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Helmerich & Payne, Inc. Announces Third Quarter Earnings

July 30, 2009 | About:

Press Release: Helmerich & Payne, Inc. Announces Third Quarter Earnings

TULSA, Okla., July 30 /PRNewswire-FirstCall/ -- Helmerich & Payne, Inc. (NYSE: HP) reported net income of $53,044,000 ($0.50 per diluted share) from operating revenues of $387,767,000 for its third fiscal quarter ended June 30, 2009, compared with net income of $125,369,000 ($1.18 per diluted share) from operating revenues of $522,517,000 during last year\'s third fiscal quarter ended June 30, 2008. Net income recorded for the third fiscal quarter ended June 30, 2009, includes $0.01 per share of after-tax gains from the sale of drilling equipment. Included in last year\'s third quarter net income were $0.09 per share of after-tax gains from the sale of portfolio securities and $0.04 per share from the sale of drilling equipment and insurance settlements, as well as a charge of $0.07 per share (after-tax) from the write-off of in-process research and development resulting from the acquisition of TerraVici Drilling Solutions. For the nine months ended June 30, 2009, the Company reported net income of $302,057,000 ($2.84 per diluted share) from operating revenues of $1,531,821,000 compared with net income of $335,253,000 ($3.16 per diluted share) from operating revenues of $1,452,824,000 during the nine months ended June 30, 2008. Net income recorded for the first nine months of fiscal 2009 included $0.03 per share of after-tax gains from the sale of drilling equipment. Included in net income for the first nine months of fiscal 2008 were gains from the sale of portfolio securities and drilling equipment, and gains from insurance settlements of $0.21 per share and the above mentioned in-process research and development charge of $0.07 per share. Segment operating income for U.S. land operations was $96,593,000 for this year\'s third fiscal quarter, compared with $159,413,000 for last year\'s third fiscal quarter and $192,930,000 for this year\'s second fiscal quarter. The decline was primarily a result of significantly lower activity levels in the U.S. land drilling market during this year\'s third fiscal quarter as compared to prior quarters. The segment\'s average rig revenue per day declined by $3,059 from $31,384 during this year\'s second fiscal quarter to $28,325 during the third fiscal quarter, and the average rig margin per day declined by $3,302 from $19,354 during this year\'s second fiscal quarter to $16,052 during the third fiscal quarter. Approximately $4,400 per day of the average rig revenue and margin per day reported for this year\'s third fiscal quarter was primarily a result of early contract termination revenue and of delay penalty revenues corresponding to requested delivery delays for new builds under long-term contracts. This compares to approximately $6,500 per day included in the rig revenue and margin per day averages corresponding to this year\'s second fiscal quarter for the same type of early termination and delay penalty revenue. Additional revenues of approximately $70 million corresponding to new build early terminations and requested delivery delays are expected to be recognized after the third fiscal quarter. At this point, the Company expects about 40% of this amount to favorably impact the fourth fiscal quarter revenues, and the remainder to favorably impact fiscal 2010. Excluding the impact of income corresponding to early terminations and requested delivery delays during this year\'s second and third fiscal quarters, the average rig revenue per day declined sequentially by $949 to $23,927 for the third fiscal quarter, and the average rig margin per day declined sequentially by $1,168 to $11,730 for the third fiscal quarter. Rig utilization for the Company\'s U.S. land segment declined to 51% for this year\'s third fiscal quarter, compared with 96% for last year\'s third fiscal quarter and 72% for this year\'s second fiscal quarter. The rig utilization rate excludes new builds under long-term contracts that may already be generating revenue, but that have not yet commenced operations given customer requests to delay new build deliveries. The Company\'s U.S. land segment had 110 rigs contracted (including 89 rigs under term contracts) and 100 rigs idle and available at the end of the third fiscal quarter. In its U.S. land segment, the Company expects an average of approximately 91 rigs to remain under term contracts during the fourth fiscal quarter of 2009, and an average of approximately 80 rigs to remain under term contracts during all of fiscal 2010. President and C.E.O. Hans Helmerich commented, "The first half of calendar 2009 has seen a dramatic plunge in U.S. land rig activity driven by lower natural gas prices and resultant capital spending reductions by exploration and production companies. We\'re encouraged by what appears to be a recent bottoming out in the industry rig count. H&P\'s rig utilization is the highest in the industry among large drilling contractors due to its high percentage of rigs on term contracts and because of the availability of FlexRigs(R) in the spot market. With over 80% of our U.S. land fleet comprised of FlexRigs, we are in a favored position to benefit from any improvement that lies ahead in the land rig market." Segment operating income for the Company\'s offshore operations was $12,723,000 for this year\'s third fiscal quarter, compared with $12,013,000 for last year\'s third fiscal quarter and $15,837,000 for this year\'s second fiscal quarter. The sequential decline was attributable to declining activity given softer market conditions in the offshore platform business and to a significant number of rigs that were concurrently operating at reduced standby or move rates during portions of the third fiscal quarter. Average rig utilization in the offshore segment was reported at 93% for this year\'s third fiscal quarter, compared with 89% during last year\'s third fiscal quarter and 98% during this year\'s second fiscal quarter. Average rig margins per day declined to $18,555 during this year\'s third fiscal quarter from $22,330 during this year\'s second fiscal quarter. The Company\'s international land operating segment recorded a loss of $8,321,000 for this year\'s third fiscal quarter, compared with operating income of $17,492,000 for last year\'s third fiscal quarter, and a $15,282,000 loss for this year\'s second fiscal quarter. The operating loss was a result of the Company\'s previous decision to not record revenue beginning the second fiscal quarter from the Company\'s operations in Venezuela until the corresponding cash is collected. This negatively impacted the international land segment\'s revenue by $19.7 million during the third fiscal quarter of 2009, or approximately $10,024 per rig revenue day. Consequently, the segment\'s average rig margin per day was reported at $907 for the quarter, as compared to $10,931, which would have been reported for the quarter if Venezuelan revenues were to have been recorded. Average rig utilization for the third fiscal quarter was 62%, compared with 79% for last year\'s third fiscal quarter, and 81% during this year\'s second fiscal quarter. The sequential decline in utilization was primarily a result of the Company\'s lower level of activity in Venezuela. The Company is proactively continuing efforts to collect unpaid invoice amounts in Venezuela. Since the Company\'s last quarterly earnings release on April 30, 2009, the Company has collected approximately $48 million (U.S. currency equivalent) from PDVSA. Included in these collections is a recent total collection in local currency equivalent to approximately $40 million U.S. dollars. As of today, the total invoiced amount by the Company that remains pending payment from PDVSA is approximately $97 million (U.S. currency equivalent), of which approximately 80% is over 90 days old. Nine of the 11 H&P rigs that formerly worked for PDVSA and that have completed their contract obligations are currently stacked in Venezuela. The Company\'s remaining two rigs continue to work for PDVSA and are expected to complete their contract obligations within the next six weeks. The Company will continue to pursue future drilling opportunities in Venezuela, but it does not expect to commit to new contracts until additional progress is made on pending receivable collections. The Company also announced today that it has entered into term daywork drilling contracts with a multinational service company (Schlumberger Ltd - SLB) for integrated project management (IPM) work in Mexico, providing four FlexRigs for a duration of at least two years. Furthermore, a fifth FlexRig is being prepared for international work based on a binding letter of intent from a U.S. based exploration and production company for a short-term project in Africa. All five of these FlexRigs were built in prior years and were recently idle and available for work in the U.S. land market. President and C.E.O. Hans Helmerich commented, "We are pleased about the opportunity to increase our international exposure to the FlexRig. The availability of FlexRigs in the U.S. provides the Company the opportunity to enlarge its international fleet with newer and more technologically advanced rigs in geographical areas where the value of the FlexRig has not been experienced before." On July 21, 2009, the Company closed a private placement of $200 million of senior unsecured, fixed-rate 6.10% notes due July 2016. The proceeds from this facility will be used to repay indebtedness, to fund capital expenditures, or for other general corporate purposes. Interest on the notes is payable semi-annually. The Company will make five equal annual principal repayments of $40 million beginning on the third anniversary of the closing date. Helmerich & Payne, Inc. is primarily a contract drilling company. As of June 30, 2009, the Company\'s existing fleet included 210 U.S. land rigs, 32 international land rigs and nine offshore platform rigs. 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 for a year 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 Results of Operations and Financial Condition" 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(R) 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           March 31      June 30               June 30     STATEMENTS OF INCOME    2009     2009      2008       2009        2008    ---------------------    ----     ----      ----       ----        ----    Operating Revenues:      Drilling - U.S.       Land               $414,514  $282,358  $391,755 $1,172,076  $1,104,662      Drilling - Offshore   51,331    55,605    47,298    157,424     104,368      Drilling -       International Land   51,829    47,290    80,585    194,297     234,944      Other                  2,626     2,514     2,879      8,024       8,850                             -----     -----     -----      -----       -----                           520,300   387,767   522,517  1,531,821   1,452,824                           -------   -------   -------  ---------   ---------    Operating costs     and expenses:      Operating costs,       excluding       depreciation        263,294   220,339   274,168    814,561     763,921      Depreciation          57,113    61,043    51,210    172,928     147,066      General and       Administrative       16,434    14,225    14,723     45,807      42,716      Research and       development           2,176     2,777       522      6,630         522      In-process       research and       development               -         -    11,129          -      11,129      Gain from       involuntary       conversion of       long-lived assets         -      (264)   (5,426)      (541)    (10,236)      Income from asset       sales                (2,055)   (1,785)   (1,616)    (4,754)     (4,404)                            ------    ------    ------     ------      ------                           336,962   296,335   344,710  1,034,631     950,714                           -------   -------   -------  ---------     -------    Operating income       183,338    91,432   177,807    497,190     502,110    Other income     (expense):      Interest and       dividend income       2,150       542     1,034      4,478       3,369      Interest expense      (2,554)   (2,793)   (4,651)    (9,047)    (14,255)      Gain on sale of       investment       securities                -         -    16,388          -      21,994      Other                    (28)      514        66        614        (370)                               ---       ---        --        ---        ----                              (432)   (1,737)   12,837     (3,955)     10,738                              ----    ------    ------     ------      ------    Income before income     taxes and equity     in income of     affiliate             182,906    89,695   190,644    493,235     512,848    Income tax provision    83,390    36,651    70,187    201,289     189,117    Equity in income of     affiliate net of     income taxes            4,222         -     4,912     10,111      11,522                             -----       ---     -----     ------      ------    NET INCOME            $103,738   $53,044  $125,369   $302,057    $335,253                          ========   =======  ========   ========    ========    Earnings per     common share:      Basic                  $0.99     $0.50     $1.20      $2.87       $3.22      Diluted                $0.98     $0.50     $1.18      $2.84       $3.16    Average common     shares     outstanding:      Basic                105,317   105,425   104,530    105,330     103,973      Diluted              106,372   106,829   106,689    106,544     106,130


HELMERICH & PAYNE, INC.                                 Unaudited                               (in thousands)    CONSOLIDATED CONDENSED BALANCE SHEETS             6/30/09     9/30/08    -------------------------------------           -----------  ----------    ASSETS      Cash and cash equivalents                       $141,705    $121,513      Other current assets                             450,369     569,134                                                       -------     -------        Total current assets                           592,074     690,647                                                       -------     -------      Investments                                      267,554     199,266      Net property, plant, and equipment             3,209,344   2,682,251      Other assets                                      10,882      15,881                                                        ------      ------    TOTAL ASSETS                                    $4,079,854  $3,588,045                                                    ==========  ==========    LIABILITIES AND SHAREHOLDERS\' EQUITY      Total current liabilities                       $358,792    $308,957      Total noncurrent liabilities                     697,120     538,614      Long-term notes payable                          430,000     475,000      Total shareholders\' equity                     2,593,942   2,265,474                                                     ---------   ---------    TOTAL LIABILITIES AND SHAREHOLDERS\' EQUITY      $4,079,854  $3,588,045                                                    ==========  ==========


HELMERICH & PAYNE, INC.                                Unaudited                              (in thousands)                                                            Nine Months Ended                                                                June 30    CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS          2009      2008    -----------------------------------------------          ----      ----    OPERATING ACTIVITIES:      Net income                                           $302,057  $335,253        Depreciation                                        172,928   147,066        In-process research and development                       -    11,129        Changes in assets and liabilities                   250,289    (1,077)        Gain from involuntary conversion of         long-lived assets                                     (541)  (10,236)        Gain on sale of assets and investment securities     (4,754)  (26,268)        Other                                                (9,436)  (12,279)                                                             ------   -------          Net cash provided by operating activities         710,543   443,588                                                            -------   -------    INVESTING ACTIVITIES:        Capital expenditures                               (738,411) (509,018)        Insurance proceeds from involuntary conversion         of long-lived assets                                   541    13,926        Proceeds from sale of assets and investments          6,706    31,584        Purchase of short-term investments                  (12,500)        -        Acquisition of business, net of cash acquired           (16)  (12,024)                                                                ---   -------          Net cash used in investing activities            (743,680) (475,532)                                                           --------  --------    FINANCING  ACTIVITIES:        Dividends paid                                      (15,829)  (14,060)        Net increase in bank overdraft                        8,992     4,465        Proceeds from exercise of stock options                 710    14,267        Net proceeds from short-term and long-term debt      58,267    12,259        Excess tax benefit from stock-based compensation      1,189    24,816                                                              -----    ------         Net cash provided by financing activities           53,329    41,747                                                             ------    ------    Net increase in cash and cash equivalents                20,192     9,803    Cash and cash equivalents, beginning of period          121,513    89,215                                                            -------    ------    Cash and cash equivalents, end of period               $141,705   $99,018                                                           ========   =======


SEGMENT REPORTING         Three Months Ended           Nine Months Ended                          March 31        June 30                June 30                            2009      2009      2008        2009        2008                            ----      ----      ----        ----        ----                           (in thousands, except days and per day amounts)    U.S. LAND OPERATIONS    --------------------    Revenues             $414,514  $282,358  $391,755  $1,172,076  $1,104,662    Direct operating     expenses             172,033   133,041   187,771     538,380     535,093    General and     administrative     expense                4,274     4,133     4,801      12,834      13,452    Depreciation           45,277    48,591    39,770     137,291     109,123                           ------    ------    ------     -------     -------    Segment Operating     income              $192,930   $96,593  $159,413    $483,571    $446,994    Revenue days           12,529     9,302    15,263      38,153      43,422    Average rig     revenue per day      $31,384   $28,325   $24,543     $28,791     $24,329    Average rig     expense per day      $12,030   $12,273   $11,178     $12,182     $11,212    Average rig     margin per day       $19,354   $16,052   $13,365     $16,609     $13,117    Rig utilization            72%       51%       96%         72%         95%    OFFSHORE OPERATIONS    -------------------    Revenues              $51,331   $55,605   $47,298    $157,424    $104,368    Direct operating     expenses              31,403    38,854    31,166     102,019      72,295    General and     administrative     expense                1,064     1,004     1,276       3,120       3,488    Depreciation            3,027     3,024     2,843       9,015       8,855                            -----     -----     -----       -----       -----    Segment operating     income               $15,837   $12,723   $12,013     $43,270     $19,730    Revenue days              796       763       732       2,294       1,706    Average rig     revenue per day      $48,562   $45,531   $51,309     $48,994     $45,711    Average rig     expense per day      $26,232   $26,976   $31,181     $27,516     $29,483    Average rig     margin per day       $22,330   $18,555   $20,128     $21,478     $16,228    Rig utilization            98%       93%       89%         93%         70%


SEGMENT REPORTING                Three Months Ended      Nine Months Ended                                  March 31      June 30            June 30                                    2009     2009     2008     2009     2008                                    ----     ----     ----     ----     ----                               (in thousands, except days and per day amounts)    INTERNATIONAL LAND OPERATIONS    ----------------------------    Revenues                      $51,829  $47,290  $80,585 $194,297 $234,944    Direct operating expenses      59,787   47,913   55,093  173,348  156,004    General and administrative     expense                          784      555    1,182    2,035    3,420    Depreciation                    6,540    7,143    6,818   19,889   24,120    Segment operating income     (loss)                      $(15,282) $(8,321) $17,492    $(975) $51,400    Revenue days                    2,050    1,622    1,951    6,055    5,727    Average rig revenue per day   $23,397  $27,340  $38,709  $29,704  $37,570    Average rig expense per day   $27,483  $26,433  $25,638  $25,957  $23,704    Average rig margin per day    $(4,086)    $907  $13,071   $3,747  $13,866    Rig utilization                    81%      62%      79%      80%      77%    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          $21,309  $18,877  $17,158  $73,621  $48,244    Offshore Operations            $6,752  $13,409   $4,296  $25,627  $10,501    International Land Operations  $3,865   $2,945   $5,066  $14,443  $19,784
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 following table reconciles operating income (loss) 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       Nine Months Ended                               March 31      June 30             June 30                                 2009     2009      2008      2009      2008                                 ----     ----      ----      ----      ----    Operating income (loss)    -----------------------    U.S. Land                 $192,930  $96,593  $159,413  $483,571  $446,994    Offshore                    15,837   12,723    12,013    43,270    19,730    International Land         (15,282)  (8,321)   17,492      (975)   51,400    Other                       (1,491)  (2,304)  (10,421)   (4,656)   (7,596)                                ------   ------   -------    ------    ------      Segment operating       income                 $191,994  $98,691  $178,497  $521,210  $510,528    Corporate general and     administrative            (10,312)  (8,533)   (7,464)  (27,818)  (22,356)    Other depreciation          (1,273)  (1,305)   (1,087)   (3,775)   (3,019)    Inter-segment elimination      874      530       819     2,278     2,317    Gain from involuntary     conversion of      long-lived assets              -      264     5,426       541    10,236    Income from asset sales      2,055    1,785     1,616     4,754     4,404                                 -----    -----     -----     -----     -----      Operating income        $183,338  $91,432  $177,807  $497,190  $502,110    Other income (expense):      Interest and dividend       income                    2,150      542     1,034     4,478     3,369      Interest expense          (2,554)  (2,793)   (4,651)   (9,047)  (14,255)      Gain on sale of       Investment securities         -        -    16,388         -    21,994      Other                        (28)     514        66       614      (370)                                   ---      ---        --       ---     -----        Total other income         (expense)                (432)  (1,737)   12,837    (3,955)   10,738                                  ----   ------    ------    ------    ------    Income before income     taxes and equity in     income of affiliate      $182,906  $89,695  $190,644  $493,235  $512,848                              ========  =======  ========  ========  ========
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 following table reconciles operating income (loss) 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).

Source: PRNewsWireHP is in the portfolios of Ron Baron of Baron Funds, Jean-Marie Eveillard of Arnhold & S. Bleichroeder Advisers, LLC, Kenneth Fisher of Fisher Asset Management, LLC, Kenneth Fisher of Fisher Asset Management, LLC, John Keeley of Keeley Fund Management.

Rating: 2.0/5 (1 vote)

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