Helmerich & Payne, Inc. Announces First Quarter Earnings

Jan 28, 2010, 08:45 ET from Helmerich & Payne, Inc.

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.

HELMERICH & PAYNE, INC.

Unaudited

(in thousands, except per share data)

Three Months Ended

September 30

December 31

CONSOLIDATED STATEMENTS OF INCOME

2009

2009

2008

Operating revenues:

 Drilling – U.S. Land

$269,088 

$285,069 

$475,204 

 Drilling – Offshore

47,278 

52,290 

50,488 

 Drilling - International

43,100 

59,398 

95,178 

 Other

2,751 

3,086 

2,884 

362,217 

399,843 

623,754 

Operating costs and expenses:

 Operating costs, excluding depreciation

196,997 

212,693 

330,928 

 Depreciation

63,509 

62,803 

54,772 

 General and administrative

13,606 

20,844 

15,148 

 Research and development

3,041 

1,815 

1,677 

 Gain from involuntary conversion of

   long-lived assets

(277)

 Income from asset sales

(1,278)

(698)

(914)

275,875 

297,457 

401,334 

Operating income

86,342 

102,386 

222,420 

Other income (expense):

 Interest and dividend income

487 

439 

1,786 

 Interest expense

(4,443)

(4,694)

(3,700)

 Other

194 

15 

128 

(3,762)

(4,240)

(1,786)

Income before income taxes and equity

 in income of affiliates

82,580 

98,146 

220,634 

Income tax provision

31,092 

34,911 

81,248 

Equity in income of affiliates

  net of income taxes

5,889 

NET INCOME

$ 51,488 

$ 63,235 

$145,275 

Earnings per common share:

   Basic

$   0.49 

$   0.60 

$   1.38 

   Diluted

$   0.48 

$   0.59 

$   1.36 

Average common shares outstanding:

   Basic

105,464 

105,575 

105,249 

   Diluted

106,868 

107,238 

106,310 

HELMERICH & PAYNE, INC.

Unaudited

(in thousands)

CONSOLIDATED CONDENSED BALANCE SHEETS

12/31/09

9/30/09

ASSETS

  Cash and cash equivalents

$  153,053

$  141,486

  Other current assets

427,443

381,446

     Total current assets

580,496

522,932

  Investments

366,672

356,404

  Net property, plant, and equipment

3,273,643

3,265,907

  Other assets

14,803

15,781

TOTAL ASSETS

$4,235,614

$4,161,024

LIABILITIES AND SHAREHOLDERS' EQUITY

  Total current liabilities

$  320,347

301,906

  Total noncurrent liabilities

779,285

756,109

  Long-term notes payable

380,000

420,000

  Total shareholders' equity

2,755,982

2,683,009

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$4,235,614

$4,161,024

HELMERICH & PAYNE, INC.

Unaudited

(in thousands)

Three Months Ended

December 31

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

2009

2008

OPERATING ACTIVITIES:

    Net income

$ 63,235 

$145,275 

      Depreciation

62,803 

54,772 

      Changes in assets and liabilities

(12,200)

63,014 

      Gain from involuntary conversion of long-lived assets

(277)

      Gain on sale of assets

(698)

(914)

      Other

7,010 

(7,291)

       Net cash provided by operating activities

120,150 

254,579 

INVESTING ACTIVITIES:

      Capital expenditures

(64,754)

(250,381)

      Insurance proceeds from involuntary conversion of

         long-lived assets

277 

      Proceeds from sale of assets

2,486 

1,411 

      Other

(16)

(16)

       Net cash used in investing activities

(62,284)

(248,709)

FINANCING  ACTIVITIES:

      Dividends paid

(5,287)

(5,273)

      Net increase(decrease)in bank overdraft

(2,038)

2,330 

      Exercise of stock options

(623)

300 

      Net proceeds from (payment of) notes payable

         and long-term debt

(40,000)

13,267 

      Excess tax benefit from stock-based compensation

1,649 

17 

       Net cash provided by (used in)financing activities

(46,299)

10,641 

Net increase in cash and cash equivalents

11,567 

16,511 

Cash and cash equivalents, beginning of period

141,486 

121,513 

Cash and cash equivalents, end of period

$153,053 

$138,024 

SEGMENT REPORTING

Three Months Ended

September 30

December 31

2009

2009

2008

(in thousands except days and per day amounts)

U.S. LAND OPERATIONS

Revenues

$269,088   

$285,069   

$475,204   

Direct operating expenses

125,005   

138,355   

233,306   

General and administrative expense

3,978   

6,661   

4,427   

Depreciation

49,968   

48,530   

43,423   

Segment operating income

$ 90,137   

$ 91,523   

$194,048   

Revenue days

9,902   

11,260   

16,322   

Average rig revenue per day

$ 25,895   

$ 24,113   

$ 27,066   

Average rig expense per day

$ 11,344   

$ 11,083   

$ 12,246   

Average rig margin per day

$ 14,551   

$ 13,030   

$ 14,820   

Rig utilization

55%

62%

95%

OFFSHORE OPERATIONS

Revenues

$ 47,278   

$ 52,290   

$ 50,488   

Direct operating expenses

31,423   

32,576   

31,762   

General and administrative expense

975   

1,630   

1,052   

Depreciation

2,857   

2,978   

2,964   

Segment operating income

$ 12,023   

$ 15,106   

$ 14,710   

Revenue days

644   

700   

735   

Average rig revenue per day

$ 47,547   

$ 52,960   

$ 53,057   

Average rig expense per day

$ 26,868   

$ 28,024   

$ 29,468   

Average rig margin per day

$ 20,679   

$ 24,936   

$ 23,589   

Rig utilization

78%

85%

89%

SEGMENT REPORTING

Three Months Ended

September 30

December 31

2009

2009

2008

(in thousands except days and per day amounts)

INTERNATIONAL LAND OPERATIONS

Revenues

$ 43,100 

$ 59,398 

$ 95,178 

Direct operating expenses

40,204 

41,297 

65,648 

General and administrative expense

857 

696 

696 

Depreciation

8,291 

9,002 

6,206 

Segment operating income (loss)

$ (6,252)

$  8,403 

$ 22,628 

Revenue days

1,319 

1,689 

2,383 

Average rig revenue per day

$ 29,406 

$ 33,714 

$ 36,737 

Average rig expense per day

$ 26,162 

$ 23,138 

$ 24,320 

Average rig margin per day

$  3,244 

$ 10,576 

$ 12,417 

Rig utilization

41%

44%

98%

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

$ 12,676

$ 13,560

$ 33,435

Offshore Operations

$  8,498

$  6,732

$  5,466

International Land Operations

$  4,312

$  2,454

$  7,633

Segment operating income 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 before income taxes and equity in income of affiliates as reported on the

Consolidated Statements of Income (in thousands).

Three Months Ended

September 30

December 31

2009

2009

2008

Operating income (loss)

U.S. Land

$ 90,137 

$ 91,523 

$194,048 

Offshore

12,023 

15,106 

14,710 

International Land

(6,252)

8,403 

22,628 

Other

(2,376)

(794)

(861)

 Segment operating income

$ 93,532 

$114,238 

$230,525 

Corporate general & administrative

(7,796)

(11,857)

(8,973)

Other depreciation

(1,349)

(1,336)

(1,197)

Inter-segment elimination

677 

643 

874 

Gain from involuntary conversion of long-lived

  assets

277 

Income from asset sales

1,278 

698 

914 

 Operating income

$ 86,342 

$102,386 

$222,420 

Other income (expense):

Interest and dividend income

487 

439 

1,786 

Interest expense

(4,443)

(4,694)

(3,700)

Other

194 

15 

128 

 Total other income (expense)

(3,762)

(4,240)

(1,786)

Income before income taxes and

equity in income of affiliates

$ 82,580 

$ 98,146 

$220,634 

SOURCE Helmerich & Payne, Inc.



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