Helmerich & Payne(HP) - 2026 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Adjusted EBITDA for the first fiscal quarter reached $230 million, exceeding expectations, driven by strong performance in North America Solutions and Offshore Solutions segments [7][24] - Revenues for the quarter were $1 billion, marking the third consecutive quarter at this level [24] - The company reported a net loss of $0.98 per diluted share, impacted by a non-cash impairment charge and unusual non-cash items totaling $103 million [24] Business Line Data and Key Metrics Changes - North America Solutions averaged 143 rigs working, generating a direct margin of $239 million, with average margins exceeding $18,000 per day [8][25] - International Solutions ended the quarter with 59 rigs working, generating approximately $29 million in direct margins, exceeding guidance [26] - Offshore Solutions generated a direct margin of approximately $31 million, with 3 active rigs and 33 management contracts [27] Market Data and Key Metrics Changes - North America is expected to remain the most restrained market, with a forecast of 132 to 138 active rigs in the second quarter [16][31] - Internationally, the market shows resilience, particularly in the Middle East, with rig reactivations in Saudi Arabia contributing to growth [15][18] - The outlook for gas markets is robust, driven by demand for LNG and AI-led power needs [14] Company Strategy and Development Direction - The company aims to maintain a focus on pricing, selective capital investments, and positioning to capitalize on market cycle improvements [15] - The new CEO emphasizes a commitment to innovation, particularly in technology and automation, to enhance operational performance [12][60] - The company is focused on deleveraging its balance sheet and maintaining fiscal discipline, with a goal of reducing leverage to around one turn of net debt to EBITDA [29][60] Management's Comments on Operating Environment and Future Outlook - Management believes that global demand for oil and gas will persist and grow, supported by population expansion and rising energy needs [14] - The company anticipates gradual improvement in activity levels throughout the year, with a positive outlook for the second half of 2026 [15][37] - Management expressed optimism about the full-year guidance despite short-term lumpiness in margins due to reactivation costs [34][37] Other Important Information - The company has made significant progress in deleveraging, having paid off $260 million of its $400 million term loan [24][29] - The FlexRobotics technology initiative is expected to enhance safety and operational performance, with successful deployments already in place [20][21] - The company is exploring opportunities in geothermal projects, with contracts awarded in Europe and North America [19][66] Q&A Session Questions and Answers Question: Insights on fiscal 2Q guidance and reactivation costs - Management acknowledged lumpiness between quarters due to reactivation costs moving from Q1 to Q2, with expectations for some costs to continue into Q3 [43][46] Question: Vision for H&P under new leadership - The new CEO highlighted a focus on international growth, maintaining leadership in North America, and continuing innovation in technology [56][58] Question: Profitability outlook for international operations - Management expects annualized EBITDA of approximately $5 million per rig from reactivations in Saudi Arabia, with direct margins exceeding $45 million per quarter once fully operational [78][79]