Helmerich & Payne(HP) - 2025 Q1 - Earnings Call Transcript

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$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]