Helmerich & Payne(HP) - 2025 Q3 - Quarterly Results

Executive Summary Operating and Financial Highlights for Q3 FY2025 H&P reported a Q3 FY2025 consolidated net loss of $(163) million, primarily due to a $173 million non-cash goodwill impairment charge Q3 FY2025 Consolidated Financial Highlights | Metric | Value (in millions) | | :-------------------------------- | :------------------- | | Consolidated Net Loss | $(163) | | Net Loss Per Share | $(1.64) | | Adjusted Earnings | $22 | | Adjusted Earnings Per Share | $0.22 | | Non-cash Goodwill Impairment Charge | $173 | | Consolidated Adjusted EBITDA | $268 | Q3 FY2025 Segment Performance Highlights | Segment | Operating Income (Loss) (in millions) | Direct Margin (in millions) | Margin Per Day | | :------------------------ | :---------------------- | :------------ | :------------- | | North America Solutions | $158 (vs $152M prior quarter) | $266 | $19,860 | | International Solutions | $(167) (vs $(35)M prior quarter) | $34 | N/A | - International Solutions' operating loss includes a one-time goodwill impairment of $(128) million, stemming from the KCA Deutag (KCAD) acquisition[1] - All eight unconventional FlexRigs in Saudi Arabia have commenced operations, with improving margins as KCAD operations integrate[1] - Approximately $50 million in synergies from the KCAD transaction have been identified, towards a goal of $50-$75 million in cost structure reduction[1] - The Company has repaid $120 million on its $400 million term loan and expects to repay a total of $200 million by end of calendar year 2025, up from prior expectation of $175 million[1] Management Commentary Management expressed satisfaction with Q3 operating results, highlighting strong direct margins, North America Solutions' leadership, and progress on KCAD synergies and debt repayment - Total direct margin across the three operating segments was at the high end of guidance ranges, reflecting strong operational and sales team efforts[2] - North America Solutions (NAS) maintains industry-highest market share and financial performance among drilling peers, driven by strong customer partnerships and performance contracts[2] - The expanded geographic footprint positions International Solutions as a premier land drilling company globally, with momentum in Saudi Arabia's FlexRig unconventional startup[3] - Significant progress has been made towards reducing the cost structure by $50-$75 million, with approximately $50 million identified to date[3] - The goodwill impairment related to the KCAD acquisition is an accounting requirement and does not reflect management's long-term value expectations for the KCAD assets[4] - H&P has repaid $120 million on its $400 million term loan and expects to repay a total of $200 million by year-end 2025, maintaining an investment-grade credit rating and strong financial liquidity ($187 million cash, $950 million undrawn credit facility)[5] - The company is optimistic about the long-term prospects of the oil and natural gas sector, expecting economic growth to drive increased drilling demand[5] Financial Performance Consolidated Financial Results The company reported a consolidated net loss of $(161.9) million for Q3 FY2025, primarily driven by asset impairment charges, despite increased operating revenues Unaudited Condensed Consolidated Statements of Operations Q3 FY2025 saw a net loss of $(161.9) million, a substantial decline from prior year's net income, primarily due to $173.3 million in asset impairment charges Consolidated Statements of Operations (Three Months Ended June 30, in thousands) | Metric | Q3 FY2025 | Q3 FY2024 | | :-------------------------------------- | :-------- | :-------- | | Operating Revenues | $1,040,924 | $697,724 | | Drilling services operating expenses | $704,224 | $414,880 | | Depreciation and amortization | $179,491 | $97,816 | | Selling, general and administrative | $65,506 | $60,194 | | Acquisition transaction costs | $8,623 | $6,680 | | Asset impairment charges | $173,258 | — | | Operating Income (Loss) | $(128,269) | $113,457 | | Income (Loss) before income taxes | $(132,908) | $122,388 | | NET INCOME (LOSS) | $(161,899) | $88,685 | | Diluted Earnings (loss) per share | $(1.64) | $0.88 | - The significant shift from net income to net loss in Q3 FY2025 is largely attributable to $173.3 million in asset impairment charges, which were absent in Q3 FY2024[23] Unaudited Condensed Consolidated Balance Sheets As of June 30, 2025, total assets increased significantly to $6,862.0 million, primarily driven by the KCA Deutag acquisition's impact on property, plant and equipment, goodwill, and intangible assets Consolidated Balance Sheets (in thousands) | Metric | June 30, 2025 | September 30, 2024 | | :-------------------------------- | :------------ | :----------------- | | Total current assets | $1,490,512 | $1,192,069 | | Property, plant and equipment, net | $4,408,156 | $3,016,277 | | Goodwill | $166,559 | $45,653 | | Intangible assets, net | $493,795 | $54,147 | | Total assets | $6,862,003 | $5,781,898 | | Total current liabilities | $809,769 | $446,949 | | Long-term debt, net | $2,184,836 | $1,782,182 | | Total liabilities and shareholders' equity | $6,862,003 | $5,781,898 | - The substantial increase in Property, plant and equipment, Goodwill, and Intangible assets reflects the full impact of the KCA Deutag acquisition on the balance sheet[24] Unaudited Condensed Consolidated Statements of Cash Flows For the nine months ended June 30, 2025, net cash from operating activities decreased, while investing activities saw a significant net outflow due to the business acquisition Consolidated Statements of Cash Flows (Nine Months Ended June 30, in thousands) | Metric | FY2025 | FY2024 | | :-------------------------------------- | :-------- | :-------- | | Net cash provided by operating activities | $336,000 | $515,907 | | Net cash used in investing activities | $(1,872,510) | $(353,998) | | Net cash provided by (used in) financing activities | $220,654 | $(196,145) | | Net decrease in cash and cash equivalents and restricted cash | $(1,301,534) | $(34,236) | | Cash and cash equivalents and restricted cash, end of period | $227,126 | $282,002 | - The substantial net cash outflow from investing activities is largely attributable to the $1,838.9 million payment for the acquisition of business (KCAD)[25] - Financing activities shifted from a net outflow in FY2024 to a net inflow in FY2025, primarily due to $400 million in proceeds from debt issuance[25] Operating Segment Results for the Third Quarter of Fiscal Year 2025 In Q3 FY2025, North America Solutions maintained strong performance, International Solutions experienced a significant operating loss due to goodwill impairment, and Offshore Solutions saw a decrease in operating income North America Solutions North America Solutions reported an operating income of $158 million in Q3 FY2025, with strong and stable direct margins despite a slight reduction in average rig activity North America Solutions Q3 FY2025 Performance | Metric | Q3 FY2025 (in millions) | Q2 FY2025 (in millions) | | :-------------------- | :-------- | :-------- | | Operating Income | $158 | $152 | | Direct Margin (Non-GAAP) | $266 | $265.6 | | Direct Margin per Day | $19,860 | N/A | | Average Active Rigs | 147 | 149 | - Operating income increased by $6 million quarter-over-quarter, while direct margin remained approximately flat despite slightly lower average rig activity[6] - Approximately 50% of NAS active rigs utilized performance contracts, highlighting their integral role in H&P's strategy[6] International Solutions International Solutions recorded a significant operating loss of $(167) million in Q3 FY2025, primarily due to a $(128) million goodwill impairment related to the KCA Deutag acquisition, despite sequential improvement in direct margin International Solutions Q3 FY2025 Performance | Metric | Q3 FY2025 (in millions) | Q2 FY20