Helmerich & Payne(HP) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company generated quarterly revenues of $688 million, up from$ 677 million in the previous quarter, primarily due to an increase in average active rig activity in North America [23] - Profit per diluted share was $0.84, compared to$ 0.94 in the previous quarter, with select items having a neutral impact on diluted earnings per share [24] - Total direct operating costs were $403 million for the second quarter, slightly down from$ 404 million in the previous quarter [23] Business Line Data and Key Metrics Changes - In the North America Solutions segment, the average contracted rig count increased to 155 from 149 in the first fiscal quarter, but the exit rig count was 152, below the projected range due to lower natural gas prices [25][26] - The International Solutions segment ended the second fiscal quarter with 11 rigs on contract, with results above guidance due to a less detrimental inflationary environment in Argentina [29] - The offshore segment generated a direct margin of about $3 million during the quarter, which was below guidance due to a rig being delayed in resuming full rate operations [31] Market Data and Key Metrics Changes - The company maintained a U.S. land market share of 27.5%, up from 25.5% at the end of fiscal 2023, despite a slight decrease in rig count [27] - Approximately 57% of the U.S. active fleet is on a term contract, with average pricing and revenue per day expected to remain relatively flat [56] Company Strategy and Development Direction - The company is focusing on performance-based contracts combined with technology solutions to enhance customer value and maintain strong margins [21][100] - The operational strategy includes preparing for unconventional projects in Saudi Arabia, with expectations for a long-term presence and growth opportunities in the region [8][9] - Capital allocation strategy includes a base and supplemental dividend as well as opportunistic share repurchases [48] Management's Comments on Operating Environment and Future Outlook - Management expressed a positive outlook despite choppy market conditions, noting strong margins and a resilient customer outlook regarding medium- and long-term energy fundamentals [16][7] - The company anticipates a slight decrease in North America Solutions direct margin for the third fiscal quarter due to a lower average rig count, but expects resiliency in per day direct margins [18] - Management highlighted ongoing conversations with customers to understand their deliverables and ensure alignment with their expectations [41] Other Important Information - Capital expenditures for fiscal 2024 are expected to be at the top end of the original$ 450 million to $500 million range, with maintenance CapEx revised up due to supply chain clarity [32][34] - The effective tax rate for the second quarter was approximately 27.5%, within the previously guided range [12] Q&A Session Summary Question: Update on supply and demand for the super spec market - Management noted that the super spec segment continues to grow, but activity has pulled back due to natural gas prices [66] Question: Insights on Saudi rig costs and operations - Most recommissioning expenses will be incurred in fiscal 2024, with rigs expected to commence operations in early 2025 [80] Question: Impact of customer consolidation on market share - Management indicated that delivering safe, efficient, and reliable performance will be key to benefiting from customer consolidation [85] Question: Future drilling activity related to LNG facilities - Management expressed hope for increased drilling activity as LNG facilities come online, but timing remains uncertain [142] Question: Changes in super spec rig specifications - Management confirmed that super spec rigs remain relevant and capable of handling current drilling requirements [139]