Other |
(398 |
) |
|
(399 |
) |
|
17 |
|
|
(797 |
) |
|
548 |
|
|||||
|
(15,340 |
) |
|
13,499 |
|
|
1,789 |
|
|
(1,841 |
) |
|
(42,785 |
) |
|||||
Income (loss) from continuing operations before income taxes |
(533,881 |
) |
|
44,867 |
|
|
96,935 |
|
|
(489,014 |
) |
|
106,650 |
|
|||||
Income tax provision (benefit) |
(113,413 |
) |
|
14,138 |
|
|
25,078 |
|
|
(99,275 |
) |
|
26,429 |
|
|||||
Income (loss) from continuing operations |
(420,468 |
) |
|
30,729 |
|
|
71,857 |
|
|
(389,739 |
) |
|
80,221 |
|
|||||
Income from discontinued operations before income taxes |
6,067 |
|
|
7,457 |
|
|
2,889 |
|
|
13,524 |
|
|
15,554 |
|
|||||
Income tax provision |
6,139 |
|
|
7,581 |
|
|
13,855 |
|
|
13,720 |
|
|
15,925 |
|
|||||
Loss from discontinued operations |
(72 |
) |
|
(124 |
) |
|
(10,966 |
) |
|
(196 |
) |
|
(371 |
) |
|||||
Net income (loss) |
$ |
(420,540 |
) |
|
$ |
30,605 |
|
|
$ |
60,891 |
|
|
$ |
(389,935 |
) |
|
$ |
79,850 |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic earnings (loss) per common share: |
|
|
|
|
|
|
|
|
|
||||||||||
Income (loss) from continuing operations |
$ |
(3.88 |
) |
|
$ |
0.27 |
|
|
$ |
0.65 |
|
|
$ |
(3.61 |
) |
|
$ |
0.72 |
|
Loss from discontinued operations |
— |
|
|
— |
|
|
(0.10 |
) |
|
— |
|
|
— |
|
|||||
Net income (loss) |
$ |
(3.88 |
) |
|
$ |
0.27 |
|
|
$ |
0.55 |
|
|
$ |
(3.61 |
) |
|
$ |
0.72 |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Diluted earnings (loss) per common share: |
|
|
|
|
|
|
|
|
|
||||||||||
Income (loss) from continuing operations |
$ |
(3.88 |
) |
|
$ |
0.27 |
|
|
$ |
0.65 |
|
|
$ |
(3.61 |
) |
|
$ |
0.72 |
|
Loss from discontinued operations |
— |
|
|
— |
|
|
(0.10 |
) |
|
— |
|
|
— |
|
|||||
Net income (loss) |
$ |
(3.88 |
) |
|
$ |
0.27 |
|
|
$ |
0.55 |
|
|
$ |
(3.61 |
) |
|
$ |
0.72 |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Weighted average shares outstanding (in thousands): |
|
|
|
|
|
|
|
|
|
||||||||||
Basic |
108,557 |
|
|
108,555 |
|
|
109,406 |
|
|
108,556 |
|
|
109,273 |
|
|||||
Diluted |
108,557 |
|
|
108,724 |
|
|
109,503 |
|
|
108,556 |
|
|
109,452 |
|
|||||
(Unaudited) (in thousands) |
|||||||
|
|
|
|
||||
CONDENSED CONSOLIDATED BALANCE SHEETS |
2020 |
|
2019 |
||||
Assets |
|
|
|
||||
Cash and cash equivalents |
$ |
336,089 |
|
|
$ |
347,943 |
|
Short-term investments |
45,655 |
|
|
52,960 |
|
||
Other current assets |
738,372 |
|
|
714,183 |
|
||
Total current assets |
1,120,116 |
|
|
1,115,086 |
|
||
Investments |
20,300 |
|
|
31,991 |
|
||
Property, plant and equipment, net |
3,840,213 |
|
|
4,502,084 |
|
||
Other noncurrent assets |
196,125 |
|
|
190,354 |
|
||
Total Assets |
$ |
5,176,754 |
|
|
$ |
5,839,515 |
|
|
|
|
|
||||
Liabilities and Shareholders' Equity |
|
|
|
||||
Current liabilities |
$ |
377,419 |
|
|
$ |
410,238 |
|
Long-term debt, net |
479,811 |
|
|
479,356 |
|
||
Other noncurrent liabilities |
843,024 |
|
|
922,357 |
|
||
Noncurrent liabilities - discontinued operations |
15,494 |
|
|
15,341 |
|
||
Total shareholders’ equity |
3,461,006 |
|
|
4,012,223 |
|
||
Total Liabilities and Shareholders' Equity |
$ |
5,176,754 |
|
|
$ |
5,839,515 |
|
(Unaudited) (in thousands) |
|||||||
|
Six Months Ended |
||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
2020 |
|
2019 |
||||
OPERATING ACTIVITIES: |
|
|
|
||||
Net income (loss) |
$ |
(389,935 |
) |
|
$ |
79,850 |
|
Adjustment for loss from discontinued operations |
196 |
|
|
371 |
|
||
Income (loss) from continuing operations |
(389,739 |
) |
|
80,221 |
|
||
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
||||
Depreciation and amortization |
262,137 |
|
|
284,620 |
|
||
Asset impairment charge |
563,234 |
|
|
— |
|
||
Amortization of debt discount and debt issuance costs |
900 |
|
|
752 |
|
||
Provision for (recovery of) bad debt |
1,779 |
|
|
(75 |
) |
||
Stock-based compensation |
20,952 |
|
|
16,589 |
|
||
Loss on investment securities |
9,592 |
|
|
36,957 |
|
||
Gain on sale of assets |
(14,589 |
) |
|
(17,090 |
) |
||
Gain on sale of subsidiary |
(14,963 |
) |
|
— |
|
||
Deferred income tax (benefit) expense |
(106,878 |
) |
|
8,827 |
|
||
Other |
(3,779 |
) |
|
(3,209 |
) |
||
Changes in assets and liabilities |
(95,976 |
) |
|
1,471 |
|
||
Net cash provided by operating activities from continuing operations |
232,670 |
|
|
409,063 |
|
||
Net cash used in operating activities from discontinued operations |
(28 |
) |
|
(45 |
) |
||
Net cash provided by operating activities |
232,642 |
|
|
409,018 |
|
||
|
|
|
|
||||
INVESTING ACTIVITIES: |
|
|
|
||||
Capital expenditures |
(94,312 |
) |
|
(329,980 |
) |
||
Purchase of short-term investments |
(36,336 |
) |
|
(42,406 |
) |
||
Payment for acquisition of business, net of cash acquired |
— |
|
|
(2,781 |
) |
||
Proceeds from sale of short-term investments |
43,894 |
|
|
58,015 |
|
||
Proceeds from sale of subsidiary |
15,056 |
|
|
— |
|
||
Proceeds from asset sales |
24,799 |
|
|
24,559 |
|
||
Other |
(51 |
) |
|
— |
|
||
Net cash used in investing activities |
(46,950 |
) |
|
(292,593 |
) |
||
|
|
|
|
||||
FINANCING ACTIVITIES: |
|
|
|
||||
Dividends paid |
(155,890 |
) |
|
(156,580 |
) |
||
Debt issuance costs paid |
— |
|
|
(3,912 |
) |
||
Proceeds from stock option exercises |
4,100 |
|
|
2,257 |
|
||
Payments for employee taxes on net settlement of equity awards |
(3,455 |
) |
|
(6,268 |
) |
||
Payment of contingent consideration from acquisition of business |
(4,250 |
) |
|
— |
|
||
Share repurchase |
(28,504 |
) |
|
— |
|
||
Other |
(445 |
) |
|
— |
|
||
Net cash used in financing activities |
(188,444 |
) |
|
(164,503 |
) |
||
Net decrease in cash and cash equivalents and restricted cash |
(2,752 |
) |
|
(48,078 |
) |
||
Cash and cash equivalents and restricted cash, beginning of period |
382,971 |
|
|
326,185 |
|
||
Cash and cash equivalents and restricted cash, end of period |
$ |
380,219 |
|
|
$ |
278,107 |
|
|
Three Months Ended |
|
Six Months Ended |
||||||||||||||||
|
|
|
|
|
|
|
|
||||||||||||
SEGMENT REPORTING (in thousands, except operating statistics) |
2020 |
|
2019 |
|
20191 |
|
2020 |
|
20191 |
||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Operating revenues |
$ |
530,664 |
|
|
$ |
508,828 |
|
|
$ |
617,533 |
|
|
$ |
1,039,492 |
|
|
$ |
1,236,958 |
|
Direct operating expenses |
347,241 |
|
|
327,292 |
|
|
377,430 |
|
|
674,533 |
|
|
785,116 |
|
|||||
Research and development |
860 |
|
|
259 |
|
|
134 |
|
|
1,119 |
|
|
301 |
|
|||||
Selling, general and administrative expense |
8,514 |
|
|
10,861 |
|
|
11,169 |
|
|
19,375 |
|
|
22,826 |
|
|||||
Depreciation |
114,927 |
|
|
113,726 |
|
|
126,785 |
|
|
228,653 |
|
|
250,787 |
|
|||||
Asset impairment charge |
368,215 |
|
|
— |
|
|
— |
|
|
368,215 |
|
|
— |
|
|||||
Segment operating income (loss) |
$ |
(309,093 |
) |
|
$ |
56,690 |
|
|
$ |
102,015 |
|
|
$ |
(252,403 |
) |
|
$ |
177,928 |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Revenue days |
17,273 |
|
|
17,684 |
|
|
21,262 |
|
|
34,957 |
|
|
43,194 |
|
|||||
Average rig revenue per day |
$ |
26,256 |
|
|
$ |
25,405 |
|
|
$ |
25,462 |
|
|
$ |
25,825 |
|
|
$ |
25,251 |
|
Average rig expense per day |
15,497 |
|
|
14,987 |
|
|
14,169 |
|
|
15,239 |
|
|
14,790 |
|
|||||
Average rig margin per day |
$ |
10,759 |
|
|
$ |
10,418 |
|
|
$ |
11,293 |
|
|
$ |
10,586 |
|
|
$ |
10,461 |
|
Rig utilization |
63 |
% |
|
64 |
% |
|
67 |
% |
|
64 |
% |
|
68 |
% |
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
INTERNATIONAL LAND OPERATIONS |
|
|
|
|
|
|
|
|
|
||||||||||
Operating revenues |
$ |
51,250 |
|
|
$ |
46,462 |
|
|
$ |
50,808 |
|
|
$ |
97,712 |
|
|
$ |
117,095 |
|
Direct operating expenses |
37,964 |
|
|
34,075 |
|
|
33,051 |
|
|
72,039 |
|
|
80,590 |
|
|||||
Selling, general and administrative expense |
1,248 |
|
|
1,455 |
|
|
794 |
|
|
2,703 |
|
|
3,076 |
|
|||||
Depreciation |
7,821 |
|
|
7,817 |
|
|
8,995 |
|
|
15,638 |
|
|
18,832 |
|
|||||
Asset impairment charge |
156,686 |
|
|
— |
|
|
— |
|
|
156,686 |
|
|
— |
|
|||||
Segment operating income (loss) |
$ |
(152,469 |
) |
|
$ |
3,115 |
|
|
$ |
7,968 |
|
|
$ |
(149,354 |
) |
|
$ |
14,597 |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Revenue days |
1,547 |
|
|
1,619 |
|
|
1,559 |
|
|
3,166 |
|
|
3,318 |
|
|||||
Average rig revenue per day |
$ |
31,706 |
|
|
$ |
27,714 |
|
|
$ |
31,130 |
|
|
$ |
29,664 |
|
|
$ |
33,476 |
|
Average rig expense per day |
20,922 |
|
|
20,506 |
|
|
19,269 |
|
|
20,710 |
|
|
21,083 |
|
|||||
Average rig margin per day |
$ |
10,784 |
|
|
$ |
7,208 |
|
|
$ |
11,861 |
|
|
$ |
8,954 |
|
|
$ |
12,393 |
|
Rig utilization |
53 |
% |
|
57 |
% |
|
54 |
% |
|
55 |
% |
|
57 |
% |
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
OFFSHORE OPERATIONS |
|
|
|
|
|
|
|
|
|
||||||||||
Operating revenues |
$ |
33,079 |
|
|
$ |
40,255 |
|
|
$ |
34,583 |
|
|
$ |
73,334 |
|
|
$ |
71,493 |
|
Direct operating expenses |
32,648 |
|
|
30,045 |
|
|
26,984 |
|
|
62,693 |
|
|
53,289 |
|
|||||
Selling, general and administrative expense |
908 |
|
|
1,137 |
|
|
805 |
|
|
2,045 |
|
|
1,574 |
|
|||||
Depreciation |
2,842 |
|
|
2,745 |
|
|
2,263 |
|
|
5,587 |
|
|
4,931 |
|
|||||
Segment operating income (loss) |
$ |
(3,319 |
) |
|
$ |
6,328 |
|
|
$ |
4,531 |
|
|
$ |
3,009 |
|
|
$ |
11,699 |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Revenue days |
457 |
|
|
550 |
|
|
540 |
|
|
1,007 |
|
|
1,065 |
|
|||||
Average rig revenue per day |
$ |
42,098 |
|
|
$ |
43,839 |
|
|
$ |
31,361 |
|
|
$ |
43,049 |
|
|
$ |
33,468 |
|
Average rig expense per day |
48,117 |
|
|
30,602 |
|
|
25,941 |
|
|
38,545 |
|
|
25,791 |
|
|||||
Average rig margin per day |
$ |
(6,019 |
) |
|
$ |
13,237 |
|
|
$ |
5,420 |
|
|
$ |
4,504 |
|
|
$ |
7,677 |
|
Rig utilization |
63 |
% |
|
75 |
% |
|
75 |
% |
|
69 |
% |
|
73 |
% |
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
H&P TECHNOLOGIES |
|
|
|
|
|
|
|
|
|
||||||||||
Operating revenues |
$ |
17,709 |
|
|
$ |
18,552 |
|
|
$ |
14,729 |
|
|
$ |
36,261 |
|
|
$ |
29,465 |
|
Direct operating expenses |
1,735 |
|
|
8,389 |
|
|
4,683 |
|
|
10,124 |
|
|
11,176 |
|
|||||
Research and development |
4,803 |
|
|
6,490 |
|
|
7,128 |
|
|
11,293 |
|
|
13,980 |
|
|||||
Selling, general and administrative expense |
4,005 |
|
|
5,885 |
|
|
4,783 |
|
|
9,890 |
|
|
10,881 |
|
|||||
Depreciation and amortization |
2,407 |
|
|
2,339 |
|
|
1,943 |
|
|
4,746 |
|
|
3,825 |
|
|||||
Asset impairment charge |
38,333 |
|
|
— |
|
|
— |
|
|
38,333 |
|
|
— |
|
|||||
Segment operating loss |
$ |
(33,574 |
) |
|
$ |
(4,551 |
) |
|
$ |
(3,808 |
) |
|
$ |
(38,125 |
) |
|
$ |
(10,397 |
) |
1 During the fourth quarter of fiscal year 2019, we migrated our FlexApp offerings into our H&P Technologies segment. The activity of our FlexApps was previously included in our
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 |
|
Six Months Ended |
||||||||||||||||
|
|
|
|
|
|
|
|
||||||||||||
(in thousands) |
2020 |
|
2019 |
|
2019 |
|
2020 |
|
2019 |
||||||||||
|
$ |
77,146 |
|
|
$ |
59,566 |
|
|
$ |
76,172 |
|
|
$ |
136,713 |
|
|
$ |
146,262 |
|
International Land Operations |
2,209 |
|
|
1,587 |
|
|
2,277 |
|
|
3,796 |
|
|
6,023 |
|
|||||
Offshore Operations |
6,770 |
|
|
9,902 |
|
|
5,507 |
|
|
16,672 |
|
|
11,257 |
|
|||||
Intercompany amounts were as follows:
|
Three Months Ended |
|
Six Months Ended |
||||||||||||||||
|
|
|
|
|
|
|
|
||||||||||||
(in thousands) |
2020 |
|
2019 |
|
2019 |
|
2020 |
|
2019 |
||||||||||
|
$ |
2,412 |
|
|
$ |
2,699 |
|
|
$ |
— |
|
|
$ |
5,111 |
|
|
$ |
— |
|
Segment reconciliation amounts were as follows:
|
Three Months Ended |
||||||||||||||||||||||||||
(in thousands) |
|
|
Offshore |
|
International Land |
|
H&P Technologies |
|
Other |
|
Eliminations |
|
Total |
||||||||||||||
Operating revenue |
$ |
530,664 |
|
|
$ |
33,079 |
|
|
$ |
51,250 |
|
|
$ |
15,297 |
|
|
$ |
3,349 |
|
|
$ |
— |
|
|
$ |
633,639 |
|
Intersegment |
— |
|
|
— |
|
|
— |
|
|
2,412 |
|
|
10,649 |
|
|
(13,061 |
) |
|
— |
|
|||||||
Total operating revenue |
$ |
530,664 |
|
|
$ |
33,079 |
|
|
$ |
51,250 |
|
|
$ |
17,709 |
|
|
$ |
13,998 |
|
|
$ |
(13,061 |
) |
|
$ |
633,639 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Direct operating expenses |
335,548 |
|
|
31,521 |
|
|
37,723 |
|
|
1,735 |
|
|
12,531 |
|
|
— |
|
|
419,058 |
|
|||||||
Intersegment - self-insurance expenses |
9,281 |
|
|
1,127 |
|
|
241 |
|
|
— |
|
|
— |
|
|
(10,649 |
) |
|
— |
|
|||||||
Intersegment - FlexApps |
2,412 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(2,412 |
) |
|
— |
|
|||||||
Total contract drilling services & other operating expenses |
$ |
347,241 |
|
|
$ |
32,648 |
|
|
$ |
37,964 |
|
|
$ |
1,735 |
|
|
$ |
12,531 |
|
|
$ |
(13,061 |
) |
|
$ |
419,058 |
|
|
Six Months Ended |
||||||||||||||||||||||||||
(in thousands) |
|
|
Offshore |
|
International Land |
|
H&P Technologies |
|
Other |
|
Eliminations |
|
Total |
||||||||||||||
Operating revenue |
$ |
1,039,492 |
|
|
$ |
73,334 |
|
|
$ |
97,712 |
|
|
$ |
31,150 |
|
|
$ |
6,608 |
|
|
$ |
— |
|
|
$ |
1,248,296 |
|
Intersegment |
— |
|
— |
|
— |
|
5,111 |
|
18,545 |
|
(23,656 |
) |
|
— |
|
||||||||||||
Total operating revenue |
$ |
1,039,492 |
|
|
$ |
73,334 |
|
|
$ |
97,712 |
|
|
$ |
36,261 |
|
|
$ |
25,153 |
|
|
$ |
(23,656 |
) |
|
$ |
1,248,296 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Direct operating expenses |
$ |
653,753 |
|
|
$ |
60,298 |
|
|
$ |
71,558 |
|
|
$ |
10,124 |
|
|
$ |
24,076 |
|
|
$ |
— |
|
|
$ |
819,809 |
|
Intersegment - self-insurance expenses |
15,669 |
|
|
2,395 |
|
|
481 |
|
|
— |
|
|
— |
|
|
(18,545 |
) |
|
— |
|
|||||||
Intersegment - FlexApps |
5,111 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(5,111 |
) |
|
— |
|
|||||||
Total contract drilling services & other operating expenses |
$ |
674,533 |
|
|
$ |
62,693 |
|
|
$ |
72,039 |
|
|
$ |
10,124 |
|
|
$ |
24,076 |
|
|
$ |
(23,656 |
) |
|
$ |
819,809 |
|
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 |
|
Six Months Ended |
||||||||||||||||
|
|
|
|
|
|
|
|
||||||||||||
(in thousands) |
2020 |
|
2019 |
|
20191 |
|
2020 |
|
20191 |
||||||||||
Operating income (loss) |
|
|
|
|
|
|
|
|
|
||||||||||
|
$ |
(309,093 |
) |
|
$ |
56,690 |
|
|
$ |
102,015 |
|
|
$ |
(252,403 |
) |
|
$ |
177,928 |
|
International Land |
(152,469 |
) |
|
3,115 |
|
|
7,968 |
|
|
(149,354 |
) |
|
14,597 |
|
|||||
Offshore |
(3,319 |
) |
|
6,328 |
|
|
4,531 |
|
|
3,009 |
|
|
11,699 |
|
|||||
H&P Technologies |
(33,574 |
) |
|
(4,551 |
) |
|
(3,808 |
) |
|
(38,125 |
) |
|
(10,397 |
) |
|||||
Other |
376 |
|
|
(1,237 |
) |
|
1,164 |
|
|
(705 |
) |
|
2,718 |
|
|||||
Segment operating income (loss) |
$ |
(498,079 |
) |
|
$ |
60,345 |
|
|
$ |
111,870 |
|
|
$ |
(437,578 |
) |
|
$ |
196,545 |
|
Gain on sale of assets |
10,310 |
|
|
4,279 |
|
|
11,546 |
|
|
14,589 |
|
|
17,090 |
|
|||||
Corporate selling, general and administrative costs and corporate depreciation |
(30,772 |
) |
|
(33,256 |
) |
|
(28,270 |
) |
|
(64,184 |
) |
|
(64,200 |
) |
|||||
Operating income (loss) |
$ |
(518,541 |
) |
|
$ |
31,368 |
|
|
$ |
95,146 |
|
|
$ |
(487,173 |
) |
|
$ |
149,435 |
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
||||||||||
Interest and dividend income |
$ |
3,566 |
|
|
$ |
2,214 |
|
|
$ |
2,061 |
|
|
$ |
5,780 |
|
|
$ |
4,512 |
|
Interest expense |
(6,095 |
) |
|
(6,100 |
) |
|
(6,167 |
) |
|
(12,195 |
) |
|
(10,888 |
) |
|||||
Gain (loss) on investment securities |
(12,413 |
) |
|
2,821 |
|
|
5,878 |
|
|
(9,592 |
) |
|
(36,957 |
) |
|||||
Gain on sale of subsidiary |
— |
|
|
14,963 |
|
|
— |
|
|
14,963 |
|
|
— |
|
|||||
Other |
(398 |
) |
|
(399 |
) |
|
17 |
|
|
(797 |
) |
|
548 |
|
|||||
Total unallocated amounts |
(15,340 |
) |
|
13,499 |
|
|
1,789 |
|
|
(1,841 |
) |
|
(42,785 |
) |
|||||
Income (loss) from continuing operations before income taxes |
$ |
(533,881 |
) |
|
$ |
44,867 |
|
|
$ |
96,935 |
|
|
$ |
(489,014 |
) |
|
$ |
106,650 |
|
1 During the fourth quarter of fiscal year 2019, we migrated our FlexApp offerings into our H&P Technologies segment. The activity of our FlexApps was previously included in our
|
|||||||
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 thousands, except operating statistics) |
|
|
|
||||
|
|
|
|
||||
Average rig revenue per day |
$ |
26,256 |
|
|
$ |
25,405 |
|
Early contract termination revenue |
$ |
(589 |
) |
|
$ |
(8 |
) |
Adjusted average rig revenue per day |
$ |
25,667 |
|
|
$ |
25,397 |
|
|
|
|
|
||||
Average rig expense per day |
$ |
15,497 |
|
|
$ |
14,987 |
|
Reversal of accrued compensation |
$ |
408 |
|
|
$ |
— |
|
Adjusted average rig expense per day |
$ |
15,905 |
|
|
$ |
14,987 |
|
|
|
|
|
||||
Adjusted average rig margin per day |
$ |
9,762 |
|
|
$ |
10,410 |
|
|
|
|
|
||||
International Land Operations |
|
|
|
||||
Average rig revenue per day |
$ |
31,706 |
|
|
$ |
27,714 |
|
Early contract termination revenue |
$ |
(103 |
) |
|
$ |
— |
|
Adjusted average rig revenue per day |
$ |
31,603 |
|
|
$ |
27,714 |
|
|
|
|
|
||||
Average rig expense per day |
$ |
20,922 |
|
|
$ |
20,506 |
|
Reversal of accrued compensation |
$ |
588 |
|
|
$ |
— |
|
Adjusted average rig expense per day |
$ |
21,510 |
|
|
$ |
20,506 |
|
|
|
|
|
||||
Adjusted average rig margin per day |
$ |
10,093 |
|
|
$ |
7,208 |
|
|
|
|
|
||||
Offshore Operations |
|
|
|
||||
Average rig revenue per day |
$ |
42,098 |
|
|
$ |
43,839 |
|
Adjusted average rig revenue per day |
$ |
42,098 |
|
|
$ |
43,839 |
|
|
|
|
|
||||
Average rig expense per day |
$ |
48,117 |
|
|
$ |
30,602 |
|
Reversal of accrued compensation |
$ |
1,542 |
|
|
$ |
— |
|
Adjusted average rig expense per day |
$ |
49,659 |
|
|
$ |
30,602 |
|
|
|
|
|
||||
Adjusted average rig margin per day |
$ |
(7,561 |
) |
|
$ |
13,237 |
|
|
|
|
|
||||
H&P Technologies |
|
|
|
||||
Operating loss |
$ |
(33,574 |
) |
|
$ |
(4,551 |
) |
|
$ |
38,333 |
|
|
$ |
— |
|
Change in fair value of contingent liability |
$ |
(3,600 |
) |
|
$ |
— |
|
Reversal of accrued compensation |
$ |
(1,508 |
) |
|
$ |
— |
|
Adjusted operating loss |
$ |
(349 |
) |
|
$ |
(4,551 |
) |
|
|
|
|
||||
|
|||||||||||
|
|
|
|
|
|
|
Q2FY20 |
||||
|
2020* |
|
2020 |
|
2019 |
|
Average |
||||
|
|
|
|
|
|
|
|
||||
Term Contract Rigs |
59 |
|
|
90 |
|
|
132 |
|
|
123 |
|
Spot Contract Rigs |
27 |
|
|
60 |
|
|
63 |
|
|
67 |
|
Total Contracted Rigs |
86 |
|
|
150 |
|
|
195 |
|
|
190 |
|
Idle or Other Rigs |
176 |
|
|
149 |
|
|
104 |
|
|
109 |
|
Total Marketable Fleet |
262 |
|
|
299 |
|
|
299 |
|
|
299 |
|
| |
|||||||||||
(*) As of |
|||||||||||
H&P GLOBAL FLEET UNDER TERM CONTRACT STATISTICS Number of Rigs Already Under Long-Term Contracts(**) (Estimated Quarterly Average — as of 4/30/20) |
||||||||||||||||||||
|
Q3 |
|
Q4 |
|
Q1 |
|
Q2 |
|
Q3 |
|
Q4 |
|
Q1 |
|||||||
Segment |
FY20 |
|
FY20 |
|
FY21 |
|
FY21 |
|
FY21 |
|
FY21 |
|
FY22 |
|||||||
|
65.6 |
|
|
49.6 |
|
|
44.9 |
|
|
38.4 |
|
|
32.2 |
|
|
23.9 |
|
|
14.2 |
|
International Land Operations |
2.1 |
|
|
1.0 |
|
|
1.0 |
|
|
1.0 |
|
|
1.0 |
|
|
1.0 |
|
|
1.0 |
|
Offshore Operations |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Total |
67.7 |
|
|
50.6 |
|
|
45.9 |
|
|
39.4 |
|
|
33.2 |
|
|
24.9 |
|
|
15.2 |
|
| |
||||||||||||||||||||
(**) All of the above rig contracts have original terms equal to or in excess of six months and include provisions for early termination fees. |
||||||||||||||||||||
View source version on businesswire.com: https://www.businesswire.com/news/home/20200430006005/en/
investor.relations@hpinc.com
(918) 588‑5190
Source: