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Helmerich & Payne, Inc. Announces First Quarter Fiscal 2019 Results

January 29, 2019 5:10 PM

TULSA, Okla., Jan. 29, 2019 (GLOBE NEWSWIRE) -- Helmerich & Payne, Inc. (NYSE: HP) reported income of $19 million or $0.17 per diluted share from operating revenues of $741 million for the quarter ended December 31, 2018, compared to income of $2.5 million, or $0.02 per diluted share, on revenues of $697 million for the quarter ended September 30, 2018. Net income per diluted share for the first fiscal quarter of 2019 and the fourth fiscal quarter of 2018 include $(0.25) and $(0.17), respectively, of after-tax losses comprised of select items(3). For the first fiscal quarter select items(3) were comprised of:

Net cash provided by operating activities was $209 million for the first quarter of fiscal 2019 compared to $186 million for the fourth fiscal quarter of fiscal 2018.

President and CEO John Lindsay commented, “The Company delivered sequentially improved operational results in the face of falling crude oil prices, which decreased by more than 30% during the quarter. Customer demand for super-spec rigs continued during the first fiscal quarter and H&P responded by upgrading and converting 14 more rigs to super-spec capacity bringing our total number of super-spec FlexRigs to 221 at calendar year-end. Additionally, H&P’s FlexAppTM solutions gained further traction in the market as more customers are realizing the value these software-based drilling applications create.

“Predictably, demand for super-spec rigs this current quarter has softened largely due to oil price uncertainty and our customers' aim to spend within cash flow. Even with the softening outlook, the Company’s large offering of highly capable super-spec FlexRigs and the associated technology surrounding wellbore quality and placement becomes more critical as drilling in the U.S.’s most prolific basins increases in complexity.

“The newly created H&P Technologies segment, which encompasses H&P’s technology-based subsidiaries, Motive and MagVar, also saw increased demand during the quarter. Individually or combined with the FlexRig, our wellbore quality and placement technologies greatly enhance the economic potential of a well and add significant value to our customers and their stakeholders. The Company’s drilling automation technology, AutoSlideSM, continues to gain momentum and interest from customers and we anticipate commercialization in the Midland Basin over the next few months.”

Vice President and CFO Mark Smith also commented, “This recent lack of clear direction in crude prices is injecting an amount of uncertainty into some of our customers' drilling plans for 2019. H&P, like our customers, has responded accordingly. H&P is slowing the cadence of super-spec upgrades creating a commensurate reduction in our planned capital expenditures for the year.

“We have reduced our budgeted capex by over 20%, approximately $150 million from our initial budget. As in the past with volatile markets, the Company will maintain a disciplined capital allocation strategy and we remain confident that our operational results and financial strength will support that strategy.”

John Lindsay concluded, “The Company’s ability to plan, adapt and respond in a near-term volatile market is one of the cornerstones of our long-term success. Despite industry conditions, the primary focus remains constant at H&P - to partner with our customers and add value through our people, the FlexRig fleet and technologies to achieve common goals.”

Operating Segment Results for the First Quarter of Fiscal 2019

U.S. Land Operations:

Segment operating income increased by $15.1 million to $79.7 million sequentially. The increase in operating results was primarily driven by sequential increases in both quarterly revenue days and average rig revenue per day. The number of quarterly revenue days increased sequentially by approximately 4%. Adjusted average rig revenue per day improved by $835 or roughly 3% to $25,156(1) as average dayrates increased during the quarter.

The average rig expense per day increased sequentially by $1,334 to $15,443 as the quarter was negatively impacted by $821 of costs associated with a settled lawsuit while the prior quarter benefited from favorable adjustments to self-insurance expenses. Corresponding adjusted average rig margin per day increased $322 to $10,534(1).

The segment’s depreciation expense for the quarter includes non-cash charges of $3.5 million for abandonments and accelerated depreciation of used drilling rig components related to rig upgrades, compared to similar non-cash charges of $13.9 million during the fourth fiscal quarter of 2018.

Offshore Operations:

Segment operating income decreased by $1.0 million to $7.2 million sequentially. The number of quarterly revenue days on H&P-owned platform rigs decreased sequentially by approximately 5%, while the average rig margin per day decreased sequentially by $1,454 to $9,998 primarily due to a rig undergoing maintenance during the quarter. Management contracts on customer-owned platform rigs contributed approximately $5.4 million to the segment’s operating income, compared to approximately $5.5 million during the prior quarter.

International Land Operations:

The segment had operating income of $6.6 million this quarter as compared to an operating loss of $7.9 million during the previous quarter. The $14.5 million sequential increase in operating income was primarily attributable to asset impairments charges related to ceasing operations in Ecuador that adversely impacted the prior quarter combined with an installment payment related to prior early terminations that benefitted first fiscal quarter revenues. Revenue days decreased during the quarter by 3% to 1,758 while the adjusted average rig margin per day increased by $1,524 to $10,182(1).

H&P Technologies:

The segment had an operating loss of $10.3 million this quarter as compared to an operating loss of $15.6 million during the previous quarter. The $5.3 million sequential decrease in the operating loss was due in part to the impairment of legacy TerraVici intangible assets that negatively impacted the prior quarter.

Operational Outlook for the Second Quarter of Fiscal 2019

U.S. Land Operations:

Offshore Operations:

International Land Operations:

Other Estimates for Fiscal 2019

Select Items Included in Net Income per Diluted Share

First Quarter of Fiscal 2019 net income of $0.17 per diluted share included $(0.25) in after-tax losses comprised of the following:

Fourth Quarter of Fiscal 2018 net income of $0.02 per diluted share included $(0.17) in after-tax losses comprised of the following:

Conference Call

A conference call will be held on Wednesday, January 30, 2019 at 11:00 a.m. (ET) with John Lindsay, President and CEO, Mark Smith, Vice President and CFO, and Dave Wilson, Director of Investor Relations to discuss the Company’s fiscal first quarter 2019 results. Dial-in information for the conference call is (877) 876-9174 for domestic callers or (785) 424-1669 for international callers. The call access code is ‘Helmerich’. You may also listen to the conference call that will be broadcast live over the Internet by logging on to the Company’s website at http://www.hpinc.com and accessing the corresponding link through the Investor Relations section by clicking on “INVESTORS” and then clicking on “Event Calendar” to find the event and the link to the webcast.

About Helmerich & Payne, Inc.

Founded in 1920, Helmerich & Payne, Inc. (H&P) (NYSE: HP) is committed to delivering industry leading levels of drilling productivity and reliability. H&P operates with the highest level of integrity, safety and innovation to deliver superior results for our customers and returns for shareholders. Through its subsidiaries, the Company designs, fabricates and operates high-performance drilling rigs in conventional and unconventional plays around the world. H&P also develops and implements advanced automation, directional drilling and survey management technologies. H&P’s fleet includes 350 land rigs in the U.S., 32 international land rigs and eight offshore platform rigs. For more information, see H&P online at www.hpinc.com.

Forward-Looking Statements

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

___________________

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

(1) See the Selected Statistical & Operational Highlights table(s) for details on the revenues or charges excluded on a per revenue day basis. The inclusion or exclusion of these amounts results in adjusted revenue, expense, and/or margin per day figures, which are all non-GAAP measures.(2) 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.(3) See the corresponding section of this release for details regarding the select items.

Contact: Dave Wilson, Director of Investor Relations[email protected](918) 588‑5190

HELMERICH & PAYNE, INC.Unaudited(in thousands, except per share data)

Three Months Ended
December 31 September 30 December 31
CONSOLIDATED STATEMENTS OF OPERATIONS 2018 2018 2017
As adjusted As adjusted
Operating Revenues:
Contract drilling $ 737,358 $ 693,677 $ 561,069
Other 3,240 3,148 3,018
$ 740,598 $ 696,825 $ 564,087
Operating costs and expenses:
Contract drilling operating expenses, excluding depreciation and amortization 487,593 448,135 371,916
Operating expenses applicable to other revenues 1,274 1,325 1,167
Depreciation and amortization 141,460 150,281 143,267
Research and development 7,019 5,018 3,234
Selling, general and administrative 54,508 52,252 46,459
Asset impairment charge — 23,128 —
Gain on sale of assets (5,545) (7,527) (5,565)
686,309 672,612 560,478
Operating income (loss) from continuing operations 54,289 24,213 3,609
Other income (expense):
Interest and dividend income 2,450 2,337 1,724
Interest expense (4,720) (6,471) (5,773)
Loss on investment securities (42,844) (1) —
Other 541 (1,044) 441
(44,573) (5,179) (3,608)
Income from continuing operations before income taxes 9,716 19,034 1
Income tax provision (benefit) 1,352 16,859 (500,641)
Income from continuing operations 8,364 2,175 500,642
Income (loss) from discontinued operations, before income taxes 12,665 14,262 (519)
Income tax provision 2,070 13,984 17
Income (loss) from discontinued operations 10,595 278 (536)
Net Income $ 18,959 $ 2,453 $ 500,106
Basic earnings per common share:
Income from continuing operations $ 0.07 $ 0.02 $ 4.57
Income from discontinued operations $ 0.10 $ — $ —
Net income $ 0.17 $ 0.02 $ 4.57
Diluted earnings per common share:
Income from continuing operations $ 0.07 $ 0.02 $ 4.55
Income from discontinued operations $ 0.10 $ — $ —
Net income $ 0.17 $ 0.02 $ 4.55
Weighted average shares outstanding:
Basic 109,142 108,948 108,683
Diluted 109,425 109,397 109,095

“As Adjusted” – Effective October 1, 2018, we adopted Accounting Standards Update No. 2017-07, Compensation-Retirement Benefits – (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The statement of operations for the three months ended September 30, 2018 and December 31, 2017 has been adjusted to reflect changes that were applied retrospectively from that adoption.

HELMERICH & PAYNE, INC.Unaudited(in thousands)

December 31 September 30
CONSOLIDATED CONDENSED BALANCE SHEETS 2018 2018
Assets
Cash and cash equivalents $ 228,462 $ 284,355
Short-term investments 41,072 41,461
Other current assets 773,213 789,734
Total current assets 1,042,747 1,115,550
Investments 54,731 98,696
Property, plant and equipment, net 4,900,339 4,857,382
Other noncurrent assets 146,524 143,239
Total Assets $ 6,144,341 $ 6,214,867
Liabilities and Shareholders' Equity
Current liabilities $ 385,913 $ 377,168
Long-term debt 490,805 493,968
Other noncurrent liabilities 937,752 946,742
Noncurrent liabilities - discontinued operations 3,633 14,254
Total shareholders’ equity 4,326,238 4,382,735
Total Liabilities and Shareholders' Equity $ 6,144,341 $ 6,214,867

HELMERICH & PAYNE, INC.Unaudited(in thousands)

Three Months Ended
December 31
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS 2018 2017
As adjusted
OPERATING ACTIVITIES:
Net income $ 18,959 $ 500,106
Adjustment for (income) loss from discontinued operations (10,595) 536
Income from continuing operations 8,364 500,642
Depreciation and amortization 141,460 143,267
Loss on investment securities 42,844 —
Changes in assets and liabilities 13,857 (569,887)
Gain on sale of assets (5,545) (5,565)
Other 8,528 11,205
Net cash provided by operating activities from continuing operations 209,508 79,662
Net cash used in operating activities from discontinued operations (26) (57)
Net cash provided by operating activities 209,482 79,605
INVESTING ACTIVITIES:
Capital expenditures (196,094) (91,698)
Purchase of short-term investments (31,324) (16,183)
Payment for acquisition of business, net of cash acquired (2,781) (47,832)
Proceeds from sale of short-term investments 31,860 18,120
Proceeds from asset sales 11,609 8,749
Net cash used in investing activities (186,730) (128,844)
FINANCING ACTIVITIES:
Dividends paid (78,122) (76,503)
Debt issuance costs paid (3,912) —
Proceeds from stock option exercises 1,954 892
Payments for employee taxes on net settlement of equity awards (6,267) (5,471)
Payment of contingent consideration from acquisition of business — (1,500)
Net cash used in financing activities (86,347) (82,582)
Net (decrease) in cash and cash equivalents and restricted cash (63,595) (131,821)
Cash and cash equivalents and restricted cash, beginning of period 326,185 560,509
Cash and cash equivalents and restricted cash, end of period $ 262,590 $ 428,688

“As Adjusted” – Effective October 1, 2018, we adopted Accounting Standards Update No. 2016-18, Statement of Cash Flows – (Topic 230): Restricted Cash and Accounting Standards Update No. 2016-15, Statement of Cash Flows – (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The cash flow statement for the three months ended December 31, 2017 has been adjusted to reflect changes that were applied retrospectively from those adoptions.

Three Months Ended
December 31 September 30 December 31
SEGMENT REPORTING 2018 2018 2017
(in thousands, except operating statistics)
U.S. LAND OPERATIONS
Operating revenues $ 624,241 $ 587,244 $ 461,640
Direct operating expenses 408,806 369,744 299,064
Selling, general and administrative expense 11,656 15,365 13,993
Depreciation 124,111 131,901 123,838
Asset impairment charge — 5,695 —
Segment operating income $ 79,668 $ 64,539 $ 24,745
Revenue days 21,933 21,035 18,362
Average rig revenue per day $ 25,265 $ 24,449 $ 22,400
Average rig expense per day $ 15,443 $ 14,109 $ 13,546
Average rig margin per day $ 9,822 $ 10,340 $ 8,854
Rig utilization 68 % 65 % 57 %
OFFSHORE OPERATIONS
Operating revenues $ 36,910 $ 38,482 $ 33,366
Direct operating expenses 26,305 26,614 21,122
Selling, general and administrative expense 769 1,110 1,165
Depreciation 2,668 2,588 2,354
Segment operating income $ 7,168 $ 8,170 $ 8,725
Revenue days 525 552 460
Average rig revenue per day $ 35,635 $ 36,424 $ 35,776
Average rig expense per day $ 25,637 $ 24,972 $ 23,401
Average rig margin per day $ 9,998 $ 11,452 $ 12,375
Rig utilization 71 % 75 % 63 %
INTERNATIONAL LAND OPERATIONS
Operating revenues $ 66,287 $ 59,386 $ 63,214
Direct operating expenses 47,539 45,142 46,737
Selling, general and administrative expense 2,281 699 1,132
Depreciation 9,837 10,782 11,811
Asset impairment charge — 10,617 —
Segment operating income (loss) $ 6,630 $ (7,854) $ 3,534
Revenue days 1,758 1,818 1,587
Average rig revenue per day $ 35,575 $ 30,909 $ 38,039
Average rig expense per day $ 22,704 $ 22,251 $ 26,688
Average rig margin per day $ 12,871 $ 8,658 $ 11,351
Rig utilization 60 % 55 % 45 %
H&P TECHNOLOGIES
Revenues $ 9,920 $ 8,565 $ 2,849
Direct operating expenses, including research and development 12,391 12,083 8,589
General and administrative expense 6,099 4,699 1,709
Depreciation 1,774 1,749 1,366
Asset impairment charge — 5,637 —
Segment operating loss $ (10,344) $ (15,603) $ (8,815)

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 calculations.

Reimbursed amounts were as follows:

Three Months Ended
December 31 September 30 December 31
2018 2018 2017
U.S. Land Operations $ 60,889 $ 63,764 $ 41,114
Offshore Operations $ 5,750 $ 5,925 $ 4,098
International Land Operations $ 3,746 $ 3,194 $ 2,861

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 (loss) per the information above to income (loss) from continuing operations before income taxes as reported on the Consolidated Statements of Operations (in thousands).

Three Months Ended
December 31 September 30 December 31
2018 2018 2017
As adjusted As adjusted
Operating income (loss)
U.S. Land $ 79,668 $ 64,539 $ 24,745
Offshore 7,168 8,170 8,725
International Land 6,630 (7,854) 3,534
H&P Technologies (10,344) (15,603) (8,815)
Other 1,554 1,431 1,498
Segment operating income $ 84,676 $ 50,683 $ 29,687
Income from asset sales 5,545 7,527 5,565
Corporate selling, general and administrative costs and corporate depreciation (35,932) (33,997) (31,643)
Operating income $ 54,289 $ 24,213 $ 3,609
Other income (expense):
Interest and dividend income 2,450 2,337 1,724
Interest expense (4,720) (6,471) (5,773)
Loss on investment securities (42,844) (1) —
Other 541 (1,044) 441
Total unallocated amounts (44,573) (5,179) (3,608)
Income from continuing operations before income taxes $ 9,716 $ 19,034 $ 1
“As Adjusted” – Effective October 1, 2018, we implemented organizational changes, consistent with the manner in which our chief operating decision maker evaluates performance and allocates resources. Certain operations previously reported in “other” within our segment disclosures are now managed and presented within the new H&P Technologies reportable segment. All segment disclosures have been recast for these segment changes. Additionally, we adopted Accounting Standards Update No. 2017-07, Compensation-Retirement Benefits – (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. Operating results for the three months ended September 30, 2018 and December 31, 2017 has been adjusted to reflect changes that were applied retrospectively from that adoption.

SUPPLEMENTARY STATISTICAL INFORMATION Unaudited

SELECTED STATISTICAL & OPERATIONAL HIGHLIGHTS(Used to determine adjusted per revenue day statistics, which is a non-GAAP measure)

Three Months Ended
December 31 September 30
2018 2018
(in dollars per revenue day)
U.S. Land Operations
Total impact on U.S. Land revenue per day: $ 109 $ 128
International Land Operations
Total impact on International Land revenue per day: $ 2,689 $ —

U.S. LAND RIG COUNTS & MARKETABLE FLEET STATISTICS

January 29 December 31 September 30 Q1FY19
2019 2018 2018 Average
U.S. Land Operations
Term Contract Rigs 152 156 138 149.0
Spot Contract Rigs 86 88 94 89.4
Total Contracted Rigs 238 244 232 238.4
Idle or Other Rigs 112 106 118 111.6
Total Marketable Fleet 350 350 350 350.0

H&P GLOBAL FLEET UNDER TERM CONTRACT STATISTICSNumber of Rigs Already Under Long-Term Contracts(1)

(Estimated Quarterly Average — as of 01/29/19)

Q2 Q3 Q4 Q1 Q2 Q3 Q4
Segment FY19 FY19 FY19 FY20 FY20 FY20 FY20
U.S. Land Operations 148.9 133.2 111.2 90.9 65.4 58.6 53.2
International Land Operations 11.0 11.0 11.0 10.0 6.2 1.1 —
Offshore Operations — — — — — — —
Total 159.9 144.2 122.2 100.9 71.6 59.7 53.2

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

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Source: Helmerich & Payne, Inc.

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