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Helmerich & Payne, Inc. Announces Third Quarter Results and Additional New Build Contracts

TULSA, Okla., July 31, 2014 (GLOBE NEWSWIRE) -- Helmerich & Payne, Inc. (NYSE:HP) reported net income of $192.3 million ($1.75 per diluted share) from operating revenues of $952.1 million for the third quarter of fiscal 2014, compared to net income of $266.2 million ($2.46 per diluted share) from operating revenues of $840.2 million during the third fiscal quarter of 2013, and net income of $174.6 million ($1.59 per diluted share) from operating revenues of $893.4 million during the second fiscal quarter of 2014. Included in net income corresponding to this year's third fiscal quarter are approximately $0.13 per diluted share of after-tax gains on the sale of investment securities and approximately $0.01 per diluted share of after-tax gains related to the sale of used drilling equipment. Included in net income corresponding to last year's third fiscal quarter are approximately $0.86 per diluted share of after-tax gains on the sale of investment securities, approximately $0.02 per diluted share of after-tax gains related to the sale of used drilling equipment, and approximately $0.14 per diluted share of after-tax gains on income from discontinued operations. Included in net income corresponding to this year's second fiscal quarter are approximately $0.12 per diluted share of after-tax gains on the sale of investment securities and approximately $0.02 per diluted share of after-tax gains related to the sale of used drilling equipment.

President and CEO John Lindsay commented, "The Company achieved record levels of quarterly revenue, operating income and rig activity after activating 11 new FlexRigs®* during the quarter. We continue to see a strong U.S. land drilling market and expect to benefit from increasing activity, recovering spot pricing levels, and additional customer commitments for new FlexRigs. Since our most recent announcement last month, we have entered into agreements with six exploration and production companies to build and operate 13 additional FlexRigs to drill unconventional resource plays in the U.S. All of these rigs were ordered under multi-year term contracts and are expected to generate attractive economic returns for the Company. The new contracts bring the total number of new build commitments announced in fiscal 2014 to 74 FlexRigs, including 30 since the Company's last quarterly earnings release. As we continue to build on our competitive advantages, our focus will remain on creating value for our shareholders through our efforts to deliver safer, more reliable and efficient operations for our customers."

Operating Segment Results

Segment operating income for the Company's U.S. land operations was $271.1 million for the third quarter of fiscal 2014, compared with $236.4 million for last year's third fiscal quarter and $245.1 million for this year's second fiscal quarter. As compared to the second fiscal quarter of this year, segment operating income significantly increased primarily as a result of revenue days increasing by 1,762 (7.3%) to 26,062 during the third fiscal quarter of 2014. The corresponding average rig revenue per day increased by $89 to $28,126 and the average rig expense per day decreased by $45 to $13,035 during the third fiscal quarter. As a result, the average rig margin per day increased by $134 to $15,091 during the third fiscal quarter. Rig utilization for the segment was 88% for this year's third fiscal quarter, compared with 83% for last year's third fiscal quarter and 86% for this year's second fiscal quarter. At June 30, 2014, the Company's U.S. land segment had 289 contracted rigs, including 170 under term contracts.

Segment operating income for the Company's offshore operations was $17.0 million for the third quarter of fiscal 2014, compared with $14.1 million for last year's third fiscal quarter and $19.3 million for this year's second fiscal quarter. The sequential decline in operating income was attributable to a lower average rig margin per day which decreased to $24,303 during the third quarter of fiscal 2014. Rig utilization in the segment was reported at 89% for both the second and third quarters of fiscal 2014 and also for the third quarter of fiscal 2013.

The Company's international land operations reported segment operating income of $6.6 million for this year's third fiscal quarter, compared with $8.5 million for the third fiscal quarter of 2013 and $11.2 million for this year's second fiscal quarter. The decrease in segment operating income as compared to the second fiscal quarter was mostly attributable to a lower average rig margin per day which decreased to $9,324 during the third quarter of fiscal 2014.

Drilling Operations Outlook for the Fourth Quarter of Fiscal 2014

In the U.S. land segment, the Company expects revenue days (activity) to increase by approximately two to three percent during the fourth fiscal quarter as compared to the third fiscal quarter of 2014, even while ten FlexRigs are in the process of transitioning to international operations. The average rig revenue per day is expected to increase to approximately $28,300 and the average rig expense per day is expected to remain at roughly $13,000 during the fourth fiscal quarter. As of today, the U.S. land segment has 292 contracted rigs, including 178 under term contracts.

In the offshore segment, the Company expects the average rig margin per day to be approximately $22,000 during the fourth fiscal quarter and revenue days to increase by approximately one percent as compared to the third fiscal quarter of 2014.

In the international land segment, the Company expects total revenue days during the fourth fiscal quarter to increase by approximately two percent and the average rig margin per day to be down by approximately five percent as compared to the third fiscal quarter of 2014.

Capital Expenditures and Other Estimates for Fiscal 2014

The fiscal 2014 capital expenditures total is now expected to be slightly under the Company's prior estimate of $1.1 billion. However, the actual spending level for the fiscal year may vary depending primarily on the timing of procurement related to our ongoing FlexRig construction program.

The Company now expects total depreciation expense for fiscal 2014 to be one to two percent higher as compared to its original estimate of approximately $500 million. General and administrative expenses for the year are now expected to total two to three percent higher as compared to the original estimate of approximately $130 million. The Company's effective income tax rate is expected to be slightly over 35% for fiscal 2014.

About Helmerich & Payne, Inc.

Helmerich & Payne, Inc. is primarily a contract drilling company. As of July 31, 2014, the Company's existing fleet includes 333 land rigs in the U.S., 34 international land rigs and 9 offshore platform rigs. In addition, the Company is scheduled to complete another 38 new H&P-designed and operated FlexRigs, all under long-term contracts with customers. Upon completion of these commitments, the Company's global fleet is expected to have a total of 405 land rigs, including 375 FlexRigs.

Forward-Looking Statements

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

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

HELMERICH & PAYNE, INC.
Unaudited
(in thousands, except per share data)
Three Months Ended Nine Months Ended
CONSOLIDATED STATEMENTS OF March 31 June 30 June 30
INCOME 2014 2014 2013 2014 2013
Operating Revenues:
Drilling – U.S. Land $ 741,791 $ 802,279 $ 695,816 $2,275,744 $2,077,556
Drilling – Offshore 63,276 64,554 53,859 186,884 167,182
Drilling – International Land 85,533 81,267 86,978 262,141 268,337
Other 2,830 3,987 3,544 9,900 10,003
893,430 952,087 840,197 2,734,669 2,523,078
Operating costs and expenses:
Operating costs, excluding depreciation 480,167 515,239 450,990 1,469,454 1,379,598
Depreciation 123,963 128,978 117,790 373,178 336,822
General and administrative 34,431 34,222 31,090 100,896 96,347
Research and development 3,625 3,864 4,373 11,746 11,422
Income from asset sales (4,098) (2,128) (4,006) (11,890) (14,538)
638,088 680,175 600,237 1,943,384 1,809,651
Operating income 255,342 271,912 239,960 791,285 713,427
Other income (expense):
Interest and dividend income 490 373 341 1,316 1,082
Interest expense (1,725) (1,435) (2,091) (4,354) (4,585)
Gain on sale of investment securities 21,352 23,882 153,369 45,234 162,121
Other (32) 346 (1,214) (31) (3,195)
20,085 23,166 150,405 42,165 155,423
Income from continuing operations before income taxes 275,427 295,078 390,365 833,450 868,850
Income tax provision 100,838 102,788 139,387 293,389 307,194
Income from continuing operations 174,589 192,290 250,978 540,061 561,656
Income (loss) from discontinued operations, before income taxes 2,786 (11) 15,181 2,775 14,701
Income tax provision 2,805 -- -- 2,805 (485)
Income (loss) from discontinued operations (19) (11) 15,181 (30) 15,186
NET INCOME $ 174,570 $ 192,279 $ 266,159 $ 540,031 $ 576,842
Basic earnings per common share:
Income from continuing operations $ 1.61 $ 1.77 $ 2.35 $ 4.99 $ 5.26
Income from discontinued operations $ -- $ -- $ 0.14 $ -- $ 0.14
Net income $ 1.61 $ 1.77 $ 2.49 $ 4.99 $ 5.40
Diluted earnings per common share:
Income from continuing operations $ 1.59 $ 1.75 $ 2.32 $ 4.92 $ 5.19
Income from discontinued operations $ -- $ -- $ 0.14 $ -- $ 0.14
Net income $ 1.59 $ 1.75 $ 2.46 $ 4.92 $ 5.33
Weighted average shares outstanding:
Basic 107,692 108,137 106,430 107,657 106,206
Diluted 109,081 109,285 107,826 109,086 107,717
HELMERICH & PAYNE, INC.
Unaudited
(in thousands)
CONSOLIDATED CONDENSED BALANCE SHEETS June 30,
2014
September 30,
2013
ASSETS:
Cash and cash equivalents $ 549,928 $ 447,868
Other current assets 893,531 806,638
Current assets of discontinued operations 6,962 3,705
Total current assets 1,450,421 1,258,211
Investments 279,428 316,154
Net property, plant, and equipment 4,943,660 4,676,103
Other assets 19,573 14,359
TOTAL ASSETS $ 6,693,082 $ 6,264,827
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities $ 498,935 $ 449,063
Current liabilities of discontinued operations 3,176 3,210
Total current liabilities 502,111 452,273
Non-current liabilities 1,288,098 1,288,332
Non-current liabilities of discontinued operations 3,786 495
Long-term notes payable 80,000 80,000
Total shareholders' equity 4,819,087 4,443,727
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 6,693,082 $ 6,264,827
HELMERICH & PAYNE, INC.
Unaudited
(in thousands)
Nine Months Ended
June 30
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS 2014 2013
OPERATING ACTIVITIES:
Net income $ 540,031 $ 576,842
Adjustment for (income) loss from discontinued operations 30 (15,186)
Income from continuing operations 540,061 561,656
Depreciation 373,178 336,822
Changes in assets and liabilities (79,086) 17,230
Gain on sale of assets and investment securities (57,124) (176,659)
Other 20,896 22,408
Net cash provided by operating activities from continuing operations 797,925 761,457
Net cash provided by (used in) operating activities from discontinued operations (30) 186
Net cash provided by operating activities 797,895 761,643
INVESTING ACTIVITIES:
Capital expenditures (622,028) (618,550)
Proceeds from sale of assets and invested securities 70,690 253,950
Net cash used in investing activities from continuing activities (551,338) (364,600)
Net cash provided by investing activities from discontinued activities -- 15,000
Net cash used in investing activities (551,338) (349,600)
FINANCING ACTIVITIES:
Dividends paid (189,542) (39,519)
Exercise of stock options 22,370 6,118
Tax withholdings related to net share settlements of restricted stock (3,049) (1,677)
Excess tax benefit from stock-based compensation 25,724 7,420
Net cash used in financing activities (144,497) (27,658)
Net increase in cash and cash equivalents 102,060 384,385
Cash and cash equivalents, beginning of period 447,868 96,095
Cash and cash equivalents, end of period $ 549,928 $ 480,480
SEGMENT REPORTING Three Months Ended Nine Months Ended
March 31 June 30 June 30
2014 2014 2013 2014 2013
(in thousands, except days and per day amounts)
U.S. LAND OPERATIONS
Revenues $741,791 $802,279 $695,816 $2,275,744 $2,077,556
Direct operating expenses 378,347 408,990 348,850 1,154,523 1,064,088
General and administrative expense 10,656 9,548 9,284 30,161 27,662
Depreciation 107,726 112,639 101,294 323,944 289,032
Segment operating income $245,062 $271,102 $236,388 $ 767,116 $ 696,774
Revenue days 24,300 26,062 22,510 73,826 66,100
Average rig revenue per day $ 28,037 $ 28,126 $ 28,160 $ 28,205 $ 28,152
Average rig expense per day $ 13,080 $ 13,035 $ 12,746 $ 13,018 $ 12,821
Average rig margin per day $ 14,957 $ 15,091 $ 15,414 $ 15,187 $ 15,331
Rig utilization 86% 88% 83% 86% 82%
OFFSHORE OPERATIONS
Revenues $ 63,276 $ 64,554 $ 53,859 $ 186,884 $ 167,182
Direct operating expenses 38,479 42,446 33,961 115,801 107,274
General and administrative expense 2,528 2,264 2,214 7,122 6,608
Depreciation 2,926 2,848 3,562 9,124 10,522
Segment operating income $ 19,343 $ 16,996 $ 14,122 $ 54,837 $ 42,778
Revenue days 720 728 728 2,184 2,184
Average rig revenue per day $ 64,242 $ 64,019 $ 61,380 $ 63,515 $ 61,289
Average rig expense per day $ 36,577 $ 39,716 $ 36,272 $ 37,044 $ 36,043
Average rig margin per day $ 27,665 $ 24,303 $ 25,108 $ 26,471 $ 25,246
Rig utilization 89% 89% 89% 89% 89%
INTERNATIONAL LAND OPERATIONS
Revenues $ 85,533 $ 81,267 $ 86,978 $262,141 $268,337
Direct operating expenses 63,688 63,950 68,310 199,568 208,641
General and administrative expense 964 1,169 976 3,133 2,925
Depreciation 9,713 9,578 9,234 28,951 26,033
Segment operating income (loss) $ 11,168 $ 6,570 $ 8,458 $ 30,489 $ 30,738
Revenue days 2,032 2,024 2,132 6,212 6,392
Average rig revenue per day $ 37,095 $ 35,454 $ 35,955 $ 37,025 $ 37,294
Average rig expense per day $ 26,177 $ 26,130 $ 27,364 $ 26,826 $ 27,991
Average rig margin per day $ 10,918 $ 9,324 $ 8,591 $ 10,199 $ 9,303
Rig utilization 78% 74% 80% 78% 81%
Operating statistics exclude the effects of offshore platform management contracts, gains and losses from translation of foreign currency transactions, and do not include reimbursements of "out-of-pocket" expenses in revenue per day, expense per day and margin calculations.
Reimbursed amounts were as follows:
U.S. Land Operations $ 60,488 $ 69,267 $ 61,944 $ 193,455 $ 216,724
Offshore Operations $ 4,920 $ 5,364 $ 4,045 $ 13,050 $ 16,434
International Land Operations $ 10,157 $ 9,508 $ 10,323 $ 32,145 $ 29,955

Segment operating income for all segments is a non-GAAP financial measure of the Company's performance, as it excludes general and administrative expenses, corporate depreciation, income from asset sales and other corporate income and expense. The Company considers segment operating income to be an important supplemental measure of operating performance for presenting trends in the Company's core businesses. This measure is used by the Company to facilitate period-to-period comparisons in operating performance of the Company's reportable segments in the aggregate by eliminating items that affect comparability between periods. The Company believes that segment operating income is useful to investors because it provides a means to evaluate the operating performance of the segments and the Company on an ongoing basis using criteria that are used by our internal decision makers. Additionally, it highlights operating trends and aids analytical comparisons. However, segment operating income has limitations and should not be used as an alternative to operating income or loss, a performance measure determined in accordance with GAAP, as it excludes certain costs that may affect the Company's operating performance in future periods.

The following table reconciles operating income per the information above to income from continuing operations before income taxes as reported on the Consolidated Statements of Income (in thousands).

Three Months Ended Nine Months Ended
March 31 June 30 June 30
2014 2014 2013 2014 2013
Operating income
U.S. Land $245,062 $271,102 $236,388 $767,116 $696,774
Offshore 19,343 16,996 14,122 54,837 42,778
International Land 11,168 6,570 8,458 30,489 30,738
Other (2,244) (1,490) (2,464) (6,739) (6,638)
Segment operating income $273,329 $293,178 $256,504 $845,703 $763,652
Corporate general and administrative (20,283) (21,241) (18,616) (60,480) (59,152)
Other depreciation (3,172) (3,479) (3,096) (9,895) (9,337)
Inter-segment elimination 1,370 1,326 1,162 4,067 3,726
Income from asset sales 4,098 2,128 4,006 11,890 14,538
Operating income $255,342 $271,912 $239,960 $791,285 $713,427
Other income (expense):
Interest and dividend income 490 373 341 1,316 1,082
Interest expense (1,725) (1,435) (2,091) (4,354) (4,585)
Gain on sale of investment securities 21,352 23,882 153,369 45,234 162,121
Other (32) 346 (1,214) (31) (3,195)
Total other income (expense) 20,085 23,166 150,405 42,165 155,423
Income from continuing operations before income taxes $275,427 $295,078 $390,365 $833,450 $868,850

CONTACT: Investor Relations investor.relations@hpinc.com (918) 588-5190

Source:Helmerich & Payne, Incorporated