OREANDA-NEWS. Helmerich & Payne, Inc. (NYSE:HP) reported a net loss of $21 million (negative $0.20 per diluted share) from operating revenues of $366 million for the third quarter of fiscal 2016, compared to net income of $91 million ($0.83 per diluted share) from operating revenues of $661 million (as adjusted) during the third quarter of fiscal 2015, and net income of $21 million ($0.19 per diluted share) from operating revenues of $438 million during the second quarter of fiscal 2016.  Included in net income per diluted share for this year’s and last year’s third fiscal quarters as well as this year’s second fiscal quarter are approximately $0.27, $0.61, and $0.46, respectively, of after-tax income related to a combination of select items (including long-term contract early termination compensation from customers) as described in a separate section of this press release.

President and CEO John Lindsay commented, “Even though oil prices have pulled back over the past several weeks, it is encouraging to still see signs of optimism in the market.   In May, the BHI U.S. land rig count troughed at 380 rigs, and has since increased from what everyone hopes was the absolute bottom of this market cycle.  Recently, some E&P companies have announced budget increases and rig count additions.  It is a positive sign, but many still remain on the sidelines.

“This has been an extraordinary downturn and it is having a pervasive effect on every enterprise within the industry.  While H&P remains very strong and has been proactive and effective in adjusting to this new environment, the declines in activity levels and spot pricing that we have experienced have significantly impacted our bottom line and the size of our organization.  An improving market reverses these two trends, and we believe that we are uniquely positioned to grow market share in the increasingly complex drilling environment that unconventional shale plays will require going forward. 

“Time will tell whether momentum is truly building in the market; a few data points do not make a trend.   However, regardless of the timing, we are making every effort to emerge from this as a stronger Company for customers, employees, and shareholders.”

Operating Segment Results

Segment operating income for the Company’s U.S. land operations was $26 million for the third quarter of fiscal 2016, compared with $122 million for last year’s third fiscal quarter and $63 million for this year’s second fiscal quarter.  As compared to the second quarter of fiscal 2016, segment operating income decreased as a result of lower quarterly levels of activity and rig margins (excluding revenues from early contract terminations), as well as impairment charges during the third fiscal quarter related to used drilling equipment.  The number of quarterly revenue days decreased sequentially by approximately 22% to 7,483 days.  Excluding the impact of $8,287 and $10,790 per day corresponding to revenues from early contract terminations during this year’s second and third fiscal quarters, respectively, the average rig revenue per day decreased sequentially by $1,247 to $24,684.  Excluding the impact of $110 and $363 per day corresponding to employee severance expense during this year’s second and third fiscal quarters, respectively, the average rig expense per day decreased sequentially by $612 to $13,417.  Thus, the corresponding average rig margin per day decreased sequentially by $635 to $11,267.  Rig utilization for the segment was 24% for this year’s third fiscal quarter, compared with 47% and 31% for last year’s third fiscal quarter and this year’s second fiscal quarter, respectively.  At June 30, 2016, the Company’s U.S. land segment had approximately 89 contracted rigs generating revenue (including 75 under long-term contracts) and 259 idle rigs.  The 89 contracted rigs included 84 rigs generating revenue days.

Segment operating income for the Company’s offshore operations was $2.1 million for the third quarter of fiscal 2016, compared with $14.7 million for last year’s third fiscal quarter and $3.3 million for this year’s second fiscal quarter.  The sequential decrease in operating income was attributable to employee severance expense and declines in rig revenue days.  Excluding the impact of $537 and $1,236 per day corresponding to employee severance expense during this year’s second and third fiscal quarters, respectively, the average rig margin per day increased sequentially from $7,883 to $7,981, and quarterly revenue days decreased from 691 days to 637 days during the third fiscal quarter.

The Company’s international land operations reported a segment operating loss of $5.0 million for this year’s third fiscal quarter, compared with operating income of $19.0 million (as adjusted) for last year’s third fiscal quarter and an operating loss of $2.3 million for this year’s second fiscal quarter.  The sequential decrease in operating results was attributable to declines in the average daily margins and rig revenue days. Excluding the impact of $212 and $924 per day corresponding to employee severance expense during this year’s second and third fiscal quarters, respectively, the average rig margin per day decreased sequentially from $10,699 to $9,461 during the third fiscal quarter.  The number of quarterly revenue days decreased sequentially by approximately 3% to 1,274 days.

Drilling Operations Outlook for the Fourth Quarter of Fiscal 2016

In the U.S. land segment, the Company expects revenue days (activity) to increase by roughly 3% to 7% during the fourth fiscal quarter as compared to the third fiscal quarter of 2016.  Excluding any impact from early termination revenue, the average rig revenue per day is expected to be roughly $24,000, and the corresponding average rig expense per day is expected to decrease to roughly $13,300.  As of today, the U.S. land segment has approximately 91 contracted rigs that are generating revenue (including 72 under term contracts) and 257 idle rigs.  The 91 contracted rigs include 86 rigs generating revenue days.

In the offshore segment, the Company expects revenue days to increase by approximately 1% during the fourth fiscal quarter as compared to the third fiscal quarter of 2016.  The average rig margin per day is expected to be approximately $8,000 during the fourth quarter of fiscal 2016. 

In the international land segment, the Company expects revenue days to increase by approximately 5% to 10% during the fourth quarter as compared to the third quarter of fiscal 2016.  The average rig margin per day is expected to be roughly $8,300 during the fourth quarter of fiscal 2016.

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

Included in net loss per diluted share corresponding to the third quarter of fiscal 2016 are approximately $0.27 of after-tax income related to a combination of the following:  $0.35 of after-tax gains from long-term contract early termination compensation from customers; $0.02 of after-tax losses from employee severance expense; $0.03 of after-tax losses from impairment charges related to used drilling equipment; and $0.03 of after-tax losses in general and administrative expenses from employer 401K plan matching contributions related to employee work force reductions.

Included in net income per diluted share corresponding to the third quarter of fiscal 2015 are approximately $0.61 of after-tax income related to a combination of the following:  $0.60 (as adjusted) of after-tax gains from long-term contract early termination compensation from customers and $0.01 of after-tax gains related to the sale of used drilling equipment. 

Included in net income per diluted share corresponding to the second quarter of fiscal 2016 are approximately $0.46 of after-tax income related to a combination of the following:  $0.49 of after-tax gains from long-term contract early termination compensation from customers; $0.02 of after-tax gains related to the sale of used drilling equipment; $0.01 of after-tax losses from employee severance expense; and $0.04 of losses from discontinued operations.    

About Helmerich & Payne, Inc.

Helmerich & Payne, Inc. is primarily a contract drilling company.  As of July 28, 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 another two new H&P-designed and operated FlexRigs®* during this fiscal 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.

 
HELMERICH & PAYNE, INC.
Unaudited
(in thousands, except per share data)
 
  Three Months Ended Nine Months Ended
CONSOLIDATED STATEMENTS OF March 31 June 30 June 30
OPERATIONS   2016     2016   2015
(As adjusted)		   2016   2015
(As adjusted)
           
Operating Revenues:          
  Drilling – U.S. Land $     349,283   $     285,028   $     494,615   $   1,004,116   $   2,103,125  
  Drilling – Offshore   34,325     30,492     57,071     106,697     189,386  
  Drilling – International Land   51,352     47,983     106,551     171,529     304,262  
  Other   3,231     2,983     3,208     10,182     11,129  
  $     438,191   $     366,486   $   661,445   $  1,292,524   $ 2,607,902  
           
Operating costs and expenses:          
  Operating costs, excluding depreciation   221,611     186,146     350,640     684,401     1,377,202  
  Depreciation   141,517     138,690     144,965     422,336     433,445  
  Asset impairment charge   -     6,250     -     6,250     -  
  General and administrative   33,811     46,496     29,253     112,381     96,984  
  Research and development   2,315     2,707     3,329     7,941     12,344  
  Income from asset sales   (2,684 )   (547 )   (1,791 )   (7,820 )   (8,819 )
    396,570     379,742     526,396     1,225,489     1,911,156  
           
Operating income (loss)   41,621     (13,256 )   135,049     67,035     696,746  
           
Other income (expense):          
    Interest and dividend income   799     778     1,588     2,310     4,447  
    Interest expense   (5,721 )   (6,407 )   (6,136 )   (16,652 )   (9,326 )
    Other   653     534     (281 )     926       88  
    (4,269 )   (5,095 )   (4,829 )   (13,416 )   (4,791 )
Income (loss) from continuing operations          
  before income taxes   37,352     (18,351 )   130,220     53,619     691,955  
Income tax provision   12,178     2,842     39,321     33,740     243,891  
Income (loss) from continuing operations   25,174     (21,193 )   90,899     19,879     448,064  
           
Income (loss) from discontinued operations,
before income taxes 		   (56 )   2,193     (27 )   2,241     (41 )
Income tax provision   3,913     2,200     -     6,113     -  
Loss from discontinued operations   (3,969 )   (7 )   (27 )   (3,872 )   (41 )
           
NET INCOME (LOSS) $     21,205   $      (21,200 ) $     90,872   $     16,007   $     448,023  
           
Basic earnings per common share:          
    Income (loss) from continuing operations $     0.23   $     (0.20 ) $     0.84   $     0.18   $     4.13  
    Loss from discontinued operations $     (0.04 ) $      -   $     -   $     (0.04 ) $     -  
           
    Net income (loss) $     0.19   $     (0.20 ) $     0.84   $     0.14   $     4.13  
                               
Diluted earnings per common share:                              
Income (loss) from continuing operations $ 0.23   $ (0.20 ) $ 0.83   $ 0.17   $ 4.10  
Loss from discontinued operations $ (0.04 ) $ -   $ -   $ (0.04 ) $ -  
                               
Net income $ 0.19   $ (0.20 ) $ 0.83   $ 0.13   $ 4.10  
                               
Weighted average shares outstanding:                              
Basic   108,014     108,047     107,652     107,970     107,759  
Diluted   108,466     108,047     108,469     108,523     108,571  
                               

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)
 
    June 30
2016		   September 30
2015
(As Adjusted)
CONSOLIDATED CONDENSED BALANCE SHEETS    
         
ASSETS        
    Cash and cash equivalents   $     907,032     $     729,384  
    Short term investments     49,565       45,543  
    Other current assets     580,995       656,170  
    Current assets of discontinued operations     80       8,097  
       Total current assets     1,537,672       1,439,194  
    Investments     99,898       104,354  
    Net property, plant, and equipment     5,306,434       5,563,170  
    Other assets     32,515       40,524  
TOTAL ASSETS   $   6,976,519     $ 7,147,242  
         
LIABILITIES AND SHAREHOLDERS' EQUITY        
    Current liabilities   $     326,571     $   344,820  
    Current liabilities of discontinued operations     38       3,377  
       Total current liabilities     326,609       348,197  
    Non-current liabilities     1,451,314       1,406,036  
    Non-current liabilities of discontinued operations     3,984       4,720  
    Long-term notes payable     493,150       492,443  
    Total shareholders’ equity     4,701,462       4,895,846  
         
         
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   $ 6,976,519      $   7,147,242  
 
 
HELMERICH & PAYNE, INC.
Unaudited
(in thousands)
   
  Nine Months Ended
  June 30
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS   2016   2015
(As Adjusted)
     
OPERATING ACTIVITIES:    
    Net income $    16,007   $      448,023  
    Adjustment for loss from discontinued operations   3,872       41  
    Income from continuing operations   19,879       448,064  
      Depreciation   422,336     433,445  
      Asset impairment charge     6,250     -  
      Changes in assets and liabilities     153,624     258,102  
      Gain on sale of assets   (7,820 )   (8,819 )
      Other   21,071     20,805  
      Net cash provided by operating activities from continuing operations   615,340     1,151,597  
      Net cash provided by (used in) operating activities from discontinued operations   70     (41 )
        Net cash provided by operating activities   615,410     1,151,556  
     
INVESTING ACTIVITIES:    
Capital expenditures   (219,549 )   (971,602 )
      Purchase of short-term investments   (36,958 )   -  
      Proceeds from sales of short-term investments   32,681     -  
      Proceeds from sale of assets   12,804     17,757  
        Net cash used in investing activities   (211,022 )   (953,845 )
     
FINANCING  ACTIVITIES:    
      Proceeds from senior notes, net of discount and debt issuance costs   (32 )   491,923  
      Proceeds from short-term debt     -     1,002  
      Payments on short-term debt   -     (1,002 )
      Increase in bank overdraft     -     10,824  
      Dividends paid     (224,040 )   (223,827 )
      Repurchase of common stock   -     (59,654 )
      Exercise of stock options   483     (609 )
     Tax withholdings related to net share settlements of restricted stock   (3,912 )   (5,104 )
     Excess tax benefit from stock-based compensation   761     2,969  
        Net cash provided by (used in) financing activities   (226,740 )   216,522  
     
Net increase in cash and cash equivalents     177,648     414,233  
Cash and cash equivalents, beginning of period     729,384     360,307  
Cash and cash equivalents, end of period $    907,032   $    774,540