Helmerich & Payne, Inc. — Q1 FY2022 10-Q
Reporting period: Three months ended December 31, 2021; comparisons are with the three months ended December 31, 2020, unless otherwise noted. H&P provides drilling services and technologies, principally through North America Solutions, Offshore Gulf of Mexico, and International Solutions. The results are unaudited.
Financial results and liquidity
| Metric | Q1 FY2022 | Q1 FY2021 |
|---|---|---|
| Operating revenue | $409.8 million | $246.4 million |
| Operating loss from continuing operations | $42.6 million | $93.2 million |
| Loss from continuing operations | $51.3 million | $77.9 million |
| Net loss | $51.4 million; $0.48 per diluted share | $70.4 million; $0.66 per diluted share |
| Cash used in operating activities | $3.7 million | $19.6 million |
- Revenue increased about 66%, primarily reflecting greater drilling activity. Average North America active rigs increased to 141 from 81; quarter-end contracted rigs rose to 166 from 137 at September 30, 2021.
- The quarter’s results included a $60.1 million debt-extinguishment loss, comprising a $56.4 million make-whole premium and $3.7 million write-off of unamortized debt costs, and a $47.9 million gain on investment securities, principally the ADNOC Drilling investment revaluation. A $16.4 million YPF settlement revenue contribution was recognized in International Solutions.
- Cash and cash equivalents were $234.2 million and short-term investments were $207.1 million at December 31, 2021. Together with $750 million available on the revolving facility, management reported approximately $1.2 billion of near-term liquidity and said it did not anticipate needing to draw on the facility.
- Operating cash use improved year over year. Investing cash use was $44.7 million, including $44.0 million of capital expenditures; financing cash use was $635.6 million, primarily reflecting repayment of the 2025 notes, the make-whole premium, dividends, and $60.4 million of share repurchases.
- Debt at quarter-end included $550 million face value of 2.90% senior notes due 2031, with a $542.2 million balance-sheet carrying value. The $487.1 million 4.65% notes due 2025 were redeemed in October 2021. H&P also reported $30.4 million outstanding under bilateral bank facilities; the revolving facility had no borrowings or letters of credit outstanding. The company reported covenant compliance.
- Quarter-end total assets were $4.39 billion and shareholders’ equity was $2.78 billion. The declared dividend was $0.25 per share. The long-term debt-to-total-capitalization ratio was 16.5%, versus 15.9% at September 30, 2021.
Changes and operating performance
- North America Solutions revenue rose to $341.0 million from $202.0 million; segment operating loss narrowed to $28.9 million from $72.9 million. Higher rig count drove the improvement, partly offset by higher activity-related and recommissioning costs.
- International Solutions revenue increased to $37.2 million from $10.5 million and segment operating income was $8.0 million versus an $8.4 million loss. The YPF settlement materially contributed to the improvement.
- Offshore Gulf of Mexico revenue declined to $29.3 million from $32.3 million, while segment operating income increased to $5.5 million from $2.7 million, helped by lower operating costs and a favorable adjustment to prior-period self-insurance liabilities.
- Asset impairment charges were $4.4 million, related to rig substructures and two international rigs classified as held for sale. Selling, general and administrative expense increased to $43.7 million from $39.3 million.
- Backlog was $723.5 million at December 31, up from $572.0 million at September 30, 2021. H&P reported a fleet of 271 rigs and 166 contracted rigs at quarter-end. The filing notes a subsequent customer notice to early terminate an international fixed-term contract; December backlog includes approximately $22 million of related future dayrate revenue.
Outlook, risks and contingencies
- Management anticipated higher fiscal 2022 rig activity than in fiscal 2021 and expected to add approximately 11–21 rigs during Q2 FY2022. It described North America as the principal near-term opportunity, expected limited change offshore, and saw international opportunities on a longer timeline. These are expectations, not guaranteed results.
- Management cited more favorable commodity prices and customer budgets, but emphasized oil and gas price volatility, OPEC+ decisions, customer spending, and COVID-19—including variants, labor and logistics constraints, and possible operational interruptions—as uncertainties.
- International risks include political and economic instability, currency controls and difficulty repatriating funds, particularly in Argentina. Cash held in Argentina was $39.6 million at quarter-end; foreign-exchange losses were $1.0 million for the quarter.
- Management expected existing cash and operating cash flows to fund fiscal 2022 operating needs, scheduled debt payments, dividends, and estimated capital expenditures, while noting there is no assurance cash generation will continue at current levels. It also cited more than $10 million of annualized savings from prior cost measures, with full benefit expected in calendar 2022; further measures could result in restructuring charges.
- Purchase commitments for equipment, parts, and supplies were approximately $62.9 million. The filing describes litigation relating to the seizure of the company’s Venezuelan business; recovery timing, amount, and likelihood could not be determined. Management said other ordinary-course legal matters, considering reserves and insurance, were not expected to materially adversely affect financial condition, cash flows, or results.
Important facts for investors to verify
- Whether North America rig additions and customer spending develop in line with management’s Q2 and FY2022 expectations, and how activity affects margins and cash flow.
- The status and financial impact of the international contract termination notice, including the $22 million included in December backlog.
- Cash conversion, capital spending, shareholder returns, and liquidity after the debt redemption and share repurchases.
- Changes in the market value and liquidity restrictions of the ADNOC Drilling investment, and the extent to which investment gains affect reported earnings.
- Developments in COVID-19, commodity prices, Argentina currency restrictions, and the unresolved Venezuelan litigation.