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Helmerich & Payne, Inc. Announces Second Quarter Results

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·20 min read
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  • H&P's North America Solutions segment exited the second quarter of fiscal year 2021 with 109 active rigs up roughly 15% during the quarter

  • The Company ended the quarter with $562 million in cash and short-term investments and no amounts drawn on its $750 million revolving credit facility culminating in approximately $1.3 billion in available liquidity

  • Quarterly North America Solutions operating gross margins(1) increased $19 million to $64 million sequentially, as revenues increased by $48 million to $250 million and expenses increased by $29 million to $186 million

  • The Company reported a fiscal second quarter net loss of $(1.13) per diluted share; including select items(2) of $(0.53) per diluted share

  • The Company incurred a non-cash impairment charge of $54 million related to fair market adjustments for decommissioned rigs that are held for sale and recognized a $23 million loss on sales related to excess drilling equipment and spares

  • Adoption of our drilling automation technologies and new commercial models continues to increase with 25% to 30% of our active FlexRig® fleet utilizing AutoSlide®, and roughly 30% utilizing some form of performance-based contract

  • On March 3, 2021, the Board of Directors of the Company declared a quarterly cash dividend of $0.25 per share, payable on June 1, 2021, to stockholders of record at the close of business on May 17, 2021

Helmerich & Payne, Inc. (NYSE: HP) reported a net loss of $121 million, or $(1.13) per diluted share, from operating revenues of $296 million for the quarter ended March 31, 2021, compared to a net loss of $70 million, or $(0.66) per diluted share, on revenues of $246 million for the quarter ended December 31, 2020. The net losses per diluted share for the second and first quarters of fiscal year 2021 include $(0.53) and $0.16, respectively, of after-tax gains and losses comprised of select items(2). For the second quarter of fiscal year 2021, select items(2) were comprised of:

  • $0.04 of after-tax gains pertaining to a non-cash fair market adjustment to our equity investment, and discontinued operations related to adjustments resulting from currency fluctuations

  • $(0.57) of after-tax losses pertaining to a non-cash impairment for fair market adjustments to decommissioned rigs that are held for sale, loss on sales of excess drilling equipment and spares, and restructuring charges

Net cash provided by operating activities was $78 million for the second quarter of fiscal year 2021 compared to net cash used in operating activities of $20 million for the first quarter of fiscal year 2021.

President and CEO John Lindsay commented, "The increase in activity we experienced during the first half of our fiscal 2021 year has been encouraging, particularly in light of the record industry downturn last year. As in the past, our strong market standing and flexible financial position is enabling us to concentrate on long-term, strategic objectives during volatile and uncertain markets. We are making good progress in deploying digital technology solutions and introducing new commercial models to the industry, but realize there is still a lot of work ahead of us.

"Clearly, the energy industry's capital discipline, which started prior to the global pandemic, remains resolute, and this is something we are actually pleased to see. The attention to controlled spending and generating returns in a variety of commodity price environments is what the industry needs to attract and retain investment. A natural step in capital discipline is deriving the most value per capital dollar spent, not just in a one-year budget cycle, but over the life of an investment. This corresponds directly to where we believe H&P, as the leading drilling solutions provider, delivers the most value to our customers and is the driver behind the development of our digital technology solutions and commercial models that are structured around achieving value-added outcomes.

"H&P's focus will remain on bringing value to the customer by leveraging software, data and FlexRig technology. Our digitally-enabled drilling operations provide automation solutions that deliver both efficiency gains and wellbore quality. Our customers experience not only near-term financial benefits, like lower well costs and the reduction of certain downhole risks, but also have positive economic implications over the long-term life of the well. An important ingredient to a successful technology strategy is the integration of new commercial models, which incorporate performance metrics into the contract. New commercial models are designed to generate win-win outcomes - the customer has a well with improved economics and H&P is compensated for helping to create a portion of that value. Currently, approximately 30% of our active fleet in the U.S. is under some type of performance contract."

Senior Vice President and CFO Mark Smith also commented, "The quality and strength of H&P's financial position, after emerging from one of the most challenging times in the Company's history, bears reiteration. H&P exited the March fiscal quarter with $562 million in cash and short-term investments, a debt-to-cap of 14% and approximately $1.3 billion in available liquidity. Additionally, lenders with $680 million of commitments under our undrawn revolving credit facility recently exercised their option to extend the maturity of our credit facility by one year to 2025. Much like the Company's strong balance sheet, the commitment to our long-standing capital allocation strategy of returning cash to shareholders remains firmly intact.

"As the market landscape continues to evolve, the Company's focus on marketing its highly capable, super-spec FlexRig fleet is more pronounced leading us to initiate a plan in March of this year to sell certain older, less capable rigs, the majority of which were previously decommissioned, written down and expected to be sold for scrap. As a result of this plan, we reclassified those assets to held for sale for accounting purposes and we incurred an impairment of $54 million related to fair market adjustments. Additionally we recognized a $23 million loss on sales related to excess drilling equipment and spares.

"We continue to move forward with our strategies of further rationalizing our operating cost structure by identifying other areas of potential cost improvement. We are now quantifying the expected savings and timing of these strategies with the expectation of implementing these initiatives in the coming quarters. The margin improvements resulting from these additional cost saving initiatives will be recognized over the next few quarters with the full ongoing benefits expected to be realized in fiscal 2022."

John Lindsay concluded, "One of H&P's strengths is its ability to adapt to changing, and often volatile, market conditions. Our people, rig assets and technology, and financial position are the drivers behind why H&P is considered a market leader and partner of choice within the industry. While challenges still remain ahead, I am confident that H&P and our people are up to the task and will be successful."

Operating Segment Results for the Second Quarter of Fiscal Year 2021

North America Solutions:

This segment had an operating loss of $109.8 million compared to an operating loss of $72.9 million during the previous quarter. The increase in the operating loss was due to impairments related to fair market adjustments to decommissioned rigs that are held for sale and restructuring charges. Absent these select items(2), this segment's operating loss declined by $18.8 million on a sequential basis, due mainly to a higher level of rig activity.

Operating gross margins(1) increased by $19.4 million to $64.1 million as both revenues and expenses increased sequentially. There was no early contract termination revenue recognized during the quarter compared to the prior quarter, which benefited from $5.8 million in early contract termination revenue. Operating results were still negatively impacted by the costs associated with reactivating rigs; $9.7 million in the second fiscal quarter compared to $10.6 million in the first fiscal quarter. While 21 idle rigs were reactivated during the quarter, only 15 were incremental to the rig count due to the normal contracting churn. The majority of the remaining reactivated rigs have already returned to service subsequent to March 31, 2021.

International Solutions:

This segment had an operating loss of $3.5 million compared to an operating loss of $8.4 million during the previous quarter. Operating gross margins(1) improved to a negative $1.9 million from a negative $7.0 million in the previous quarter, as the current quarter benefited from additional revenue days and certain revenue reimbursements of approximately $1.9 million. Current quarter results included a $2.4 million foreign currency loss related to our South American operations compared to an approximate $1.9 million foreign currency loss in the first quarter of fiscal year 2021.

Offshore Gulf of Mexico:

This segment had operating income of $3.0 million compared to operating income of $2.7 million during the previous quarter. Operating gross margins(1) remained relatively flat at $6.2 million compared to $6.0 million in the prior quarter.

Operational Outlook for the Third Quarter of Fiscal Year 2021

North America Solutions:

  • We expect North America Solutions operating gross margins(1) to be between $65-$75 million

  • We expect to exit the quarter at between 120-125 contracted rigs

International Solutions:

  • We expect International Solutions operating gross margins(1) to be between $(1)-$(3) million, exclusive of any foreign exchange gains or losses

Offshore Gulf of Mexico:

  • We expect Offshore Gulf of Mexico operating gross margins(1) to be between $6-$9 million

Other Estimates for Fiscal Year 2021

  • Gross capital expenditures are still expected to be approximately $85 to $105 million; roughly one-third expected for maintenance, roughly one-third expected for skidding to walking conversions and roughly one-third for corporate and information technology. Ongoing asset sales include reimbursements for lost and damaged tubulars and sales of other used drilling equipment that offset a portion of the gross capital expenditures and are still expected to total approximately $25 million in fiscal year 2021. Note the sale of the offshore platform rig during the first quarter of fiscal year 2021 is excluded from this number.

  • Depreciation is now expected to be approximately $425 million

  • Research and development expenses for fiscal year 2021 are now expected to be roughly $25 million

  • General and administrative expenses for fiscal year 2021 are still expected to be approximately $160 million

Select Items Included in Net Income per Diluted Share

Second quarter of fiscal year 2021 net loss of $(1.13) per diluted share included $(0.53) in after-tax losses comprised of the following:

  • $0.02 of non-cash after-tax gains related to fair market value adjustments to equity investments

  • $0.02 of non-cash after-tax gains from discontinued operations related to adjustments resulting from currency fluctuations

  • $(0.01) of after-tax losses related to restructuring charges

  • $(0.17) of after-tax losses pertaining to the sale of excess drilling equipment and spares

  • $(0.39) of non-cash after-tax losses for impairments related to fair market value adjustments to decommissioned rigs that are held for sale

First quarter of fiscal year 2021 net loss of $(0.66) per diluted share included $0.16 in after-tax gains comprised of the following:

  • $0.07 of after-tax gains pertaining to the sale of an offshore platform rig

  • $0.07 of non-cash after-tax gains from discontinued operations related to adjustments resulting from currency fluctuations

  • $0.02 of non-cash after-tax gains related to fair market value adjustments to equity investments

  • $(0.00) of after-tax losses related to restructuring charges

Conference Call

A conference call will be held on Friday, April 30, 2021, at 11:00 a.m. (ET) with John Lindsay, President and CEO, Mark Smith, Senior Vice President and CFO, and Dave Wilson, Vice President of Investor Relations, to discuss the Company’s second quarter fiscal year 2021 results. Dial-in information for the conference call is (800) 895-3361 for domestic callers or (785) 424-1062 for international callers. The call access code is ‘Helmerich’. You may also listen to the conference call that will be broadcast live over the internet by logging on to the Company’s website at http://www.helmerichpayne.com and accessing the corresponding link through the investor relations section by clicking on "Investors" and then clicking on "News and Events - Events & Presentations" to find the event and the link to the webcast.

About Helmerich & Payne, Inc.

Founded in 1920, Helmerich & Payne, Inc. (H&P) (NYSE: HP) is committed to delivering industry leading levels of drilling productivity and reliability. H&P operates with the highest level of integrity, safety and innovation to deliver superior results for its customers and returns for shareholders. Through its subsidiaries, the Company designs, fabricates and operates high-performance drilling rigs in conventional and unconventional plays around the world. H&P also develops and implements advanced automation, directional drilling and survey management technologies. At March 31, 2021, H&P's fleet included 242 land rigs in the U.S., 32 international land rigs and seven offshore platform rigs. For more information, see H&P online at www.helmerichpayne.com.

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, dividends, 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.

We use our Investor Relations website as a channel of distribution for material company information. Such information is routinely posted and accessible on our Investor Relations website at www.helmerichpayne.com.

Note Regarding Trademarks. Helmerich & Payne, Inc. owns or has rights to the use of trademarks, service marks and trade names that it uses in conjunction with the operation of its business. Some of the trademarks that appear in this release or otherwise used by H&P include FlexRig and AutoSlide, which may be registered or trademarked in the U.S. and other jurisdictions.

(1) Operating gross margin is defined as operating revenues less direct operating expenses.

(2) See the corresponding section of this release for details regarding the select items. The Company believes identifying and excluding select items is useful in assessing and understanding current operational performance, especially in making comparisons over time involving previous and subsequent periods and/or forecasting future periods results. Select items are excluded as they are deemed to be outside of the Company's core business operations.

HELMERICH & PAYNE, INC.

Condensed Consolidated Statements of Operations

(Unaudited)

Three Months Ended

Six Months Ended

(in thousands, except per share amounts)

March 31,

December 31

March 31,

March 31,

March 31,

2021

2020

2020

2021

2020

Operating revenues

Drilling services

$

294,026

$

244,781

$

630,290

$

538,807

$

1,241,688

Other

2,145

1,596

3,349

3,741

6,608

296,171

246,377

633,639

542,548

1,248,296

Operating costs and expenses

Drilling services operating expenses, excluding depreciation and amortization

230,313

198,689

417,743

429,002

817,072

Other operating expenses

1,274

1,362

1,315

2,636

2,737

Depreciation and amortization

106,417

106,861

132,006

213,278

262,137

Research and development

5,334

5,583

6,214

10,917

13,092

Selling, general and administrative

39,349

39,303

41,978

78,652

91,786

Asset impairment charge

54,284

563,234

54,284

563,234

Restructuring charges

1,608

138

1,746

(Gain) loss on sale of assets

18,515

(12,336

)

(10,310

)

6,179

(14,589

)

457,094

339,600

1,152,180

796,694

1,735,469

Operating loss from continuing operations

(160,923

)

(93,223

)

(518,541

)

(254,146

)

(487,173

)

Other income (expense)

Interest and dividend income

4,819

1,879

3,566

6,698

5,780

Interest expense

(5,759

)

(6,139

)

(6,095

)

(11,898

)

(12,195

)

Gain (loss) on investment securities

2,520

2,924

(12,413

)

5,444

(9,592

)

Gain on sale of subsidiary

14,963

Other

(577

)

(1,480

)

(398

)

(2,057

)

(797

)

1,003

(2,816

)

(15,340

)

(1,813

)

(1,841

)

Loss from continuing operations before income taxes

(159,920

)

(96,039

)

(533,881

)

(255,959

)

(489,014

)

Income tax benefit

(36,624

)

(18,115

)

(113,413

)

(54,739

)

(99,275

)

Loss from continuing operations

(123,296

)

(77,924

)

(420,468

)

(201,220

)

(389,739

)

Income from discontinued operations before income taxes

2,293

7,493

6,067

9,786

13,524

Income tax provision

6,139

13,720

Income (loss) from discontinued operations

2,293

7,493

(72

)

9,786

(196

)

Net loss

$

(121,003

)

$

(70,431

)

$

(420,540

)

$

(191,434

)

$

(389,935

)

Basic earnings (loss) per common share:

Loss from continuing operations

$

(1.15

)

$

(0.73

)

$

(3.88

)

$

(1.87

)

$

(3.61

)

Income from discontinued operations

$

0.02

$

0.07

$

$

0.09

$

Net loss

$

(1.13

)

$

(0.66

)

$

(3.88

)

$

(1.78

)

$

(3.61

)

Diluted earnings (loss) per common share:

Loss from continuing operations

$

(1.15

)

$

(0.73

)

$

(3.88

)

$

(1.87

)

$

(3.61

)

Income from discontinued operations

$

0.02

$

0.07

$

$

0.09

$

Net loss

$

(1.13

)

$

(0.66

)

$

(3.88

)

$

(1.78

)

$

(3.61

)

Weighted average shares outstanding (in thousands):

Basic

107,861

107,617

108,577

107,738

108,556

Diluted

107,861

107,617

108,577

107,738

108,556

HELMERICH & PAYNE, INC.

Condensed Consolidated Balance Sheets

(Unaudited)

March 31,

September 30,

(in thousands except share data and share amounts)

2021

2020

Assets

Current Assets:

Cash and cash equivalents

$

427,243

$

487,884

Short-term investments

134,491

89,335

Accounts receivable, net of allowance of $1,806 and $1,820, respectively

209,402

192,623

Inventories of materials and supplies, net

96,504

104,180

Prepaid expenses and other, net

97,857

89,305

Assets held-for-sale

13,076

Total current assets

978,573

963,327

Investments

34,569

31,585

Property, plant and equipment, net

3,374,235

3,646,341

Other Noncurrent Assets:

Goodwill

45,653

45,653

Intangible assets, net

77,430

81,027

Operating lease right-of-use asset

56,474

44,583

Other assets, net

21,170

17,105

Total other noncurrent assets

200,727

188,368

Total assets

$

4,588,104

$

4,829,621

Liabilities and Shareholders’ Equity

Current Liabilities:

Accounts payable

$

63,934

$

36,468

Dividends payable

27,327

27,226

Accrued liabilities

160,342

155,442

Total current liabilities

251,603

219,136

Noncurrent Liabilities:

Long-term debt, net

481,647

480,727

Deferred income taxes

604,536

650,675

Other

163,063

147,180

Noncurrent liabilities - discontinued operations

3,559

13,389

Total noncurrent liabilities

1,252,805

1,291,971

Shareholders' Equity:

Common stock, $.10 par value, 160,000,000 shares authorized, 112,222,865 and 112,151,563 shares issued as of March 31, 2021 and September 30, 2020, respectively, and 107,893,998 and 107,488,242 shares outstanding as of March 31, 2021 and September 30, 2020, respectively

11,222

11,215

Preferred stock, no par value, 1,000,000 shares authorized, no shares issued

Additional paid-in capital

516,870

521,628

Retained earnings

2,762,735

3,010,012

Accumulated other comprehensive loss

(25,274

)

(26,188

)

Treasury stock, at cost, 4,328,867 shares and 4,663,321 shares as of March 31, 2021 and September 30, 2020, respectively

(181,857

)

(198,153

)

Total shareholders’ equity

3,083,696

3,318,514

Total liabilities and shareholders' equity

$

4,588,104

$

4,829,621

HELMERICH & PAYNE, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

Six Months Ended March 31,

(in thousands)

2021

2020

OPERATING ACTIVITIES:

Net loss

$

(191,434

)

$

(389,935

)

Adjustment for (income) loss from discontinued operations

(9,786

)

196

Loss from continuing operations

(201,220

)

(389,739

)

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization

213,278

262,137

Asset impairment charge

54,284

563,234

Amortization of debt discount and debt issuance costs

920

900

Provision for credit loss

(227

)

1,779

Provision for obsolete inventory

423

684

Stock-based compensation

14,277

20,952

(Gain) loss on investment securities

(5,444

)

9,592

(Gain) loss on sale of assets

6,179

(14,589

)

Gain on sale of subsidiary

(14,963

)

Deferred income tax benefit

(46,068

)

(106,878

)

Other

3,646

(3,779

)

Changes in assets and liabilities

18,779

(96,660

)

Net cash provided by operating activities from continuing operations

58,827

232,670

Net cash used in operating activities from discontinued operations

(25

)

(28

)

Net cash provided by operating activities

58,802

232,642

INVESTING ACTIVITIES:

Capital expenditures

(30,745

)

(94,312

)

Purchase of investments

(106,731

)

(36,336

)

Proceeds from sale of investments

63,742

43,894

Proceeds from sale of subsidiary

15,056

Proceeds from asset sales

13,419

24,799

Other

(51

)

Net cash used in investing activities

(60,315

)

(46,950

)

FINANCING ACTIVITIES:

Dividends paid

(54,230

)

(155,890

)

Proceeds from stock option exercises

4,100

Payments for employee taxes on net settlement of equity awards

(2,119

)

(3,455

)

Payment of contingent consideration from acquisition of business

(250

)

(4,250

)

Share repurchase

(28,504

)

Other

(445

)

Net cash used in financing activities

(56,599

)

(188,444

)

Net decrease in cash and cash equivalents and restricted cash

(58,112

)

(2,752

)

Cash and cash equivalents and restricted cash, beginning of period

536,747

382,971

Cash and cash equivalents and restricted cash, end of period

$

478,635

$

380,219

Three Months Ended

Six Months Ended

SEGMENT REPORTING

March 31,

December 31

March 31,

March 31,

(in thousands, except operating statistics)

2021

2020

2020(1)

2021

2020(1)

NORTH AMERICA SOLUTIONS OPERATIONS

Operating revenues

$

249,939

$

201,990

$

545,961

$

451,929

$

1,070,642

Direct operating expenses

185,841

157,309

346,564

343,150

679,546

Segment gross margin (3)

64,098

44,681

199,397

108,779

391,096

Depreciation

99,917

100,324

117,334

200,241

233,399

Research and development

5,329

5,466

5,663

10,795

12,412

Selling, general and administrative expense

12,960

11,680

12,519

24,640

29,265

Asset impairment charge

54,284

406,548

54,284

406,548

Restructuring charges

1,442

139

1,581

Segment operating loss

$

(109,834

)

$

(72,928

)

$

(342,667

)

$

(182,762

)

$

(290,528

)

Operating Statistics (2):

Average active rigs

105

81

190

93

191

Number of active rigs at the end of period

109

94

150

109

150

Number of available rigs at the end of period

242

262

299

242

...

299

Reimbursements of "out-of-pocket" expenses

$

27,290

$

18,789

$

77,166

$

46,079

$

136,734

INTERNATIONAL SOLUTIONS OPERATIONS

Operating revenues

$

14,813

$

10,518

$

51,250

$

25,331

$

97,712

Direct operating expenses

16,718

17,523

37,964

34,241

72,039

Segment gross margin (3)

(1,905

)

(7,005

)

13,286

(8,910

)

25,673

Depreciation

415

373

7,821

788

15,638

Selling, general and administrative expense

1,138

979

1,248

2,117

2,703

Asset impairment charge

156,686

156,686

Segment operating loss

$

(3,458

)

$

(8,357

)

$

(152,469

)

$

(11,815

)

$

(149,354

)

Operating Statistics (2):

Average active rigs

4

4

17

4

17

Number of active rigs at the end of period

5

4

15

5

15

Number of available rigs at the end of period

32

32

32

32

32

Reimbursements of "out-of-pocket" expenses

$

1,613

$

2,559

$

2,209

$

4,172

$

3,796

OFFSHORE GULF OF MEXICO OPERATIONS

Operating revenues

$

29,274

$

32,273

$

33,079

$

61,547

$

73,334

Direct operating expenses

23,069

26,256

32,648

49,325

62,693

Segment gross margin (3)

6,205

6,017

431

12,222

10,641

Depreciation

2,593

2,606

2,842

5,199

5,587

Selling, general and administrative expense

634

669

908

1,303

2,045

Segment operating income (loss)

$

2,978

$

2,742

$

(3,319

)

$

5,720

$

3,009

Operating Statistics (2):

Average active rigs

4

5

5

5

6

Number of active rigs at the end of period

4

4

5

4

5

Number of available rigs at the end of period

7

7

8

7

8

Reimbursements of "out-of-pocket" expenses

$

5,193

$

7,868

$

6,763

$

13,061

$

16,663

(1)

Operations previously reported within the H&P Technologies reportable segment are now managed and presented within the North America Solutions reportable segment.

(2)

These operating metrics allow investors to analyze the various components of segment financial results in terms of activity, utilization and other key results. Management uses these metrics to analyze historical segment financial results and as the key inputs for forecasting and budgeting segment financial results. Beginning in the first quarter of fiscal year 2021, these operating metrics replaced previously used per day metrics. As a result, prior year comparative information is also provided above.

(3)

Segment gross margin and operating income/loss have limitations and should not be used as alternatives to revenues, expenses, or operating income/loss, which are performance measures determined in accordance with GAAP.

Segment reconciliation amounts were as follows:

Three Months Ended March 31, 2021

(in thousands)

North America
Solutions

Offshore Gulf
of Mexico

International
Solutions

Other

Eliminations

Total

Operating revenue

$

249,939

$

29,274

$

14,813

$

2,145

$

$

296,171

Intersegment

8,680

(8,680

)

Total operating revenue

$

249,939

$

29,274

$

14,813

$

10,825

$

(8,680

)

$

296,171

Direct operating expenses

182,698

21,097

16,582

11,210

231,587

Intersegment

3,143

1,972

136

12

(5,263

)

Total drilling services & other operating expenses

$

185,841

$

23,069

$

16,718

$

11,222

$

(5,263

)

$

231,587

Six Months Ended March 31, 2021

(in thousands)

North America
Solutions

Offshore Gulf
of Mexico

International
Solutions

Other

Eliminations

Total

Operating revenue

$

451,929

$

61,547

$

25,331

$

3,741

$

$

542,548

Intersegment

15,802

(15,802

)

Total operating revenue

$

451,929

$

61,547

$

25,331

$

19,543

$

(15,802

)

$

542,548

Direct operating expenses

337,867

45,120

33,936

14,715

431,638

Intersegment

5,283

4,205

305

257

(10,050

)

Total drilling services & other operating expenses

$

343,150

$

49,325

$

34,241

$

14,972

$

(10,050

)

$

431,638

Segment operating income (loss) for all segments is a non-GAAP financial measure of the Company’s performance, as it excludes gain on sale of assets, corporate selling, general and administrative expenses, corporate restructuring charges, and corporate depreciation. The Company considers segment operating income (loss) 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 (loss) 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 segment operating income (loss) per the information above to loss from continuing operations before income taxes as reported on the Unaudited Condensed Consolidated Statements of Operations:

Three Months Ended

Six Months Ended

March 31,

December 31

March 31,

March 31,

March 31,

(in thousands)

2021

2020

2020 (1)

2021

2020 (1)

Operating income (loss)

North America Solutions

$

(109,834

)

$

(72,928

)

$

(342,667

)

$

(182,762

)

$

(290,528

)

International Solutions

(3,458

)

(8,357

)

(152,469

)

(11,815

)

(149,354

)

Offshore Gulf of Mexico

2,978

2,742

(3,319

)

5,720

3,009

Other

(1,072

)

4,111

376

3,039

(705

)

Eliminations

(3,433

)

(2,126

)

(5,559

)

Segment operating loss

$

(114,819

)

$

(76,558

)

$

(498,079

)

$

(191,377

)

$

(437,578

)

Gain (loss) on sale of assets

(18,515

)

12,336

10,310

(6,179

)

14,589

Corporate selling, general and administrative costs and corporate depreciation

(27,589

)

(29,001

)

(30,772

)

(56,590

)

(64,184

)

Operating loss

$

(160,923

)

$

(93,223

)

$

(518,541

)

$

(254,146

)

$

(487,173

)

Other income (expense):

Interest and dividend income

4,819

1,879

3,566

6,698

5,780

Interest expense

(5,759

)

(6,139

)

(6,095

)

(11,898

)

(12,195

)

Gain (loss) on investment securities

2,520

2,924

(12,413

)

5,444

(9,592

)

Gain on sale of subsidiary

14,963

Other

(577

)

(1,480

)

(398

)

(2,057

)

(797

)

Total unallocated amounts

1,003

(2,816

)

(15,340

)

(1,813

)

(1,841

)

Loss from continuing operations before income taxes

$

(159,920

)

$

(96,039

)

$

(533,881

)

$

(255,959

)

$

(489,014

)

(1)

Operations previously reported within the H&P Technologies reportable segment are now managed and presented within the North America Solutions reportable segment.

SUPPLEMENTARY STATISTICAL INFORMATION

Unaudited

U.S. LAND RIG COUNTS & MARKETABLE FLEET STATISTICS

April 29,

March 31,

December 31,

Q2FY21

2021

2021

2020

Average

U.S. Land Operations

Term Contract Rigs

64

64

65

67

Spot Contract Rigs

54

45

29

38

Total Contracted Rigs

118

109

94

105

Idle or Other Rigs

124

153

168

157

Total Marketable Fleet

242

262

262

262

H&P GLOBAL FLEET UNDER TERM CONTRACT STATISTICS

Number of Rigs Already Under Long-Term Contracts(*)

(Estimated Quarterly Average — as of 03/31/21)

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Segment

FY21

FY21

FY22

FY22

FY22

FY22

FY23

U.S. Land Operations

63.5

48.5

39.5

33.3

28.0

25.0

21.9

International Land Operations

1.0

1.0

1.0

1.0

1.0

1.0

1.0

Offshore Operations

Total

64.5

49.5

40.5

34.3

29.0

26.0

22.9

(*) All of the above rig contracts have original terms equal to or in excess of six months and include provisions for early termination fees.

SELECT ITEMS(**)

Three Months Ended March 31, 2021

(in thousands, except per share data)

Pretax

Tax

Net

EPS

Net loss (GAAP basis)

$

(121,003

)

$

(1.13

)

(-) Fair market adjustment to equity investments

$

2,520

$

545

$

1,975

$

0.02

(-) Gain from discontinued ops. - currency fluctuation adjustments

$

2,293

$

$

2,293

$

0.02

(-) Restructuring charges

$

(1,608

)

$

(352

)

$

(1,256

)

$

(0.01

)

(-) Loss on the sale of excess drilling equipment and spares

$

(23,019

)

$

(5,061

)

$

(17,958

)

$

(0.17

)

(-) Impairments for fair market value adjustments to decomm. rigs

$

(54,284

)

$

(11,888

)

$

(42,396

)

$

(0.39

)

Adjusted net loss

$

(63,661

)

$

(0.60

)

Three Months Ended December 31, 2020

(in thousands, except per share data)

Pretax

Tax

Net

EPS

Net loss (GAAP basis)

$

(70,431

)

$

(0.66

)

(-) Gain on the sale of an offshore platform rig

$

9,178

$

2,030

$

7,148

$

0.07

(-) Gain from discontinued ops. - currency fluctuation adjustments

$

7,493

$

$

7,493

$

0.07

(-) Fair market adjustment to equity investments

$

2,924

$

647

$

2,277

$

0.02

(-) Restructuring charges

$

(138

)

$

(31

)

$

(107

)

$

Adjusted net loss

$

(87,242

)

$

(0.82

)

Note: Excluded from the select items above are revenues recognized due to early contract terminations in the amount (pretax) of $5.8 million for the three months ended December 31, 2020.

(**)The Company believes identifying and excluding select items is useful in assessing and understanding current operational performance, especially in making comparisons over time involving previous and subsequent periods and/or forecasting future period results. Select items are excluded as they are deemed to be outside of the Company's core business operations.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210429006035/en/

Contacts

Dave Wilson, Vice President of Investor Relations
investor.relations@hpinc.com
(918) 588‑5190