Helmerich & Payne Earnings Crush Loss Estimate, Sales Beat
Contract drilling services provider Helmerich & Payne Inc. HP reported net operating earnings per share for the first fiscal quarter of 2016 (three months ended Dec 31, 2015) – excluding special items – of 5 cents, contrary to the Zacks Consensus Estimate for a loss of 8 cents. The outperformance came on the back of lower rig expenses in its U.S. land segment.
However, Helmerich & Payne’s performance deteriorated from the year-ago adjusted profit amid sharply lower drilling activity.
Helmerich & Payne’s earnings outperformance now puts the spotlight on peers such as Patterson-UTI Energy Inc. PTEN, Nabors Industries Ltd. NBR and Transocean Ltd. RIG, who have yet to come out with their numbers.
Revenues of $487.8 million were down 54% from the first fiscal quarter 2015 but came above the Zacks Consensus Estimate of $464 million.
Segment Performance
U.S. Land Operations: During the quarter, operating revenues totaled $369.8 million (76% of total revenue), down 58% year over year. While average rig revenue per operating day was $28,651 -- 3% below the year-ago period -- average rig margin per day edged down 4% to $15,761. However, utilization levels plunged to 39% (from 89% in the first fiscal quarter of 2015), pushing down the segment operating income by 83% from the year-earlier quarter to $55.5 million.
Offshore Operations: Helmerich & Payne’s offshore revenues were down 40% year over year to $41.9 million. Daily average rig revenue more than halved to $27,539 and average rig margin per day fell 62% to $7,920. This led to the decline in the segment operating income, which decreased 64% from the previous year period to $7.7 million. Meanwhile, rig utilization came down from the year-ago level of 98% to 89%.
International Land Operations: Helmerich & Payne’s international land operations recorded revenues of $72.2 million, down from $96.7 million in the previous-year quarter. Average daily rig revenue was $46,031, up 13% from the corresponding period last year, while rig margin per day was $11,811, higher than the $10,342 a year ago.
But these positive tidings were more than offset by declining activity levels, which plunged to 40% from 60% a year ago. As a result, the segment posted a quarterly loss of $6.7 million, as against income of $10.6 million in the first quarter of fiscal 2015.
Capital Expenditure & Balance Sheet
During the quarter, Helmerich & Payne spent approximately $114.5 million on capital programs. As of Dec 31, 2015, the company had approximately $848.2 million in cash, while long-term debt stood at $492.7 million (debt-to-capitalization ratio of 9.3%).
Guidance
The Tulsa, OK-based Zacks Rank #4 (Sell) company expects activity in the U.S. land segment to fall by 20% sequentially during the second fiscal quarter of 2016. While the average rig revenue per day is likely to remain essentially unchanged, daily average rig cost is expected to go up to roughly $13,600 during next quarter.
As for the offshore segment, Helmerich & Payne sees the average rig margin per day to be around $8,250 during the second quarter of fiscal 2016 and revenue days to fall by 5-10% sequentially.
Lastly, the international land segment will likely experience a decline in revenue days by 5-10% in the next quarter, while average rig margin per day is expected to average roughly $7,500.
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