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Helmerich & Payne (HP) Q1 Loss Narrows on Solid U.S. Land

Zacks Equity Research

Helmerich & Payne Inc. HP reported first-quarter fiscal 2018 adjusted operating loss of 2 cents per share, narrower than the Zacks Consensus Estimate of a loss of 14 cents.The outperformance was primarily driven by higher drilling activity at its biggest segment – U.S. Land. The bottom line also compared favorably with the year-ago adjusted loss of 41 cents.

Revenues of $564.1 million topped the Zacks Consensus Estimate of $538 million. Further the top line witnessed an increase of more than 53% from the year-ago number of $368.6 million.

 

Helmerich & Payne, Inc. Price, Consensus and EPS Surprise
 

Helmerich & Payne, Inc. Price, Consensus and EPS Surprise | Helmerich & Payne, Inc. Quote

 

Segment Performance

U.S. Land: During the quarter, operating revenues totaled $461.6 million (81.8% of total revenues), up 75.1% year over year. While average rig revenue per operating day was $22,400 — 10.7% below the year-ago period — average rig margin per day was down 7.6% to $8,854. However, utilization levels of 57% in the quarter under review (versus 31% in first-quarter fiscal 2017) resulted in an operating income of 24.7 million at the segment marking a turn around from the year-ago loss of $30.9 million.

Offshore: Helmerich & Payne’s Offshore revenues came in at $33.4 million compared with $33.8 million in the prior-year quarter. Daily average rig revenue rose 14.2% to $35,776 and average rig margin per day rose 18.1% to $12,375. Owing to this, the segment’s operating income increased 28.6% to $8.7 million. However, rig utilization came down from the year-ago level of 78% to 63%.

International Land: Helmerich & Payne’s International Land operations generated revenues of $63.2 million, down slightly from $68 million in the previous-year quarter. Average daily rig revenue was $38,039, down 32% from the corresponding period of last year and rig margin per day was $11,351, down from the year-ago figure of $12,969.

However, average rig expense per day decreased 38%, while activity levels increased to 45% from 33% a year ago. As a result, the segment’s operating income was $3.5 million as against the year-ago income of $0.8 million.

Capital Expenditure & Balance Sheet

During the quarter, Helmerich & Payne spent approximately $91.7 million on capital programs. As of Dec 31, 2017, the company had approximately $383.7 million in cash, while long-term debt stood at $493.2 million (debt-to-capitalization ratio of 9.7%).

Guidance

The Tulsa, OK-based company expects activity in the U.S. land segment to rise by 3-4% sequentially during the second fiscal quarter of 2018. While the average rig revenue per day is likely to be flat compared with the first fiscal quarter, daily average rig cost is expected to be roughly $13,900 during next quarter.

As for the offshore segment, Helmerich & Payne sees the average rig margin per day to be around $11,500 during second-quarter fiscal 2018 and revenue days to fall 2% sequentially.

The international land segment will likely suffer a 4% decrease in revenue days during the next quarter, while average rig margin per day is expected to average roughly $8,000.

For fiscal 2018, Helmerich & Payne projects a capital budget of $350 million.

Zacks Rank & Key Picks

Helmerich & Payne currently carries a Zacks Rank #4 (Sell).

Meanwhile, one can look at some better-ranked energy players like Cabot Oil & Gas Corporation COG, Denbury Resources, Inc. DNR and Pioneer Natural Resources Company PXD. All the companies sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Cabot is expected to witness a year-over-year increase of 94.4% in earnings in 2018.

Denbury Resources is expected to witness a year-over-year increase of 189.8% in 2018 earnings.

Pioneer Natural is expected to witness a year-over-year increase of 137.4% in earnings in 2018.

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