Company Overview - Helmerich & Payne (H&P) is a premier U S driller with 149 contracted rigs[10] - The company has a strong presence in the Middle East with 65 contracted rigs, including 17 rigs that are temporarily suspended or notified to suspend operations in Saudi Arabia[10] - H&P has an asset-light offshore business with 37 offshore rigs and management contracts[10] - The company is a major provider of rigs in Vaca Muerta, indicating growth market exposure[10] Financial Performance and Strategy - H&P is targeting a 50% direct margin with a focus on NAS Direct margin/day[11] - The company repaid $25 million on its existing $400 million term loan during the second fiscal quarter and expects to repay approximately $175 million in calendar year 2025[11] - H&P anticipates realizing $50-$75 million in synergies and other cost savings[22] - Q2 Fiscal Year 2025 Adjusted EBITDA was $241.5 million, with a diluted EPS of $0.01 and adjusted EPS of $0.02[20] - Net capital expenditures for Q2 Fiscal Year 2025 were $144.8 million[20] Market Position and Outlook - Approximately 50% of North America Solutions segment contracts are performance-based[12] - Total liquidity stands at $1.15 billion, comprising cash and an undrawn credit facility, with a debt reduction goal of $400 million in 2025-2026[22] - The company's backlog is approximately $7.6 billion, supported by large investment-grade customers[22]

Core Insights - Helmerich & Payne reported $1.02 billion in revenue for the quarter ended March 2025, a year-over-year increase of 47.7% [1] - The EPS for the same period was $0.02, down from $0.86 a year ago, indicating a significant decline [1] - The revenue exceeded the Zacks Consensus Estimate of $992.67 million by 2.35%, while the EPS fell short of the consensus estimate of $0.65 by 96.92% [1] Financial Performance Metrics - Average active rigs in North America Solutions were 149, slightly above the three-analyst average estimate of 148 [4] - The number of available rigs in North America Solutions was 224, close to the average estimate of 226 [4] - In International Solutions, the number of available rigs was 153, significantly higher than the estimated 111 [4] - Average active rigs in International Solutions reached 69, compared to the average estimate of 47 [4] - Operating Revenues for Other segments were $3.65 million, below the average estimate of $22.47 million, but showed a year-over-year increase of 29.6% [4] - Operating Revenues for International Solutions were $247.91 million, exceeding the average estimate of $180.77 million, with a remarkable year-over-year change of 440.4% [4] - Operating Revenues for North America Solutions were $599.69 million, slightly below the average estimate of $572.80 million, reflecting a year-over-year decrease of 2.2% [4] - Drilling services generated $1.01 billion in revenue, surpassing the average estimate of $982.62 million, with a year-over-year increase of 47.8% [4] - Segment operating income for International Solutions was a loss of $34.98 million, compared to the average estimate of a $4.09 million profit [4] - Segment operating income for North America Solutions was $151.94 million, exceeding the average estimate of $136.91 million [4] Stock Performance - Helmerich & Payne's shares returned +1.2% over the past month, underperforming the Zacks S&P 500 composite's +10.6% change [3] - The stock currently holds a Zacks Rank 3 (Hold), suggesting it may perform in line with the broader market in the near term [3]

Helmerich & Payne (HP) came out with quarterly earnings of $0.02 per share, missing the Zacks Consensus Estimate of $0.65 per share. This compares to earnings of $0.86 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of -96.92%. A quarter ago, it was expected that this oil and gas well-drilling contractor would post earnings of $0.69 per share when it actually produced earnings of $0.71, delivering a surprise of 2.90%.Over the las ...

[Operating and Financial Highlights](index=1&type=section&id=Operating%20and%20Financial%20Highlights) Helmerich & Payne reported fiscal second quarter 2025 net income of **$1.7 million** on **$1.0 billion** revenue, with **$242 million** Adjusted EBITDA, highlighted by the KCA Deutag acquisition and debt reduction efforts - Completed the acquisition of KCA Deutag, significantly advancing the company's long-term international growth strategy[4](index=4&type=chunk) - Increased expected cost savings from the KCA Deutag acquisition, now anticipating over **$25 million** in expense synergies and a total cost structure reduction of **$50 to $75 million**[4](index=4&type=chunk) Q2 FY2025 Key Financial Metrics | Metric | Value | | :--- | :--- | | Operating Revenues | $1.0 billion | | Net Income | $1.7 million | | Diluted EPS | $0.01 | | Adjusted EBITDA | $242 million | | Net Cash from Operating Activities | $56.0 million | | North America Direct Margin per Day | $19,800 | - The company repaid **$25 million** on its term loan during the quarter and expects to repay a total of approximately **$175 million** in calendar year 2025[4](index=4&type=chunk) [Management Commentary](index=1&type=section&id=Management%20Commentary) Management emphasized the KCA Deutag acquisition as a historic milestone for international expansion, positioning H&P as a leading global drilling company - The KCA Deutag acquisition is a significant achievement, positioning H&P as a leading global drilling company for long-term international expansion[3](index=3&type=chunk) - The North America Solutions segment maintained a steady rig count and achieved margins better than expectations, demonstrating resilience[3](index=3&type=chunk) - The International Solutions segment is facing near-term headwinds from rig suspensions and start-up costs related to Saudi Arabia operations, impacting the Q3 outlook, though sequential improvement is expected[6](index=6&type=chunk) - The company has identified permanent cost savings and synergies from the acquisition, expecting to reduce its overall cost structure by **$50 to $75 million**, with the full impact realized during fiscal year 2026[7](index=7&type=chunk) - Debt reduction remains a key priority, with a **$25 million** repayment on the term loan in Q2 and a target of approximately **$175 million** in repayments by the end of calendar 2025[7](index=7&type=chunk) [Operating Segment Results](index=2&type=section&id=Operating%20Segment%20Results%20for%20the%20Second%20Quarter%20of%20Fiscal%20Year%202025) The second quarter results include 75 days of operations from the newly acquired KCA Deutag, impacting International and Offshore segments [North America Solutions](index=2&type=section&id=North%20America%20Solutions) This segment's performance was stable, with operating income of **$151.9 million**, a slight decrease from **$152.2 million** in the previous quarter North America Solutions Performance (Q2'25 vs Q1'25) | Metric | Q2 FY2025 | Q1 FY2025 | | :--- | :--- | :--- | | Operating Income | $151.9 million | $152.2 million | | Direct Margin | $265.7 million | $265.8 million | [International Solutions](index=2&type=section&id=International%20Solutions) The segment's operating loss increased to **$35.0 million** from **$14.9 million** sequentially, primarily due to start-up costs and rig suspensions in Saudi Arabia International Solutions Performance (Q2'25 vs Q1'25) | Metric | Q2 FY2025 | Q1 FY2025 | | :--- | :--- | :--- | | Operating Loss | $(35.0) million | $(14.9) million | | Direct Margin | $26.9 million | $(6.9) million | [Offshore Solutions](index=3&type=section&id=Offshore%20Solutions) This segment experienced substantial growth, with operating income rising to **$17.4 million** from **$3.5 million** in the previous quarter, primarily due to KCA Deutag's offshore operations Offshore Solutions Performance (Q2'25 vs Q1'25) | Metric | Q2 FY2025 | Q1 FY2025 | | :--- | :--- | :--- | | Operating Income | $17.4 million | $3.5 million | | Direct Margin | $26.2 million | $6.5 million | [Operational Outlook for Q3 FY2025](index=3&type=section&id=Operational%20Outlook%20for%20the%20Third%20Quarter%20of%20Fiscal%20Year%202025) For the third quarter of fiscal 2025, Helmerich & Payne anticipates a modestly lower rig count in North America and provides direct margin guidance for all segments Q3 FY2025 Segment Guidance | Segment | Metric | Guidance | | :--- | :--- | :--- | | **North America Solutions** | Direct Margin | $235 - $260 million | | | Average Rig Count | 143 - 149 rigs | | **International Solutions** | Direct Margin | $25 - $35 million | | | Average Rig Count | 85 - 91 rigs | | **Offshore Solutions** | Direct Margin | $22 - $29 million | | | Avg. Management Contracts | 30 - 35 contracts | [Other Estimates for Fiscal Year 2025](index=3&type=section&id=Other%20Estimates%20for%20Fiscal%20Year%202025) The company updated its full-year fiscal 2025 guidance, now expecting depreciation of approximately **$595 million**, while other key estimates remain unchanged Full-Year Fiscal 2025 Financial Estimates | Metric | Expected Value | | :--- | :--- | | Gross Capital Expenditures | $360 - $395 million | | Depreciation | ~$595 million | | Research & Development Expenses | ~$32 million | | General & Administrative Expenses | ~$280 million | | Cash Taxes | $190 - $240 million | | Interest Expense (Q3-Q4) | ~$50 million | [Interim Financial Information](index=6&type=section&id=Interim%20Financial%20Information) This section presents the unaudited condensed consolidated financial statements as of March 31, 2025, reflecting the significant impact of the KCA Deutag acquisition [Consolidated Statements of Operations](index=6&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) For the second quarter ended March 31, 2025, H&P reported operating revenues of **$1.016 billion**, a substantial increase from **$677.3 million**, though net income fell to **$1.7 million** due to acquisition costs Q2 FY2025 Income Statement Highlights (vs. Q1 FY2025) | (in thousands) | Q2 FY2025 (3 mo. ended Mar 31, '25) | Q1 FY2025 (3 mo. ended Dec 31, '24) | | :--- | :--- | :--- | | Operating Revenues | $1,016,039 | $677,302 | | Operating Income | $42,163 | $90,886 | | Net Income Attributable to H&P | $1,654 | $54,772 | | Diluted EPS | $0.01 | $0.54 | [Consolidated Balance Sheets](index=7&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) As of March 31, 2025, total assets grew to **$7.24 billion** from **$5.78 billion**, driven by the KCA Deutag acquisition, which also increased total liabilities to **$4.19 billion** Balance Sheet Comparison (in thousands) | Account | March 31, 2025 | September 30, 2024 | | :--- | :--- | :--- | | Total Current Assets | $1,493,188 | $1,192,069 | | Property, Plant and Equipment, net | $4,485,344 | $3,016,277 | | Total Assets | $7,242,263 | $5,781,898 | | Total Current Liabilities | $887,565 | $446,949 | | Long-term Debt, net | $2,233,619 | $1,782,182 | | Total Shareholders' Equity | $3,052,263 | $2,917,152 | [Consolidated Statements of Cash Flows](index=8&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) For the six months ended March 31, 2025, net cash from operating activities was **$214.4 million**, while investing activities used **$1.82 billion**, primarily for the KCA Deutag acquisition Cash Flow Summary (Six Months Ended March 31, 2025) | (in thousands) | Amount | | :--- | :--- | | Net cash provided by operating activities | $214,404 | | Net cash used in investing activities | $(1,815,523) | | Net cash provided by financing activities | $311,107 | | Net decrease in cash | $(1,283,606) | [Segment Reporting](index=9&type=section&id=SEGMENT%20REPORTING) This section provides a detailed financial and operational breakdown for each business segment, highlighting significant revenue growth in International and Offshore segments due to the KCA Deutag acquisition Segment Performance - Q2 FY2025 (in thousands) | Segment | Operating Revenues | Direct Margin (Non-GAAP) | Segment Operating Income (Loss) | | :--- | :--- | :--- | :--- | | North America Solutions | $599,694 | $265,621 | $151,943 | | International Solutions | $247,909 | $26,926 | $(34,983) | | Offshore Solutions | $149,080 | $26,176 | $17,375 | Average Active Rigs (Q2'25 vs Q1'25) | Segment | Q2 FY2025 | Q1 FY2025 | | :--- | :--- | :--- | | North America Solutions | 149 | 149 | | International Solutions | 69 | 18 | | Offshore Solutions | 3 | 3 | [Supplementary Statistical Information](index=11&type=section&id=SUPPLEMENTARY%20STATISTICAL%20INFORMATION) As of May 7, 2025, H&P's fleet included 149 contracted rigs in North America and 88 contracted rigs in its International segment, reflecting expanded operational scale post-acquisition Rig Count and Fleet Status (as of May 7, 2025) | Segment | Total Contracted Rigs | Total Marketable Fleet | | :--- | :--- | :--- | | North American Solutions | 149 | 224 | | International Solutions | 88 | 153 | | Offshore Solutions (Platform Rigs) | 3 | 7 | | Offshore Solutions (Mgmt. Contracts) | 34 | N/A | [Non-GAAP Measurements](index=12&type=section&id=NON-GAAP%20MEASUREMENTS) This section provides reconciliations for non-GAAP financial measures to their most comparable GAAP counterparts, including Adjusted Net Income, Direct Margin, and Adjusted EBITDA [Reconciliation of Adjusted Net Income](index=12&type=section&id=NON-GAAP%20RECONCILIATION%20OF%20SELECT%20ITEMS%20AND%20ADJUSTED%20NET%20INCOME) For the second quarter of fiscal 2025, the company's GAAP net income of **$1.7 million** ($0.01 per share) was adjusted to **$1.9 million**, or **$0.02** per share, after accounting for various items Q2 FY2025 Net Income to Adjusted Net Income Reconciliation (in thousands) | Description | Net Amount | EPS Impact | | :--- | :--- | :--- | | **Net income (GAAP basis)** | **$1,654** | **$0.01** | | (-) Fair market adjustment to equity investments | $16,206 | $0.16 | | (-) Losses related to transaction and integration costs | $(10,665) | $(0.11) | | Other Adjustments | $(5,747) | $(0.06) | | **Adjusted net income (Non-GAAP)** | **$1,860** | **$0.02** | [Reconciliation of Direct Margin](index=13&type=section&id=NON-GAAP%20RECONCILIATION%20OF%20DIRECT%20MARGIN) The report reconciles the non-GAAP direct margin metric to the GAAP-compliant segment operating income (loss), defining direct margin as operating revenues less direct operating expenses - Direct margin is defined as operating revenues less direct operating expenses (both excluding reimbursements) and is used by the company to assess operational performance[44](index=44&type=chunk) [Reconciliation of Adjusted EBITDA](index=14&type=section&id=NON-GAAP%20RECONCILIATION%20OF%20ADJUSTED%20EBITDA) For the second quarter of fiscal 2025, H&P reconciled its net income of **$1.7 million** to an Adjusted EBITDA of **$241.5 million** by adding back income tax, interest, depreciation, and other select items Q2 FY2025 Net Income to Adjusted EBITDA Reconciliation (in thousands) | Description | Amount | | :--- | :--- | | **Net income** | **$1,654** | | Add back: Income tax expense | $41,462 | | Add back: Net Interest & Other Expense | $21,095 | | Add back: Depreciation and amortization | $157,657 | | Add back: Select Items (Transaction costs, etc.) | $41,644 | | **Adjusted EBITDA (Non-GAAP)** | **$241,504** |

The Zacks Oil and Gas - Drilling industry operates in a volatile environment, influenced by rig availability, contracting activity, and capital expenditures rather than commodity prices alone. A 5% decline in the U.S. rig count over the past year has slowed drilling momentum, raising concerns for domestic service providers. Meanwhile, offshore drilling demand remains strong, with high utilization rates and multi-year contracts supporting revenue stability. However, short-term imbalances in the Gulf of Mexic ...

Core Viewpoint - Helmerich & Payne's international expansion efforts are seen as attractive, but the stock is currently fairly valued, leading to a neutral rating on the shares. The stock has since dropped over 30% [1]. Group 1 - The stock of Helmerich & Payne has experienced a decline of over 30% since the last analysis [1]. - The previous thesis highlighted the attractiveness of the company's international expansion efforts [1]. Group 2 - The author expresses a focus on emerging markets and seeks investment opportunities that are low-risk with high uncertainty [1]. - The investment philosophy is influenced by notable investors and economic thinkers, emphasizing an owner-mindset and a disregard for macroeconomic noise [1].

Company Overview - Helmerich & Payne (HP) has experienced a challenging year, with shares down 33%, underperforming the energy sector's 1.5% increase and the S&P 500's 11% growth, currently priced at $25.42, near its 52-week low of $23.80 [1] - HP is a leading player in land and offshore drilling, boasting the youngest and most efficient rig fleet, with advanced FlexRigs that enhance operational efficiency [2] Strengths - The company has a strong global presence, recently delivering eight FlexRigs to Saudi Arabia and acquiring KCA Deutag, which adds a $5.5 billion contract backlog [2] - HP maintains disciplined capital management, with $526 million in cash and an undrawn $950 million credit facility, alongside plans to repay a $400 million loan within 18 months [2] - The firm holds a 35% market share in the super-spec rig space, particularly in the Permian Basin, with industry-leading margins [2] Weaknesses - HP faces near-term challenges, particularly with the integration of KCA Deutag leading to higher costs, and expected international margins for the second quarter of fiscal 2025 ranging from a loss of $7 million to a loss of $3 million [3] - The North America Solutions segment, HP's largest, has seen revenues fall to $598 million in the first quarter of fiscal 2025, with further margin declines anticipated [3] - Increased debt from the KCA acquisition adds financial risk, with an additional $75 million in interest expenses this year, and HP remains vulnerable to oil price fluctuations and potential decreases in drilling demand due to industry consolidation [3] Industry Position - HP is part of the Zacks Oil and Gas – Drilling industry, which ranks in the bottom 9% of 247 industries, indicating potential underperformance [4] - The fiscal 2025 earnings per share estimate for HP has declined by 7% in the past 30 days, from $3.13 to $2.93 [4] - Despite solid assets and a strong balance sheet, near-term headwinds and industry pressures have led to a Zacks Rank 3 (Hold) for HP [4]

Group 1 - HP Inc. is facing a pivotal moment with the End of Life date for Windows 10 approaching in October 2023, which may impact its product offerings and sales [1] - The emergence of AI PCs is becoming more significant, indicating a potential shift in consumer preferences and technology trends that could benefit HP Inc. [1] Group 2 - The analysis style emphasizes strong fundamentals, particularly focusing on revenue and earnings growth, which are critical for bullish investment positions [1] - Sentiment analysis is also important, with a preference for scenarios where market pessimism exists, suggesting potential buying opportunities for investors [1]

Core Viewpoint - Helmerich & Payne, Inc. reported a fiscal first-quarter 2025 adjusted net income of 71 cents per share, exceeding the Zacks Consensus Estimate of 69 cents, primarily due to strong performance in the North America Solutions segment [1][2]. Financial Performance - The adjusted net income of 71 cents per share is lower than the year-ago quarter's figure of 97 cents per share, attributed to weakness in the International Solutions segment [2]. - Operating revenues for the quarter were $677.3 million, missing the Zacks Consensus Estimate of $691 million, with Drilling Services sales totaling $674.6 million, also below the consensus mark of $688 million [2]. - North America Solutions segment generated operating revenues of $598.1 million, a slight increase of 0.7% year over year, but missed the Zacks Consensus Estimate of $608 million [4]. - International Solutions segment reported operating revenues of $47.5 million, a decrease of 13.6% from the previous year, missing projections due to challenges in the Saudi Arabia market [5]. - Offshore Solutions revenues increased by 14.4% to $29.2 million, but still fell short of projections [6]. Segmental Performance - North America Solutions achieved an operating profit of $152 million, up from $144.5 million in the prior-year period, benefiting from lower expenses [4]. - International Solutions faced an operating loss of $15.2 million, compared to a profit of $5.4 million in the same quarter last year [5]. - Offshore Solutions reported an operating profit of $3.5 million, a 15% increase from the prior year, but missed estimates due to material and supply expense timing issues [6]. Financial Position - The company spent $106.5 million on capital programs in the reported quarter, with cash and cash equivalents totaling $391.2 million and long-term debt at $1.8 billion, resulting in a debt-to-capitalization ratio of 37.7% [7]. Guidance - For Q2 Fiscal 2025, the company expects operating gross margin to be between $240-$260 million for North America Solutions and $6-$8 million for Gulf of Mexico (Offshore Solutions) legacy operations [8]. - International Solutions' direct margins are anticipated to be between $7 million and $3 million, excluding foreign exchange impacts [9]. - The capital outlay for fiscal year 2025 is estimated to be between $360 million and $395 million, with ongoing asset sales expected to offset some expenditures [10].

Financial Data and Key Metrics Changes - The company reported quarterly revenues of $677 million, a decrease from $693 million in the previous quarter, primarily due to lower revenues in the North American Solutions segment [28] - Net income per diluted share was $0.54, down from $0.76 in the previous quarter, impacted by a net loss of $0.17 per share from select items [29] - Adjusted diluted earnings per share were $0.71, compared to $0.76 in the fourth fiscal quarter [30] - Capital expenditures for the first quarter were $106 million, consistent with expectations [31] - Cash flow from operations remained strong at $158 million, down from $169 million in the previous quarter [31] Business Line Data and Key Metrics Changes - In the North American Solutions segment, the average contracted rigs were 149, slightly down from the previous quarter, with revenues of $598 million, a decrease of $20 million [32][33] - The segment direct margin was approximately $266 million, down from $274 million in the last quarter [33] - The International Solutions segment ended the quarter with 20 rigs on contract, of which 15 were generating revenue [34] - The offshore Gulf of Mexico segment generated a direct margin of $6.5 million, just below the guidance range [36] Market Data and Key Metrics Changes - The company holds over 35% market share in the super spec FlexRig fleet in the U.S., with a strong presence in major basins, particularly the Permian [12] - The company expects North American Solutions to generate at least $1 billion of direct margin on an annual basis [38] - The legacy KCA operations are expected to contribute between $35 million and $50 million in direct margin [40] Company Strategy and Development Direction - The company is focused on international growth, having completed the acquisition of KCA Deutag, positioning itself as a global leader in onshore drilling solutions [10][11] - The acquisition is expected to enhance financial resilience and cash flow diversification across global markets [18] - The company aims to maintain a strong financial position while balancing free cash flow growth, capital expenditure opportunities, and returns to shareholders [25] Management's Comments on Operating Environment and Future Outlook - Management acknowledged near-term headwinds related to rig suspensions from the KCA acquisition and startup costs in Saudi Arabia, viewing these as temporary challenges [21] - The company remains optimistic about long-term energy demand and the potential for growth in natural gas production [102] - Management emphasized the importance of maintaining pricing discipline and delivering value to customers through performance-based contracts [107] Other Important Information - The company maintains an investment-grade credit rating, supported by its scale and diversified operations following the KCA acquisition [49] - The company is committed to reducing long-term net leverage to or below one term [50] - The cash and short-term investments were approximately $526 million as of December 31, 2024, providing adequate liquidity for operations and dividends [48] Q&A Session Summary Question: Can you talk about the range for the KCA international onshore margin? - The expected margin range is between $35 million and $50 million, influenced by market softness and rig suspension timing [55][56] Question: How does the trajectory look in Oman and Kuwait? - Positive feedback was received, with opportunities for growth in Oman and Kuwait, although Latin America may remain flat [66][68] Question: What are the moving parts driving the lower outlook for direct margin in North America? - The lower outlook is attributed to rig churn and slight pricing changes, but performance-based contracts remain strong [71][73] Question: What is the expected timing for the rigs in Saudi to become fully operational? - The company is pleased with the performance and expects strong earnings power once all rigs are operational, estimating close to $20 million of EBITDA margin contribution [84][86] Question: What are the startup costs associated with the legacy international operations? - Most costs are related to labor and rentals, with expectations of significant margin contributions once rigs are operational [94][97] Question: How does the company view the market for natural gas activity in 2025? - The company is bullish on long-term fundamentals for natural gas, although significant growth may not occur until 2026 [102][103]