Helmerich & Payne, Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended September 30, 2023. Although the request refers to 2023 Q4, this is an annual filing; the supplied filing text does not provide a clear standalone fourth-quarter financial results summary. H&P provides land and offshore drilling services and related technology. Its reportable segments are North America Solutions, Offshore Gulf of Mexico, and International Solutions.
Financial performance and liquidity
| Metric | FY2023 | FY2022 |
|---|---|---|
| Operating revenue | $2.872 billion | $2.059 billion |
| Operating income | $561.9 million | $45.3 million |
| Net income | $434.1 million | $7.0 million |
| Diluted EPS | $4.16 | $0.05 |
| Cash from operations | $833.7 million | $233.9 million |
| Capital expenditures | $395.5 million | $250.9 million |
- Revenue rose about 39% year over year, driven chiefly by higher pricing and activity in North America Solutions and increased International Solutions activity. Operating margin was approximately 19.6% and net margin approximately 15.1% in FY2023.
- Cash and cash equivalents were $257.2 million and short-term investments were $93.6 million at year-end; restricted cash was $59.1 million. Current assets totaled $1.007 billion versus current liabilities of $418.9 million.
- Long-term debt had a $550 million face amount, consisting of 2.90% senior notes due 2031; carrying value was $545.1 million. No borrowings or letters of credit were outstanding under the $750 million revolving credit facility, and the company reported compliance with debt covenants.
- Drilling contract backlog was $1.4 billion, up from $1.2 billion. Approximately $0.9 billion was expected to be recognized in FY2024 and $0.5 billion in FY2025 and later; backlog excludes anticipated renewals and performance bonuses and may not be fully realized.
Changes versus the prior year
- Operating income increased substantially alongside stronger revenue and pricing. Net income also benefited from investment gains and the absence of FY2022’s $60.1 million debt-extinguishment loss.
- Operating cash flow increased by approximately $599.8 million. The filing attributes the improvement primarily to higher activity and pricing.
- North America Solutions revenue increased 40.9% to $2.520 billion, while segment operating income rose to $625.5 million from $121.9 million. International Solutions revenue increased 56.2% to $212.6 million, but the segment recorded a $0.9 million operating loss. Offshore Gulf of Mexico revenue increased 3.8% to $130.2 million; segment operating income was $22.8 million, slightly below the prior year.
- Contracted active rigs at fiscal year-end fell to 164 from 192. The company repurchased 6.5 million shares for $249.0 million and paid $1.94 per share in dividends, including a $0.94 supplemental dividend, compared with $1.00 per share in FY2022.
Outlook, risks and notable items
- Management expected calendar-year 2024 customer spending and activity to be similar to 2023. For FY2024, it expected modestly higher rig activity in the first half and relatively stable activity in the second half, while prioritizing economic margins over utilization.
- FY2024 capital spending was estimated at $450 million to $500 million, including maintenance, IT spending and walking-rig conversions for up to 14 rigs. Management planned continued investment in international expansion.
- Management said operating expenses were expected to remain elevated due to service intensity and rig performance demands, and projected higher FY2024 selling, general and administrative expenses, including labor and third-party service costs.
- Key business risks include volatile oil and gas prices and customer spending, competition and dayrate pressure, contract cancellations and backlog realization, cost inflation, operational and weather hazards, and cybersecurity threats. International operations face political, currency and repatriation risks; Argentina has currency controls and high inflation.
- Customer and geographic concentration warrant attention: the ten largest drilling customers generated 50.4% of consolidated revenue; one Offshore Gulf of Mexico customer accounted for 84.0% of that segment’s revenue. Argentina and Colombia are significant international markets.
- Notable items included $12.1 million of noncash asset impairments, mainly involving rigs and equipment being scrapped or sold; an $11.3 million net gain on investment securities, including a $27.4 million ADNOC Drilling gain partly offset by investment losses and a $12.2 million Argentina Blue Chip Swap loss; and a $19.5 million settlement in a fatal-accident lawsuit, within insurance coverage and without expense above the deductible, according to the company.
- The company reported a $77.3 million self-insurance liability for workers’ compensation and casualty claims; this estimate was identified as a critical audit matter. A claim relating to the 2010 seizure of Venezuelan assets remains unresolved, and the company cannot estimate the timing or amount of any recovery.
- Ernst & Young issued unqualified opinions on the financial statements and internal control over financial reporting. Management also concluded disclosure controls were effective.
Important facts for investors to verify
- Whether FY2024 activity, pricing and margins develop in line with management’s outlook, particularly as contracted rigs declined year over year.
- How much of the $1.4 billion backlog is converted to revenue and cash flow, and whether customers cancel or modify fixed-term contracts.
- Whether cash generation can support planned capital expenditures, dividends and repurchases while maintaining liquidity and debt covenant compliance.
- The durability of FY2023 earnings, including the contribution of investment-security gains, equipment reimbursement gains and other unusual items.
- Exposure to major customers, Argentina’s currency restrictions, self-insurance claims, and the outcomes of legal and other contingencies.