×

Helmerich & Payne, Inc. Announces Fiscal Year-End Results

TULSA, Okla., Nov. 17, 2016 (GLOBE NEWSWIRE) -- Helmerich & Payne, Inc. (NYSE:HP) reported a net loss of $57 million (negative $0.54 per diluted share) from operating revenues of $1.6 billion for its fiscal year ended September 30, 2016, compared to net income of $420 million1 ($3.85 per diluted share) from operating revenues of $3.2 billion for its prior fiscal year ended September 30, 2015. Included in net income (loss) per diluted share for fiscal 2016 and fiscal 2015 are approximately $0.54 and $0.86, respectively, in after-tax income related to a combination of select items as described in a separate section of this press release. Select items, among others, include long-term contract early termination compensation, lawsuit settlement charges, losses from the impairment of a position in the Company’s portfolio of marketable securities, and abandonment charges.

Net loss for the fourth fiscal quarter of 2016 was $73 million (negative $0.68 per diluted share) from operating revenues of $332 million. Included in net loss per diluted share corresponding to this year’s fourth fiscal quarter are approximately $0.35 in after-tax losses related to a combination of select items as described in a separate section of this press release.

President and CEO John Lindsay commented, “It is good to deliver better than expected quarterly operational results in the midst of an improving U.S. land market. Our goal is to safely provide performance driven drilling services, and as we think about the future, it is helpful to properly frame where the Company is today.

“Our AC drive FlexRig®* fleet is positioned to take market share in a strong or moderate U.S. land market recovery. We are uniquely leveraged to provide E&P companies the rig of choice, particularly those drilling more challenging horizontal wells. The design of our FlexRig fleet allows for a broad range of rig upgrades providing a family of solutions for our customers.

“An example of H&P’s industry leading capability is our current fleet of AC drive FlexRigs that have 7,500 psi circulating systems and multi-well pad drilling capability. These rigs meet the general criteria of what some industry followers have identified as ‘super-spec’ rigs, which is a subset of AC drive rigs with 1,500 horsepower drawworks ratings. We have approximately 80 of these rigs in our U.S. land fleet, and if demand remains high we could upgrade additional FlexRigs and have approximately 120 of these rigs by the end of our 2017 second fiscal quarter. The current industry capacity for additional super-spec rigs appears to be limited, which positions H&P very well for future expansion in this space. In the event of a significant market improvement for super-spec rigs, we have the capability of providing a total of approximately 270 rigs to the market without requiring new build rigs, by solely relying upon upgrades where needed to our current FlexRig3 and FlexRig5 fleet.

“In addition to having what we strongly believe is the best fleet for the more technically challenging shale wells, we have the people, the systems and the operational support structures to drive top performance and reliability for our customers. We have accumulated more than 1,800 rig years of AC drive operational experience. Our expertise designing, building and now upgrading the fleet provides great optionality for the customer and has resulted in H&P having the largest and most capable fleet of AC drive rigs in the industry. We remain committed to further expand our competitive advantages through technology and the scale of our operations in order to continue to add value to our customers and shareholders.”

Operating Segment Results

Segment operating loss for the Company’s U.S. land operations was $70 million for the fourth quarter of fiscal 2016, compared with segment operating income of $34 million for last year’s fourth fiscal quarter and $26 million for this year’s third fiscal quarter. As compared to the third quarter of fiscal 2016, the decrease in segment operating income was primarily attributable to a decline in early termination revenues and to charges of $38.1 million for abandonments (non-cash) related to the decommissioning of used drilling equipment, $18.8 million for an accrued lawsuit settlement liability, and $4.5 million corresponding to an adjustment (non-cash) to the self-insurance reserve for worker’s compensation claims. The abandonment charge is included with depreciation and the other two charges are included in direct operating expenses in the segment during the fourth quarter. The number of quarterly revenue days increased sequentially by approximately 6% to 7,955 days. Excluding the impact of $10,790 and $3,744 per day of revenues from early contract terminations during the third and fourth fiscal quarters, respectively, the average rig revenue per day decreased sequentially by $280 to $24,404. Excluding the impact of $363 per day of employee severance expense during the third fiscal quarter and of $2,923 per day of lawsuit settlement and self-insurance reserve charges during the fourth quarter, the average rig expense per day decreased sequentially by $91 to $13,326. Thus, the corresponding average rig margin per day decreased sequentially by $189 to $11,078. Rig utilization for the segment was 25% for this year’s fourth fiscal quarter, compared with 43% and 24% for last year’s fourth fiscal quarter and this year’s third fiscal quarter, respectively. At September 30, 2016, the Company’s U.S. land segment had approximately 95 contracted rigs generating revenue (including 72 under long-term contracts) and 253 idle rigs. The 95 contracted rigs included 91 rigs generating revenue days.

Segment operating income for the Company’s offshore operations was $2.6 million for the fourth quarter of fiscal 2016, compared with $12.6 million1 for last year’s fourth fiscal quarter and $2.1 million for this year’s third fiscal quarter. The sequential increase in operating income was attributable to a higher average rig margin per day and a slight increase in revenue days in the fourth quarter of fiscal 2016. Excluding the impact of $1,236 per day of employee severance expense during the third fiscal quarter and of $752 per day corresponding to an adjustment to a self-insurance reserve for worker’s compensation claims during the fourth quarter, the average rig margin per day increased sequentially from $7,981 to $9,070, and quarterly revenue days increased from 637 days to 644 days during the fourth fiscal quarter.

The Company’s international land operations reported segment operating loss of $0.2 million for this year’s fourth fiscal quarter, compared with an operating loss of $47.2 million1 for last year’s fourth fiscal quarter and an operating loss of $5.0 million for this year’s third fiscal quarter. The sequential improvement in operating results was attributable to a higher average daily rig margin and an increase in rig revenue days. Excluding the impact of $924 per day of employee severance expense during the third fiscal quarter, the average rig margin per day increased sequentially from $9,461 to $10,619 during the fourth fiscal quarter. The number of quarterly revenue days increased sequentially by approximately 8% to 1,372 days.

Drilling Operations Outlook for the First Quarter of Fiscal 2017

In the U.S. land segment, the Company expects revenue days (activity) to increase by roughly 20% during the first fiscal quarter of 2017 as compared to the fourth fiscal quarter of 2016. Excluding any impact from early termination revenue, the average rig revenue per day is expected to be roughly $23,500, and the average rig expense per day is expected to be roughly $14,200. As of today, the U.S. land segment has approximately 105 contracted rigs that are generating revenue (including 72 under term contracts) and 243 idle rigs. The 105 contracted rigs include 102 rigs generating revenue days.

In the offshore segment, the Company expects revenue days to be unchanged during the first fiscal quarter of 2017 as compared to the fourth fiscal quarter of 2016. The average rig margin per day is expected to be approximately $11,250 during the first quarter of fiscal 2017.

In the international land segment, the Company expects revenue days to decrease by approximately 5% during the first fiscal quarter of 2017 as compared to the fourth fiscal quarter of 2016. Excluding any impact from early termination revenue, the average rig margin per day is expected to be roughly $8,000 during the first quarter of fiscal 2017.

Capital Expenditures and Other Estimates for Fiscal 2017

The Company’s capital expenditures for fiscal 2017 are expected to be roughly $200 million. Depreciation expense is expected to decrease to approximately $525 million, and general and administrative expenses are expected to decrease to approximately $140 million for fiscal 2017.

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

Included in net loss per diluted share for fiscal 2016 are select items totaling approximately $0.54 in after-tax income comprised of the following: $1.29 of after-tax income from long-term contract early termination compensation from customers (which favorably impacted net income by approximately $139 million); $0.06 of after-tax gains related to the sale of used drilling equipment; $0.03 of after-tax losses related to an adjustment to the self-insurance reserve for worker’s compensation claims; $0.04 of after-tax losses from impairment charges related to used drilling equipment; $0.04 of after-tax losses in general and administrative expenses from employer 401K plan matching contributions related to employee work force reductions; $0.05 of after-tax losses from employee severance expense; $0.05 of after-tax losses related to currency exchange losses; $0.11 of after-tax losses from accrued charges related to a lawsuit settlement agreement; $0.15 of after-tax losses from the impairment of a position in the Company’s portfolio of marketable securities; $0.23 of after-tax losses from abandonment charges related to the decommissioning of used drilling equipment; $0.04 of losses from discontinued operations; and a negative impact of $0.07 related to adjustments to the Internal Revenue Code Section 199 deduction for domestic production activities.

Included in net income per diluted share for fiscal 2015 are select items totaling approximately $0.86 in after-tax income comprised of the following: $1.30 of after-tax income from long-term contract early termination compensation from customers (which favorably impacted net income by approximately $141 million); $0.07 of after-tax gains related to the sale of used drilling equipment; $0.03 of after-tax losses related to an allowance for doubtful accounts; $0.23 of after-tax losses from impairment charges for certain (SCR) land rigs; and $0.25 of after-tax losses from abandonment charges related to the decommissioning of certain (SCR) land rigs and other used drilling equipment.

Included in net loss per diluted share corresponding to the fourth quarter of fiscal 2016 are select items totaling approximately $0.35 in after-tax losses comprised of the following: $0.18 of after-tax income from long-term contract early termination compensation from customers; $0.01 of after-tax gains related to the sale of used drilling equipment; $0.03 of after-tax losses related to an adjustment to the self-insurance reserve for worker’s compensation claims; $0.11 of after-tax losses from accrued charges related to a lawsuit settlement agreement; $0.15 of after-tax losses from the impairment of a position in the Company’s portfolio of marketable securities; $0.23 of after-tax losses from abandonment charges related to the decommissioning of used drilling equipment; and a negative impact of $0.02 related to adjustments to the Internal Revenue Code Section 199 deduction for domestic production activities.

About Helmerich & Payne, Inc.

Helmerich & Payne, Inc. is primarily a contract drilling company. As of November 17, 2016, the Company’s existing fleet includes 348 land rigs in the U.S., 38 international land rigs, and nine offshore platform rigs. In addition, the Company is scheduled to deliver two new H&P-designed and operated FlexRigs during the calendar year, both 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.

1 Value(s) adjusted due to previously announced elimination of legacy one-month lag period between the Company’s U.S. fiscal year and its foreign subsidiaries’ fiscal years. The footnoted item(s) in this release now reflects the period-specific effects of this change.

HELMERICH & PAYNE, INC.
Unaudited
(in thousands, except per share data)
Three Months EndedFiscal Year Ended
CONSOLIDATED STATEMENTS OFJune 30September 30September 30
2016201620152016 2015
OPERATIONS (As adjusted) (As adjusted)
Operating Revenues:
Drilling – U.S. Land$285,028 $238,346 $420,393 $1,242,462 $2,523,518
Drilling – Offshore 30,492 31,904 52,280 138,601 241,666
Drilling – International Land 47,983 58,365 78,069 229,894 382,331
Other 2,983 3,093 3,058 13,275 14,187
$366,486 $331,708 $553,800 $1,624,232 $3,161,702
Operating costs and expenses:
Operating costs, excluding depreciation 186,146 214,404 326,274 898,805 1,703,476
Depreciation 138,690 176,251 174,594 598,587 608,039
Asset impairment charge 6,250 - 39,242 6,250 39,242
General and administrative 46,496 33,802 37,728 146,183 134,712
Research and development 2,707 2,328 3,760 10,269 16,104
Income from asset sales (547) (2,076) (3,015) (9,896) (11,834)
379,742 424,709 578,583 1,650,198 2,489,739
Operating income (loss) (13,256) (93,001) (24,783) (25,966) 671,963
Other income (expense):
Interest and dividend income 778 856 1,393 3,166 5,840
Interest expense (6,407) (6,261) (5,697) (22,913) (15,023)
Loss on investment securities - (25,989) - (25,989) -
Other 534 (1,891) (989) (965) (901)
(5,095) (33,285) (5,293) (46,701) (10,084)
Income (loss) from continuing operations before income taxes (18,351) (126,286) (30,076) (72,667) 661,879
Income tax provision 2,842 (53,417) (2,486) (19,677) 241,405
Income (loss) from continuing operations (21,193) (72,869) (27,590) (52,990) 420,474
Income (loss) from discontinued operations, before income taxes 2,193 119 (6) 2,360 (124)
Income tax provision 2,200 85 - 6,198 77
Income (loss) from discontinued operations (7) 34 (6) (3,838) (47)
NET INCOME (LOSS)$(21,200)$(72,835)$(27,596)$(56,828)$420,427
Basic earnings per common share:
Income (loss) from continuing operations$(0.20)$(0.68)$(0.26)$(0.50)$3.88
Loss from discontinued operations$ - $ - $ - $(0.04)$ -
Net income (loss)$(0.20)$(0.68)$(0.26)$(0.54)$3.88
Diluted earnings per common share:
Income (loss) from continuing operations$(0.20)$(0.68)$(0.26)$(0.50)$3.85
Loss from discontinued operations$ - $ - $ - $(0.04)$ -
Net income $(0.20)$(0.68)$(0.26)$(0.54)$3.85
Weighted average shares outstanding:
Basic 108,047 108,070 107,740 107,996 107,754
Diluted 108,047 108,070 107,740 107,996 108,570


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)
CONSOLIDATED CONDENSED BALANCE SHEETS September 30
2016
September 30
2015
(As Adjusted)
ASSETS
Cash and cash equivalents $ 905,561 $ 729,384
Short term investments 44,148 45,543
Other current assets 622,913 656,170
Current assets of discontinued operations 64 8,097
Total current assets 1,572,686 1,439,194
Investments 84,955 104,354
Net property, plant, and equipment 5,144,733 5,563,170
Other assets 29,645 40,524
TOTAL ASSETS $ 6,832,019 $7,147,242
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities $ 330,061 $ 344,820
Current liabilities of discontinued operations 59 3,377
Total current liabilities 330,120 348,197
Non-current liabilities 1,445,237 1,406,036
Non-current liabilities of discontinued operations 3,890 4,720
Long-term notes payable 491,847 492,443
Total shareholders’ equity 4,560,925 4,895,846
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 6,832,019 $ 7,147,242


HELMERICH & PAYNE, INC.
Unaudited
(in thousands)
Years Ended
September 30
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS 2016 2015
(As Adjusted)
OPERATING ACTIVITIES:
Net income (loss)$ (56,828) $ 420,427
Adjustment for loss from discontinued operations 3,838 47
Income (loss) from continuing operations (52,990) 420,474
Depreciation 598,587 608,039
Asset impairment charge 6,250 39,242
Loss on investment securities 25,989 -
Changes in assets and liabilities 156,957 338,217
Gain on sale of assets (9,896) (11,834)
Other 28,653 34,483
Net cash provided by operating activities from continuing operations 753,550 1,428,621
Net cash provided by (used in) operating activities from discontinued operations 47 (47)
Net cash provided by operating activities 753,597 1,428,574
INVESTING ACTIVITIES:
Capital expenditures (257,169) (1,131,445)
Purchase of short-term investments (57,276) (45,607)
Proceeds from sale of short-term investments 58,381 -
Proceeds from sale of assets 21,845 22,643
Net cash used in investing activities (234,219) (1,154,409)
FINANCING ACTIVITIES:
Proceeds from senior notes, net of discount and debt issuance costs (1,111) 491,651
Proceeds from short-term debt - 1,002
Payments on short-term debt - (1,002)
Payments on long-term debt (40,000) (40,000)
Dividends paid (300,152) (298,367)
Repurchase of common stock - (59,654)
Exercise of stock options 1,040 2,650
Tax withholdings related to net share settlements of restricted stock (3,912) (5,140)
Excess tax benefit from stock-based compensation 934 3,772
Net cash provided by (used in) financing activities (343,201) 94,912
Net increase in cash and cash equivalents 176,177 369,077
Cash and cash equivalents, beginning of period 729,384 360,307
Cash and cash equivalents, end of period$ 905,561 $ 729,384


SEGMENT REPORTINGThree Months EndedFiscal Year Ended
June 30September 30September 30
20162016201520162015
(As adjusted) (As adjusted)
(in thousands, except days and per day amounts)
U.S. LAND OPERATIONS
Revenues$285,028 $238,346 $420,393 $1,242,462 $2,523,518
Direct operating expenses 122,694 143,681 219,700 603,800 1,254,424
General and administrative expense 14,221 11,267 15,984 50,057 50,769
Depreciation 116,061 153,135 151,056 508,237 519,950
Asset impairment charge 6,250 - - 6,250 -
Segment operating income (loss)$25,802 $(69,737)$33,653 $74,118 $698,375
Revenue days 7,483 7,955 13,490 36,984 75,866
Average rig revenue per day$35,474 $28,148 $28,700 $31,369 $30,211
Average rig expense per day$13,780 $16,249 $13,823 $14,117 $13,483
Average rig margin per day$21,694 $11,899 $14,877 $17,252 $16,728
Rig utilization 24% 25% 43% 30% 62%
OFFSHORE OPERATIONS
Revenues$30,492 $31,904 $52,280 $138,601 $241,666
Direct operating expenses 24,249 25,376 35,738 106,983 158,488
General and administrative expense 975 790 1,049 3,464 3,517
Depreciation 3,184 3,184 2,877 12,495 11,659
Segment operating income $2,084 $2,554 $12,616 $15,659 $68,002
Revenue days 637 644 736 2,708 3,067
Average rig revenue per day$25,568 $26,608 $31,422 $26,973 $44,125
Average rig expense per day$18,823 $18,290 $18,126 $19,381 $27,246
Average rig margin per day$6,745 $8,318 $13,296 $7,592 $16,879
Rig utilization 78% 78% 89% 82% 93%
INTERNATIONAL LAND OPERATIONS
Revenues$47,983 $58,365 $78,069 $229,894 $382,331
Direct operating expenses 38,230 43,618 69,784 183,969 289,700
General and administrative expense 772 532 892 2,909 3,148
Depreciation 13,972 14,377 15,383 57,102 57,334
Asset impairment change - - 39,242 - 39,242
Segment operating loss (4,991)$(162)$(47,232)$(14,086)$(7,093)
Revenue days 1,274 1,372 1,608 5,364 7,284
Average rig revenue per day$34,693 $38,061 $43,660 $39,044 $47,352
Average rig expense per day$26,156 $27,442 $38,659 $28,638 $34,848
Average rig margin per day$8,537 $10,619 $5,001 $10,406 $12,504
Rig utilization 37% 39% 45% 39% 51%
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$19,593 $14,422 $33,225 $82,337 $231,528
Offshore Operations$5,270 $5,451 $11,710 $23,138 $33,254
International Land Operations$3,784 $6,142 $7,863 $20,458 $37,420


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 Operations (in thousands).

Three Months EndedFiscal Year Ended
June 30September 30September 30
2016 2016 2015
(As adjusted)
2016 2015
(As adjusted)
Operating income (loss)
U.S. Land$ 25,802 $ (69,737)$ 33,653 $ 74,118 $ 698,375
Offshore 2,084 2,554 12,616 15,659 68,002
International Land (4,991) (162) (47,232) (14,086) (7,093)
Other (2,186) ( 2,652) (3,471) (7,491) (10,911)
Segment operating income (loss) $ 20,709 $ (69,997)$ (4,434)$ 68,200 $ 748,373
Corporate general and administrative (30,528) (21,213) (19,803) (89,753) (77,278)
Other depreciation (4,456) (4,276) (3,803) (16,313) (15,077)
Inter-segment elimination 472 409 242 2,004 4,111
Income from asset sales 547 2,076 3,015 9,896 11,834
Operating income (loss)$ (13,256)$ (93,001)$ (24,783)$ (25,966)$ 671,963
Other income (expense):
Interest and dividend income 778 856 1,393 3,166 5,840
Interest expense (6,407) (6,261) (5,697) (22,913) (15,023)
Loss on investment securities - (25,989) - (25,989) -
Other 534 (1,891) (989) (965) (901)
Total other expense (5,095) (33,285) (5,293) (46,701) (10,084)
Income (loss) from continuing operations before income taxes$ (18,351)$(126,286)$ (30,076)$ (72,667)$ 661,879

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

Source:Helmerich & Payne, Incorporated