Helmerich & Payne (NYSE: HP) reported Q2 EPS of $0.55, $0.17 better than the analyst estimate of $0.38. Revenue for the quarter came in at $721 million versus the consensus estimate of $711.49 million.

President and CEO John Lindsay commented, “From the outset, this was a quarter challenged by industry uncertainty, so I am pleased to report that the Company not only stayed on target and delivered sequentially improved net income, but also achieved two significant milestones.

“Concern over crude oil prices persisted from the prior quarter which softened demand for incremental super-spec rigs, but H&P completed the planned upgrades already in its pipeline bringing our total number of super-spec FlexRigs to 230 at quarter end. Based on trends we are seeing in rig releases and current demand, we believe the Company’s active rig count will bottom-out early during this quarter with super-spec utilization in the 90%-plus range. This should be supportive of the current pricing environment.

“Crude oil prices are up approximately 40% since the beginning of the calendar year and in past cycles this would have resulted in higher activity. However, we have seen a tempered response and even reductions in activity by some in the industry. Clearly, customer behavior is changing, and their movement is towards prioritization of cash flows and returns. An additional emphasis is placed on disciplined spending and determining where value can be added to improve performance and long-term cash flows. H&P is well positioned in this type of environment with the hardware – a FlexRig fleet that is an industry leader in drilling unconventional wells, and with the software – a digital technology platform that when deployed on a rig can improve well economics, both of which help our customers achieve their goals.

“During the quarter, H&P achieved a major milestone through the commercialization of its drilling automation technology, AutoSlide. We believe AutoSlide and the other software-based offerings from our H&P Technologies (HPT) platform, Motive and MagVar, will continue to gain traction in the industry as the benefits of wellbore quality and placement become more evident as multi-well pad drilling shifts to a manufacturing-type process. The benefits of these technologies can have a meaningful impact on customer well economics by improving production dynamics and lowering the risk of wellbore interference, thereby bolstering financial returns through the life of the well. We are committed to partnering with our customers to unlock these benefits.

“A pivotal long-term objective has been to translate H&P’s position of drilling leadership in U.S. unconventional basins to key international markets where super-spec FlexRigs and HPT software solutions, including AutoSlide, can add significant value to the customer. That has started coming to fruition with the signing of a letter of intent to deploy our first super-spec FlexRig from the U.S. to Argentina later this quarter. We see this as a significant milestone and are excited about this opportunity and what it portends for H&P’s Latin America business, as well as other international markets.”

Vice President and CFO Mark Smith also commented, “Despite the head winds that prevailed in the beginning of calendar year 2019, H&P kept its focus on achieving long-term success with the commercialization of AutoSlide and a letter of intent to send a super-spec FlexRig to an international location. Both lay the groundwork for future growth opportunities for H&P. The Company’s previously reduced cadence for super-spec upgrades remains unchanged for the balance of our fiscal year, as does our capital allocation strategy. As we look ahead, we are confident in the cash flow generation potential of our upgraded super-spec FlexRig fleet.”

John Lindsay concluded, “The Company achieved excellent operational results and several technical accomplishments during the quarter. Our ability to adapt and respond to uncertain market conditions while securing new opportunities for long-term success is paramount. These achievements aren’t possible without the efforts of our people working as a team to deliver on our goals; this exemplifies H&P’s commitment to excellence, which culminated in the Company being ranked first in customer satisfaction for 11 years in a row.”

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