Business context and reporting period
Helmerich & Payne, Inc. (NYSE: HP) provides land and offshore drilling services and related technology to oil and gas producers. This Form 10-K covers the fiscal year ended September 30, 2021; although the request identifies 2021 Q4, the supplied filing does not provide a distinct fourth-quarter financial summary.
Operations comprise North America Solutions, Offshore Gulf of Mexico, International Solutions, and Other. At year-end, the fleet totaled 273 rigs, with 137 contracted. North America supplied 84.2% of consolidated revenue.
Financial performance and liquidity
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue | $1.219 billion | $1.774 billion |
| Operating loss from continuing operations | $428.5 million | $620.2 million |
| Loss from continuing operations | $337.5 million; $3.14 per diluted share | $496.4 million; $4.62 per diluted share |
| Net loss | $326.2 million; $3.04 per diluted share | $494.5 million; $4.60 per diluted share |
| Cash from operating activities | $136.4 million | $538.9 million |
| Capital expenditures | $82.1 million | $140.8 million |
Revenue fell 31.3%, primarily from lower activity, pricing, and early termination revenue. Direct drilling-service operating expenses were $952.6 million, down from $1.185 billion. Consolidated operating margin remained negative; the operating loss includes depreciation and impairment charges. Segment gross margins were $252.9 million for North America Solutions, $29.2 million for Offshore Gulf of Mexico, and negative $10.8 million for International Solutions.
At September 30, cash and cash equivalents were $917.5 million and short-term investments were $198.7 million, totaling $1.116 billion. The company also reported $750 million available under its revolving credit facility, with no facility borrowings outstanding. Reported debt had a $1.037 billion face value, including $487.1 million of 4.65% notes classified as current and $550 million of 2.90% notes due 2031. The 2025 notes were redeemed on October 27, 2021; the company said post-redemption near-term liquidity was approximately $1.3 billion. Long-term debt to total capitalization was 15.9%, versus 12.8% in 2020.
The annual dividend was $1.00 per share, down from $2.38 in 2020. A $0.25-per-share dividend was declared for payment in December 2021.
Material changes versus the prior year
- Average active rigs declined to 107.4 in North America from 134.3; Offshore Gulf of Mexico fell to 4.3 from 5.3; International Solutions fell to 5.0 from 12.6. Year-end contracted rigs increased to 137 from 79.
- Contract backlog declined to $572 million from $658 million; $440.8 million was expected to be recognized in FY2022 and about $131.2 million in FY2023 and later.
- Asset impairment charges were $70.9 million, substantially below the $563.2 million recorded in FY2020. FY2021 charges included $56.4 million for 71 domestic non-super-spec rigs planned for sale and $14.4 million for lower-margin trucking and casing-running assets planned for sale.
- Operating cash flow fell to $136.4 million from $538.9 million, principally reflecting lower activity and pricing. Cash and short-term investments increased, with the company also receiving an $86.5 million advance for an eight-rig sale to ADNOC Drilling.
Outlook, commentary, risks, and unusual items
Management expected North American rig activity to increase as customers planned for higher 2022 spending, while noting that activity may not rise in step with oil prices. International improvement was expected over a longer timeline; little change was anticipated in Offshore Gulf of Mexico. FY2022 capital spending was estimated at $250 million to $270 million. Management cited more than $10 million of annualized savings from FY2021 cost actions, with full benefit expected in calendar 2022, and anticipated further incremental cost reductions.
Key exposures include commodity-price and customer-spending volatility, the COVID-19 pandemic, competition and excess rig capacity, contract cancellations and backlog realization, customer concentration, foreign currency and political risk, supply-chain and labor constraints, cybersecurity, environmental and climate regulation, and operational events for which insurance or indemnities may be inadequate. Argentina currency controls limited repatriation; H&P recorded $5.4 million of foreign-currency losses there in FY2021. One Offshore Gulf of Mexico customer represented 77.9% of that segment’s revenue.
Notable transactions and contingencies: the ADNOC rig sale was subject to staged delivery and acceptance; no rigs had been delivered by year-end. H&P made a $100 million cornerstone investment in ADNOC Drilling, whose IPO closed after year-end, subject to a three-year lock-up. The 2025-note redemption entailed a $58.1 million make-whole premium and accrued interest, plus a $3.7 million write-off, to be recognized in FY2022. After year-end, H&P sold its trucking and casing-running businesses for combined net cash proceeds of $5.8 million, with possible earnout revenue, and settled a YPF dispute for an approximately $11 million cash payment plus multi-year contracts for three rigs. A long-running claim over the expropriation of H&P’s Venezuelan business remains unresolved; any recovery is uncertain.
The independent auditor issued an unqualified opinion on the financial statements and internal controls. The filing identifies self-insurance accruals and valuation of assets held for sale as critical audit matters.
Important facts for investors to verify
- Whether contracted-rig counts, dayrates, utilization, and backlog convert into sustained revenue and operating cash flow.
- Delivery, acceptance, costs, and gain recognition for the ADNOC rig package, and the market value and restrictions on the $100 million ADNOC Drilling investment.
- Post-redemption debt, liquidity, and FY2022 cash needs, including the $250–$270 million capital-spending estimate and dividend sustainability.
- Execution and proceeds from the non-super-spec rig and service-line dispositions, and whether planned cost savings are realized.
- Potential effects of customer concentration, Argentina’s currency restrictions, COVID-19, commodity-price changes, and the unresolved Venezuela claim.