Helmerich & Payne, Inc. Announces First Quarter Earnings

TULSA, Okla., Jan. 28 /PRNewswire-FirstCall/ -- Helmerich & Payne, Inc. (NYSE: HP) reported net income of $63,235,000 ($0.59 per diluted share) from operating revenues of $399,843,000 for its first fiscal quarter ended December 31, 2009, compared with net income of $145,275,000 ($1.36 per diluted share) from operating revenues of $623,754,000 during last year’s first fiscal quarter ended December 31, 2008.  Included in both this year’s and last year’s first quarter net income are less than $.01 per share of gains from the sale of drilling equipment and involuntary conversion of long lived assets.  

Segment operating income for U.S. land operations was $91,523,000 for this year’s first fiscal quarter, compared with $194,048,000 for last year’s first fiscal quarter and $90,137,000 for last year’s fourth fiscal quarter.  The decline as compared to last year’s first quarter was primarily a result of significantly lower activity levels in the U.S. land drilling market.  Excluding the impact of income corresponding to early contract terminations and to compensation from customers that requested delivery delays during last year’s fourth and this year’s first fiscal quarters, the average rig revenue per day declined sequentially by $295 to $22,724 for the first fiscal quarter, and the average rig margin per day only slightly declined sequentially by $45 to $11,651 for the first fiscal quarter.  

Approximately $1,400 of the average rig revenue and margin per day corresponding to U.S. land operations for this year’s first fiscal quarter was a result of early contract termination revenue and of revenue related to requested delivery delays for new builds under long-term contracts.   This compares to approximately $2,850 included in the rig revenue and margin per day averages corresponding to last year’s fourth fiscal quarter for the same type of revenue.  Additional revenue of approximately $19 million corresponding to new build early terminations (all of which took place before the fourth fiscal quarter of 2009) and to requested delivery delays are expected to be recognized during the last three quarters of fiscal 2010.  At this point, the Company expects almost 50% of this amount to favorably impact revenue during the second fiscal quarter, and the remainder to favorably impact the last two quarters of fiscal 2010.  

Rig utilization for the Company’s U.S. land segment was 62% for this year’s first fiscal quarter, compared with 95% for last year’s first fiscal quarter and 55% for last year’s fourth fiscal quarter.  At December 31, 2009, the Company’s U.S. land segment had 143 contracted rigs and 67 idle and available rigs.  The 143 contracted rigs included 101 rigs under term contracts, five of which were new FlexRigs®* waiting on customers that requested delivery delays.  Delayed FlexRigs do not generate revenue days and are not considered for purposes of calculating and reporting rig utilization rates.  In its U.S. land segment, the Company now expects an average of approximately 102 rigs to remain under term contracts during the second fiscal quarter, 97 during the third fiscal quarter and 87 during the fourth fiscal quarter of 2010.  The corresponding estimated annual averages for rigs already under term contracts for fiscal 2010, fiscal 2011 and fiscal 2012 are 95, 60 and 36 rigs, respectively.

Segment operating income for the Company’s offshore operations was $15,106,000 for the first fiscal quarter of 2010, compared with $14,710,000 for last year’s first fiscal quarter and $12,023,000 for last year’s fourth fiscal quarter.  Average rig utilization of the Company’s nine platform rigs in the offshore segment was 85% for this year’s first fiscal quarter, compared with 89% during last year’s first fiscal quarter and 78% during last year’s fourth fiscal quarter.  Average rig margins per day increased to $24,936 during this year’s first fiscal quarter from $20,679 during last year’s fourth fiscal quarter.  

The Company’s international land operations recorded segment operating income of $8,403,000 for this year’s first fiscal quarter, compared with operating income of $22,628,000 for the first fiscal quarter of 2009, and an operating loss of $6,252,000 for the fourth fiscal quarter of 2009.  The operating income decline as compared to last year’s first quarter is mostly attributable to the reduction in the Company’s level of activity in Venezuela from 11 to no active rigs.  The sequential quarter to quarter improvement was primarily a result of the Company’s incremental activity in Mexico and Argentina, as well as a very successful short-term project executed in Africa during the first fiscal quarter of 2010.  Average international rig utilization for the first fiscal quarter was 44%, compared with 98% during last year’s first fiscal quarter, and 41% during last year’s fourth fiscal quarter.  

After the adjustments corresponding to the recent devaluation in Venezuela, the total invoiced amount by the Company that remains due from PDVSA as of January 12, 2010, is valued at approximately $57 million (U.S. currency equivalent), including approximately $46 million in invoices issued since the Company changed its revenue recognition to cash basis for its Venezuelan operation.  Invoices issued under cash basis revenue recognition include approximately $42 million in potential future revenue and approximately $4 million in non-revenue billings.  As reported in its press release dated January 12, 2010, the Company expects the recent devaluation in Venezuela to result in a currency exchange loss of approximately $20 million to be recorded in the second fiscal quarter ending March 31, 2010.  All 11 H&P rigs that formerly worked for PDVSA have completed their contract obligations and are currently idle.  The Company will continue to pursue future drilling opportunities in Venezuela for these 11 conventional rigs, but it does not expect to return to work in Venezuela until additional progress is made on pending receivable collections and on conversion of local currency to U.S. dollars.  

President and CEO Hans Helmerich commented, “We are encouraged by the improvements we saw during the first fiscal quarter, particularly with the sequential increases in operating income and rig utilization in each of our markets.  Customers are signaling that their spending plans are increasing in 2010 and the Company is well positioned with the newest and most technologically advanced land rig fleet to deliver the best value in the market.  While there is still an oversupply of land rigs in the U.S., only a fraction are higher technology rigs which are clearly the preferred tool for the increasing and prolific shale projects requiring horizontal and directional drilling.”

Helmerich & Payne, Inc. is primarily a contract drilling company.  As of January 28, 2010, the Company’s existing fleet included 210 land rigs in the U.S., 39 international land rigs and nine offshore platform rigs.  In addition, the Company is scheduled to complete another three new H&P-designed and operated FlexRigs during fiscal 2010 under long-term contracts with customers.  Upon completion of these commitments, the Company’s global land fleet will include a total of 190 FlexRigs.

Helmerich & Payne, Inc.’s conference call/webcast is scheduled to begin this morning at 11:00 a.m. ET (10:00 a.m. CT) and can be accessed at http://www.hpinc.com under Investors.  If you are unable to participate during the live webcast, the call will be archived on H&P’s website indicated above.

Statements in this release and information disclosed in the conference call and webcast that are “forward-looking statements” within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934 are based on current expectations and assumptions that are subject to risks and uncertainties. For information regarding risks and uncertainties associated with the Company’s business, please refer to the “Risk Factors” and “Management’s Discussion & 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.

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

SOURCE Helmerich & Payne, Inc.