Helmerich & Payne, Inc. Announces Fiscal Year-End Results

TULSA, Okla., Nov. 17, 2016 (GLOBE NEWSWIRE) -- Helmerich & Payne, Inc. (NYSE:HP) reported a net loss of $57 million (negative $0.54 per diluted share) from operating revenues of $1.6 billion for its fiscal year ended September 30, 2016, compared to net income of $420 million 1 ($3.85 per diluted share) from operating revenues of $3.2 billion for its prior fiscal year ended September 30, 2015.  Included in net income (loss) per diluted share for fiscal 2016 and fiscal 2015 are approximately $0.54 and $0.86, respectively, in after-tax income related to a combination of select items as described in a separate section of this press release.  Select items, among others, include long-term contract early termination compensation, lawsuit settlement charges, losses from the impairment of a position in the Company's portfolio of marketable securities, and abandonment charges.  

Net loss for the fourth fiscal quarter of 2016 was $73 million (negative $0.68 per diluted share) from operating revenues of $332 million.  Included in net loss per diluted share corresponding to this year's fourth fiscal quarter are approximately $0.35 in after-tax losses related to a combination of select items as described in a separate section of this press release.

President and CEO John Lindsay commented, "It is good to deliver better than expected quarterly operational results in the midst of an improving U.S. land market.  Our goal is to safely provide performance driven drilling services, and as we think about the future, it is helpful to properly frame where the Company is today. 

"Our AC drive FlexRig®* fleet is positioned to take market share in a strong or moderate U.S. land market recovery.  We are uniquely leveraged to provide E&P companies the rig of choice, particularly those drilling more challenging horizontal wells.  The design of our FlexRig fleet allows for a broad range of rig upgrades providing a family of solutions for our customers.

"An example of H&P's industry leading capability is our current fleet of AC drive FlexRigs that have 7,500 psi circulating systems and multi-well pad drilling capability.  These rigs meet the general criteria of what some industry followers have identified as 'super-spec' rigs, which is a subset of AC drive rigs with 1,500 horsepower drawworks ratings.   We have approximately 80 of these rigs in our U.S. land fleet, and if demand remains high we could upgrade additional FlexRigs and have approximately 120 of these rigs by the end of our 2017 second fiscal quarter.  The current industry capacity for additional super-spec rigs appears to be limited, which positions H&P very well for future expansion in this space.  In the event of a significant market improvement for super-spec rigs, we have the capability of providing a total of approximately 270 rigs to the market without requiring new build rigs, by solely relying upon upgrades where needed to our current FlexRig3 and FlexRig5 fleet.

"In addition to having what we strongly believe is the best fleet for the more technically challenging shale wells, we have the people, the systems and the operational support structures to drive top performance and reliability for our customers.  We have accumulated more than 1,800 rig years of AC drive operational experience.  Our expertise designing, building and now upgrading the fleet provides great optionality for the customer and has resulted in H&P having the largest and most capable fleet of AC drive rigs in the industry.  We remain committed to further expand our competitive advantages through technology and the scale of our operations in order to continue to add value to our customers and shareholders."

Operating Segment Results

Segment operating loss for the Company's U.S. land operations was $70 million for the fourth quarter of fiscal 2016, compared with segment operating income of $34 million for last year's fourth fiscal quarter and $26 million for this year's third fiscal quarter.  As compared to the third quarter of fiscal 2016, the decrease in segment operating income was primarily attributable to a decline in early termination revenues and to charges of $38.1 million for abandonments (non-cash) related to the decommissioning of used drilling equipment, $18.8 million for an accrued lawsuit settlement liability, and $4.5 million corresponding to an adjustment (non-cash) to the self-insurance reserve for worker's compensation claims.  The abandonment charge is included with depreciation and the other two charges are included in direct operating expenses in the segment during the fourth quarter.  The number of quarterly revenue days increased sequentially by approximately 6% to 7,955 days.  Excluding the impact of $10,790 and $3,744 per day of revenues from early contract terminations during the third and fourth fiscal quarters, respectively, the average rig revenue per day decreased sequentially by $280 to $24,404.  Excluding the impact of $363 per day of employee severance expense during the third fiscal quarter and of $2,923 per day of lawsuit settlement and self-insurance reserve charges during the fourth quarter, the average rig expense per day decreased sequentially by $91 to $13,326.  Thus, the corresponding average rig margin per day decreased sequentially by $189 to $11,078.  Rig utilization for the segment was 25% for this year's fourth fiscal quarter, compared with 43% and 24% for last year's fourth fiscal quarter and this year's third fiscal quarter, respectively.  At September 30, 2016, the Company's U.S. land segment had approximately 95 contracted rigs generating revenue (including 72 under long-term contracts) and 253 idle rigs.  The 95 contracted rigs included 91 rigs generating revenue days.

Segment operating income for the Company's offshore operations was $2.6 million for the fourth quarter of fiscal 2016, compared with $12.6 million 1 for last year's fourth fiscal quarter and $2.1 million for this year's third fiscal quarter.  The sequential increase in operating income was attributable to a higher average rig margin per day and a slight increase in revenue days in the fourth quarter of fiscal 2016.  Excluding the impact of $1,236 per day of employee severance expense during the third fiscal quarter and of $752 per day corresponding to an adjustment to a self-insurance reserve for worker's compensation claims during the fourth quarter, the average rig margin per day increased sequentially from $7,981 to $9,070, and quarterly revenue days increased from 637 days to 644 days during the fourth fiscal quarter.

The Company's international land operations reported segment operating loss of $0.2 million for this year's fourth fiscal quarter, compared with an operating loss of $47.2 million 1 for last year's fourth fiscal quarter and an operating loss of $5.0 million for this year's third fiscal quarter.  The sequential improvement in operating results was attributable to a higher average daily rig margin and an increase in rig revenue days. Excluding the impact of $924 per day of employee severance expense during the third fiscal quarter, the average rig margin per day increased sequentially from $9,461 to $10,619 during the fourth fiscal quarter.  The number of quarterly revenue days increased sequentially by approximately 8% to 1,372 days.

Drilling Operations Outlook for the First Quarter of Fiscal 2017

In the U.S. land segment, the Company expects revenue days (activity) to increase by roughly 20% during the first fiscal quarter of 2017 as compared to the fourth fiscal quarter of 2016.  Excluding any impact from early termination revenue, the average rig revenue per day is expected to be roughly $23,500, and the average rig expense per day is expected to be roughly $14,200.  As of today, the U.S. land segment has approximately 105 contracted rigs that are generating revenue (including 72 under term contracts) and 243 idle rigs.  The 105 contracted rigs include 102 rigs generating revenue days.

In the offshore segment, the Company expects revenue days to be unchanged during the first fiscal quarter of 2017 as compared to the fourth fiscal quarter of 2016.  The average rig margin per day is expected to be approximately $11,250 during the first quarter of fiscal 2017. 

In the international land segment, the Company expects revenue days to decrease by approximately 5% during the first fiscal quarter of 2017 as compared to the fourth fiscal quarter of 2016.  Excluding any impact from early termination revenue, the average rig margin per day is expected to be roughly $8,000 during the first quarter of fiscal 2017.

Capital Expenditures and Other Estimates for Fiscal 2017

The Company's capital expenditures for fiscal 2017 are expected to be roughly $200 million.  Depreciation expense is expected to decrease to approximately $525 million, and general and administrative expenses are expected to decrease to approximately $140 million for fiscal 2017.

Select Items Included in Net Income (or Loss) per Diluted Share

Included in net loss per diluted share for fiscal 2016 are select items totaling approximately $0.54 in after-tax income comprised of the following:  $1.29 of after-tax income from long-term contract early termination compensation from customers (which favorably impacted net income by approximately $139 million); $0.06 of after-tax gains related to the sale of used drilling equipment; $0.03 of after-tax losses related to an adjustment to the self-insurance reserve for worker's compensation claims; $0.04 of after-tax losses from impairment charges related to used drilling equipment; $0.04 of after-tax losses in general and administrative expenses from employer 401K plan matching contributions related to employee work force reductions; $0.05 of after-tax losses from employee severance expense; $0.05 of after-tax losses related to currency exchange losses; $0.11 of after-tax losses from accrued charges related to a lawsuit settlement agreement; $0.15 of after-tax losses from the impairment of a position in the Company's portfolio of marketable securities; $0.23 of after-tax losses from abandonment charges related to the decommissioning of used drilling equipment; $0.04 of losses from discontinued operations; and a negative impact of $0.07 related to adjustments to the Internal Revenue Code Section 199 deduction for domestic production activities.

Included in net income per diluted share for fiscal 2015 are select items totaling approximately $0.86 in after-tax income comprised of the following:  $1.30 of after-tax income from long-term contract early termination compensation from customers (which favorably impacted net income by approximately $141 million); $0.07 of after-tax gains related to the sale of used drilling equipment; $0.03 of after-tax losses related to an allowance for doubtful accounts; $0.23 of after-tax losses from impairment charges for certain (SCR) land rigs; and $0.25 of after-tax losses from abandonment charges related to the decommissioning of certain (SCR) land rigs and other used drilling equipment.

Included in net loss per diluted share corresponding to the fourth quarter of fiscal 2016 are select items totaling approximately $0.35 in after-tax losses comprised of the following:  $0.18 of after-tax income from long-term contract early termination compensation from customers; $0.01 of after-tax gains related to the sale of used drilling equipment; $0.03 of after-tax losses related to an adjustment to the self-insurance reserve for worker's compensation claims; $0.11 of after-tax losses from accrued charges related to a lawsuit settlement agreement; $0.15 of after-tax losses from the impairment of a position in the Company's portfolio of marketable securities; $0.23 of after-tax losses from abandonment charges related to the decommissioning of used drilling equipment; and a negative impact of $0.02 related to adjustments to the Internal Revenue Code Section 199 deduction for domestic production activities.

About Helmerich & Payne, Inc.

Helmerich & Payne, Inc. is primarily a contract drilling company.  As of November 17, 2016, the Company's existing fleet includes 348 land rigs in the U.S., 38 international land rigs, and nine offshore platform rigs.  In addition, the Company is scheduled to deliver two new H&P-designed and operated FlexRigs during the calendar year, both under long-term contracts with customers.  Upon completion of these commitments, the Company's global fleet is expected to have a total of 388 land rigs, including 373 AC drive FlexRigs.

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, budgets, projected costs and plans and objectives of management for future operations, 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.

*FlexRig® is a registered trademark of Helmerich & Payne, Inc.                                                                                        

1 Value(s) adjusted due to previously announced elimination of legacy one-month lag period between the Company's U.S. fiscal year and its foreign subsidiaries' fiscal years. The footnoted item(s) in this release now reflects the period-specific effects of this change. 
HELMERICH & PAYNE, INC.
Unaudited
(in thousands, except per share data)
 
  Three Months Ended Fiscal Year Ended
CONSOLIDATED STATEME NTS OF June 30 September 30 September 30
  2016 2016 2015 2016   2015  
OPERATIONS     (As adjusted)   (As adjusted)
           
Operating Revenues:          
Drilling - U.S. Land $ 285,028   $ 238,346   $ 420,393   $ 1,242,462   $ 2,523,518  
Drilling - Offshore   30,492     31,904     52,280     138,601     241,666  
Drilling - International Land   47,983     58,365     78,069     229,894     382,331  
Other   2,983     3,093     3,058     13,275     14,187  
  $ 366,486   $ 331,708   $ 553,800   $ 1,624,232   $ 3,161,702  
           
Operating costs and expenses:        
Operating costs, excluding depreciation   186,146     214,404     326,274     898,805     1,703,476  
Depreciation    138,690     176,251     174,594     598,587     608,039  
Asset impairment charge   6,250     -     39,242     6,250     39,242  
General and administrative   46,496     33,802     37,728     146,183     134,712  
Research and development   2,707     2,328     3,760     10,269     16,104  
Income from asset sales   (547 )   (2,076 )   (3,015 )   (9,896 )   (11,834 )
    379,742     424,709     578,583     1,650,198     2,489,739  
           
Operating income (loss)   (13,256 )   (93,001 )   (24,783 )   (25,966 )   671,963  
           
Other income (expense):          
Interest and dividend income   778     856     1,393     3,166     5,840  
Interest expense   (6,407 )   (6,261 )   (5,697 )   (22,913 )   (15,023 )
Loss on investment securities   -     (25,989 )   -     (25,989 )   -  
Other   534     (1,891 )   (989 )   (965 )   (901 )
    (5,095 )   (33,285 )   (5,293 )   (46,701 )   (10,084 )
         
Income (loss) from continuing operations before income taxes    (18,351 )   (126,286 )   (30,076 )   (72,667 )   661,879  
Income tax provision    2,842     (53,417 )   (2,486 )   (19,677 )   241,405  
Income (loss) from continuing operations   (21,193 )   (72,869 )   (27,590 )   (52,990 )   420,474  
           
Income (loss) from discontinued operations, before income taxes    2,193     119     (6 )   2,360     (124 )
Income tax provision   2,200     85     -     6,198     77  
Income (loss) from discontinued operations    (7 )   34     (6 )   (3,838 )   (47 )
           
NET INCOME (LOSS) $ (21,200 ) $ (72,835 ) $ (27,596 ) $ (56,828 ) $ 420,427  
                               
Basic earnings per common share:                              
Income (loss) from continuing operations $ (0.20 ) $ (0.68 ) $ (0.26 ) $ (0.50 ) $ 3.88  
Loss from discontinued operations $     -   $      -   $     -   $ (0.04 ) $   -  
                               
Net income (loss) $ (0.20 ) $ (0.68 ) $ (0.26 ) $ (0.54 ) $ 3.88  
                               
Diluted earnings per common share:                              
Income (loss) from continuing operations $ (0.20 ) $ (0.68 ) $ (0.26 ) $ (0.50 ) $ 3.85  
Loss from discontinued operations $     -   $      -   $   -   $ (0.04 ) $     -  
                               
Net income  $ (0.20 ) $ (0.68 ) $ (0.26 ) $ (0.54 ) $ 3.85  
           
Weighted average shares outstanding:        
Basic   108,047     108,070     107,740     107,996     107,754  
Diluted   108,047     108,070     107,740     107,996     108,570  

Effective October 1, 2015, the Company eliminated a legacy one-month lag period between its U.S. fiscal year and its foreign subsidiaries' fiscal years.  As required, the elimination of the one-month lag has been applied retrospectively to all periods presented herein.
 
HELMERICH & PAYNE, INC.
Unaudited
 (in thousands)
 
CONSOLIDATED CONDENSED BALANCE SHEETS   September 30 2016     September 30 2015 (As Adjusted)
   
         
ASSETS        
Cash and cash equivalents   $     905,561     $     729,384  
Short term investments     44,148       45,543  
Other current assets     622,913       656,170  
Current assets of discontinued operations     64       8,097  
Total current assets     1,572,686       1,439,194  
Investments     84,955       104,354  
Net property, plant, and equipment     5,144,733       5,563,170  
Other assets     29,645       40,524  
TOTAL ASSETS   $   6,832,019     $ 7,147,242  
                 
LIABILITIES AND SHAREHOLDERS' EQUITY                
Current liabilities   $     330,061     $   344,820  
Current liabilities of discontinued operations     59       3,377  
Total current liabilities     330,120       348,197  
Non-current liabilities     1,445,237       1,406,036  
Non-current liabilities of discontinued operations     3,890       4,720  
Long-term notes payable     491,847       492,443  
Total shareholders' equity     4,560,925       4,895,846  
                 
                 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   $   6,832,019        $   7,147,242  

 
 
HELMERICH & PAYNE, INC.
Unaudited
 (in thousands)
   
   
   Years Ended
  September 30
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS   2016       2015 (As Adjusted)  
   
OPERATING ACTIVITIES:          
Net income (loss) $     (56,828 )   $     420,427  
Adjustment for loss from discontinued operations   3,838       47  
Income (loss) from continuing operations   (52,990 )     420,474  
Depreciation   598,587       608,039  
Asset impairment charge   6,250       39,242  
Loss on investment securities   25,989       -  
Changes in assets and liabilities   156,957       338,217  
Gain on sale of assets   (9,896 )     (11,834 )
Other   28,653       34,483  
Net cash provided by operating activities from continuing operations   753,550       1,428,621  
Net cash provided by (used in) operating activities from discontinued operations   47       (47 )
Net cash provided by operating activities   753,597       1,428,574  
     
INVESTING ACTIVITIES:    
Capital expenditures   (257,169 )     (1,131,445 )
Purchase of short-term investments   (57,276 )     (45,607 )
Proceeds from sale of short-term investments   58,381       -  
Proceeds from sale of assets   21,845       22,643  
Net cash used in investing activities   (234,219 )     (1,154,409 )
     
FINANCING  ACTIVITIES:    
Proceeds from senior notes, net of discount and debt issuance costs   (1,111 )     491,651  
Proceeds from short-term debt   -       1,002  
Payments on short-term debt   -       (1,002 )
Payments on long-term debt   (40,000 )     (40,000 )
Dividends paid   (300,152 )     (298,367 )
Repurchase of common stock   -       (59,654 )
Exercise of stock options   1,040       2,650  
Tax withholdings related to net share settlements of restricted stock   (3,912 )     (5,140 )
Excess tax benefit from stock-based compensation   934       3,772  
Net cash provided by (used in) financing activities   (343,201 )     94,912  
     
Net increase in cash and cash equivalents   176,177       369,077  
Cash and cash equivalents, beginning of period   729,384       360,307  
Cash and cash equivalents, end of period $     905,561     $   729,384  

SEGMENT REPORTING Three Months Ended Fiscal Year Ended
  June 30 September 30 September 30
  2016 2016 2015 2016 2015
      (As adjusted)   (As adjusted)
  (in thousands, except days and per day amounts)
U.S. LAND OPERATIONS          
Revenues $ 285,028   $ 238,346   $ 420,393   $ 1,242,462   $ 2,523,518  
Direct operating expenses   122,694     143,681     219,700     603,800     1,254,424  
General and administrative expense   14,221     11,267     15,984     50,057     50,769  
Depreciation   116,061     153,135     151,056     508,237     519,950  
Asset impairment charge   6,250        -       -     6,250       -  
Segment operating income (loss) $ 25,802   $ (69,737 ) $ 33,653   $ 74,118   $ 698,375  
                               
Revenue days   7,483     7,955     13,490     36,984     75,866  
Average rig revenue per day $ 35,474   $ 28,148   $ 28,700   $ 31,369   $ 30,211  
Average rig expense per day $ 13,780   $ 16,249   $ 13,823   $ 14,117   $ 13,483  
Average rig margin per day $ 21,694   $ 11,899   $ 14,877   $ 17,252   $ 16,728  
Rig utilization   24 %   25 %   43 %   30 %   62 %
                               
OFFSHORE OPERATIONS                              
Revenues $ 30,492   $ 31,904   $ 52,280   $ 138,601   $ 241,666  
Direct operating expenses   24,249     25,376     35,738     106,983     158,488  
General and administrative expense   975     790     1,049     3,464     3,517  
Depreciation   3,184     3,184     2,877     12,495     11,659  
Segment operating income  $ 2,084   $ 2,554   $ 12,616   $ 15,659   $ 68,002  
                               
Revenue days   637     644     736     2,708     3,067  
Average rig revenue per day $ 25,568   $ 26,608   $ 31,422   $ 26,973   $ 44,125  
Average rig expense per day $ 18,823   $ 18,290   $ 18,126   $ 19,381   $ 27,246  
Average rig margin per day $ 6,745   $ 8,318   $ 13,296   $ 7,592   $ 16,879  
Rig utilization    78 %   78 %   89 %   82 %   93 %
                           
INTERNATIONAL LAND OPERATIONS        
Revenues $ 47,983   $ 58,365   $ 78,069   $ 229,894   $ 382,331  
Direct operating expenses   38,230     43,618     69,784     183,969     289,700  
General and administrative expense   772     532     892     2,909     3,148  
Depreciation   13,972     14,377     15,383     57,102     57,334  
Asset impairment change     -        -     39,242       -     39,242  
Segment operating loss   (4,991 ) $ (162 ) $ (47,232 ) $ (14,086 ) $ (7,093 )
                               
Revenue days   1,274     1,372     1,608     5,364     7,284  
Average rig revenue per day $ 34,693   $ 38,061   $ 43,660   $ 39,044   $ 47,352  
Average rig expense per day $ 26,156   $ 27,442   $ 38,659   $ 28,638   $ 34,848  
Average rig margin per day $ 8,537   $ 10,619   $ 5,001   $ 10,406   $ 12,504  
Rig utilization    37 %   39 %   45 %   39 %   51 %
           
Operating statistics exclude the effects of offshore platform management contracts, 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 calculations.
 
Reimbursed amounts were as follows:
           
U.S. Land Operations $ 19,593   $ 14,422   $ 33,225   $ 82,337   $ 231,528  
Offshore Operations $ 5,270   $ 5,451   $ 11,710   $ 23,138   $ 33,254  
International Land Operations $ 3,784   $ 6,142   $ 7,863   $ 20,458   $ 37,420  

Segment operating income for all segments is a non-GAAP financial measure of the Company's performance, as it excludes general and administrative expenses, corporate depreciation, income from asset sales and other corporate income and expense.  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 per the information above to income from continuing operations before income taxes as reported on the Consolidated Statements of Operations (in thousands).

    Three Months Ended Fiscal Year Ended
  June 30 September 30 September 30
    2016     2016   2015 (As adjusted)   2016   2015 (As adjusted)
Operating income (loss)          
U.S. Land $   25,802   $    (69,737 ) $   33,653   $     74,118   $   698,375  
Offshore     2,084      2,554       12,616     15,659       68,002  
International Land     (4,991 )     (162 )     (47,232 )     (14,086 )     (7,093 )
Other     (2,186 )     ( 2,652 )     (3,471 )   (7,491 )     (10,911 )
 Segment operating income (loss) $   20,709   $     (69,997 ) $     (4,434 ) $     68,200   $   748,373  
Corporate general and administrative     (30,528 )     (21,213 )      (19,803 )   (89,753 )     (77,278 )
Other depreciation     (4,456 )     (4,276 )     (3,803 )   (16,313 )     (15,077 )
Inter-segment elimination     472       409       242     2,004       4,111  
Income from asset sales     547       2,076       3,015     9,896       11,834  
  Operating income  (loss) $   (13,256 ) $   (93,001 ) $   (24,783 ) $   (25,966 ) $   671,963  
           
Other income (expense):          
 Interest and dividend income      778       856       1,393       3,166       5,840  
 Interest expense     (6,407 )     (6,261 )     (5,697 )   (22,913 )     (15,023 )
 Loss on investment securities   -       (25,989 )     -     (25,989 )   -  
 Other   534       (1,891 )     (989 )   (965 )     (901 )
 Total other expense     (5,095 )     (33,285 )     (5,293 )   (46,701 )     (10,084 )
           
 Income (loss) from continuing operations before income taxes $ (18,351 ) $ (126,286 ) $ (30,076 ) $ (72,667 ) 661,879  
                               
Contact:  Investor Relationsinvestor.relations@hpinc.com(918) 588-5190

Primary Logo