Helmerich & Payne, Inc. Announces Fiscal Fourth Quarter & Fiscal Year Results
Helmerich & Payne, Inc. (NYSE: HP) reported a net loss of $79 million, or $(0.74) per diluted share, from operating revenues of $344 million for the quarter ended September 30, 2021, compared to a net loss of $56 million, or $(0.52) per diluted share, on revenues of $332 million for the quarter ended June 30, 2021. The net losses per diluted share for the fourth and third quarters of fiscal year 2021 include $(0.12) and $0.05 of after-tax losses and gains, respectively, comprised of select items(2). For the fourth quarter of fiscal year 2021, select items(2) were comprised of:
$0.03 of after-tax gains pertaining to the sale of equipment $(0.15) of after-tax losses pertaining to a non-cash impairment for the fair market adjustments to equipment held for sale, closing costs associated with the ADNOC Drilling transactions, restructuring charges, a non-cash fair market adjustment to our equity investment and an inventory write-downNet cash provided by operating activities was $47 million for the fourth quarter of fiscal year 2021 compared to $31 million for the third quarter of fiscal year 2021.
For fiscal year 2021, the Company reported a net loss of $326 million, or $(3.04) per diluted share, from operating revenues of $1.2 billion. The net loss per diluted share includes $(0.44) of after-tax losses comprised of select items(2). Net cash provided by operating activities was $136 million in fiscal year 2021 compared to $539 million in fiscal year 2020.
President and CEO John Lindsay commented, "As we head towards 2022 we expect that the demand for H&P's drilling solutions will continue to improve, and capital discipline, along with the help of strong commodity prices, will strengthen the industry. I am confident we are well-positioned to deliver value in this environment.
"As contemplated, rig activity increases were more measured during our fiscal fourth quarter as we realized more rig churn among customers. Regardless, we are pleased with the 5% incremental rig count increase we experienced during the quarter and are optimistic as we look ahead to the fourth calendar quarter, where we expect to see our rig count increase sequentially at a higher pace as customers begin to reset their annual capital budgets. We are already experiencing increased rig activity with 141 rigs working in North America today. That said, we believe the market will remain disciplined, but customers' budgets will be set based on the higher commodity price environment. We expect utilization of readily available rigs to remain very high and our projected increase in rig demand will be more than we can accommodate with our current active fleet, meaning we will have to reactivate more long-idled rigs to satisfy demand.
"The tightness in the supply of readily available rigs and the sizeable costs associated with rig reactivations have begun to move contract pricing upward in the market. This will likely become even more pronounced in the coming months and we expect pricing to continue to improve as rig demand picks up heading into 2022. It is my belief H&P's new commercial models and digital technology solutions will also continue to drive economic returns higher, not only for our customers, but also for ourselves.
"International activity tends to lag the U.S.; however, we expect to see activity improve in these markets in the coming quarters as well. For example, we recently signed agreements with YPF to put four rigs to work under term contracts in Argentina commencing at different dates in fiscal 2022. Additionally, our recent transactions to sell eight rigs to the Middle East's largest(4) land driller, ADNOC Drilling, and the subsequent $100 million cornerstone investment in the company's recent initial public offering, provides H&P with a unique opportunity going forward. This is just the beginning of what we look forward to being a fruitful alliance with ADNOC Drilling and represents an initial step in our international expansion plans."
Senior Vice President and CFO Mark Smith also commented, "We expect the Company's strong financial position will be bolstered by improving rig activity levels and pricing, which will give us flexibility to take advantage of additional opportunities. Looking out into fiscal 2022, we have set our initial capex budget to range between $250 and $270 million, representing a substantial sequential increase that tracks with expected activity levels.
"Just prior to our fiscal year end, the Company closed on an upsized $550 million senior notes offering. The notes' coupon of 2.90% represents a record low for a BBB(3) rated 10-year or longer tenor from an oilfield service company. Due to the Company's already strong balance sheet, we were able to take advantage of the historically low interest rate environment, securing low cost, long-term capital and extend our refinancing horizon, which provides us greater financial agility and reduced risk."
John Lindsay concluded, “Those who have worked in this industry know it is resilient, and that it has delivered reliable, affordable energy which has been critical to global progress and prosperity. The industry has made significant progress in reducing the environmental impact of its operational emissions and will continue to do so in the future. At H&P, we are optimistic about the future, and we believe our rigs, digital technology, solid financial position, and the commitment of our people position us to lead the recovery by delivering value-added solutions and services to our customers and partners."
Operating Segment Results for the Fourth Quarter of Fiscal Year 2021
North America Solutions:
This segment had an operating loss of $60.7 million compared to an operating loss of $43.7 million during the previous quarter. The increase in the operating loss was primarily due to impairments related to fair market adjustments for equipment held for sale. Absent the select items(2) for the quarters, this segment's operating loss declined by $4.1 million on a sequential basis.
Operating gross margins(1) decreased by $5.8 million to $69.1 million. Throughout this fiscal year, we prudently managed our expenses and inventory levels, utilizing previously expensed consumable inventory harvested during stacking activities in 2020 rather than fully costed inventory or purchasing new inventory. However, rig activity levels have increased and remain elevated, while previously expensed inventory has been exhausted, causing the need to issue average cost inventory as well as begin purchasing additional inventory to replenish stock levels. This occurrence, along with costs associated with reactivating rigs, adversely impacted operating results during the quarter. Rig reactivation costs were $6.6 million in the fourth fiscal quarter compared to $5.9 million in the third fiscal quarter.
International Solutions:
This segment had an operating loss of $5.7 million compared to an operating loss of $3.5 million during the previous quarter due to higher SG&A expenses associated with the ADNOC Drilling transactions. Operating gross margins(1) improved slightly to a negative $0.4 million from a negative $1.4 million in the previous quarter. Current quarter results included a $0.7 million foreign currency loss primarily related to our South American operations compared to a $0.6 million foreign currency loss in the third quarter of fiscal year 2021.
Offshore Gulf of Mexico:
This segment had operating income of $4.5 million compared to operating income of $5.7 million during the previous quarter. Operating gross margins(1) for the quarter were $7.7 million compared to $9.2 million in the prior quarter.
Operational Outlook for the First Quarter of Fiscal Year 2022
North America Solutions:
We expect North America Solutions operating gross margins(1) to be between $75-$85 million, which includes approximately $15 million in estimated reactivation costs We expect to exit the quarter at between 152-157 contracted rigsInternational Solutions:
We expect International Solutions operating gross margins(1) to be between $(2)-$0 million, exclusive of any foreign exchange gains or lossesOffshore Gulf of Mexico:
We expect Offshore Gulf of Mexico operating gross margins(1) to be between $6-$8 millionOther Estimates for Fiscal Year 2022
Gross capital expenditures are expected to be approximately $250 to $270 million; approximately 50% expected for maintenance, including tubular purchases, roughly 35% expected for skidding to walking conversions and approximately 15% 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 expected to total approximately $40 million in fiscal year 2022. Depreciation for fiscal year 2022 is expected to be approximately $405 million Research and development expenses for fiscal year 2022 are expected to be roughly $25 million General and administrative expenses for fiscal year 2022 are expected to be approximately $170 million of which roughly $45-$48 million is expected for the first fiscal quarterSelect Items Included in Net Income per Diluted Share
Fourth quarter of fiscal year 2021 net loss of $(0.74) per diluted share included $(0.12) in after-tax losses comprised of the following:
$0.03 of after-tax gains related to the sale of equipment $(0.01) of non-cash after-tax losses related to fair market value adjustments to equity investments $(0.01) of non-cash after-tax losses related to an inventory write-down $(0.01) of after-tax losses related to restructuring charges $(0.02) of after-tax losses related to closing costs associated with the ADNOC Drilling transactions $(0.10) of after-tax losses related to the non-cash impairment for fair market value adjustments to equipment that is held for saleThird quarter of fiscal year 2021 net loss of $(0.52) per diluted share included $0.05 in after-tax gains comprised of the following:
$0.01 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 $0.05 of income tax adjustments related to certain discrete tax items $(0.01) of after-tax losses related to the non-cash impairment for fair market value adjustments to decommissioned rigs that are held for sale $(0.01) of after-tax losses related to restructuring charges $(0.01) of after-tax losses related to the change in the fair values of certain contingent liabilitiesFiscal year 2021 net loss of $(3.04) per diluted share included $(0.44) in after-tax losses comprised of the following:
$0.05 of income tax adjustments related to certain discrete tax items $0.05 of non-cash after-tax gains related to fair market value adjustments to equity investments $0.10 of non-cash after-tax gains from discontinued operations related to adjustments resulting from currency fluctuations $0.10 of after-tax gains pertaining to the sale of an offshore platform rig and equipment $(0.01) of non-cash after-tax losses related to an inventory write-down $(0.01) of after-tax losses related to the change in the fair values of certain contingent liabilities $(0.02) of after-tax losses related to closing costs associated with the ADNOC Drilling transactions $(0.03) of after-tax losses related to restructuring charges $(0.17) of after-tax losses pertaining to the sale of excess drilling equipment and spares $(0.50) of after-tax losses related to non-cash impairment for fair market value adjustments to decommissioned rigs and equipment that are held for saleConference Call
A conference call will be held on Thursday, November 18, 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 fourth 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 September 30, 2021, H&P's fleet included 236 land rigs in the United States, 30 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, which may be registered or trademarked in the United States 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.
(3) Investment grade rating of BBB+ from S&P Global and Baa1 from Moody's.
(4) Largest in terms of fleet size.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
Year Ended
(in thousands, except per share
amounts)
September 30,
June 30,
September 30,
September 30,
2021
2021
2020
2021
2020
OPERATING REVENUES
Drilling services
$
342,219
$
329,774
$
205,621
$
1,210,800
$
1,761,714
Other
1,588
2,439
2,646
7,768
12,213
343,807
332,213
208,267
1,218,568
1,773,927
OPERATING COSTS AND EXPENSES
Drilling services operating expenses, excluding depreciation and amortization
268,127
255,471
162,518
952,600
1,184,788
Other operating expenses
1,021
1,481
1,491
5,138
5,777
Depreciation and amortization
101,955
104,493
109,587
419,726
481,885
Research and development
5,197
5,610
4,915
21,724
21,645
Selling, general and administrative
51,824
41,719
32,619
172,195
167,513
Asset impairment charge
14,436
2,130
—
70,850
563,234
Restructuring charges
2,070
2,110
552
5,926
16,047
Gain on sale of assets
(3,787
)
(3,434
)
(27,985
)
(1,042
)
(46,775
)
440,843
409,580
283,697
1,647,117
2,394,114
OPERATING LOSS FROM CONTINUING OPERATIONS
(97,036
)
(77,367
)
(75,430
)
(428,549
)
(620,187
)
Other income (expense)
Interest and dividend income
2,029
1,527
753
10,254
7,304
Interest expense
(6,094
)
(5,963
)
(6,154
)
(23,955
)
(24,474
)
Gain (loss) on investment securities
(1,126
)
2,409
(1,395
)
6,727
(8,720
)
Gain on sale of subsidiary
—
—
—
—
14,963
Other
(2,630
)
(970
)
(1,673
)
(5,657
)
(5,384
)
(7,821
)
(2,997
)
(8,469
)
(12,631
)
(16,311
)
Loss from continuing operations before income taxes
(104,857
)
(80,364
)
(83,899
)
(441,180
)
(636,498
)
Income tax benefit
(25,323
)
(23,659
)
(23,253
)
(103,721
)
(140,106
)
Loss from continuing operations
(79,534
)
(56,705
)
(60,646
)
(337,459
)
(496,392
)
Income from discontinued operations before income taxes
373
1,150
7,905
11,309
30,580
Income tax provision
—
—
6,222
—
28,685
Income from discontinued operations
373
1,150
1,683
11,309
1,895
NET LOSS
$
(79,161
)
$
(55,555
)
$
(58,963
)
$
(326,150
)
$
(494,497
)
Basic earnings (loss) per common share:
Loss from continuing operations
$
(0.74
)
$
(0.53
)
$
(0.57
)
$
(3.14
)
$
(4.62
)
Income from discontinued operations
—
0.01
0.02
0.10
0.02
Net loss
$
(0.74
)
$
(0.52
)
$
(0.55
)
$
(3.04
)
$
(4.60
)
Diluted earnings (loss) per common share:
Loss from continuing operations
$
(0.74
)
$
(0.53
)
$
(0.57
)
$
(3.14
)
$
(4.62
)
Income from discontinued operations
—
0.01
0.02
0.10
0.02
Net loss
$
(0.74
)
$
(0.52
)
$
(0.55
)
$
(3.04
)
$
(4.60
)
Weighted average shares outstanding (in thousands):
Basic
107,899
107,896
107,484
107,818
108,009
Diluted
107,899
107,896
107,484
107,818
108,009
HELMERICH & PAYNE, INC.
CONSOLIDATED BALANCE SHEETS
September 30,
September 30,
(in thousands except share data and share amounts)
2021
2020
ASSETS
Current Assets:
Cash and cash equivalents
$
917,534
$
487,884
Short-term investments
198,700
89,335
Accounts receivable, net of allowance of $2,068 and $1,820, respectively
228,894
192,623
Inventories of materials and supplies, net
84,057
104,180
Prepaid expenses and other, net
85,928
89,305
Assets held-for-sale
71,453
—
Total current assets
1,586,566
963,327
Investments
135,444
31,585
Property, plant and equipment, net
3,127,287
3,646,341
Other Noncurrent Assets:
Goodwill
45,653
45,653
Intangible assets, net
73,838
81,027
Operating lease right-of-use asset
49,187
44,583
Other assets, net
16,153
17,105
Total other noncurrent assets
$
184,831
$
188,368
Total assets
$
5,034,128
$
4,829,621
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable
71,996
36,468
Dividends payable
27,332
27,226
Current portion of long-term debt
483,486
—
Accrued liabilities
283,492
155,442
Total current liabilities
866,306
219,136
Noncurrent Liabilities:
Long-term debt, net
541,997
480,727
Deferred income taxes
563,437
650,675
Other
147,757
147,180
Noncurrent liabilities - discontinued operations
2,013
13,389
Total noncurrent liabilities
1,255,204
1,291,971
Shareholders' Equity:
Common stock, $0.10 par value, 160,000,000 shares authorized, 112,222,865 and 112,151,563 shares issued as of September 30, 2021 and 2020, respectively, and 107,898,859 and 107,488,242 shares outstanding as of September 30, 2021 and 2020, respectively
11,222
11,215
Preferred stock, no par value, 1,000,000 shares authorized, no shares issued
—
—
Additional paid-in capital
529,903
521,628
Retained earnings
2,573,375
3,010,012
Accumulated other comprehensive loss
(20,244
)
(26,188
)
Treasury stock, at cost, 4,324,006 shares and 4,663,321 shares as of September 30, 2021 and 2020, respectively
(181,638
)
(198,153
)
Total shareholders’ equity
$
2,912,618
$
3,318,514
Total liabilities and shareholders' equity
$
5,034,128
$
4,829,621
HELMERICH & PAYNE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended September 30,
(in thousands)
2021
2020
2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss
$
(326,150
)
$
(494,497
)
$
(33,656
)
Adjustment for (income) loss from discontinued operations
(11,309
)
(1,895
)
1,146
Loss from continuing operations
(337,459
)
(496,392
)
(32,510
)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization
419,726
481,885
562,803
Asset impairment charge
70,850
563,234
224,327
Amortization of debt discount and debt issuance costs
1,423
1,817
1,732
Provision for credit loss
203
2,203
2,321
Stock-based compensation
27,858
36,329
34,292
Loss (gain) on investment securities
(6,727
)
8,720
54,488
Gain on sale of assets
(1,042
)
(46,775
)
(39,691
)
Gain on sale of subsidiary
—
(14,963
)
—
Deferred income tax benefit
(89,752
)
(157,555
)
(44,554
)
Other
13,793
(2,423
)
4,431
Changes in assets and liabilities
37,614
162,848
88,174
Net cash provided by operating activities from continuing operations
136,488
538,928
855,813
Net cash used in operating activities from discontinued operations
(48
)
(47
)
(62
)
Net cash provided by operating activities
136,440
538,881
855,751
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures
(82,148
)
(140,795
)
(458,402
)
Purchase of investments
(417,601
)
(134,641
)
(97,652
)
Payment for acquisition of business, net of cash acquired
—
—
(16,163
)
Proceeds from sale of investments
207,716
94,646
98,764
Proceeds from sale of subsidiary
—
15,056
—
Proceeds from asset sales
43,515
78,399
50,817
Cash received in advance of property, plant and equipment sale
86,524
—
—
Other
—
(550
)
—
Net cash used in investing activities
(161,994
)
(87,885
)
(422,636
)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid
(109,130
)
(260,335
)
(313,421
)
Proceeds from debt issuance
548,719
—
—
Debt issuance costs
(3,935
)
—
(3,912
)
Proceeds from stock option exercises
—
4,100
3,053
Payments for employee taxes on net settlement of equity awards
(2,162
)
(3,784
)
(6,418
)
Payment of contingent consideration from acquisition of business
(7,250
)
(8,250
)
—
Payments for early extinguishment of long-term debt
—
—
(12,852
)
Share repurchase
—
(28,505
)
(42,779
)
Other
(719
)
(446
)
—
Net cash provided by (used in) financing activities
425,523
(297,220
)
(376,329
)
Net increase in cash and cash equivalents and restricted cash
399,969
153,776
56,786
Cash and cash equivalents and restricted cash, beginning of period
536,747
382,971
326,185
Cash and cash equivalents and restricted cash, end of period
$
936,716
$
536,747
$
382,971
HELMERICH & PAYNE, INC.
SEGMENT REPORTING
Three Months Ended
Year Ended
September 30,
June 30,
September 30,
September 30,
(in thousands, except operating statistics)
2021
2021
2020
2021
2020
NORTH AMERICA SOLUTIONS
Operating revenues
$
293,303
$
281,132
$
149,304
$
1,026,364
$
1,474,380
Direct operating expenses
224,185
206,172
110,048
773,507
942,277
Segment gross margin (2)
69,118
74,960
39,256
252,857
532,103
Depreciation and amortization
95,177
96,997
101,941
392,415
438,039
Research and development
5,411
5,605
4,828
21,811
20,699
Selling, general and administrative expense
13,866
12,583
10,916
51,089
53,714
Asset impairment charge
14,436
2,130
—
70,850
406,548
Restructuring charges
899
1,388
(232
)
3,868
7,005
Segment operating loss
$
(60,671
)
$
(43,743
)
$
(78,197
)
$
(287,176
)
$
(393,902
)
Operating Statistics (1):
Average active rigs
124
119
65
107
134
Number of active rigs at the end of period
127
121
69
127
69
Number of available rigs at the end of period
236
242
262
236
262
Reimbursements of "out-of-pocket" expenses
$
34,536
$
33,282
$
6,915
$
113,897
$
171,455
INTERNATIONAL SOLUTIONS
Operating revenues
$
17,308
$
15,278
$
23,996
$
57,917
$
144,185
Direct operating expenses
17,741
16,690
25,157
68,672
124,791
Segment gross margin (2)
(433
)
(1,412
)
(1,161
)
(10,755
)
19,394
Depreciation
652
573
897
2,013
17,531
Selling, general and administrative expense
4,565
1,346
733
8,028
4,565
Asset impairment charge
—
—
—
—
156,686
Restructuring charges
—
207
683
207
2,980
Segment operating loss
$
(5,650
)
$
(3,538
)
$
(3,474
)
$
(21,003
)
$
(162,368
)
Operating Statistics (1):
Average active rigs
6
5
5
5
13
Number of active rigs at the end of period
6
6
5
6
5
Number of available rigs at the end of period
30
32
32
30
32
Reimbursements of "out-of-pocket" expenses
$
1,369
$
1,152
$
3,224
$
6,693
$
10,099
OFFSHORE GULF OF MEXICO
Operating revenues
$
31,488
$
33,364
$
32,321
$
126,399
$
143,149
Direct operating expenses
23,797
24,127
27,711
97,249
119,371
Segment gross margin (2)
7,691
9,237
4,610
29,150
23,778
Depreciation
2,420
2,938
3,090
10,557
11,681
Selling, general and administrative expense
729
592
72
2,624
3,365
Restructuring charges
—
—
(8
)
—
1,254
Segment operating income
$
4,542
$
5,707
$
1,456
$
15,969
$
7,478
Operating Statistics (1):
Average active rigs
4
4
5
4
5
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
Reimbursement of "out-of-pocket" expenses
$
5,985
$
8,342
$
5,548
$
27,388
$
30,436
(1)
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.
(2)
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 September 30, 2021
(in thousands)
North America
Solutions
Offshore Gulf
of Mexico
International
Solutions
Other
Eliminations
Total
Operating revenue
$
293,303
31,488
$
17,308
$
1,708
$
—
$
343,807
Intersegment
—
—
—
10,235
(10,235
)
—
Total operating revenue
$
293,303
31,488
$
17,308
$
11,943
$
(10,235
)
$
343,807
Direct operating expenses
214,696
18,019
17,320
19,113
—
269,148
Intersegment
9,489
5,778
421
114
(15,802
)
—
Total drilling services & other operating expenses
$
224,185
23,797
$
17,741
$
19,227
$
(15,802
)
$
269,148
Year Ended September 30, 2021
(in thousands)
North America
Solutions
Offshore Gulf
of Mexico
International
Solutions
Other
Eliminations
Total
Operating revenue
$
1,026,364
$
126,399
$
57,917
$
7,888
$
—
$
1,218,568
Intersegment
—
—
—
35,416
(35,416
)
—
Total operating revenue
$
1,026,364
$
126,399
$
57,917
$
43,304
$
(35,416
)
$
1,218,568
Direct operating expenses
755,193
85,062
67,803
49,680
—
957,738
Intersegment
18,314
12,187
869
384
(31,754
)
—
Total drilling services & other operating expenses
$
773,507
$
97,249
$
68,672
$
50,064
$
(31,754
)
$
957,738
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 operating income (loss) per the information above to loss from continuing operations before income taxes as reported on the Consolidated Statements of Operations:
Three Months Ended
Year Ended
September 30,
June 30,
September 30,
September 30,
(in thousands)
2021
2021
2020
2021
2020
Operating income (loss)
North America Solutions
$
(60,671
)
$
(43,743
)
$
(78,197
)
$
(287,176
)
$
(393,902
)
International Solutions
(5,650
)
(3,538
)
(3,474
)
(21,003
)
(162,368
)
Offshore Gulf of Mexico
4,542
5,707
1,456
15,969
7,478
Other
(8,073
)
(4,670
)
699
(9,704
)
4,403
Eliminations
7,277
(3,298
)
—
(1,580
)
—
Segment operating loss
$
(62,575
)
$
(49,542
)
$
(79,516
)
$
(303,494
)
$
(544,389
)
Gain on sale of assets
3,787
3,434
27,985
1,042
46,775
Corporate selling, general and administrative costs, corporate depreciation and corporate restructuring charges
(38,248
)
(31,259
)
(23,889
)
(126,097
)
(122,573
)
Operating loss
$
(97,036
)
$
(77,367
)
$
(75,420
)
$
(428,549
)
$
(620,187
)
Other income (expense):
Interest and dividend income
2,029
1,527
753
10,254
7,304
Interest expense
(6,094
)
(5,963
)
(6,154
)
(23,955
)
(24,474
)
Gain (loss) on investment securities
(1,126
)
2,409
(1,395
)
6,727
(8,720
)
Gain on sale of subsidiary
—
—
—
—
14,963
Other
(2,630
)
(970
)
(1,673
)
(5,657
)
(5,384
)
Total unallocated amounts
(7,821
)
(2,997
)
(8,469
)
(12,631
)
(16,311
)
Loss from continuing operations before income taxes
$
(104,857
)
$
(80,364
)
$
(83,889
)
$
(441,180
)
$
(636,498
)
SUPPLEMENTARY STATISTICAL INFORMATION
Unaudited
U.S. LAND RIG COUNTS & MARKETABLE FLEET STATISTICS
November 17,
September 30,
June 30,
Q4FY21
2021
2021
2021
Average
U.S. Land Operations
Term Contract Rigs
82
73
64
67
Spot Contract Rigs
59
54
57
57
Total Contracted Rigs
141
127
121
124
Idle or Other Rigs
95
109
121
116
Total Marketable Fleet
236
236
242
240
H&P GLOBAL FLEET UNDER TERM CONTRACT STATISTICS
Number of Rigs Already Under Long-Term Contracts(*)
(Estimated Quarterly Average — as of 9/30/21)
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Segment
FY22
FY22
FY22
FY22
FY23
FY23
FY23
U.S. Land Operations
81.9
77.2
55.5
41.9
29.4
7.0
5.5
International Land Operations
1.0
1.0
1.0
1.0
1.0
1.0
1.0
Offshore Operations
—
—
—
—
—
—
—
Total
82.9
78.2
56.5
42.9
30.4
8.0
6.5
(*) 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 September 30, 2021
(in thousands, except per share data)
Pretax
Tax
Net
EPS
Net loss (GAAP basis)
$
(79,161
)
$
(0.74
)
(-) Gains related to the sale of equipment
$
4,348
$
810
$
3,538
$
0.03
(-) Adjustment to future value earn out for acquisitions
$
(200
)
$
(49
)
$
(151
)
$
—
(-) Fair market value adjustments to equity investments
$
(1,130
)
$
(246
)
$
(884
)
$
(0.01
)
(-) Inventory write-down
$
(1,714
)
$
(403
)
$
(1,311
)
$
(0.01
)
(-) Restructuring charges
$
(2,074
)
$
(499
)
$
(1,575
)
$
(0.01
)
(-) Closing costs of the ADNOC Drilling transactions
$
(2,634
)
$
(617
)
$
(2,017
)
$
(0.02
)
(-) Impairment for fair market value adjustments to equipment held for sale
$
(14,436
)
$
(3,562
)
$
(10,874
)
$
(0.10
)
Adjusted net loss
$
(65,887
)
$
(0.62
)
Three Months Ended June 30, 2021
(in thousands, except per share data)
Pretax
Tax
Net
EPS
Net loss (GAAP basis)
$
(55,555
)
$
(0.52
)
(-) Adjustment for tax position
$
5,777
$
5,777
$
0.05
(-) Fair market adjustment to equity investments
$
2,253
$
593
$
1,660
$
0.02
(-) Gain from discontinued ops. - currency fluctuation adjustments
$
1,150
$
—
$
1,150
$
0.01
(-) Restructuring charges
$
(2,110
)
$
(512
)
$
(1,598
)
$
(0.01
)
(-) Adjustment to future value earnout for acquisitions
$
(823
)
$
(191
)
$
(632
)
$
(0.01
)
(-) Impairment for fair market value adjustments to decomm. rigs
$
(2,131
)
$
(1,200
)
$
(931
)
$
(0.01
)
Adjusted net loss
$
(60,981
)
$
(0.57
)
Twelve Months Ended September 30, 2021
(in thousands, except per share data)
Pretax
Tax
Net
EPS
Net loss (GAAP basis)
$
(326,150
)
$
(3.04
)
(-) Gain from discontinued ops. - currency fluctuation adjustments
$
10,936
$
—
$
10,936
$
0.10
(-) Fair market adjustment to equity investments
$
6,572
$
1,545
$
5,027
$
0.05
(-) Adjustment for tax position
$
—
$
(5,777
)
$
5,777
$
0.05
(-) Losses related to an inventory write-down
$
(1,714
)
$
(403
)
$
(1,311
)
$
(0.01
)
(-) Adjustment to future value earn out for acquisitions
$
(1,023
)
$
(240
)
$
(783
)
$
(0.01
)
(-) Losses related to closing costs associated with the ADNOC Drilling transaction
$
(2,637
)
$
(620
)
$
(2,017
)
$
(0.02
)
(-) Restructuring charges
$
(5,930
)
$
(1,393
)
$
(4,537
)
$
(0.03
)
(-) Net loss on the sale of excess drilling equipment and spares
$
(9,493
)
$
(2,231
)
$
(7,262
)
$
(0.07
)
(-) Impairment for fair market value adjustments to equipment held for sale
$
(70,850
)
$
(16,650
)
$
(54,200
)
$
(0.50
)
Adjusted net loss
$
(277,780
)
$
(2.60
)
(**)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.
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