Helmerich & Payne(HP) - 2019 Q3 - Quarterly Report

PART I. Financial Information Financial Statements This section presents Helmerich & Payne, Inc.'s unaudited condensed consolidated financial statements as of June 30, 2019, including Balance Sheets, Statements of Operations, and Cash Flows Unaudited Condensed Consolidated Balance Sheets Total assets decreased from $6.21 billion to $5.90 billion, primarily due to reduced Property, Plant, and Equipment, with total shareholders' equity also declining Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | June 30, 2019 | September 30, 2018 | | :--- | :--- | :--- | | Total Current Assets | $1,116,238 | $1,115,550 | | Property, plant and equipment, net | $4,583,673 | $4,857,382 | | Total Assets | $5,897,379 | $6,214,867 | | Total Current Liabilities | $390,526 | $377,168 | | Long-term debt, net | $491,651 | $493,968 | | Total Liabilities | $1,802,325 | $1,832,132 | | Total Shareholders' Equity | $4,095,054 | $4,382,735 | Unaudited Condensed Consolidated Statements of Operations The company reported a $154.7 million net loss for Q3 2019, largely due to a $224.3 million asset impairment charge, resulting in a $74.8 million net loss for the nine-month period Key Operating Results (in thousands, except per share amounts) | Metric | Three Months Ended June 30, 2019 | Three Months Ended June 30, 2018 | Nine Months Ended June 30, 2019 | Nine Months Ended June 30, 2018 | | :--- | :--- | :--- | :--- | :--- | | Operating Revenues | $687,974 | $648,872 | $2,149,440 | $1,790,443 | | Operating Income (Loss) | ($167,874) | $6,306 | ($18,439) | $8,751 | | Asset Impairment Charge | $224,327 | $0 | $224,327 | $0 | | Net Income (Loss) | ($154,683) | ($8,008) | ($74,833) | $480,219 | | Diluted EPS | ($1.42) | ($0.08) | ($0.71) | $4.35 | Unaudited Condensed Consolidated Statements of Cash Flows Net cash from operations significantly increased to $659.4 million for the nine months ended June 30, 2019, while investing activities used $374.0 million and financing activities used $242.5 million Cash Flow Summary for Nine Months Ended June 30 (in thousands) | Cash Flow Activity | 2019 | 2018 | | :--- | :--- | :--- | | Net cash provided by operating activities | $659,371 | $371,428 | | Net cash used in investing activities | ($373,961) | ($342,184) | | Net cash used in financing activities | ($242,489) | ($241,811) | | Net increase (decrease) in cash | $42,921 | ($212,567) | Notes to Unaudited Condensed Consolidated Financial Statements The notes detail accounting policies, segment reporting, and significant events including new accounting standard adoptions, an asset impairment charge, and a debt exchange offer - Effective October 1, 2018, the company reorganized into four reportable business segments: U.S. Land, Offshore, International Land, and the new H&P Technologies segment[26] - The company adopted new accounting standards, including ASC 606 and ASU 2016-01, affecting revenue recognition and equity investment accounting[39] - A decision to downsize the FlexRig4 fleet led to a pre-tax impairment charge of $224.3 million in Q3 2019 for excess capital spares and support equipment[55] - The company completed a debt exchange offer in December 2018, swapping $487.1 million of subsidiary notes for new parent company notes to simplify its debt structure[63] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance, market outlook, strategic developments, segment analysis, and liquidity, highlighting its strong super-spec rig position amidst moderate demand Executive Summary and Market Outlook The company maintains leadership in performance drilling with its FlexRig fleet, navigating crude oil price volatility and moderate demand by reducing its capital expenditure plan - The company's long-term strategy focuses on innovation, technology, safety, and operational excellence, leveraging its advanced uniform rig fleet and financial strength[159] - Demand for super-spec rigs increased through 2018, with H&P holding over 40% of the U.S. land drilling super-spec market share as of June 30, 2019[164][166] - The fiscal 2019 capital expenditure plan was reduced from $650-$680 million to $500-$530 million due to market moderation and customer spending adjustments[165] - Growth opportunities are identified in the International Land segment, particularly in Argentina, with the deployment of super-spec FlexRigs from the U.S[167] Recent Developments Recent developments include a debt exchange offer, the establishment of H&P Technologies, the acquisition of Angus Jamieson Consulting, and a $224.3 million impairment charge from downsizing the FlexRig4 fleet - A debt exchange offer was completed, swapping $487.1 million of HPIDC notes for new parent company notes, simplifying the corporate debt structure[169] - H&P Technologies was established as a new reportable business segment, focusing on advanced drilling technologies and automation solutions[171] - Angus Jamieson Consulting (AJC), a leader in wellbore positioning, was acquired to accelerate H&P Technologies' automation platform development[172] - Downsizing the FlexRig4 fleet resulted in a $224.3 million impairment charge for excess capital spares and support equipment[175] Contract Backlog Contract drilling backlog increased to $1.6 billion as of June 30, 2019, up from $1.2 billion, primarily driven by U.S. Land segment contracts, with 72% expected in fiscal year 2020 and beyond Contract Backlog by Segment (in billions) | Segment | June 30, 2019 | September 30, 2018 | | :--- | :--- | :--- | | U.S. Land | $1.4 | $1.0 | | Offshore | $0.0 | $0.0 | | International Land | $0.2 | $0.2 | | Total | $1.6 | $1.2 | Results of Operations This section analyzes the company's operating results for the three and nine months ended June 30, 2019, detailing consolidated and segment performance across revenues, expenses, and key operating statistics Consolidated Results - Three Months Ended June 30 | Metric (in millions) | 2019 | 2018 | | :--- | :--- | :--- | | Operating Revenues | $688.0 | $648.9 | | Asset Impairment Charge | $224.3 | $0.0 | | Net Loss | ($154.7) | ($8.0) | Consolidated Results - Nine Months Ended June 30 | Metric (in millions) | 2019 | 2018 | | :--- | :--- | :--- | | Operating Revenues | $2,100 | $1,800 | | Asset Impairment Charge | $224.3 | $0.0 | | Net Income (Loss) | ($74.8) | $480.2 | Liquidity and Capital Resources The company maintains strong liquidity with $334.8 million cash, $45.7 million short-term investments, and $659.4 million operating cash flow, revising its capital expenditure budget to $500-$530 million while continuing dividends - Primary liquidity sources include $334.8 million cash on hand, $45.7 million short-term investments, operating cash flow, and a $750 million credit facility[229][232] - Fiscal 2019 capital expenditures are estimated at $500 million to $530 million, reduced from an initial $650 million to $680 million[235] - A new $750 million unsecured revolving credit facility was entered in November 2018, maturing in 2023, with no borrowings as of June 30, 2019[240] - Dividends paid totaled $235.1 million ($2.13 per share) for the nine months ended June 30, 2019, continuing a 46-year history of increasing annual dividends[239] Quantitative and Qualitative Disclosures about Market Risk This section addresses the company's exposure to market risks, including equity price, interest rate, and foreign currency exchange rate risks, with further details referenced in other report sections - The company faces market risks including equity price risk from investments, interest rate risk on debt, and foreign currency exchange rate risk from international operations[254] Controls and Procedures Management concluded the company's disclosure controls and procedures were effective as of June 30, 2019, with no material changes to internal controls over financial reporting during the quarter - Management concluded the company's disclosure controls and procedures were effective as of June 30, 2019[254] - No material changes to internal controls over financial reporting occurred during the third fiscal quarter[255] PART II. Other Information Legal Proceedings The company provides an update on its lawsuit against Venezuela regarding the 2011 nationalization of its business, with proceedings currently stayed due to political upheaval - A lawsuit against Venezuela for asset expropriation is currently stayed due to political instability[256][257] - The company cannot determine the timing, amount, or likelihood of recovery from the lawsuit and has not recognized any contingent gains[257] Risk Factors There have been no material changes to the risk factors previously disclosed in the company's 2018 Annual Report on Form 10-K - No material changes in risk factors have occurred since the company's 2018 Annual Report on Form 10-K[258] Exhibits This section lists documents filed as exhibits with the Form 10-Q, including CEO and CFO certifications and XBRL-formatted financial statements - Exhibits filed include CEO and CFO certifications (31.1, 31.2, 32) and XBRL data files (101)[260] Signatures