Helmerich & Payne, Inc. Announces Third Quarter Results and Nine New FlexRig® Contracts

TULSA, Okla., July 29, /PRNewswire-FirstCall/ -- Helmerich & Payne, Inc. (NYSE: HP) reported income from continuing operations of $64,883,000 ($0.61 per diluted share) from operating revenues of $483,384,000 for its third fiscal quarter ended June 30, 2010, compared with income from continuing operations of $68,021,000 ($0.64 per diluted share) from operating revenues of $384,359,000 during last year’s third fiscal quarter.  As previously reported, on June 30, 2010, Venezuelan President Hugo Chavez signed a Decree authorizing the “forceful acquisition” of the Company’s Venezuelan drilling assets.  As a result, the corresponding operations, previously within the Company’s International Land segment, have been reclassified as discontinued operations.  Accordingly, the assets and liabilities corresponding to the Company’s business in Venezuela, along with its results of operations, have been reclassified for all comparative periods presented.  Considering an impairment charge of $102,721,000 related to the Venezuelan governmental action, the Company reported a third quarter loss from discontinued operations of $101,598,000 ($0.95 per diluted share).  Including discontinued operations, the Company recorded a net loss of $36,715,000 for the third fiscal quarter of 2010 compared to net income of $53,044,000 for the third fiscal quarter of 2009.  Included in both this year’s and last year’s third quarter income from continuing operations are gains of approximately $.01 per share from the sale of drilling equipment.  

For the nine months ended June 30, 2010, the Company reported income from continuing operations of $202,790,000 ($1.89 per diluted share) from operating revenues of $1,316,205,000 compared with income from continuing operations of $325,570,000 ($3.05 per diluted share) from operating revenues of $1,485,464,000 during the nine months ended June 30, 2009.  Including discontinued operations, total net income was $73,267,000 and $302,057,000 during the first nine months of fiscal 2010 and 2009, respectively.  Included in the first nine months of both this year’s and last year’s income from continuing operations are gains of approximately $.03 per share from the sale of drilling equipment.  

Segment operating income for U.S. land operations was $103,138,000 for this year’s third fiscal quarter, compared with $96,593,000 for last year’s third fiscal quarter and $90,723,000 for this year’s second fiscal quarter.  The sequential increase was primarily attributable to the continuing recovery in U.S. land drilling activity, as revenue days increased to 14,374 from 13,114 during this year’s second fiscal quarter.  

Approximately $700 per day of the average rig revenue and margin per day values, as reported in the attached tables corresponding to U.S. land operations for this year’s third fiscal quarter ($23,690 and $11,151, respectively), was a result of early contract termination revenue and of revenue related to customer requested delivery delays for new builds under long-term contracts.  This compares to approximately $800 per day included in the rig revenue and margin per day averages corresponding to this year’s second fiscal quarter ($23,382 and $11,287, respectively) for the same type of revenue.  Additional revenue of approximately $5 million corresponding to new build early terminations and to requested delivery delays is now expected to be recognized in the U.S. land segment during the fourth quarter of fiscal 2010.  

Rig utilization for the Company’s U.S. land segment was 76% for this year’s third fiscal quarter, compared with 51% for last year’s third fiscal quarter and 70% for this year’s second fiscal quarter.  At June 30, 2010, the Company’s U.S. land segment had 170 contracted rigs and 45 idle and available rigs.  The 170 contracted rigs included 116 rigs under term contracts, four 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.)  

Helmerich & Payne, Inc. also announced today that since its last related announcement on July 6, 2010, the Company has signed contracts to build and operate nine additional FlexRigs.  These rigs will be built under multi-year term contracts with four exploration and production companies, and will operate in the U.S. with attractive dayrates and economic returns.  The names of the customers and other terms were not disclosed.  Considering these nine rigs, the Company has announced a total of 19 new build rigs during fiscal 2010, of which four have already been completed and 15 are under construction.  The Company expects to continue to complete and deliver these new FlexRigs through early to mid calendar 2011.

President and CEO Hans Helmerich commented, “We are encouraged by improved activity for the Company’s FlexRigs.  It confirms our earlier expectations for a bifurcated market where high performing rigs, and our FlexRigs in particular, would command better utilization and margins compared to the industry rig fleet.  Our recent new build announcements further reinforce our long-held conviction that a growing number of customers are increasingly shaping their efforts in the field around efficient, high-performing rigs.  Demand for enhanced field performance favors the Company’s strengths and capabilities and bodes well for additional opportunities ahead.”

Segment operating income for the Company’s offshore operations was $11,231,000 for the third fiscal quarter of 2010, compared with $12,723,000 for last year’s third fiscal quarter and $13,625,000 for this year’s second fiscal quarter.  Average rig utilization of the Company’s nine platform rigs in the offshore segment was 78% for this year’s third fiscal quarter, compared with 93% during last year’s third fiscal quarter and 81% during this year’s second fiscal quarter.  Average rig margins per day declined to $20,782 during this year’s third fiscal quarter from $23,023 during this year’s second fiscal quarter.  The Company estimates that third quarter segment operating income was negatively impacted by approximately 3% due to lower standby rates received as a result of the government imposed deepwater drilling moratorium.

The Company’s international land operations reported segment operating income of $9,893,000 for this year’s third fiscal quarter, compared with $6,492,000 for last year’s third fiscal quarter and $11,784,000 for the second fiscal quarter of 2010.  Although rig utilization corresponding to continuing operations in the segment sequentially increased to 76% from 73%, the average rig margin per day declined to $10,192 during the third quarter from $11,167 during the second quarter of 2010.

Helmerich & Payne, Inc. is primarily a contract drilling company.  As of July 29, 2010, the Company’s existing fleet included 217 land rigs in the U.S., 28 international land rigs and nine offshore platform rigs.  In addition, the Company is scheduled to complete another 15 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 209 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.

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 tables 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).

SOURCE Helmerich & Payne, Inc.