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Helmerich & Payne, Inc. Announces Third Quarter Results

TULSA, Okla., July 30, 2015 (GLOBE NEWSWIRE) -- Helmerich & Payne, Inc. (NYSE:HP) reported net income of $91 million ($0.83 per diluted share) from operating revenues of $660 million for the third fiscal quarter of 2015, compared to net income of $192 million ($1.75 per diluted share) from operating revenues of $952 million during the third quarter of fiscal 2014, and net income of $150 million ($1.37 per diluted share) from operating revenues of $883 million during the second quarter of fiscal 2015. Included in net income per diluted share corresponding to this year’s third fiscal quarter are approximately $0.55 of after-tax gains from long-term contract early termination compensation from customers (which favorably impacted net income by approximately $60 million) and $0.01 of after-tax gains related to the sale of used drilling equipment. Included in net income per diluted share corresponding to last year’s third fiscal quarter are approximately $0.13 of after-tax gains on the sale of investment securities and $0.01 of after-tax gains related to the sale of used drilling equipment. Included in net income per diluted share corresponding to this year’s second fiscal quarter are approximately $0.44 of after-tax gains from long-term contract early termination compensation from customers, $0.02 of after-tax gains related to the sale of used drilling equipment, and $0.05 of after-tax losses from abandonment charges.

President and CEO John Lindsay commented, “The industry has endured an unprecedented rig count decline, and yet we believe that the Company remains well positioned. Long-term contracts continue to protect our investments, the balance sheet is in great shape, our customer base remains strong, and our competitive advantages have positioned us very well to manage through this cycle and to capture opportunities when they emerge.

“The industry is faced with a global oversupply of oil, as well as other macroeconomic headwinds to a strengthening oil price. A significant difference today, compared to previous down-cycles, is that the U.S. may be positioned to become a global swing producer. In such an environment, the energy services landscape would most probably become increasingly competitive, with even greater pressure to reduce well costs, enhance productivity and add value for customers. H&P’s long-term strategy has delivered a track record of innovation and value creation. We remain committed to this endeavor and look forward to opportunities ahead.”

Operating Segment Results

Segment operating income for the Company’s U.S. land operations was $122 million for the third quarter of fiscal 2015, compared with $271 million for last year’s third fiscal quarter and $225 million for this year’s second fiscal quarter. As compared to the second quarter of fiscal 2015, segment operating income decreased primarily as a result of significantly lower levels of quarterly activity. The number of quarterly revenue days decreased sequentially by approximately 32% to 14,219 days. Excluding the impact of $3,413 and $5,325 per day corresponding to revenues from early contract terminations during this year’s second and third fiscal quarters, respectively, the average rig revenue per day decreased sequentially by $941 to $26,634, and the average rig margin per day decreased sequentially by $1,676 to $12,504. The average rig expense per day increased sequentially by $735 to $14,130. Rig utilization for the segment was 47% for this year’s third fiscal quarter, compared with 88% and 68% for last year’s third fiscal quarter and this year’s second fiscal quarter, respectively. At June 30, 2015, the Company’s U.S. land segment had approximately 153 contracted rigs generating revenue (including 123 under long-term contracts) and 188 idle rigs (including 181 AC drive FlexRigs®*).

Segment operating income for the Company’s offshore operations was $14.7 million for the third quarter of fiscal 2015, compared with $17.0 million for last year’s third fiscal quarter and $19.1 million for this year’s second fiscal quarter. The sequential decrease in operating income was attributable to a decline in the average rig margin per day and a decline in quarterly revenue days. The average rig margin per day decreased from $18,671 to $14,265, and quarterly revenue days decreased by approximately 8% to 728 days.

The Company’s international land operations reported segment operating income of $16.7 million for this year’s third fiscal quarter, compared with $6.6 million for last year’s third fiscal quarter and $6.3 million for this year’s second fiscal quarter. The sequential increase in operating income was attributable to higher early termination revenues earned during the third quarter of fiscal 2015, an increase in the average rig margin per day and an increase in quarterly revenue days. Excluding the impact of $373 and $4,658 per day corresponding to revenues from early contract terminations during this year’s second and third fiscal quarters, respectively, the average rig margin per day increased sequentially from $10,524 to $13,086. The number of quarterly revenue days increased sequentially by approximately 2% to 1,887 days.

Drilling Operations Outlook for the Fourth Quarter of Fiscal 2015

In the U.S. land segment, the Company expects revenue days (activity) to decrease by roughly three to four percent during the fourth fiscal quarter as compared to the third fiscal quarter of 2015. Excluding the impact from early termination revenue during the fourth quarter of fiscal 2015, the average rig revenue per day is expected to decrease to roughly $26,000, and the corresponding average rig expense per day is expected to decrease to roughly $13,900. As of today, the U.S. land segment has approximately 156 contracted rigs that are generating revenue (including 124 under term contracts) and 186 idle rigs (including 179 AC drive FlexRigs).

In the offshore segment, the Company expects the average rig margin per day to be approximately $10,500 during the fourth fiscal quarter and revenue days to be roughly flat as compared to the third quarter of fiscal 2015.

In the international land segment, the Company expects revenue days during the fourth fiscal quarter to be sequentially down by 10% to 15%. Excluding the impact from early termination revenue and also as compared to the third quarter of fiscal 2015, the average rig margin per day is expected to decline by approximately 30% to 35%.

Capital Expenditures and Other Estimates for Fiscal 2015

The Company continues to expect a total of approximately $1.3 billion in capital expenditures during all of fiscal 2015. Depreciation expense is now expected to be approximately $580 million, and general and administrative expenses are now expected to be approximately $130 million for fiscal 2015. Furthermore, the Company expects an effective income tax rate of approximately 34% for the fourth quarter of fiscal 2015.

About Helmerich & Payne, Inc.

Helmerich & Payne, Inc. is primarily a contract drilling company. As of July 30, 2015, the Company’s existing fleet includes 342 land rigs in the U.S., 40 international land rigs, and 9 offshore platform rigs. In addition, the Company is scheduled to complete another 12 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 394 land rigs, including 373 AC drive 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, 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.

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

HELMERICH & PAYNE, INC.
Unaudited
(in thousands, except per share data)
Three Months EndedNine Months Ended
CONSOLIDATED STATEMENTS OFMarch 31June 30June 30
INCOME 2015 2015 2014 2015 2014
Operating Revenues:
Drilling – U.S. Land$718,463 $494,615 $802,279 $2,103,125 $2,275,744
Drilling – Offshore 62,626 55,673 64,554 187,772 186,884
Drilling – International Land 98,222 106,198 81,267 297,305 262,141
Other 3,741 3,208 3,987 11,129 9,900
883,052 659,694 952,087 2,599,331 2,734,669
Operating costs and expenses:
Operating costs, excluding depreciation 469,328 351,670 515,239 1,375,241 1,469,454
Depreciation 149,708 144,295 128,978 431,616 373,178
General and administrative 34,902 29,404 34,222 97,213 100,896
Research and development 4,857 3,329 3,864 12,344 11,746
Income from asset sales (2,915) (1,784) (2,128) (8,854) (11,890)
655,880 526,914 680,175 1,907,560 1,943,384
Operating income 227,172 132,780 271,912 691,771 791,285
Other income (expense):
Interest and dividend income 2,549 1,602 373 4,436 1,316
Interest expense (2,471) (6,258) (1,435) (9,290) (4,354)
Gain on sale of investment securities - - 23,882 - 45,234
Other 55 (281) 346 88 (31)
133 (4,937) 23,166 (4,766) 42,165
Income from continuing operations
before income taxes 227,305 127,843 295,078 687,005 833,450
Income tax provision 77,769 36,956 102,788 243,525 293,389
Income from continuing operations 149,536 90,887 192,290 443,480 540,061
Income (loss) from discontinued operations, (76) (27) (11) (118) 2,775
before income taxes
Income tax provision (77) - - (77) 2,805
Income (loss) from discontinued operations 1 (27) (11) (41) (30)
NET INCOME$149,537 $90,860 $192,279 $443,439 $540,031
Basic earnings per common share:
Income from continuing operations$1.38 $0.84 $1.77 $4.09 $4.99
Income from discontinued operations$ - $ - $ - $ - $ -
Net income$1.38 $0.84 $1.77 $4.09 $4.99
Diluted earnings per common share:
Income from continuing operations$1.37 $0.83 $1.75 $4.06 $4.92
Income from discontinued operations$ - $ - $ - $ - $ -
Net income$1.37 $0.83 $1.75 $4.06 $4.92
Weighted average shares outstanding:
Basic 107,646 107,652 108,137 107,759 107,657
Diluted 108,370 108,469 109,285 108,571 109,086


HELMERICH & PAYNE, INC.
Unaudited
(in thousands)
June 30 September 30
CONSOLIDATED CONDENSED BALANCE SHEETS 2015 2014*
ASSETS
Cash and cash equivalents $ 770,918 $ 360,909
Other current assets 722,951 908,886
Current assets of discontinued operations 7,822 7,206
Total current assets 1,501,691 1,277,001
Investments 159,976 236,644
Net property, plant, and equipment 5,630,311 5,188,544
Other assets 43,839 18,809
TOTAL ASSETS $7,335,817 $ 6,720,998
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities $ 343,109 $ 503,944
Current liabilities of discontinued operations 3,394 3,217
Total current liabilities 346,503 507,161
Non-current liabilities 1,430,989 1,279,369
Non-current liabilities of discontinued operations 4,428 3,989
Long-term notes payable 532,388 39,502
Total equity 5,021,509 4,890,977
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 7,335,817 $ 6,720,998


* The September 30, 2014 balance sheet has been restated due to the adoption of Accounting Standards Update No. 2015-03 applied retrospectively.

HELMERICH & PAYNE, INC.
Unaudited
(in thousands)
Nine Months Ended
June 30
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS20152014
OPERATING ACTIVITIES:
Net income$ 443,439 $ 540,031
Adjustment for loss from discontinued operations 41 30
Income from continuing operations 443,480 540,061
Depreciation 431,616 373,178
Changes in assets and liabilities 260,533 (79,406)
Gain on sale of assets and investment securities (8,854) (57,124)
Other 20,805 21,216
Net cash provided by operating activities from continuing operations 1,147,580 797,925
Net cash used in operating activities from discontinued operations (41) (30)
Net cash provided by operating activities 1,147,539 797,895
INVESTING ACTIVITIES:
Capital expenditures (971,857) (622,028)
Proceeds from sale of assets and invested securities 17,805 70,690
Net cash used in investing activities (954,052) (551,338)
FINANCING ACTIVITIES:
Proceeds from senior notes, net of discount and debt issuance costs 491,923 -
Proceeds from short-term debt 1,002 -
Payments on short-term debt (1,002) -
Increase in bank overdraft 10,824 -
Dividends paid (223,827) (189,542)
Repurchase of common stock (59,654) -
Exercise of stock options, net of tax withholding (609) 22,370
Tax withholdings related to net share settlements of restricted stock (5,104) (3,049)
Excess tax benefit from stock-based compensation 2,969 25,724
Net cash provided by (used in) financing activities 216,522 (144,497)
Net increase in cash and cash equivalents 410,009 102,060
Cash and cash equivalents, beginning of period 360,909 447,868
Cash and cash equivalents, end of period$ 770,918 $ 549,928


SEGMENT REPORTINGThree Months EndedNine Months Ended
March 31June 30June 30
2015 2015 2014 2015 2014
(in thousands, except days and per day amounts)
U.S. LAND OPERATIONS
Revenues$718,463 $494,615 $802,279 $2,103,125 $2,275,744
Direct operating expenses 352,489 241,109 408,990 1,034,724 1,154,523
General and administrative expense 12,605 10,465 9,548 34,785 30,161
Depreciation 128,503 121,307 112,639 368,894 323,944
Segment operating income$224,866 $121,734 $271,102 $664,722 $767,116
Revenue days 20,802 14,219 26,062 62,376 73,826
Average rig revenue per day$30,988 $31,959 $28,126 $30,538 $28,205
Average rig expense per day$13,395 $14,130 $13,035 $13,410 $13,018
Average rig margin per day$17,593 $17,829 $15,091 $17,128 $15,187
Rig utilization 68% 47% 88% 68% 86%
OFFSHORE OPERATIONS
Revenues$62,626 $55,673 $64,554 $187,772 $186,884
Direct operating expenses 39,433 37,580 42,446 121,252 115,801
General and administrative expense 954 688 2,264 2,468 7,122
Depreciation 3,170 2,689 2,848 8,783 9,124
Segment operating income$19,069 $14,716 $16,996 $55,269 $54,837
Revenue days 794 728 728 2,331 2,184
Average rig revenue per day$49,783 $38,333 $64,019 $48,136 $63,515
Average rig expense per day$31,112 $24,068 $39,716 $30,126 $37,044
Average rig margin per day$18,671 $14,265 $24,303 $18,010 $26,471
Rig utilization 98% 89% 89% 95% 89%
INTERNATIONAL LAND OPERATIONS
Revenues$98,222 $106,198 $81,267 $297,305 $262,141
Direct operating expenses 77,452 73,096 63,950 219,485 199,568
General and administrative expense 1,019 781 1,169 2,487 3,133
Depreciation 13,423 15,651 9,578 40,121 28,951
Segment operating income$6,328 $16,670 $6,570 $35,212 $30,489
Revenue days 1,842 1,887 2,024 5,809 6,212
Average rig revenue per day$47,063 $51,673 $35,454 $46,027 $37,025
Average rig expense per day$36,166 $33,929 $26,130 $32,952 $26,826
Average rig margin per day$10,897 $17,744 $9,324 $13,075 $10,199
Rig utilization 52% 51% 74% 55% 78%
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$73,853 $40,188 $69,267 $198,303 $193,455
Offshore Operations$5,306 $9,466 $5,364 $20,247 $13,050
International Land Operations$11,532 $8,691 $9,508 $29,936 $32,145

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 EndedNine Months Ended
March 31June 30June 30
2015 2015 2014 2015 2014
Operating income
U.S. Land$224,866 $121,734 $271,102 $ 664,722 $ 767,116
Offshore 19,069 14,716 16,996 55,269 54,837
International Land 6,328 16,670 6,570 35,212 30,489
Other (3,217) (2,324) (1,490) (7,440) (6,739)
Segment operating income $247,046 $150,796 $293,178 $ 747,763 $ 845,703
Corporate general and administrative (20,324) (17,470) (21,241) (57,473) (60,480)
Other depreciation (3,767) (3,626) (3,479) (11,274) (9,895)
Inter-segment elimination 1,302 1,296 1,326 3,901 4,067
Income from asset sales 2,915 1,784 2,128 8,854 11,890
Operating income $227,172 $132,780 $271,912 $ 691,771 $ 791,285
Other income (expense):
Interest and dividend income 2,549 1,602 373 4,436 1,316
Interest expense (2,471) (6,258) (1,435) (9,290) (4,354)
Gain on sale of investment securities - - 23,882 - 45,234
Other 55 (281) 346 88 (31)
Total other income (expense) 133 (4,937) 23,166 (4,766) 42,165
Income from continuing operations
before income taxes
$ 227,305 $ 127,843 $295,078 $ 687,005 $ 833,450


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

Source:Helmerich & Payne, Incorporated