Market Overview

Helmerich & Payne, Inc. Announces Third Quarter Results

Share:
  • Reported a net loss of $(0.43) per diluted share; including select items(1) of $(0.09) per diluted share
  • The Company realigned its financial reporting into three operating segments - North America Solutions, International Solutions and Offshore Gulf of Mexico
  • Quarterly North America Solutions operating gross margins(2) decreased $98 million to $102 million sequentially, as revenues decreased by $292 million to $254 million and expenses decreased by $194 million to $153 million
  • The Company took additional actions reducing its cost structure by an additional $25 million annually bringing total cost-savings to over $75 million on an annualized basis
  • Concurrent with its cost-saving measures the Company incurred a restructuring charge of $15 million
  • H&P continued its leadership position in drilling automation technology as customers have now drilled more than 300 wells and over 5 million feet utilizing AutoSlide℠
  • On June 3, 2020, Directors of the Company declared a quarterly cash dividend of $0.25 per share on August 31, 2020 to stockholders of record at the close of business August 17, 2020
  • The Company ended the quarter with $492 million in cash and short-term investments and no amounts drawn on its $750 million revolving credit facility creating over $1.2 billion in liquidity 

 

Helmerich & Payne, Inc. (NYSE:HP) reported a net loss of $46 million or $(0.43) per diluted share from operating revenues of $317 million for the quarter ended June 30, 2020, compared to a net loss of $421 million, or $(3.88) per diluted share, on revenues of $634 million for the quarter ended March 31, 2020. The net losses per diluted share for the third and second quarters of fiscal year 2020 include $(0.09) and $(3.96), respectively, of after-tax losses comprised of select items(1). For the third quarter of fiscal year 2020, select items(1) were comprised of:

  • $0.02 of after-tax gains pertaining to a non-cash fair market adjustment to our equity investment
  • $(0.11) of after-tax losses pertaining to restructuring charges

Net cash provided by operating activities was $214 million for the third quarter of fiscal year 2020 compared to $121 million for the second quarter of fiscal year 2020.

President and CEO John Lindsay commented, "The unprecedented decline in activity experienced during the quarter continues to reverberate throughout the industry and we expect that ramifications will be felt for several quarters to come. The health and safety of our employees and customers remains our top priority followed by maintaining our financial strength and flexibility. In response to the COVID-19 pandemic, H&P acted decisively to preserve operational and financial integrity, capitalizing on our strengths as we remain focused on addressing the challenges and opportunities within the energy sector.

"The current state of the industry pointedly underscores a necessity for change and is providing opportunities to accelerate strategic objectives aimed at how we approach adding value and how that value is perceived by our customers. Our customer centric approach has served the Company well for 100 years and is evolving to encompass the wider array of drilling and digital technology solutions H&P can deliver. This will change the narrative around the value proposition we offer to our customers. Rather than focusing on discrete products, like rigs or separate technology applications, we are focusing on packaging the total solution - combining people, rigs and technology to deliver the best possible well that accomplishes our customer's operational goals while reducing their financial risk. We believe these changes are required in order to improve not only the value delivery, but also to enhance the economic performance for our customers and H&P stakeholders.

"As we continue to evolve this business model, we are also aligning business segments to reflect the integration of our solution-based offering by combining our proprietary rig technology, touch of a button automation software, uniform FlexRig fleet and digital expertise into one unique industry offering. Accordingly, what historically had been referred to as the U.S. Land Operations and HP Technologies business segments have been combined to form the North America Solutions business segment.

"We will utilize this new segment to facilitate deployment of digital technologies and assimilate new performance-based commercial models into the industry. The utilization of rig automation software, such as AutoSlide℠, in combination with contracts based upon H&P's drilling performance and well quality, rather than a generic dayrate, provide a higher level of wellbore efficiency and value. Customer adoption of AutoSlide is progressing and it is now deployed on over one-third of our active rigs - more than during any previous quarter. Our number of performance-based contracts has held relatively steady despite record rig count declines and limited incremental contracting activity."

Senior Vice President and CFO Mark Smith also commented, "The Company continues to take actions to preserve its strong financial position. In addition to the previously announced measures, which included a reduction to the annual dividend of approximately $200 million, a reduction in planned fiscal 2020 capital spend of $95 million and a roughly $50 million reduction in fixed operational overhead, the Company took further steps to reduce its planned fiscal 2020 capital spend by another $40 million and its selling, general and administrative cost structure by $25 million on an annualized basis. The culmination of these cost-saving initiatives resulted in a $15 million restructuring charge during the quarter. We expect to see results from these efforts increase in our fiscal fourth quarter. While the vast majority of these reductions are related to the U.S., we are implementing similar cost-saving measures in our international locations as well, working through local jurisdictional regulations.

"More than a quarter has passed since the COVID-19 pandemic began, and we are still unable to reasonably estimate its duration or ascertain the full extent it will have on the industry in terms of timing or magnitude of a recovery. As a result, we cannot be certain of the ultimate impact on H&P's operations or financial position. In the meantime, the Company will continue to innovate and lead the way forward. Our solid economic footing remains intact with approximately $490 million in cash on hand and short-term investments and no amounts drawn on our $750 million revolving credit facility. During the quarter, H&P's already healthy financial position was bolstered by the anticipated unlock of working capital, which included a sizable reduction in our accounts receivable, and recognition of approximately $50 million in early contract termination revenue. We anticipate similar benefits in the coming quarters, although not to the same magnitude. Finally, it is worth reiterating, we have liquidity of over $1.2 billion and our debt-to-cap is 12%, with no maturities until 2025."

John Lindsay concluded, "The Company moved quickly and decisively making several strategic and impactful decisions that we believe will position us well for the future. We remain acutely aware of the constraints imposed by the current environment and because of our people, our drilling solutions' capabilities and solid financial footing, H&P is well positioned to address the challenges ahead."

Operating Segment Results for the Third Quarter of Fiscal Year 2020

North America Solutions:

This segment had an operating loss of $25 million compared to an operating loss of $343 million during the previous quarter. The prior quarter was adversely impacted by $407 million in asset impairment charges, while the current quarter operating loss was driven by the dramatic decline in rig activity due to significantly lower crude oil prices resulting from a global supply and demand imbalance caused by the pandemic.

Operating gross margins(2) declined by $97.6 million to $101.8 million as both revenues and expenses declined sequentially. Revenues during the quarter benefited from $50.2 million in early contract termination revenue and better than anticipated activity due to more favorable timing around the stacking of a number of rigs. A slight offset to some of these benefits was the increase in the number of rigs that became idle but contracted which carry lower revenues. Idle but contracted rigs also carry lower costs, which in addition to lower activity contributed to lower expense during the quarter. Expenses also benefited from internal costs savings initiatives that are having a more immediate and substantial impact than previously expected. Technology solutions operations were in-line with expectations.

International Solutions:

This segment had an operating loss of $9.5 million compared to an operating loss of $152.5 million during the previous quarter. The decrease in the operating loss was primarily attributable to impairments of drilling equipment that adversely impacted prior quarter results. Operating gross margins(2) declined to a negative $5.1 million from a positive $13.3 million in the previous quarter as there were fewer rigs operating during the quarter and a higher mix of lower margin rigs contracted. Additionally, this segment carried higher expenses relative to activity levels resulting from compliance with local jurisdictional requirements surrounding COVID-19. The Company continues to explore opportunities to mitigate these expenses, while maintaining strict adherence to local regulations. Current quarter results included a $3.2 million foreign currency loss related to our South American operations compared to an approximate $3.4 million foreign currency loss in the second quarter of fiscal year 2020.

Offshore Gulf of Mexico:

This segment had operating income of $3.0 million compared to an operating loss of $3.3 million during the previous quarter. Operating gross margins(2) increased to $8.5 million compared to $0.4 million in the prior quarter resulting from increased financial contribution from a rig that commenced drilling operations during the third quarter and the absence of unfavorable expenses and unexpected downtime that adversely impacted the prior quarter. Segment operating income from management contracts on customer-owned platform rigs contributed approximately $1.7 million, compared to approximately $3.2 million during the prior quarter.

Operational Outlook for the Fourth Quarter of Fiscal Year 2020

North America Solutions:

  • We expect North America Solutions operating gross margins(2) to be between $38-$48 million, inclusive of approximately $12 million of contract early termination compensation
  • We expect to exit the quarter at between 58-63 contracted rigs, inclusive of approximately 10-15 contracted rigs generating revenue that could remain idle

International Solutions:

  • We expect International Solutions operating gross margins(2) to be between $(2)-$0 million, exclusive of any foreign exchange gains or loses

Offshore Gulf of Mexico:

  • We expect Offshore Gulf of Mexico rig operating gross margins(2) to be between $5-$7 million
  • Management contracts are also expected to generate approximately $2 million in operating income

Other Estimates for Fiscal Year 2020

  • Gross capital expenditures are now expected to be approximately $150 to $165 million. Asset sales include reimbursements for lost and damaged tubulars and sales of other used drilling equipment that offset a portion of the gross capital expenditures and are expected to total approximately $35 million in fiscal year 2020.
  • General and administrative expenses for fiscal year 2020 are expected to be less than $175 million, excluding any future one-time items
  • Depreciation is now expected to be approximately $475 million

COVID-19 Update

The COVID-19 pandemic continues to have a significant impact around the world and on our Company. After falling dramatically, crude oil prices and industry activity appear to have stabilized albeit at much lower levels. The environment in which we operate is still uncertain; however, from the onset of COVID-19's rapid spread across the U.S. in early March 2020, we moved quickly and took several actions to maintain the health and safety of H&P employees, customers and stakeholders and to preserve our financial strength. We discussed these actions in our press release dated, April 30, 2020 and in our quarterly report on Form-10Q for the period ended March 31, 2020 and will provide updates in our quarterly report on Form-10Q for the period ended June 30, 2020 when filed.

Select Items Included in Net Income per Diluted Share

Third quarter of fiscal year 2020 net loss of $(0.43) per diluted share included $(0.09) in after-tax losses comprised of the following:

  • $0.02 of non-cash after-tax gains related to fair market value adjustments to equity investments
  • $(0.11) of after-tax losses related to restructuring charges

Second quarter of fiscal year 2020 net loss of $(3.88) per diluted share included $(3.96) in after-tax losses comprised of the following:

  • $0.03 of after-tax gains related to the change in fair value of a contingent liability
  • $0.13 of after-tax benefits from the reversal of accrued compensation
  • $(0.09) of non-cash after-tax losses related to fair market value adjustments to equity investments
  • $(4.03) of non-cash after-tax losses related to the impairment of goodwill, less capable rigs and excess related equipment and inventory

Conference Call

A conference call will be held on Wednesday, July 29, 2020 at 12:00 p.m. (ET) with John Lindsay, President and CEO, Mark Smith, Senior Vice President and CFO, and Dave Wilson, Director of Investor Relations to discuss the Company's third quarter fiscal year 2020 results. Dial-in information for the conference call is (800) 895-3361 for domestic callers or (785) 424-1062 for international callers. The call access code is ‘Helmerich'. You may also listen to the conference call that will be broadcast live over the Internet by logging on to the Company's website at http://www.hpinc.com and accessing the corresponding link through the Investor Relations section by clicking on "INVESTORS" and then clicking on "Event Calendar" to find the event and the link to the webcast.

About Helmerich & Payne, Inc.

Founded in 1920, Helmerich & Payne, Inc. (H&P) (NYSE:HP) is committed to delivering industry leading levels of drilling productivity and reliability. H&P operates with the highest level of integrity, safety and innovation to deliver superior results for its customers and returns for shareholders. Through its subsidiaries, the Company designs, fabricates and operates high-performance drilling rigs in conventional and unconventional plays around the world. H&P also develops and implements advanced automation, directional drilling and survey management technologies. At June 30, 2020, H&P's fleet included 262 land rigs in the U.S., 32 international land rigs and eight offshore platform rigs. For more information, see H&P online at www.hpinc.com.

Forward-Looking Statements

This release includes "forward-looking statements" within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, and such statements are based on current expectations and assumptions that are subject to risks and uncertainties. All statements other than statements of historical facts included in this release, including, without limitation, statements regarding the registrant's future financial position, operations outlook, business strategy, dividends, budgets, projected costs and plans and objectives of management for future operations, and the impact or duration of the COVID-19 pandemic and any subsequent recovery, are forward-looking statements. For information regarding risks and uncertainties associated with the Company's business, please refer to the "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of the Company's SEC filings, including but not limited to its annual report on Form 10‑K and quarterly reports on Form 10‑Q. As a result of these factors, Helmerich & Payne, Inc.'s actual results may differ materially from those indicated or implied by such forward-looking statements. We undertake no duty to update or revise our forward-looking statements based on changes in internal estimates, expectations or otherwise, except as required by law.

We use our Investor Relations website as a channel of distribution for material company information. Such information is routinely posted and accessible on our Investor Relations website at www.hpinc.com.


Note Regarding Trademarks. Helmerich & Payne, Inc. owns or has rights to the use of trademarks, service marks and trade names that it uses in conjunction with the operation of its business. Some of the trademarks that appear in this release or otherwise used by H&P include FlexRig and AutoSlide, which may be registered or trademarked in the U.S. and other jurisdictions.

(1) See the corresponding section of this release for details regarding the select items. The Company believes identifying and excluding select items is useful in assessing and understanding current operational performance, especially in making comparisons over time involving previous and subsequent periods and/or forecasting future periods results. Select items are excluded as they are deemed to be outside of the Company's core business operations.

(2) Operating gross margin is defined as operating revenues less direct operating expenses.

 

HELMERICH & PAYNE, INC.

(Unaudited)

(in thousands, except per share data)

 

Three Months Ended

 

Nine Months Ended

 

June 30,

 

March 31,

 

June 30,

 

June 30,

CONSOLIDATED STATEMENTS OF OPERATIONS

2020

 

2020

 

2019

 

2020

 

2019

Operating revenues

 

 

 

 

 

 

 

 

 

Contract drilling services

$

314,405

 

 

$

630,290

 

 

$

684,788

 

 

$

1,556,093

 

 

$

2,139,798

 

Other

2,959

 

 

3,349

 

 

3,186

 

 

9,567

 

 

9,642

 

 

317,364

 

 

633,639

 

 

687,974

 

 

1,565,660

 

 

2,149,440

 

Operating costs and expenses

 

 

 

 

 

 

 

 

 

Contract drilling services operating expenses, excluding depreciation and amortization

205,198

 

 

417,743

 

 

443,114

 

 

1,022,270

 

 

1,372,426

 

Other operating expenses

1,549

 

 

1,315

 

 

1,414

 

 

4,286

 

 

4,308

 

Depreciation and amortization

110,161

 

 

132,006

 

 

143,297

 

 

372,298

 

 

427,917

 

Research and development

3,638

 

 

6,214

 

 

7,066

 

 

16,730

 

 

21,347

 

Selling, general and administrative

43,108

 

 

41,978

 

 

46,590

 

 

134,894

 

 

144,604

 

Asset impairment charge

 

 

563,234

 

 

224,327

 

 

563,234

 

 

224,327

 

Restructuring charges

15,495

 

 

 

 

 

 

15,495

 

 

 

Gain on sale of assets

(4,201

)

 

(10,310

)

 

(9,960

)

 

(18,790

)

 

(27,050

)

 

374,948

 

 

1,152,180

 

 

855,848

 

 

2,110,417

 

 

2,167,879

 

Operating loss from continuing operations

(57,584

)

 

(518,541

)

 

(167,874

)

 

(544,757

)

 

(18,439

)

Other income (expense)

 

 

 

 

 

 

 

 

 

Interest and dividend income

771

 

 

3,566

 

 

2,349

 

 

6,551

 

 

6,861

 

Interest expense

(6,125

)

 

(6,095

)

 

(6,257

)

 

(18,320

)

 

(17,145

)

Gain (loss) on investment securities

2,267

 

 

(12,413

)

 

(13,271

)

 

(7,325

)

 

(50,228

)

Gain on sale of subsidiary

 

 

 

 

 

 

14,963

 

 

 

Other

(2,914

)

 

(398

)

 

(1,599

)

 

(3,711

)

 

(1,051

)

 

(6,001

)

 

(15,340

)

 

(18,778

)

 

(7,842

)

 

(61,563

)

Loss from continuing operations before income taxes

(63,585

)

 

(533,881

)

 

(186,652

)

 

(552,599

)

 

(80,002

)

Income tax benefit

(17,578

)

 

(113,413

)

 

(32,031

)

 

(116,853

)

 

(5,602

)

Loss from continuing operations

(46,007

)

 

(420,468

)

 

(154,621

)

 

(435,746

)

 

(74,400

)

Income from discontinued operations before income taxes

9,151

 

 

6,067

 

 

7,244

 

 

22,675

 

 

22,798

 

Income tax provision

8,743

 

 

6,139

 

 

7,306

 

 

22,463

 

 

23,231

 

Income (loss) from discontinued operations

408

 

 

(72

)

 

(62

)

 

212

 

 

(433

)

Net loss

$

(45,599

)

 

$

(420,540

)

 

$

(154,683

)

 

$

(435,534

)

 

$

(74,833

)

 

 

 

 

 

 

 

 

 

 

Basic loss per common share:

 

 

 

 

 

 

 

 

 

Loss from continuing operations

$

(0.43

)

 

$

(3.88

)

 

$

(1.42

)

 

$

(4.05

)

 

$

(0.71

)

Loss from discontinued operations

$

 

 

$

 

 

$

 

 

$

 

 

$

 

Net loss

$

(0.43

)

 

$

(3.88

)

 

$

(1.42

)

 

$

(4.05

)

 

$

(0.71

)

 

 

 

 

 

 

 

 

 

 

Diluted loss per common share:

 

 

 

 

 

 

 

 

 

Loss from continuing operations

$

(0.43

)

 

$

(3.88

)

 

$

(1.42

)

 

$

(4.05

)

 

$

(0.71

)

Loss from discontinued operations

$

 

 

$

 

 

$

 

 

 

 

$

 

Net loss

$

(0.43

)

 

$

(3.88

)

 

$

(1.42

)

 

$

(4.05

)

 

$

(0.71

)

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding (in thousands):

 

 

 

 

 

 

 

 

 

Basic

107,439

 

 

108,557

 

 

109,425

 

 

108,185

 

 

109,324

 

Diluted

107,439

 

 

108,557

 

 

109,425

 

 

108,185

 

 

109,324

 

HELMERICH & PAYNE, INC.

(Unaudited)

(in thousands)

 

June 30,

 

September 30,

CONDENSED CONSOLIDATED BALANCE SHEETS

2020

 

2019

Assets

 

 

 

Cash and cash equivalents

$

426,245

 

 

$

347,943

 

Short-term investments

65,787

 

 

52,960

 

Other current assets

498,512

 

 

714,183

 

Total current assets

990,544

 

 

1,115,086

 

Investments

25,280

 

 

31,991

 

Property, plant and equipment, net

3,754,206

 

 

4,502,084

 

Other noncurrent assets

192,296

 

 

190,354

 

Total Assets

$

4,962,326

 

 

$

5,839,515

 

 

 

 

 

Liabilities and Shareholders' Equity

 

 

 

Current liabilities

$

242,167

 

 

$

410,238

 

Long-term debt, net

480,269

 

 

479,356

 

Other noncurrent liabilities

828,751

 

 

922,357

 

Noncurrent liabilities - discontinued operations

15,082

 

 

15,341

 

Total shareholders' equity

3,396,057

 

 

4,012,223

 

Total Liabilities and Shareholders' Equity

$

4,962,326

 

 

$

5,839,515

 

HELMERICH & PAYNE, INC.

(Unaudited)

(in thousands)

 

Nine Months Ended June 30,

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

2020

 

2019

OPERATING ACTIVITIES:

 

 

 

Net loss

$

(435,534

)

 

$

(74,833

)

Adjustment for (income) loss from discontinued operations

(212

)

 

433

 

Loss from continuing operations

(435,746

)

 

(74,400

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

Depreciation and amortization

372,298

 

 

427,917

 

Asset impairment charge

563,234

 

 

224,327

 

Restructuring charges

3,536

 

 

 

Amortization of debt discount and debt issuance costs

1,358

 

 

1,176

 

Provision for bad debt

4,151

 

 

544

 

Stock-based compensation

32,059

 

 

25,467

 

Loss on investment securities

7,325

 

 

50,228

 

Gain on sale of assets

(18,790

)

 

(27,050

)

Gain on sale of subsidiary

(14,963

)

 

 

Deferred income tax benefit

(122,366

)

 

(25,503

)

Other

(2,891

)

 

5,356

 

Changes in assets and liabilities

57,086

 

 

51,365

 

Net cash provided by operating activities from continuing operations

446,291

 

 

659,427

 

Net cash used in operating activities from discontinued operations

(38

)

 

(56

)

Net cash provided by operating activities

446,253

 

 

659,371

 

 

 

 

 

INVESTING ACTIVITIES:

 

 

 

Capital expenditures

(120,960

)

 

(403,570

)

Purchase of short-term investments

(78,303

)

 

(71,852

)

Payment for acquisition of business, net of cash acquired

 

 

(2,781

)

Proceeds from sale of short-term investments

66,033

 

 

68,015

 

Proceeds from sale of subsidiary

15,056

 

 

 

Proceeds from asset sales

31,200

 

 

36,227

 

Other

(50

)

 

 

Net cash used in investing activities

(87,024

)

 

(373,961

)

 

 

 

 

FINANCING ACTIVITIES:

 

 

 

Dividends paid

(233,124

)

 

(235,058

)

Debt issuance costs paid

 

 

(3,912

)

Proceeds from stock option exercises

4,100

 

 

2,901

 

Payments for employee taxes on net settlement of equity awards

(3,752

)

 

(6,420

)

Payment of contingent consideration from acquisition of business

(4,250

)

 

 

Share repurchase

(28,504

)

 

 

Other

(446

)

 

 

Net cash used in financing activities

(265,976

)

 

(242,489

)

Net increase in cash and cash equivalents and restricted cash

93,253

 

 

42,921

 

Cash and cash equivalents and restricted cash, beginning of period

382,971

 

 

326,185

 

Cash and cash equivalents and restricted cash, end of period

$

476,224

 

 

$

369,106

 

 

 

Three Months Ended

 

Nine Months Ended

 

June 30,

 

March 31,

 

June 30,

 

June 30,

SEGMENT REPORTING

(in thousands, except operating statistics)

2020

 

2020 (1)

 

2019 (1)

 

2020

 

2019 (1)

NORTH AMERICA SOLUTIONS OPERATIONS

 

 

 

 

 

 

 

 

 

Operating revenues

$

254,434

 

 

$

545,961

 

 

$

600,831

 

 

$

1,325,076

 

 

$

1,867,253

 

Direct operating expenses

152,663

 

 

346,564

 

 

380,454

 

 

832,229

 

 

1,176,746

 

Research and development

3,459

 

 

5,663

 

 

4,966

 

 

15,871

 

 

19,247

 

Selling, general and administrative expense

13,533

 

 

12,519

 

 

16,654

 

 

42,798

 

 

50,361

 

Depreciation

102,699

 

 

117,334

 

 

128,864

 

 

336,098

 

 

383,477

 

Asset impairment charge

 

 

406,548

 

 

216,908

 

 

406,548

 

 

216,908

 

Restructuring charges

7,237

 

 

 

 

 

 

7,237

 

 

 

Segment operating income (loss)

$

(25,157

)

 

$

(342,667

)

 

$

(147,015

)

 

$

(315,705

)

 

$

20,514

 

 

 

 

 

 

 

 

 

 

 

Revenue days

8,101

 

 

17,273

 

 

19,846

 

 

43,058

 

 

63,040

 

Average rig revenue per day

$

27,975

 

 

$

27,281

 

 

$

26,627

 

 

$

26,953

 

 

$

26,152

 

Average rig expense per day

15,412

 

 

15,598

 

 

15,523

 

 

15,507

 

 

15,198

 

Average rig margin per day

$

12,563

 

 

$

11,683

 

 

$

11,104

 

 

$

11,446

 

 

$

10,954

 

Rig utilization

32

%

 

63

%

 

62

%

 

54

%

 

66

%

 

 

 

 

 

 

 

 

 

 

INTERNATIONAL SOLUTIONS OPERATIONS

 

 

 

 

 

 

 

 

 

Operating revenues

$

22,477

 

 

$

51,250

 

 

$

46,283

 

 

$

120,189

 

 

$

163,378

 

Direct operating expenses

27,595

 

 

37,964

 

 

34,146

 

 

99,634

 

 

114,736

 

Selling, general and administrative expense

1,129

 

 

1,248

 

 

1,150

 

 

3,832

 

 

4,225

 

Depreciation

996

 

 

7,821

 

 

8,591

 

 

16,634

 

 

27,423

 

Asset impairment charge

 

 

156,686

 

 

7,419

 

 

156,686

 

 

7,419

 

Restructuring charges

2,297

 

 

 

 

 

 

2,297

 

 

 

Segment operating income (loss)

$

(9,540

)

 

$

(152,469

)

 

$

(5,023

)

 

$

(158,894

)

 

$

9,575

 

 

 

 

 

 

 

 

 

 

 

Revenue days

988

 

 

1,547

 

 

1,510

 

 

4,154

 

 

4,828

 

Average rig revenue per day

$

19,642

 

 

$

31,706

 

 

$

29,669

 

 

$

27,281

 

 

$

32,285

 

Average rig expense per day

21,589

 

 

20,922

 

 

21,650

 

 

20,919

 

 

21,261

 

Average rig margin per day

$

(1,947

)

 

$

10,784

 

 

$

8,019

 

 

$

6,362

 

 

$

11,024

 

Rig utilization

34

%

 

53

%

 

51

%

 

48

%

 

55

%

 

 

 

 

 

 

 

 

 

 

OFFSHORE GULF OF MEXICO OPERATIONS

 

 

 

 

 

 

 

 

 

Operating revenues

$

37,494

 

 

$

33,079

 

 

$

37,674

 

 

$

110,828

 

 

$

109,167

 

Direct operating expenses

28,967

 

 

32,648

 

 

28,869

 

 

91,660

 

 

82,158

 

Selling, general and administrative expense

1,248

 

 

908

 

 

1,145

 

 

3,293

 

 

2,719

 

Depreciation

3,004

 

 

2,842

 

 

2,582

 

 

8,591

 

 

7,512

 

Restructuring charges

1,262

 

 

 

 

 

 

1,262

 

 

 

Segment operating income (loss)

$

3,013

 

 

$

(3,319

)

 

$

5,078

 

 

$

6,022

 

 

$

16,778

 

 

 

 

 

 

 

 

 

 

 

Revenue days

455

 

 

457

 

 

546

 

 

1,462

 

 

1,611

 

Average rig revenue per day

$

49,654

 

 

$

42,098

 

 

$

39,643

 

 

$

45,105

 

 

$

35,561

 

Average rig expense per day

34,702

 

 

48,117

 

 

27,222

 

 

37,348

 

 

26,276

 

Average rig margin per day

$

14,952

 

 

$

(6,019

)

 

$

12,421

 

 

$

7,757

 

 

$

9,285

 

Rig utilization

63

%

 

63

%

 

75

%

 

67

%

 

74

%

(1)

Prior period information has been restated to reflect the transition of the H&P Technologies reportable segment to the North America Solutions reportable segment.

Note 1: Per revenue day metrics and segment operating income/loss are used by the Company to facilitate period-to-period comparisons in operating performance of the Company's reportable segments in the aggregate. These measures highlight operating trends and aid analytical comparisons. However, per revenue day metrics and segment operating income/loss have limitations and should not be used as alternatives to revenues, expenses, or operating income/loss, which are performance measures determined in accordance with GAAP.

Note 2: Operating statistics exclude the effects of offshore platform management contracts and gains and losses from translation of foreign currency transactions and do not include reimbursements of "out-of-pocket" expenses in revenue per day, expense per day and margin per day calculations. Additionally, expense per day and margin per day calculations do not include intercompany expenses.

Reimbursed amounts were as follows:
 

 

Three Months Ended

 

Nine Months Ended

 

June 30,

 

March 31,

 

June 30,

 

June 30,

(in thousands)

2020

 

2020

 

2019

 

2020

 

2019

North America Solutions Operations

27,807

 

 

77,146

 

 

72,386

 

 

164,533

 

 

218,648

 

International Solutions Operations

3,079

 

 

2,209

 

 

1,483

 

 

6,875

 

 

7,506

 

Offshore Gulf of Mexico Operations

8,223

 

 

6,770

 

 

7,277

 

 

24,895

 

 

18,534

 

Segment reconciliation amounts were as follows:
 

 

Three Months Ended June 30, 2020

(in thousands)

North America

Solutions

 

Offshore Gulf

of Mexico

 

International

Solutions

 

Other

 

Eliminations

 

Total

Operating revenue

$

254,434

 

 

$

37,494

 

 

$

22,477

 

 

$

2,959

 

 

$

 

 

$

317,364

 

Intersegment

 

 

 

 

 

 

10,384

 

 

(10,384

)

 

 

Total operating revenue

$

254,434

 

 

$

37,494

 

 

$

22,477

 

 

$

13,343

 

 

$

(10,384

)

 

$

317,364

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct operating expenses

144,522

 

 

26,986

 

 

27,333

 

 

7,906

 

 

 

 

206,747

 

Intersegment

8,141

 

 

1,981

 

 

262

 

 

 

 

(10,384

)

 

 

Total contract drilling services & other operating expenses

$

152,663

 

 

$

28,967

 

 

$

27,595

 

 

$

7,906

 

 

$

(10,384

)

 

$

206,747

 

 

 

Nine Months Ended June 30, 2020

(in thousands)

North America Solutions

 

Offshore Gulf of Mexico

 

International Solutions

 

Other

 

Eliminations

 

Total

Operating revenue

$

1,325,076

 

 

$

110,828

 

 

$

120,189

 

 

$

9,567

 

 

$

 

 

$

1,565,660

 

Intersegment

 

 

 

 

 

 

28,927

 

 

(28,927

)

 

 

Total operating revenue

$

1,325,076

 

 

$

110,828

 

 

$

120,189

 

 

$

38,494

 

 

$

(28,927

)

 

$

1,565,660

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct operating expenses

808,420

 

 

87,285

 

 

98,891

 

 

31,960

 

 

 

 

1,026,556

 

Intersegment

23,809

 

 

4,375

 

 

743

 

 

 

 

(28,927

)

 

 

Total contract drilling services & other operating expenses

$

832,229

 

 

$

91,660

 

 

$

99,634

 

 

$

31,960

 

 

$

(28,927

)

 

$

1,026,556

 

Segment operating income (loss) for all segments is a non-GAAP financial measure of the Company's performance, as it excludes gain on sale of assets, corporate selling, general and administrative expenses, corporate restructuring charges, and corporate depreciation. The Company considers segment operating income to be an important supplemental measure of operating performance for presenting trends in the Company's core businesses. This measure is used by the Company to facilitate period-to-period comparisons in operating performance of the Company's reportable segments in the aggregate by eliminating items that affect comparability between periods. The Company believes that segment operating income is useful to investors because it provides a means to evaluate the operating performance of the segments and the Company on an ongoing basis using criteria that are used by our internal decision makers. Additionally, it highlights operating trends and aids analytical comparisons. However, segment operating income has limitations and should not be used as an alternative to operating income or loss, a performance measure determined in accordance with GAAP, as it excludes certain costs that may affect the Company's operating performance in future periods.

The following table reconciles operating income (loss) per the information above to loss from continuing operations before income taxes as reported on the Consolidated Statements of Operations:

 

Three Months Ended

 

Nine Months Ended

 

June 30,

 

March 31,

 

June 30,

 

June 30,

(in thousands)

2020

 

2020 (1)

 

2019 (1)

 

2020

 

2019 (1)

Operating income (loss)

 

 

 

 

 

 

 

 

 

North America Solutions

$

(25,157

)

 

$

(342,667

)

 

$

(147,015

)

 

$

(315,705

)

 

$

20,514

 

International Solutions

(9,540

)

 

(152,469

)

 

(5,023

)

 

(158,894

)

 

9,575

 

Offshore Gulf of Mexico

3,013

 

 

(3,319

)

 

5,078

 

 

6,022

 

 

16,778

 

Other

4,389

 

 

376

 

 

(731

)

 

3,704

 

 

1,988

 

Segment operating income (loss)

$

(27,295

)

 

$

(498,079

)

 

$

(147,691

)

 

$

(464,873

)

 

$

48,855

 

Gain on sale of assets

4,201

 

 

10,310

 

 

9,960

 

 

18,790

 

 

27,050

 

Corporate selling, general and administrative costs, corporate depreciation and corporate restructuring charges

(34,490

)

 

(30,772

)

 

(30,143

)

 

(98,674

)

 

(94,344

)

Operating loss

$

(57,584

)

 

$

(518,541

)

 

$

(167,874

)

 

$

(544,757

)

 

$

(18,439

)

Other income (expense):

 

 

 

 

 

 

 

 

 

Interest and dividend income

771

 

 

3,566

 

 

2,349

 

 

6,551

 

 

6,861

 

Interest expense

(6,125

)

 

(6,095

)

 

(6,257

)

 

(18,320

)

 

(17,145

)

Gain (loss) on investment securities

2,267

 

 

(12,413

)

 

(13,271

)

 

(7,325

)

 

(50,228

)

Gain on sale of subsidiary

 

 

 

 

 

 

14,963

 

 

 

Other

(2,914

)

 

(398

)

 

(1,599

)

 

(3,711

)

 

(1,051

)

Total unallocated amounts

(6,001

)

 

(15,340

)

 

(18,778

)

 

(7,842

)

 

(61,563

)

Loss from continuing operations before income taxes

$

(63,585

)

 

$

(533,881

)

 

$

(186,652

)

 

$

(552,599

)

 

$

(80,002

)

(1)

Prior period information has been restated to reflect the transition of the H&P Technologies reportable segment to the North America Solutions reportable segment.

SUPPLEMENTARY STATISTICAL INFORMATION

Unaudited

U.S. LAND RIG COUNTS & MARKETABLE FLEET STATISTICS

 

July 28,

 

June 30,

 

March 31,

 

Q3FY20

 

2020*

 

2020*

 

2019

 

Average

U.S. Land Operations

 

 

 

 

 

 

 

Term Contract Rigs

51

 

 

53

 

 

90

 

 

66

 

Spot Contract Rigs

13

 

 

15

 

 

60

 

 

23

 

Total Contracted Rigs

64

 

 

68

 

 

150

 

 

89

 

Idle or Other Rigs

198

 

 

194

 

 

149

 

 

173

 

Total Marketable Fleet

262

 

 

262

 

 

299

 

 

262

 

(*) As of July 28, 2020 and June 30, 2020, the Company had 20 contracted rigs generating revenue that were idle.

H&P GLOBAL FLEET UNDER TERM CONTRACT STATISTICS

Number of Rigs Already Under Long-Term Contracts(**)

(Estimated Quarterly Average — as of 6/30/20)

 

Q4

 

Q1

 

Q2

 

Q3

 

Q4

 

Q1

 

Q2

Segment

FY20

 

FY21

 

FY21

 

FY21

 

FY21

 

FY22

 

FY22

U.S. Land Operations

50.1

 

 

45.5

 

 

37.9

 

 

31.8

 

 

27.5

 

 

17.3

 

 

13.1

 

International Land Operations

1.0

 

 

1.0

 

 

1.0

 

 

1.0

 

 

1.0

 

 

1.0

 

 

1.0

 

Offshore Operations

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

51.1

 

 

46.5

 

 

38.9

 

 

32.8

 

 

28.5

 

 

18.3

 

 

14.1

 

(**) All of the above rig contracts have original terms equal to or in excess of six months and include provisions for early termination fees.

SELECT ITEMS(***)

 

 

June 30, 2020

(in thousands, except per share data)

Pretax

 

Tax

 

Net

 

EPS

Net loss (GAAP basis)

 

 

 

 

$

(45,599

)

 

$

(0.43

)

Restructuring charges

$

(15,495

)

 

$

(3,254

)

 

$

(12,241

)

 

$

(0.11

)

Fair market adjustment to equity investments

$

2,267

 

 

$

652

 

 

$

1,615

 

 

$

0.02

 

Adjusted net loss

 

 

 

 

$

(34,973

)

 

$

(0.34

)

 

March 31, 2020

(in thousands, except per share data)

Pretax

 

Tax

 

Net

 

EPS

Net loss (GAAP basis)

 

 

 

 

$

(420,540

)

 

$

(3.88

)

Impairment of goodwill, rigs and related equipment

$

(563,234

)

 

$

(125,770

)

 

$

(437,464

)

 

$

(4.03

)

Fair market adjustment to equity investments

$

(12,413

)

 

$

(2,983

)

 

$

(9,430

)

 

$

(0.09

)

Reversal of accrued compensation

$

17,681

 

 

$

4,038

 

 

$

13,643

 

 

$

0.13

 

Change in fair value of contingent liability

$

3,600

 

 

$

822

 

 

$

2,778

 

 

$

0.03

 

Adjusted net income

 

 

 

 

$

9,933

 

 

$

0.08

 

Note: Excluded from the select items above are revenues recognized due to early contract terminations in the amount (pretax) of $50.2 million and $10.3 million for the periods ended June 30, 2020 and March 31, 2020, respectively.

(***)The Company believes identifying and excluding select items is useful in assessing and understanding current operational performance, especially in making comparisons over time involving previous and subsequent periods and/or forecasting future period results. Select items are excluded as they are deemed to be outside of the Company's core business operations. Previously reflected in the March 31, 2020 select items were early contract terminations, sales of used drilling equipment and abandonment and accelerated depreciation charges; however, we no longer classify these as select items.

 

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