Helmerich & Payne, Inc. Announces Fourth Quarter and Year-End Results and New FlexRig® Contracts

TULSA, Okla., Nov. 18, 2010 /PRNewswire-FirstCall/ -- Helmerich & Payne, Inc. (NYSE: HP) reported income from continuing operations of $286,081,000 ($2.66 per diluted share) from operating revenues of $1,875,162,000 for its fiscal year ended September 30, 2010, compared to income from continuing operations of $380,546,000 ($3.56 per diluted share) from operating revenues of $1,843,740,000 during the prior fiscal year ended September 30, 2009.  Included in both fiscal 2010 and 2009 income from continuing operations is non-operating related income (after-tax) of $0.03 per diluted share.  Non-operating items included income from the sale of assets during 2010 and 2009, and gains on the involuntary conversion of long-lived assets during 2009.  The total reported loss for discontinued operations was $129,769,000 in fiscal 2010 and $27,001,000 in fiscal 2009, all of which corresponds to the Company’s former operations in Venezuela.  Consequently, net income for fiscal 2010 amounted to $156,312,000, compared to $353,545,000 for fiscal 2009.  

Income from continuing operations for the fourth quarter of fiscal 2010 was $83,291,000 ($0.77 per diluted share) from operating revenues of $558,957,000, compared to income from continuing operations of $54,976,000 ($0.51 per diluted share) from operating revenues of $358,276,000 during the fourth fiscal quarter of 2009, and income from continuing operations of $64,883,000 ($0.61 per diluted share) from operating revenues of $483,384,000 during the third fiscal quarter of 2010.  Included in income from continuing operations for the third fiscal quarter of 2010 is a non-operating gain of $0.01 per diluted share.  Net income for the fourth quarter of fiscal 2010 was $83,045,000 ($0.77 per diluted share), compared to net income of $51,488,000 ($0.48 per diluted share) during the fourth fiscal quarter of 2009, and a net loss of $36,715,000 (-$0.34 per diluted share) during the third fiscal quarter of 2010.      

Segment operating income for U.S. land operations was $118,894,000 for the fourth fiscal quarter of 2010, compared with $90,137,000 for last year’s fourth fiscal quarter and $103,138,000 for this year’s third fiscal quarter.  The sequential increase in segment operating income was primarily attributable to the continuing recovery in U.S. land drilling activity, as quarterly revenue days increased to 16,303 from 14,374 during this year’s third fiscal quarter, and average revenue per day increased by $695 to $24,385 from $23,690.  Excluding early contract termination related revenue and customer requested delivery delay revenue for new build rigs, the average rig revenue per day for the fourth quarter increased by $1,062 to $24,065 from $23,003 during the third quarter, and the corresponding average rig margin per day for the fourth quarter increased by $547 to $11,013.  Average rig expense per day increased by $515 from $12,539 during the third quarter to $13,054 during the fourth quarter.  The quarterly increase in average rig expense per day was mostly attributable to approximately $350 per day related to expenses that the Company does not expect to incur going forward.  

Rig utilization for the Company’s U.S. land segment was 82% for this year’s fourth fiscal quarter, compared with 55% for last year’s fourth fiscal quarter and 76% for this year’s third fiscal quarter.  At September 30, 2010, the Company’s U.S. land segment had 185 contracted rigs and 35 idle rigs.  The 185 contracted rigs included 127 rigs under term contracts, one of which was a new FlexRig®* waiting on a customer that requested a delivery delay.  

Helmerich & Payne, Inc. also announced today that the Company has signed contracts to build and operate four additional FlexRigs.  These rigs will be built and operated in the U.S. under multi-year term contracts that provide attractive dayrates and economic returns.   Since March 2010, the Company has announced contracts for the construction of 23 new build FlexRigs, of which 11 have already been completed.  The remaining 12 are expected to be delivered during the first three quarters of fiscal 2011.  

President and CEO Hans Helmerich commented, “While industry rig counts in the U.S. land sector have exceeded most expectations in 2010, they are currently still about 20% below the previous cyclical peak.  Notably, we have surpassed our previous record during that peak and now have the highest level of activity in the ninety-year history of the Company.  Today, we announced contracts for four new build FlexRigs in addition to the 19 announced earlier this year.  With over 200 H&P-designed and built FlexRigs over the last 12 years, and with well over 700 rig years of FlexRig operating experience, our ability to build a better rig for less, and to attain a higher dayrate and margin for that rig, remains unmatched.”  

Segment operating income for the Company’s offshore operations was $13,107,000 for the fourth fiscal quarter of 2010, compared with $12,023,000 for last year’s fourth fiscal quarter and $11,231,000 for this year’s third fiscal quarter.  Although the level of activity (number of revenue days) in this segment was relatively flat as compared to the third fiscal quarter, the average rig margin per day sequentially increased by $1,799 to $22,581 during this year’s fourth fiscal quarter.   This increase resulted from a favorable impact of approximately $2,000 per day related to a reduction of certain expenses during the quarter that is not expected to recur going forward.

The Company’s international land operations reported segment operating income of $15,485,000 for this year’s fourth fiscal quarter, compared with a loss of $1,511,000 for last year’s fourth fiscal quarter and income of $9,893,000 for the third fiscal quarter of 2010.  The number of revenue days for the fourth quarter increased by approximately five percent as compared to the third quarter.  Operating income for the segment significantly increased quarter to quarter.  The sequential increase was primarily attributable to early contract termination revenue from two of the six rigs that were assigned to the Company’s operations in Mexico.  Excluding the impact corresponding to these early contract terminations, the average rig margin per day for the fourth quarter declined by $664 to $9,528 from $10,192 during the third quarter.  

Helmerich & Payne, Inc. is primarily a contract drilling company.  As of November 18, 2010, the Company’s existing fleet included 224 land rigs in the U.S., 28 international land rigs and nine offshore platform rigs.  In addition, the Company is scheduled to complete another 12 new H&P-designed and operated FlexRigs under long-term contracts with customers.  Upon completion of these commitments in fiscal 2011, the Company’s global land fleet is expected to include a total of 213 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.

HELMERICH & PAYNE, INC.

Unaudited

(in thousands, except per share data)



Three Months Ended

Fiscal Year Ended


June 30

September 30

September 30

CONSOLIDATED STATEMENTS OF OPERATIONS

2010

2010 

2009

2010

2009

Operating Revenues:






  Drilling – U.S. Land

$366,989

$435,998

$269,088

$1,412,495

$1,441,164

  Drilling – Offshore

53,131

49,548

47,278

202,734

204,702

  Drilling – International Land

60,045

69,802

39,159

247,179

187,099

  Other

3,219

3,609

2,751

12,754

10,775


483,384

558,957

358,276

1,875,162

1,843,740

Operating costs and expenses:






  Operating costs, excluding depreciation

285,583

329,198

190,682

1,071,959

944,780

  Depreciation

65,208

73,240

61,453

262,658

227,535

  General and administrative

20,114

20,183

13,341

81,479

58,822

  Research and development

3,254

3,851

3,041

12,262

9,671

  Gain from involuntary conversion of

    long-lived assets

-

-

-

-

(541)

  Income from asset sales

(2,249)

(747)

(696)

(4,992)

(5,402)


371,910

425,725

267,821

1,423,366

1,234,865







Operating income from continuing operations

111,474

133,232

90,455

451,796

608,875







Other income (expense):






  Interest and dividend income

940

275

393

1,811

2,755

  Interest expense

(3,961)

(4,465)

(4,443)

(17,158)

(13,590)

  Other

215

1,534

194

1,787

245


(2,806)

(2,656)

(3,856)

(13,560)

(10,590)

Income from continuing operations






 before income taxes and equity in income  






 of affiliate

108,668

130,576

86,599

438,236

598,285







Income tax provision

43,785

47,285

31,623

152,155

227,850







Equity in income of affiliate






  net of income taxes

-

-

-

-

10,111

Income from continuing operations

$  64,883

$ 83,291

$ 54,976

$  286,081

$  380,546







Loss from discontinued operations, before        






  income taxes

(101,548)

1,216

(4,019)

(125,944)

(22,470)

Income tax provision

50

1,462

(531)

3,825

4,531

Loss from discontinued operations

(101,598)

(246)

(3,488)

(129,769)

(27,001)







NET INCOME (LOSS)

$ (36,715)

$ 83,045

$ 51,488

$  156,312

$  353,545







Basic earnings per common share:






 Income from continuing operations

$    0.61

$   0.78

$   0.52

$     2.70

$     3.61

 Loss from discontinued operations

$   (0.96)

$      -

$  (0.03)

$    (1.23)

$    (0.26)







      Net Income (loss)

$   (0.35)

$   0.78

$   0.49

$     1.47

$     3.35




HELMERICH & PAYNE, INC.

Unaudited

(in thousands, except per share data)



Three Months Ended

Fiscal Year Ended


June 30

September 30

September 30

CONSOLIDATED STATEMENTS OF OPERATIONS

2010

2010 

2009

2010

2009







Diluted earnings per common share:






 Income from continuing operations

$   0.61

$  0.77

$   0.51

$    2.66

$     3.56

 Loss from discontinued operations

$  (0.95)

$     -

$  (0.03)

$   (1.21)

$    (0.25)







       Net Income (loss)

$  (0.34)

$  0.77

$   0.48

$    1.45

$     3.31







Weighted average shares outstanding:






 Basic

105,743

105,814

105,464

105,711

105,364

 Diluted

107,444

107,452

106,868

107,404

106,608




HELMERICH & PAYNE, INC.

Unaudited

(in thousands)


CONSOLIDATED CONDENSED BALANCE SHEETS


9/30/10


9/30/09


ASSETS





  Cash and cash equivalents


$   63,020


$   96,142

  Other current assets


579,514


345,884

  Current assets of discontinued operations


10,270


80,906

     Total current assets


652,804


522,932

  Investments


320,712


356,404

  Net property, plant, and equipment


3,275,020


3,194,273

  Other assets


16,834


15,781

  Noncurrent assets of discontinued operations


-


71,634

TOTAL ASSETS


$4,265,370


$4,161,024











LIABILITIES AND SHAREHOLDERS' EQUITY





  Current liabilities


$  224,646


$  284,923

  Current liabilities of discontinued operations


7,992


16,983

     Total current liabilities


232,638


301,906

  Noncurrent liabilities


862,989


745,904

  Noncurrent liabilities of discontinued operations


2,278


10,205

  Long-term notes payable


360,000


420,000

  Total shareholders' equity


2,807,465


2,683,009






TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY


$4,265,370


$4,161,024




HELMERICH & PAYNE, INC.

Unaudited

(in thousands)



Years Ended


September 30



CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS 

2010

2009



OPERATING ACTIVITIES:



    Net income

$  156,312

$ 353,545

    Adjustment for loss from discontinued operations

129,769

27,001

    Income from continuing operations

286,081

380,546

      Depreciation

262,658

227,535

      Changes in assets and liabilities

(93,237)

278,978

      Gain from involuntary conversion of long-lived assets

-

(541)

      Gain on sale of assets and investment securities

(4,992)

(5,402)

      Other

16,140

(8,849)

      Net cash provided by operating activities from



         continuing operations

466,650

872,267

      Net cash provided by (used in) operating activities from



         discontinued operations

(4,362)

23,672

        Net cash provided by operating activities

462,288

895,939




INVESTING ACTIVITIES:



      Capital expenditures

(329,572)

(876,839)

      Insurance proceeds from involuntary conversion of

         long-lived assets

-

541

      Proceeds from sale of assets and short-term investments

20,383

8,069

      Purchase of short-term investments

(16)

(12,500)

       Acquisition of business, net of cash acquired

-

(16)

      Net cash used in investing activities from continuing



         operations

(309,205)

(880,745)

      Net cash used in investing activities from discontinued



         operations

(55)

(3,284)

        Net cash used in investing activities

(309,260)

(884,029)




FINANCING  ACTIVITIES:



      Dividends paid

(22,254)

(21,111)

      Increase (decrease) in bank overdraft

(2,038)

2,038

      Exercise of stock options

(202)

1,272

      Net proceeds from (payments for) short-term and long-term debt

(165,000)

23,267

      Excess tax benefit from stock-based compensation

3,344

1,217

       Net cash provided by (used in) financing activities

(186,150)

6,683




Net increase (decrease) in cash and cash equivalents

(33,122)

18,593

Cash and cash equivalents, beginning of period

96,142

77,549

Cash and cash equivalents, end of period

$   63,020

$  96,142







SEGMENT REPORTING

Three Months Ended

Fiscal Year Ended


June 30


September 30

September 30


2010


2010


2009

2010

2009


(in thousands, except days and per day amounts)









U.S. LAND OPERATIONS








Revenues

$366,989


$435,998


$269,088

$1,412,495

$1,441,164

Direct operating expenses

206,707


251,280


125,005

772,766

663,385

General and administrative expense

5,458


5,606


3,978

23,799

16,812

Depreciation

51,686


60,218


49,968

211,652

187,259

Segment operating income

$103,138


$118,894


$ 90,137

$  404,278

$  573,708









Revenue days

14,374


16,303


9,902

55,051

48,055

Average rig revenue per day

$ 23,690


$ 24,385


$ 25,895

$   23,909

$   28,194

Average rig expense per day

$ 12,539


$ 13,054


$ 11,344

$   12,288

$   12,009

Average rig margin per day

$ 11,151


$ 11,331


$ 14,551

$   11,621

$   16,185

Rig utilization

76%


82%


55%

73%

68%









OFFSHORE OPERATIONS








Revenues

$ 53,131


$ 49,548


$ 47,278

$  202,734

$  204,702

Direct operating expenses

37,382


31,671


31,423

131,325

133,442

General and administrative expense

1,329


1,384


975

5,821

4,095

Depreciation

3,189


3,386


2,857

12,519

11,872

Segment operating income

$ 11,231


$ 13,107


$ 12,023

$   53,069

$   55,293









Revenue days

638


644


644

2,642

2,938

Average rig revenue per day

$ 46,138


$ 42,312


$ 47,547

$   47,534

$   48,677

Average rig expense per day

$ 25,356


$ 19,731


$ 26,868

$   24,653

$   27,373

Average rig margin per day

$ 20,782


$ 22,581


$ 20,679

$   22,881

$   21,304

Rig utilization

78%


78%


78%

80%

89%




SEGMENT REPORTING

Three Months Ended

Fiscal Year Ended


June 30

September 30

September 30


2010

2010

2009

2010

2009


(in thousands, except days and per day amounts)

INTERNATIONAL LAND OPERATIONS






Revenues

$ 60,045

$ 69,802

$ 39,159

$247,179

$187,099

Direct operating expenses

41,113

45,647

33,843

166,021

146,565

General and administrative expense

771

971

592

2,949

2,301

Depreciation

8,268

7,699

6,235

29,938

19,278

Segment operating income

$ 9,893

$ 15,485

$ (1,511)

$ 48,271

$ 18,955







Revenue days

1,881

1,976

1,126

7,254

4,807

Average rig revenue per day

$ 30,669

$ 33,194

$ 30,947

$ 32,451

$ 35,618

Average rig expense per day

$ 20,477

$ 20,621

$ 24,961

$ 21,142

$ 26,528

Average rig margin per day

$ 10,192

$ 12,573

$  5,986

$ 11,309

$  9,090

Rig utilization

76%

78%

50%

71%

70%







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

$ 26,474

$ 38,457

$ 12,676

$ 96,304

$ 86,297

Offshore Operations

$ 13,771

$ 11,211

$  8,498

$ 37,594

$ 34,125

International Land Operations

$  2,357

$  4,210

$  4,312

$ 11,779

$ 15,884




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 Company's Venezuelan operation, which was historically an operating segment within the International Land Segment, was discontinued in the third quarter of fiscal 2010.  Consequently, its operating results are excluded from the segment data table above.  

The following table reconciles operating income per the information above to income from continuing operations before income taxes and equity in income of affiliates as reported on the Consolidated Statements of Operations (in thousands).

SEGMENT REPORTING

Three Months Ended

Fiscal Year Ended


June 30

September 30

September 30


2010

2010

2009

2010

2009

Operating income






U.S. Land

$103,138

$118,894

$ 90,137

$404,278

$573,708

Offshore

11,231

13,107

12,023

53,069

55,293

International Land

9,893

15,485

(1,511)

48,271

18,955

Other

(1,803)

(1,745)

(2,376)

(6,765)

(7,032)

  Segment operating income

$122,459

$145,741

$ 98,273

$498,853

$640,924

Corporate general and administrative

(12,556)

(12,222)

(7,796)

(48,910)

(35,614)

Other depreciation

(1,295)

(1,309)

(1,349)

(5,275)

(5,124)

Inter-segment elimination

617

275

631

2,136

2,746

Gain from involuntary conversion of long-lived assets

-

-

-

-

541

Income from asset sales

2,249

747

696

4,992

5,402

  Operating income

$111,474

$133,232

$ 90,455

$451,796

$608,875







Other income (expense):






Interest and dividend income

940

275

393

1,811

2,755

Interest expense

(3,961)

(4,465)

(4,443)

(17,158)

(13,590)

Gain on sale of investment securities      

-

-

-

-

-

Other

215

1,534

194

1,787

245

 Total other income (expense)

(2,806)

(2,656)

(3,856)

(13,560)

(10,590)







Income from continuing operations before income taxes and equity in income of affiliates

$108,668

$130,576

$ 86,599

$438,236

$598,285




SOURCE Helmerich & Payne, Inc.



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