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Helmerich & Payne, Inc. Announces Second Quarter Results

TULSA, Okla., May 02, 2016 (GLOBE NEWSWIRE) -- Helmerich & Payne, Inc. (NYSE:HP) reported net income of $21 million ($0.19 per diluted share) from operating revenues of $438 million for the second quarter of fiscal 2016, compared to net income of $154 million ($1.41 per diluted share, as adjusted) from operating revenues of $886 million during the second quarter of fiscal 2015, and net income of $16 million ($0.15 per diluted share) from operating revenues of $488 million during the first quarter of fiscal 2016. Included in net income per diluted share for this year’s and last year’s second fiscal quarters as well as this year’s first fiscal quarter are approximately $0.47, $0.40, and $0.10, respectively, of after-tax income related to a combination of select items (including long-term contract early termination compensation from customers) as described in a separate section of this press release.

President and CEO John Lindsay commented, “These are demanding times in the energy service space, and the challenge for many is now one of survival. The U.S. land rig count is comparable to the all-time record lows reached in 1999. Sharp reductions in personnel, expenses, and investments are occurring worldwide, and we expect to see further deterioration in terms of drilling activity during the third fiscal quarter.

“But even if this difficult environment persists, we believe that H&P’s competitive and financial positions remain very strong. Our long-term contracts have allowed the Company to remain profitable and protect FlexRig®* investments. We are able to focus energy on efforts that add value to our customers and help us to become even more efficient and effective as an organization. Whether we see more declines in activity or a significant improvement in demand, H&P is well positioned to respond. As we have described in the past, our strong and liquid balance sheet, robust backlog, and lower spending requirements should allow us to continue to return cash to shareholders. Our strength is driven by our people, and we appreciate their attitude in the face of this adversity and their dedication to the Company through these difficult times.”

Operating Segment Results

Segment operating income for the Company’s U.S. land operations was $63 million for the second quarter of fiscal 2016, compared with $225 million for last year’s second fiscal quarter and $56 million for this year’s first fiscal quarter. As compared to the first quarter of fiscal 2016, segment operating income increased as a result of a higher level of early termination revenue during the second fiscal quarter, which was partially offset by lower quarterly levels of activity and rig margins. The number of quarterly revenue days decreased sequentially by approximately 20% to 9,601 days. Excluding the impact of $2,417 and $8,287 per day corresponding to revenues from early contract terminations during this year’s first and second fiscal quarters, respectively, the average rig revenue per day decreased sequentially by $303 to $25,931, and the average rig margin per day decreased sequentially by $1,552 to $11,792. The average rig expense per day increased sequentially by $1,249 to $14,139. Rig utilization for the segment was 31% for this year’s second fiscal quarter, compared with 68% and 39% for last year’s second fiscal quarter and this year’s first fiscal quarter, respectively. At March 31, 2016, the Company’s U.S. land segment had approximately 94 contracted rigs generating revenue (including 82 under long-term contracts) and 253 idle rigs.

Segment operating income for the Company’s offshore operations was $3.3 million for the second quarter of fiscal 2016, compared with $19.0 million (as adjusted) for last year’s second fiscal quarter and $7.7 million for this year’s first fiscal quarter. The sequential decrease in operating income was attributable to declines in management contract activity, average daily margins and rig revenue days. The average rig margin per day decreased sequentially from $7,920 to $7,346, and quarterly revenue days decreased from 736 days to 691 days during the second fiscal quarter.

The Company’s international land operations reported a segment operating loss of $2.3 million for this year’s second fiscal quarter, compared with operating income of $10.6 million (as adjusted) for last year’s second fiscal quarter and an operating loss of $6.7 million for this year’s first fiscal quarter. The sequential improvement in operating results was attributable to a significant currency exchange loss that negatively impacted the first fiscal quarter. The average rig margin per day decreased sequentially from $11,811 to $10,487 during the second fiscal quarter. The number of quarterly revenue days decreased sequentially by approximately 7% to 1,307 days.

Drilling Operations Outlook for the Third Quarter of Fiscal 2016

In the U.S. land segment, the Company expects revenue days (activity) to decrease by roughly 25% to 28% during the third fiscal quarter as compared to the second fiscal quarter of 2016. Excluding any impact from early termination revenue, the average rig revenue per day is expected to be roughly $25,000, and the corresponding average rig expense per day is expected to decrease to roughly $13,800. As of today, the U.S. land segment has approximately 84 contracted rigs that are generating revenue (including 77 under term contracts) and 263 idle rigs.

In the offshore segment, the Company expects revenue days to decrease by approximately 8% during the third fiscal quarter as compared to the second fiscal quarter of 2016. The average rig margin per day is expected to be approximately $8,000 during the third quarter of fiscal 2016.

In the international land segment, the Company expects revenue days to decrease by approximately 3% during the third quarter as compared to the second quarter of fiscal 2016. The average rig margin per day is expected to be roughly $11,000 during the third quarter of fiscal 2016.

Select Items Included in Net Income (or Loss) per Diluted Share

Included in net income per diluted share corresponding to the second quarter of fiscal 2016 are approximately $0.47 of after-tax income related to a combination of the following: $0.49 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 $0.04 of losses from discontinued operations.

Included in net income per diluted share corresponding to the second quarter of fiscal 2015 are approximately $0.40 of after-tax income related to a combination of the following: $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 $0.06 of after-tax losses from abandonment charges related to the decommissioning of certain (SCR) land rigs and other used drilling equipment.

Included in net income per diluted share corresponding to the first quarter of fiscal 2016 are approximately $0.10 of after-tax income related to a combination of the following: $0.17 of after-tax gains from long-term contract early termination compensation from customers; $0.03 of after-tax gains related to the sale of used drilling equipment; $0.05 of after-tax losses related to a currency exchange loss; and a negative $0.05 impact on income tax expense primarily due to a fiscal 2015 adjustment to the Domestic Production Deduction that resulted from a U.S. tax law change in December 2015 extending bonus depreciation allowances that had expired December 31, 2014.

About Helmerich & Payne, Inc.

Helmerich & Payne, Inc. is primarily a contract drilling company. As of May 2, 2016, the Company’s existing fleet includes 347 land rigs in the U.S., 38 international land rigs, and nine offshore platform rigs. In addition, the Company is scheduled to deliver another three new H&P-designed and operated FlexRigs during this fiscal year, all under long-term contracts with customers. Upon completion of these commitments, the Company’s global fleet is expected to have a total of 388 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 EndedSix Months Ended
CONSOLIDATED STATEMENTS OF December 31March 31March 31
20152016 2015 2016 2015
INCOME (As adjusted) (As adjusted)
Operating Revenues:
Drilling – U.S. Land $369,805 $349,283 $718,463 $719,088 $1,608,510
Drilling – Offshore 41,880 34,325 62,428 76,205 132,315
Drilling – International Land 72,194 51,352 101,038 123,546 197,711
Other 3,968 3,231 3,741 7,199 7,921
$487,847 $438,191 $885,670 $926,038 $1,946,457
Operating costs and expenses:
Operating costs, excluding depreciation 276,644 221,611 467,099 498,255 1,026,562
Depreciation 142,129 141,517 150,248 283,646 288,480
General and administrative 32,074 33,811 34,995 65,885 67,731
Research and development 2,919 2,315 4,857 5,234 9,015
Income from asset sales (4,589) (2,684) (2,855) (7,273) (7,028)
449,177 396,570 654,344 845,747 1,384,760
Operating income 38,670 41,621 231,326 80,291 561,697
Other income (expense):
Interest and dividend income 733 799 2,564 1,532 2,859
Interest expense (4,524) (5,721) (2,600) (10,245) (3,190)
Other (261) 653 55 392 369
(4,052) (4,269) 19 (8,321) 38
Income from continuing operations
before income taxes 34,618 37,352 231,345 71,970 561,735
Income tax provision 18,720 12,178 77,803 30,898 204,570
Income from continuing operations 15,898 25,174 153,542 41,072 357,165
Income (loss) from discontinued operations, before income taxes 104 (56) (76) 48 (91)
Income tax provision - 3,913 (77) 3,913 (77)
Income (loss) from discontinued operations 104 (3,969) 1 (3,865) (14)
NET INCOME $ 16,002 $ 21,205 $ 153,543 $ 37,207 $ 357,151
Basic earnings per common share:
Income from continuing operations $0.15 $0.23 $1.42 $0.38 $3.29
Income from discontinued operations $- $(0.04)$- $(0.04)$-
Net income $0.15 $0.19 $1.42 $0.34 $3.29
Diluted earnings per common share:
Income from continuing operations $0.15 $0.23 $1.41 $0.37 $3.27
Income from discontinued operations $- $(0.04)$- $(0.04)$-
Net income $0.15 $0.19 $1.41 $0.33 $3.27
Weighted average shares outstanding:
Basic 107,852 108,014 107,646 107,933 107,812
Diluted 108,409 108,466 108,370 108,430 108,620
Effective October 1, 2015, the Company eliminated a legacy one-month lag period between its U.S. fiscal year and its foreign subsidiaries’ fiscal years. As required, the elimination of the one-month lag has been applied retrospectively to all periods presented herein.


HELMERICH & PAYNE, INC.
Unaudited
(in thousands)
March 31
2016
September 30
2015
(As Adjusted)
CONSOLIDATED CONDENSED BALANCE SHEETS
ASSETS
Cash and cash equivalents $898,013 $729,384
Short term investments 45,526 45,543
Other current assets 516,608 656,170
Current assets of discontinued operations 230 8,097
Total current assets 1,460,377 1,439,194
Investments 83,363 104,354
Net property, plant, and equipment 5,446,352 5,563,170
Other assets 35,013 40,524
TOTAL ASSETS $7,025,105 $7,147,242
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities $371,246 $344,820
Current liabilities of discontinued operations 82 3,377
Total current liabilities 371,328 348,197
Non-current liabilities 1,374,648 1,406,036
Non-current liabilities of discontinued operations 4,110 4,720
Long-term notes payable 492,919 492,443
Total shareholders’ equity 4,782,100 4,895,846
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $7,025,105 $7,147,242


HELMERICH & PAYNE, INC.
Unaudited
(in thousands)
Six Months Ended
March 31
2016 2015
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (As Adjusted)
OPERATING ACTIVITIES:
Net income $37,207 $357,151
Adjustment for loss from discontinued operations 3,865 14
Income from continuing operations 41,072 357,165
Depreciation 283,646 288,480
Changes in assets and liabilities 158,870 164,666
Gain on sale of assets (7,273) (7,028)
Other 16,104 13,299
Net cash provided by operating activities from continuing operations 492,419 816,582
Net cash provided by (used in) operating activities from discontinued operations 98 (14)
Net cash provided by operating activities 492,517 816,568
INVESTING ACTIVITIES:
Capital expenditures (180,481) (766,029)
Purchase of short-term investments (21,869) -
Proceeds from sales of short-term investments 21,676 -
Proceeds from sale of assets and invested securities 9,715 15,155
Net cash used in investing activities (170,959) (750,874)
FINANCING ACTIVITIES:
Proceeds from senior notes, net of discount and debt issuance costs (32) 492,791
Proceeds from short-term debt - 1,002
Payments on short-term debt - (1,002)
Increase in bank overdraft - 12,560
Dividends paid (149,300) (149,347)
Repurchase of common stock - (59,654)
Exercise of stock options (199) (1,079)
Tax withholdings related to net share settlements of restricted stock (3,617) (4,248)
Excess tax benefit from stock-based compensation 219 2,761
Net cash provided by (used in) financing activities (152,929) 293,784
Net increase in cash and cash equivalents 168,629 359,478
Cash and cash equivalents, beginning of period 729,384 360,307
Cash and cash equivalents, end of period $898,013 $719,785


SEGMENT REPORTINGThree Months EndedSix Months Ended
December 31
March 31
March 31
2015 2016 2015 2016 2015
(As adjusted) (As adjusted)
(in thousands, except days and per day amounts)
U.S. LAND OPERATIONS
Revenues$369,805 $349,283 $718,463 $719,088 $1,608,510
Direct operating expenses 181,541 155,884 352,489 337,425 793,615
General and administrative expense 12,373 12,196 12,605 24,569 24,320
Depreciation 120,359 118,682 128,510 239,041 247,587
Segment operating income$55,532 $62,521 $224,859 $118,053 $542,988
Revenue days 11,945 9,601 20,802 21,546 48,157
Average rig revenue per day$28,651 $34,218 $30,988 $31,132 $30,118
Average rig expense per day$12,890 $14,139 $13,395 $13,447 $13,196
Average rig margin per day$15,761 $20,079 $17,593 $17,685 $16,922
Rig utilization 39% 31% 68% 35% 78%
OFFSHORE OPERATIONS
Revenues$41,880 $34,325 $62,428 $76,205 $132,315
Direct operating expenses 30,293 27,065 39,264 57,358 83,739
General and administrative expense 862 837 954 1,699 1,780
Depreciation 3,003 3,124 3,170 6,127 6,094
Segment operating income$7,722 $3,299 $19,040 $11,021 $40,702
Revenue days 736 691 794 1,427 1,603
Average rig revenue per day$27,539 $28,004 $49,783 $27,764 $52,588
Average rig expense per day$19,619 $20,658 $31,112 $20,123 $32,877
Average rig margin per day$7,920 $7,346 $18,671 $7,641 $19,711
Rig utilization 89% 84% 98% 87% 98%
INTERNATIONAL LAND OPERATIONS
Revenues$72,194 $ 51,352 $101,038 $123,546 $197,711
Direct operating expenses 64,008 38,113 75,391 102,121 149,314
General and administrative expense 718 887 1,112 1,605 1,628
Depreciation 14,133 14,620 13,956 28,753 25,629
Segment operating income (loss)$ (6,665)$ (2,268)$ 10,579 $(8,933)$ 21,140
Revenue days 1,411 1,307 1,771 2,718 3,840
Average rig revenue per day$46,031 $ 36,774 $52,054 $41,580 $ 46,014
Average rig expense per day$34,220 $26,287 $ 37,761 $30,406 $ 33,850
Average rig margin per day$11,811 $ 10,487 $14,293 $11,174 $ 12,164
Rig utilization 40% 38% 49% 39% 54%
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$27,571 $20,751 $73,853 $48,322 $ 158,115
Offshore Operations$6,331 $6,086 $ 5,096 $12,417 $10,828
International Land Operations$7,244 $3,288 $ 8,850 $10,532 $21,017

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 EndedSix Months Ended
December 31March 31March 31
2015 2016 2015 2016 2015
(As adjusted) (As adjusted)
Operating income
U.S. Land $55,532 $62,521 $224,859 $118,053 $542,988
Offshore 7,722 3,299 19,040 11,021 40,702
International Land (6,665) (2,268) 10,579 (8,933) 21,140
Other (1,304) (1,349) (3,217) (2,653) (5,116)
Segment operating income $55,285 $62,203 $251,261 $117,488 $599,714
Corporate general and administrative (18,121) (19,891) (20,324) (38,012) (40,003)
Other depreciation (3,610) (3,971) (3,767) (7,581) (7,648)
Inter-segment elimination 527 596 1,301 1,123 2,606
Income from asset sales 4,589 2,684 2,855 7,273 7,028
Operating income $ 38,670 $ 41,621 $231,326 $ 80,291 $561,697
Other income (expense):
Interest and dividend income 733 799 2,564 1,532 2,859
Interest expense (4,524) (5,721) (2,600) (10,245) (3,190)
Gain on sale of investment securities - - - - -
Other (261) 653 55 392 369
Total other income (expense) (4,052) (4,269) 19 (8,321) 38
Income from continuing operations before income taxes $ 34,618 $ 37,352 $ 231,345 $ 71,970 $ 561,735

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

Source:Helmerich & Payne, Incorporated