Helmerich & Payne(HP) - 2024 Q3 - Quarterly Results

Financial Highlights Helmerich & Payne reported fiscal third-quarter 2024 net income of $89 million, or $0.88 per diluted share, an increase from the prior quarter's $85 million, with operating revenues growing sequentially to $698 million, generating $197 million in cash from operations and returning $42 million to shareholders Q3 FY22024 vs Q2 FY2024 Key Financials (in millions) | Metric | Q3 FY2024 | Q2 FY2024 | | :--- | :--- | :--- | | Net Income | $89 million | $85 million | | Diluted EPS | $0.88 | $0.84 | | Operating Revenues | $698 million | $688 million | | Net Cash from Operations | $197 million | $144 million | - The Board of Directors declared a quarterly base dividend of $0.25 per share and a supplemental dividend of $0.17 per share, totaling $42 million returned to shareholders during the quarter[18][28] - Net income for the quarter included a net $(0.04) per share impact from select items, primarily consisting of a $0.06 gain from equity investment adjustments and $(0.10) in losses from a Blue Chip Swap transaction and professional fees[14][28] - The North America Solutions (NAS) segment exited the quarter with 146 active rigs, achieving revenue per day of $39,800 and direct margins per day of $20,300[28] Management Commentary Management highlighted the resilience of the North America Solutions segment, which maintained a stable rig count despite a broader industry decline, emphasizing progress on the international strategy with the first super-spec rig arriving in Saudi Arabia for a new contract with Saudi Aramco, and anticipating a stable to modestly inclining rig count despite macro headwinds - The North America Solutions (NAS) active rig count remained relatively stable during the third fiscal quarter, demonstrating resilience despite a more significant decline in the overall industry rig count[16] - The company is advancing its international strategy, marked by the arrival of its first super-spec FlexRig® in Saudi Arabia to begin work for Saudi Aramco, with preparation for the remaining seven rigs on schedule[16][17][32] - The company returned $42 million to shareholders via dividends in the quarter, with preliminary FY2025 capex expected to be similar to FY2024 levels, and potential increases tied to new international contract awards[18] - Management anticipates continued contractual churn in the U.S. market but expects the active rig count to be flat with a potential modest incline towards the fiscal year-end[30][31] Operating Segment Results and Outlook In Q3 FY2024, the North America Solutions segment's operating income increased sequentially due to higher direct margins, while the International Solutions segment posted an operating loss primarily driven by start-up costs for Saudi Arabia operations, and the Offshore Gulf of Mexico segment saw a significant rise in operating income as rigs became fully operational ahead of schedule North America Solutions The North America Solutions segment's operating income grew to $163.4 million from $147.1 million in the prior quarter, as direct margin increased by $6.0 million to $277.4 million, with the company exiting Q3 with 146 active rigs and projecting an exit rig count between 147-153 for Q4, with direct margins of $260-$280 million North America Solutions Performance (Q3 vs Q2 FY2024, in millions) | Metric | Q3 FY2024 | Q2 FY2024 | | :--- | :--- | :--- | | Operating Income | $163.4 million | $147.1 million | | Direct Margin | $277.4 million | $271.4 million | North America Solutions Q4 FY2024 Outlook (in millions) | Metric | Q4 FY2024 Guidance | | :--- | :--- | | Direct Margins | $260 - $280 million | | Exit Active Rigs | 147 - 153 | International Solutions This segment reported an operating loss of $4.8 million, a sharp decline from the $3.6 million operating income in the previous quarter, primarily due to recommissioning and start-up expenses for rigs being exported to Saudi Arabia, with Q4 direct margins projected to be between $(2) million and $2 million, including an estimated $6-$8 million in rig preparation and start-up costs International Solutions Performance (Q3 vs Q2 FY2024, in millions) | Metric | Q3 FY2024 | Q2 FY2024 | | :--- | :--- | :--- | | Operating Income (Loss) | ($4.8 million) | $3.6 million | | Direct Margin | $0.4 million | $8.4 million | - The decrease in operating income was mainly due to recommissioning expenses for rigs being sent to Saudi Arabia and related start-up costs[33] International Solutions Q4 FY2024 Outlook (in millions) | Metric | Q4 FY2024 Guidance | | :--- | :--- | | Direct Margins | $(2) - $2 million | | Est. Saudi Start-up Costs | $6 - $8 million | Offshore Gulf of Mexico Operating income for the Offshore segment surged to $5.0 million from just $0.1 million in the prior quarter, with this significant improvement attributed to rigs moving to full operating rates earlier than planned, and the outlook for Q4 anticipating direct margins to be between $6-$8 million Offshore Gulf of Mexico Performance (Q3 vs Q2 FY2024, in millions) | Metric | Q3 FY2024 | Q2 FY2024 | | :--- | :--- | :--- | | Operating Income | $5.0 million | $0.1 million | | Direct Margin | $7.6 million | $2.9 million | - The increase in operating income was primarily attributable to rigs moving to full operating rates earlier than planned[33] Offshore Gulf of Mexico Q4 FY2024 Outlook (in millions) | Metric | Q4 FY2024 Guidance | | :--- | :--- | | Direct Margins | $6 - $8 million | Fiscal Year 2024 Outlook The company updated its full-year guidance for fiscal 2024, maintaining gross capital expenditures at approximately $500 million, with expected offsets from asset sales revised to $45 million, and updated guidance for depreciation, R&D, and G&A expenses, while the cash tax forecast remains unchanged Updated FY2024 Full-Year Guidance (in millions) | Metric | FY2024 Estimate | | :--- | :--- | | Gross Capital Expenditures | ~$500 million | | Asset Sale Offsets | ~$45 million | | Depreciation | ~$400 million | | R&D Expenses | ~$40 million | | G&A Expenses | ~$250 million | | Cash Taxes Paid | $150 - $200 million | Consolidated Financial Statements This section provides the unaudited condensed consolidated financial statements for the three and nine months ended June 30, 2024, showing the company generated $697.7 million in revenue and $88.7 million in net income for the third quarter, with total assets at $4.48 billion as of June 30, 2024, and cash from operations at $515.9 million for the nine-month period Statements of Operations For the third quarter ended June 30, 2024, H&P reported total operating revenues of $697.7 million and an operating income of $111.3 million, resulting in a net income of $88.7 million and diluted earnings per share of $0.88, which compares favorably to the prior quarter's net income of $84.8 million Condensed Statement of Operations (in thousands) | Metric | Three Months Ended June 30, 2024 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Operating Revenues | $697,724 | $687,943 | | Operating Income | $111,313 | $110,572 | | Net Income | $88,685 | $84,831 | | Diluted EPS | $0.88 | $0.84 | Balance Sheets As of June 30, 2024, H&P's balance sheet showed total assets of $4.48 billion, an increase from $4.38 billion at the end of fiscal 2023, with cash and cash equivalents at $203.6 million, total liabilities at $1.63 billion, and total shareholders' equity increasing to $2.86 billion Condensed Balance Sheet Data (in thousands) | Metric | June 30, 2024 | September 30, 2023 | | :--- | :--- | :--- | | Total Current Assets | $970,319 | $1,006,625 | | Property, Plant & Equipment, net | $3,014,345 | $2,921,695 | | Total Assets | $4,484,982 | $4,381,956 | | Total Current Liabilities | $456,792 | $418,931 | | Long-Term Debt, net | $545,589 | $545,144 | | Total Shareholders' Equity | $2,856,845 | $2,771,943 | Statements of Cash Flows For the nine months ended June 30, 2024, net cash provided by operating activities was $515.9 million, net cash used in investing activities totaled $354.0 million largely due to $389.1 million in capital expenditures, and net cash used in financing activities was $415.0 million, driven by dividends and share repurchases Cash Flow Summary (Nine Months Ended June 30, in thousands) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $515,907 | $619,000 | | Net Cash used in Investing Activities | ($353,998) | ($191,044) | | Net Cash used in Financing Activities | ($414,992) | ($414,992) | Supplementary Information and Non-GAAP Reconciliations This section provides supplemental operational data and reconciles non-GAAP measures to their GAAP equivalents, detailing H&P's 148 contracted U.S. land rigs as of July 24, 2024, and outlining future rig activity under long-term contracts, while clarifying adjustments made to GAAP net income to arrive at adjusted net income and reconciling segment operating income to the non-GAAP direct margin metric Supplementary Rig Data As of July 24, 2024, H&P's U.S. land operations had 148 total contracted rigs, comprising 88 on term contracts and 60 on spot contracts, out of a total marketable fleet of 232, with a forward-looking schedule showing 95.9 total rigs under long-term contracts for Q4 FY24, projected to decrease to 14.0 by Q2 FY26 U.S. Land Rig Counts (as of July 24, 2024) | Contract Type | Rig Count | | :--- | :--- | | Term Contract Rigs | 88 | | Spot Contract Rigs | 60 | | Total Contracted Rigs | 148 | | Idle or Other Rigs | 84 | | Total Marketable Fleet | 232 | Rigs Under Long-Term Contracts (Estimated Quarterly Average) | Period | Total Rigs | | :--- | :--- | | Q4 FY24 | 95.9 | | Q1 FY25 | 83.4 | | Q2 FY25 | 53.9 | | Q3 FY25 | 42.1 | | Q4 FY25 | 38.1 | Non-GAAP Reconciliations The company provides reconciliations for key non-GAAP metrics, showing that for Q3 FY24, GAAP net income of $88.7 million was adjusted for items including a $7.5 million pre-tax gain on equity investments and a $7.1 million pre-tax loss on a Blue Chip Swap transaction, resulting in an adjusted net income of $93.3 million, and detailing how direct margin for each segment is reconciled to segment operating income - The company uses non-GAAP metrics like direct margin and adjusted net income to assess and understand current operational performance, facilitate comparisons over time, and forecast future results by excluding items deemed outside core business operations[3][10][48] Reconciliation of Net Income to Adjusted Net Income (Q3 FY2024, in thousands) | Description | Pre-Tax | Tax Impact | Net | | :--- | :--- | :--- | :--- | | Net Income (GAAP) | - | - | $88,685 | | Fair market adjustment to equity investments | $7,508 | $1,944 | $5,564 | | Non-recurring professional service fees | $(6,680) | $(1,730) | $(4,950) | | Losses on a Blue Chip Swap transaction | $(7,112) | $(1,842) | $(5,270) | | Adjusted Net Income (Non-GAAP) | - | - | $93,341 | Reconciliation of Segment Operating Income to Direct Margin (Q3 FY2024, in thousands) | Segment | Operating Income (Loss) | Depreciation & Amortization | R&D | SG&A | Direct Margin (Non-GAAP) | | :--- | :--- | :--- | :--- | :--- | :--- | | North America Solutions | $163,359 | $89,207 | $10,623 | $14,234 | $277,423 | | International Solutions | $(4,844) | $2,797 | - | $2,483 | $436 | | Offshore Gulf of Mexico | $5,010 | $1,798 | - | $799 | $7,607 |